SB Partners 10-Q 2009 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, 2009

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.)
1 New Haven Avenue, Suite 207, Milford, CT.	06460
(Address of principal executive offices)	(Zip Code)

(203) 283-9593

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [X] Yes   [ ] No

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

[ ] large accelerated filer                                                      [ ] accelerated filer                                           [X] non-accelerated filer                                           [ ] small reporting company

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
Item 1	Financial Statements
	Consolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008 (audited)	1
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2009 and 2008	2
	Consolidated Statements of Changes in Partners' Capital (Deficit) (unaudited) for the nine months ended September 30, 2009
		3
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2009 and 2008	4
	Notes to Consolidated Financial Statements (unaudited)	5 – 7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	8 – 11
Item 3	Quantitative and Qualitative Disclosures about Market Risk	12
Item 4T	Controls and Procedures	12
Part II	Other Information	12
	Signatures	13
	Exhibit 31	14 – 15
	Exhibit 32	16

1

ITEM 1. FINANCIAL STATEMENTS

SB PARTNERS
(A New York Limited Partnership)
CONSOLIDATED BALANCE SHEETS
			September 30			December 31
			2009			2008
			(unaudited)			(audited)
Assets:
Investments -
	Real estate, at cost
	Land		$	3,595,000		$	3,595,000
	Buildings, furnishings and improvements			32,771,710			32,771,710
	Less - accumulated depreciation			(2,796,507	)		(2,166,282	)
				33,570,203			34,200,428
	Real estate held for sale			4,462,607			4,379,087
	Investment in Sentinel Omaha, LLC			14,051,367			22,851,207
	Less - reserve for investment
	in Sentinel Omaha, LLC			(14,051,367	)		-
				38,032,810			61,430,722
Other Assets -
	Cash and cash equivalents			232,584			544,241
	Other			235,796			88,561
		Total assets	$	38,501,190		$	62,063,524
Liabilities:
	Mortgage notes and unsecured loan payable		$	38,688,316		$	38,806,090
	Accounts payable and accrued expenses			345,237			556,892
	Tenant security deposits			25,580			25,580
	Other liabilities in discontinued operations			90,860			110,753
		Total liabilities		39,149,993			39,499,315
Partners' Capital (Deficit):
	Units of partnership interest without par value;
	Limited partner - 7,753 units			(630,284	)		22,579,734
	General partner - 1 unit			(18,519	)		(15,525	)
		Total partners' capital (deficit)		(648,803	)		22,564,209
		Total liabilities and partners' capital (deficit)	$	38,501,190		$	62,063,524
See notes to consolidated financial statements

2

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,
		2009			2008			2009			2008
Revenues:
Base rental income		$	626,730		$	604,464		$	1,859,648		$	1,813,362
Other rental income			148,643			67,320			426,196			329,050
Interest on short-term investments and other			11			2,615			165			14,856
	Total revenues		775,384			674,399			2,286,009			2,157,268
Expenses:
Real estate operating expenses			76,038			79,416			316,575			306,954
Interest on mortgage notes & unsecured loan payable			369,203			494,489			1,120,760			1,557,590
Depreciation and amortization			215,201			225,926			645,605			677,778
Real estate taxes			89,413			25,482			312,447			226,346
Management fees			216,831			275,849			643,003			671,844
Other			53,690			32,033			79,722			51,238
Total expenses			1,020,376			1,133,195			3,118,112			3,491,750
Loss from operations			(244,992	)		(458,796	)		(832,103	)		(1,334,482	)
Equity in net income (loss) of investment			(4,796,879	)		589,813			(8,799,840	)		(25,468	)
Reserve for investment			(14,051,367	)		-			(14,051,367	)		-
Income (loss) from continuing operations			(19,093,238	)		131,017			(23,683,310	)		(1,359,950	)
Income from discontinued operations			123,740			87,797			470,298			213,707
Net income (loss)			(18,969,498	)		218,814			(23,213,012	)		(1,146,243	)
Income (loss) allocated to general partner			(2,447	)		28			(2,994	)		(148	)
Income (loss) allocated to limited partners		$	(18,967,051	)	$	218,786		$	(23,210,018	)	$	(1,146,095	)
Earnings (loss) per unit of limited partnership interest
(basic and diluted)
Continuing operations		$	(2,462.69	)	$	16.90		$	(3,054.73	)	$	(175.41	)
Discontinued operations		$	15.96		$	11.32		$	60.66		$	27.56
Net income (loss)		$	(2,446.73	)	$	28.22		$	(2,994.07	)	$	(147.85	)
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 (DEFICIT)

For the nine months ended September 30, 2009 (Unaudited

Limited Partners:
	Units of Partnership Interest
					Cumulative			Accumulated
	Number		Amount		Cash Distributions			Earnings (Losses)			Total
Balance, January 1, 2009		7,753	$	119,968,973	$	(111,721,586	)	$	14,332,347		$	22,579,734
Net loss		-		-		-			(23,210,018	)		(23,210,018	)
Balance, September 30, 2009		7,753	$	119,968,973	$	(111,721,586	)	$	(8,877,671	)	$	(630,284	)
General Partner:
	Units of Partnership Interest
					Cumulative			Accumulated
	Number		Amount		Cash Distributions			Earnings (Losses)			Total
Balance, January 1, 2009		1	$	10,000	$	(26,364	)	$	839		$	(15,525	)
Net loss		-		-		-			(2,994	)		(2,994	)
Balance, September 30, 2009		1	$	10,000	$	(26,364	)	$	(2,155	)	$	(18,519	)

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,
	2009			2008
Cash Flows From Operating Activities:
Net loss	$	(23,213,012	)	$	(1,146,243	)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Equity in net loss of investment		8,799,840			25,468
Reserve for investment		14,051,367			-
Depreciation and amortization		645,605			777,557
Net (increase) in operating assets		(162,616	)		(27,939	)
Net increase (decrease) in operating liabilities		(211,654	)		122,944
Net (decrease) in liabilities in discontinued operations		(19,893	)		-
Net cash (used in) operating activites		(110,363	)		(248,213	)
Cash Flows From Investing Activities:
Capital additions to real estate owned		(83,520	)		(14,102	)
Net cash (used in) investing activites		(83,520	)		(14,102	)
Cash Flows From Financing Activities:
Principal payments on mortgage notes payable		(117,774	)		(98,964	)
Distributions paid to partners		-			(852,885	)
Net cash (used in) financing activities		(117,774	)		(951,849	)
Net change in cash and cash equivalents		(311,657	)		(1,214,164	)
Cash and cash equivalents at beginning of period		544,241			1,679,152
Cash and cash equivalents at end of period	$	232,584		$	464,988
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	1,120,760		$	1,475,719

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 nine month period ended September 30, 2009 are not necessarily indicative of the results to be expected for a full year.

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, 2008.

(2) INVESTMENTS IN REAL ESTATE

As of September 30, 2009, 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, 2009 and December 31, 2008:

	No. of	Year of		Real Estate at Cost
Type	Prop.	Acquisition	Description	9/30/2009			12/31/2008
Warehouse distribution properties	2	2005-06   596,605 sf		$	36,366,710		$	36,366,710
Less: Accumulated depreciation					(2,796,507	)		(2,166,282	)
					33,570,203			34,200,428
Real estate held for sale	(a)	200260,345 sf			4,422,673			4,379,087
Total investments in real estate				$	37,992,876		$	38,579,515
(a) At September 30, 2009 and December 31, 2008, real estate held for sale includes Eagle Lake IV Business Center.

6

(3) INVESTMENT IN SENTINEL OMAHA, LLC

In 2007, the Partnership made an investment in the amount of $37,200,000 in Sentinel Omaha, LLC (“Omaha”), the manager of which is an affiliate of the Partnership’s General Partner.  The investment represents a 30% ownership interest in Omaha.

The following are the condensed financial statements (000’s omitted) of Omaha as of and for the periods ended September 30, 2009 and December 31, 2008.

	(Unaudited)			(Audited)
Balance Sheet	September 30, 2009			December 31, 2008
Investment in real estate, net	$	390,750		$	444,500
Other assets		12,905			12,536
Debt		(349,462	)		(373,035	)
Other liabilities		(7,335	)		(7,810	)
Member's Equity	$	46,858		$	76,191
	(Unaudited)
Statement of Operations	September 30, 2009
Rent and other income	$	38,251
Real estate operating expenses		(20,918	)
Other income and expenses		(15,299	)
Unrealized losses		(31,900	)
Realized gain on sale		533
Net loss	$	(29,333	)

The Omaha investment reports on a fair value basis and due to the mortgage crisis, stagnant real estate market and slowing economy, the investment in Omaha reported an additional write-down in the value of its real estate portfolio of approximately $32,757,000 (6.3%) for the nine months ended September 30, 2009.  In addition, the Partnership made its own analysis of the current and projected financial condition of Omaha.  The Partnership anticipates a continuing reduction of the values of the properties in the Omaha portfolio.  On July 1, 2009, Omaha executed an extension of its unsecured mortgage.  The extension, among other items, increased the spread on the interest rate on the unsecured debt by approximately 390 basis points.  The current outstanding balance of the unsecured debt is approximately $93 million increasing the interest expense on that balance by approximately $3,600,000 per annum.  The Partnership projects Omaha’s cash reserves may be depleted during 2010 or 2011 due to higher interest rate spreads on its unsecured loan.  A comparison of the estimated current value of the real estate portfolio to the total related mortgage debt reports an approximate loan to value ratio of 89%.  The Partnership expects Omaha may not have new sources of cash available due to the continued constrained credit market.  Omaha may not be able to extend its unsecured mortgage in 2011 or may default on the unsecured loan sooner due to not meeting debt service and loan to value covenants.  Also, under the terms of the mortgage extension, Omaha is precluded from making distributions to its investors until its unsecured mortgage is paid off.  As a result of the aforementioned, the Partnership has reserved 100% of the reported value of its investment in Omaha on the balance sheet as of September 30, 2009.

 (4)  MORTGAGE NOTES AND UNSECURED LOAN PAYABLE

Mortgage notes and unsecured loan 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				at Maturity		2009		2008
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		6,688,316		6,806,090
Bank Loan:
Unsecured (c )											22,000,000		22,000,000
										$	38,688,316	$	38,806,090

7

(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 matured on October 1, 2008 and provided for interest only monthly payments based upon LIBOR plus 1.95%. The outstanding amount of the Loan at September 30, 2009 was $22,000,000.  The holder of the Loan formally extended the maturity to February 28, 2009 and has continued negotiations for a longer term extension.  The Partnership has remained current on all monthly interest payments under the terms of the original extension.  On July 1, 2009 the Partnership received written notice from the holder of the Loan which makes demand for the immediate payment of the Loan.  If the outstanding obligation is not paid, the holder may initiate appropriate action to collect the outstanding obligations, including enforcement of its rights and remedies under the loan documents or applicable law.  The Partnership and the holder continue discussions as to terms for extending the Loan on a longer term basis. There can be no assurance that the holder will offer such extension or that the Partnership will be able to comply with the terms offered and conditions that may be imposed by the holder in exchange for such extension. This matter raises substantial doubt regarding the Partnership’s ability to continue as a going concern.

8

ITEM 2.                                                        MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

General

The consolidated financial statements for the three and nine months ended September 30, 2009 and 2008, reflect the operations of one industrial flex property and two warehouse distribution centers as well as a 30% interest in Omaha.

Results of Operations

Total revenues from continuing operations for the three months ended September 30, 2009 increased approximately $101,000 to approximately $775,000 from approximately $674,000 for the three months ended September 30, 2008.  Loss from continuing operations increased approximately $19,224,000 to loss of approximately $19,093,000 for the three months ended September 30, 2009, as compared to an approximate income of $131,000 for the three months ended September 30, 2008.  Income from discontinued operations for the three months ended September 30, 2009 increased by approximately $36,000 to approximately $124,000 from an approximate income of $88,000 for the same period in 2008. Total expenses from continuing operations for the three months ended September 30, 2009 decreased approximately $127,000 to approximately $1,020,000 from approximately $1,133,000 for the three months ended September 30, 2008.

Total revenues from continuing operations for the nine months ended September 30, 2009 increased approximately $129,000 to approximately $2,286,000 from approximately $2,157,000 for the nine months ended September 30, 2008.  Loss from continuing operations increased approximately $22,323,000 to a loss of approximately $23,683,000 for the nine months ended September 30, 2009, as compared to an approximate loss of $1,360,000 for the nine months ended September 30, 2008.  Income from discontinued operations for the nine months ended September 30, 2009 increased by approximately $257,000 to approximately $470,000 from an approximate income of $214,000 for the same period in 2008. Total expenses from continuing operations for the nine months ended September 30, 2009 decreased approximately $388,000 to approximately $3,118,000 from approximately $3,492,000 for the nine months ended September 30, 2008.

The change in net loss from continuing operations for the three and nine months ended September 30, 2009 is primarily the result of the increase in equity in net loss of investment.  This increase in the equity in net loss of investment is due to the further write-down by Omaha in the value of the properties and mortgages in its portfolio coupled with Registrant’s reserving 100% of the remaining estimated current value of its investment in Omaha.  The Omaha investment reports on a fair value basis and due to the mortgage crisis, stagnant real estate market and slowing economy, the investment in Omaha reported an additional write-down in the value of its real estate portfolio of approximately $32,757,000 (6.3%) for the nine months ended September 30, 2009.  In addition, Registrant made its own analysis of the current and projected financial condition of Omaha.  Registrant anticipates a continuing reduction of the values of the properties in the Omaha portfolio and projects Omaha’s cash reserves will be depleted due to higher interest rate spreads on its unsecured loan.  Registrant expects Omaha may not have new sources of cash available due to the continued constrained credit market.  Omaha may not be able to extend its unsecured mortgage in 2011 or may default on the unsecured loan sooner due to not meeting debt service and loan to value covenants.  Also, under the terms of the mortgage extension Omaha signed effective July 1, 2009, Omaha is precluded from making distributions to its investors until its unsecured mortgage is paid off.  As a result of the aforementioned, Registrant has reserved 100% of the reported value of its investment in Omaha on the balance sheet as of September 30, 2009.

The decrease in expenses for the three and nine month period is primarily the result of lower interest expense on mortgages due to lower floating rates. In addition, expenses were lower due to a reduction in amortization of deferred financing costs.  On December 18, 2008, Registrant started marketing its industrial flex property in Minnesota for a sale.  The asset was classified as an asset held for sale and Registrant stopped recording depreciation expense on the asset. The reduction of depreciation expense partially offset by a decrease in other income at the industrial flex property is the reason for the increase in income from discontinued operations for the three month period ended September 30, 2009 as compared to 2008. The reduction of depreciation expense and an increase in other income at the industrial flex property is the reason for the increase in income from discontinued operations for the nine month period ended September 30, 2009 as compared to 2008. 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, 2008. There were no significant changes to such policies in 2009. 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.

9

Liquidity and Capital Resources

As of September 30, 2009, the Registrant had cash and cash equivalents of approximately $233,000. These balances are approximately $312,000 lower than cash and cash equivalents held on December 31, 2008.Cash and cash equivalents were lower as Registrant paid down operating liabilities, scheduled mortgage principal payments and capital costs for the industrial flex property in Minnesota.

Total outstanding debt at September 30, 2009, consisted of approximately $16,688,000 of long-term non-recourse first mortgage notes, secured by real estate owned by the Registrant 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 management fees.

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. However, the real estate market continues to suffer through one of its worst debt crises.  Interest rates are still high and some borrowers still find it difficult to secure debt at acceptable terms as lenders continue to impose stricter terms on borrowers. Registrant’s unsecured credit facility matured October 1, 2008.   The holder of the unsecured debt formally extended the maturity to February 28, 2009.

  As a result of Registrant’s inability to replace, extend or refinance the unsecured credit facility, in their report dated May 27, 2009 as of and for the year ended December 31, 2008, Registrant’s independent auditors expressed substantial doubt as to Registrant’s ability to continue as a going concern.  On July 1, 2009 Registrant received written notice from the holder of the Loan which makes demand for the immediate payment of the Loan.  If the outstanding obligation is not paid, the holder may initiate appropriate action to collect the outstanding obligations, including enforcement of its rights and remedies under the loan documents or applicable law. The holder and Registrant continue to discuss terms for extending the Loan on a longer term basis. There can be no assurance that the holder will offer such extension or that Registrant will be able to comply with the terms offered and conditions that may be imposed by the holder in exchange for such extension.

The Registrant’s properties are expected to generate sufficient cash flow to cover operating and capital improvement costs and other working capital requirements of the Registrant for the foreseeable future.  If an extension of the Loan cannot be obtained, Registrant would not have sufficient funds to pay the obligation.

The Omaha investment reports on a fair value basis and due to the mortgage crisis, stagnant real estate market and slowing economy, the investment in Omaha reported an additional write-down in the value of its real estate portfolio of approximately $32,757,000 (6.3%) for the nine months ended September 30, 2009.  In addition, Registrant made its own analysis of the current and projected financial condition of Omaha.  Registrant anticipates a continuing reduction of the values of the properties in the Omaha portfolio.  On July 1, 2009, Omaha executed an extension of its unsecured mortgage.  The extension, among other items, increased the spread on the interest rate on the unsecured debt by approximately 390 basis points.  The current outstanding balance of the unsecured debt is approximately $93 million increasing the interest expense on that balance by approximately $3,600,000 per annum.  Registrant projects Omaha’s cash reserves may be depleted during 2010 or 2011 due to higher interest rate spreads on its unsecured loan.  A comparison of the current value of the real estate portfolio to the total related mortgage debt reports an approximate loan to value ratio of approximately 89%.  Registrant expects Omaha may not have new sources of cash available due to the continued constrained credit market.  Omaha may not be able to extend its unsecured mortgage in 2011 or may default on the unsecured loan sooner due to not meeting debt service and loan to value covenants.  Also, under the terms of the mortgage extension, Omaha is precluded from making distributions to its investors until its unsecured mortgage is paid off.  As a result of the aforementioned, Registrant does not anticipate receiving any distributions from Omaha during the foreseeable future and has reserved 100% of the reported value of its investment in Omaha on the balance sheet as of September 30, 2009.

2009 vs. 2008

Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues for the three months ended September 30, 2009, decreased approximately $12,000 to approximately $190,000 from approximately $202,000.  Other income decreased approximately $16,000.  Earlier in the current year, the tenant was billed for additional operating expense reimbursements related to prior year costs. During the past quarter, a portion of this extra billing was reversed.  Rental income was slightly higher for the three months ended September 30, 2009 as compared to 2008. Net income for the three months ended September 30, 2009 increased approximately $36,000 to approximately $124,000 from $88,000 for the three months ended September 30, 2008 due primarily to lower depreciation and amortization expense partially offset by the aforementioned decrease in operating expense reimbursements. Recording depreciation expense was discontinued as of December 18, 2008 due to Registrant classifying the property as real estate held for sale.

Total revenues for the nine months ended September 30, 2009, increased approximately $149,000 to approximately $718,000 from approximately $569,000.  Other income increased approximately $103,000 due to billing the tenant additional operating expense reimbursements for the prior year.  Rental income was also higher for the nine months ended September 30, 2009 as compared to 2008.  In 2008 the tenant received a scheduled abatement for rent for January 2008.   Net income for the nine months ended September 30, 2009 increased approximately $256,000 to approximately $470,000 from $214,000 for the nine months ended September 30, 2008 due primarily to lower depreciation and amortization expense as well as the aforementioned increases in total revenues. Recording depreciation expense was discontinued as of December 18, 2008 due to Registrant classifying the property as real estate held for sale.

10

435 Park Court (Lino Lakes, Minnesota)

Total revenues for the three months ended September 30, 2009 increased approximately $100,000 to approximately $420,000 from approximately $320,000 for the three months ended September 30, 2008. Other Income increased approximately $86,000 due to an increase in real estate tax reimbursement.  Rental Income increased approximately $14,000 due to a scheduled rate increase.  Net income, which includes deductions for interest expense and depreciation, increased approximately $36,000 to approximately $63,000 as compared to approximately $28,000 for the three months ended September 30, 2008.  The aforementioned increase in other income and rental income was partially offset by an increase in real estate tax expense.

Total revenues for the nine months ended September 30, 2009 increased approximately $126,000 to approximately $1,233,000 from approximately $1,107,000 for the nine months ended September 30, 2008. Other Income increased approximately $110,000 due to an increase in real estate tax reimbursement.  Rental Income increased approximately $16,000 due to a scheduled rate increase.  Net income, which includes deductions for interest expense and depreciation, increased approximately $39,000 to approximately $124,000 as compared to approximately $85,000 for the nine months ended September 30, 2008.  The aforementioned increase in other income and rental income was partially offset by an increase in real estate tax expense.

175 Ambassador Drive (Naperville, Illinois)

        Total revenues for the three months ended September 30, 2009, increased approximately $13,000 to approximately $355,000 from approximately $342,000 for the three months ended September 30, 2008 due to higher rental and other income.  Rental Income increased due to a scheduled rate increase.  Net income, which includes deductions for interest and depreciation, for the three months ended September 30, 2009 increased approximately $18,000 to approximately $104,000 from $86,000 for the three months ended September 30, 2008 due primarily to an increase in rental income combined with decreases in interest expense and insurance expense.

Total revenues for the nine months ended September 30, 2009, increased approximately $30,000 to approximately $1,053,000 from approximately $1,023,000 for the nine months ended September 30, 2008 due to higher rental income.  Rental Income increased due to a scheduled rate increase.  Other Income remained approximately the same.  Net income, which includes deductions for interest and depreciation, for the nine months ended September 30, 2009 increased approximately $47,000 to approximately $286,000 from $239,000 for the nine months ended September 30, 2008 due primarily to an increase in rental income combined with decreases in interest expense, insurance and administrative expense.

Investment in Sentinel Omaha, LLC

During the second and third quarters of 2007, the Registrant acquired a 30% interest in Sentinel Omaha, LLC for $37,200,000.  On September 18, 2007, Omaha acquired all the outstanding common shares of America First Apartment Investors, Inc. (“AFAI”) in a transaction valued at $532 million, including the assumption of outstanding debt and excluding transaction costs.  At the time of the acquisition, AFAI’s portfolio was comprised of 31 apartment communities and one office complex.  As of September 30, 2009, Omaha has sold seven of the 31 apartment communities including two apartment communities in Oklahoma City, OK and Omaha, NE during the third quarter 2009 to further its continuing goal of reducing the level of its debt obligations.

Total revenues for the three months ended September 30, 2009 were approximately $12,160,000.  Loss before unrealized and realized net losses was $280,000.  Major expenses included approximately $4,713,000 for interest expense, $1,441,000 for repairs and maintenance, $2,010,000 for payroll and $1,398,000 for real estate taxes. Omaha reported unrealized net losses of approximately $16,243,000 from the valuation of its real estate portfolio and its related mortgages.  Omaha reported realized net gains of approximately $533,000 on the sale of properties in Oklahoma City, OK and Omaha, NE during the third quarter 2009.  For the three months ended September 30, 2009, Registrant’s equity interest in the loss of Omaha was approximately $4,797,000.  Total revenues for the three months ended September 30, 2008 were approximately $13,599,000. The revenues decreased for the three months ended September 30, 2009 as compared to 2008 due to the sale of two properties in July 2009 as well as a decrease in average occupancy which has lead to an increase in concession costs at the apartment properties. Income before deductions for unrealized losses and realized losses was $187,000 for the three months ended September 30, 2008.  The primary reason income decreased for the three months ended September 30, 2009 as compared to 2008 was lower total revenues and higher interest expense partially offset by lower operating expenses.  Interest expense increased due to a significant increase in the interest rate spread for the unsecured mortgage as part of an extension agreement effective May 31, 2009.  Operating expenses decreased due to the aforementioned sale of the properties in Oklahoma City, OK and Omaha, NE.  Major expenses for the three months ended September 30, 2008 included approximately $4,927,000 for interest expense, $1,784,000 for repairs and maintenance, $2,138,000 for payroll and $1,510,000 for real estate taxes. In addition, Omaha reported realized gains on sales of two apartment properties of approximately $1,099,000 for the three months ended September 30, 2008. The properties sold were located in Bristol, Tennessee and Tulsa, Oklahoma. In addition, Omaha reported unrealized gains of approximately $679,000.  For the three months ended September 30, 2008, the Registrant’s equity interest in the income of Omaha was approximately $590,000.

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Total revenues for the nine months ended September 30, 2009 were approximately $38,251,000 as compared to $41,178,000 for the nine months ended September 30, 2008. The revenues decreased for the nine months ended September 30, 2009 as compared to 2008 due to the sale of two properties during the third quarter of 2009.  In addition, average occupancy declined which has lead to an increase in concession costs at the apartment properties. The decline in occupancy and the increase in concessions costs are due to the significant slowing of the U.S. economy and the higher unemployment.  Also many renters are buying homes due to the dramatic reduction in price as well as the Federal government’s one time buyer’s tax credit.  Income before unrealized losses and realized gains was $2,034,000 for the nine months ended September 30, 2009 as compared to $1,871,000 for the nine months ended September 30, 2008.  The primary reason income increased for the nine months ended September 30, 2009 as compared to 2008 was lower interest expense due to lower variable rates partially offset by the aforementioned lower revenues. During the nine months ended September 30, 2009, Omaha reported unrealized net losses of approximately $31,900,000 from the valuation of its real estate portfolio and the its related mortgages as compared to unrealized net losses of $984,000 for the nine months ended September 30, 2008.  In addition, Omaha reported a net realized gain on the sale of two properties of $533,000 for the nine months ended September 30, 2009 as compared to realized losses on sales of five apartment properties of approximately $1,652,000 for the nine months ended September 30, 2008.  The properties sold in 2009 were located in Oklahoma City, OK and Omaha, NE.  The properties sold in 2008 were located in Southfield, Michigan, Ann Arbor, Michigan, Newport News, Virginia, Bristol, Tennessee and Tulsa, Oklahoma. For the nine months ended September 30, 2009, the Registrant’s equity interest in the losses of Omaha was approximately $8,800,000 as compared to an approximate loss of $25,000 for the nine months ended September 30, 2008.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

On September 17, 2007, the Registrant entered into an 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. Based on the weighted average outstanding balance under the credit facility for the three months ended September 30, 2009, a 1% change in LIBOR would impact the Registrant’s three and nine month net loss and cash flows by approximately $55,000 and $110,000, respectively.

ITEM 4T.

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, 2009 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 over financial reporting during the quarter ended September 30, 2009 have materially affected or are reasonably likely to materially affect the Registrant’s internal controls over financial reporting.

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: December 1, 2009	By:	/s/ David Weiner
		David Weiner
		Chief Executive Officer
		Principal Financial & Accounting Officer
Dated: December 1, 2009	By:	/s/ John H. Zoeller
		John H. Zoeller
		Chief Financial Officer

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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: December 1, 2009	By:	/s/ David Weiner
		David Weiner
		Chief Executive Officer

15

John H. Zoeller, 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: December 1, 2009	By:	Principal Financing & Accounting Officer
		/s/ John H. Zoeller
		John H. Zoeller
		Chief Financial Officer

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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, 2009 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:  December 1, 2009	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, 2009 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:  December 1, 2009	By:	Principal Financing & Accounting Officer
		/s/ John H. Zoeller
		John H. Zoeller
		Chief Financial Officer