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, 2002
-------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from ----------------------- to ----------
(Amended by Exch Act Rel No. 312905. eff 4/26/93.)
Commission File Number: 0-8952
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SB PARTNERS
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(Exact name of registrant as specified in its charter)
New York 13-6294787
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(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
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(Registrant's telephone number, including area code)
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(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
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 (Unaudited)
Condensed Consolidated Balance Sheets as of
September 30, 2002 and December 31, 2001..........................1
Condensed Consolidated Statements of Operations
for the three and nine months ended
September 30, 2002 and 2001.......................................2
Condensed Consolidated Statements of Changes in Partners' Capital
for the nine months ended September 30, 2002......................3
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2002 and 2001.............4
Notes to Condensed Consolidated Financial Statements..............5 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations................9 - 15
Quantitative and Qualitative Disclosures About
Market Risk......................................................16
Controls and Procedures..............................................16
Part II Other Information....................................................16
1
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2002 and December 31, 2001 (Unaudited)
----------------------------------------------------
September 30, December 31,
2002 2001
------------ -----------
Assets:
Investments -
Real estate, at cost
Land $ 5,780,842 $ 5,310,842
Buildings, furnishings and improvements 55,439,142 50,775,943
Less - accumulated depreciation (6,766,880) (5,641,349)
----------- -----------
54,453,104 50,445,436
Real estate asset held for sale 0 13,723,236
Investment in joint venture 3,447,420 0
----------- -----------
57,900,524 64,168,672
Other assets -
Cash and cash equivalents 1,908,305 634,029
Cash held by lenders in escrow 1,130,881 1,448,291
Other 576,714 753,916
----------- -----------
Total assets $61,516,424 $67,004,908
=========== ===========
Liabilities:
Mortgage notes payable $30,338,600 $51,146,251
Accounts payable and accrued expenses 1,046,516 865,421
Tenant security deposits 248,888 224,365
----------- -----------
Total liabilities 31,634,004 52,236,037
----------- -----------
Partners' Capital:
Units of partnership interest without par value;
Limited partners - 7,753 units 29,897,002 14,785,402
General partner - 1 unit (14,582) (16,531)
----------- -----------
Total partners' capital 29,882,420 14,768,871
----------- -----------
Total liabilities and partners' capital $61,516,424 $67,004,908
=========== ===========
See notes to condensed consolidated financial statements.
2
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
-----------------------------------------------------------
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
2002 2001 2002 2001
---------- ---------- ----------- ----------
Revenues:
Rental income $1,964,658 $3,124,776 $ 7,383,366 $9,206,586
Other rental income 138,656 155,028 430,430 440,442
Interest on short-term investments 7,212 3,224 30,779 16,031
---------- ---------- ----------- ----------
Total revenues 2,110,526 3,283,028 7,844,575 9,663,059
---------- ---------- ----------- ----------
Expenses:
Real estate operating expenses 915,913 1,230,192 3,454,595 3,747,563
Interest on mortgage notes payable 534,561 925,888 3,306,067 2,778,778
Depreciation and amortization 420,522 528,732 1,260,885 1,754,937
Real estate taxes 238,404 294,487 754,873 884,903
Management fees 199,439 207,972 595,643 623,540
Other 7,373 58,957 33,933 118,380
---------- ---------- ----------- ----------
Total expenses 2,316,212 3,246,228 9,405,996 9,908,101
---------- ---------- ----------- ----------
Income (loss) from operations (205,686) 36,800 (1,561,421) (245,042)
Equity in net loss of joint venture (17,182) 0 (30,560) 0
Net gain on sale of investment in real estate
property, including $379,725 net gain
on sale of water rights 0 0 17,480,880 0
---------- ---------- ----------- ----------
Net income (loss) (222,868) 36,800 15,888,899 (245,042)
Income (loss) allocated to general partner (29) 5 2,049 (32)
---------- ---------- ----------- ----------
Income (loss) allocated to limited partners $ (222,839) $ 36,795 $15,886,850 $ (245,010)
========== ========== =========== ==========
Net Income (Loss)
Per Unit of Limited Partnership Interest
(Basic and Diluted)
Operations $ (28.74) $ 4.75 $ (205.32) $ (31.60)
========== ========== =========== ==========
Net gain on sale $ 0 $ 0 $ 2,254.58 $ 0
========== ========== =========== ==========
Net income (loss) $ (28.74) $ 4.75 $ 2,049.26 $ (31.60)
========== ========== =========== ==========
Weighted Average Number of Units of Limited
Partnership Interest Outstanding 7,753 7,753 7,753 7,753
========== ========== =========== ==========
See notes to condensed consolidated financial statements.
3
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the nine months ended September 30, 2002 (Unaudited)
-----------------------------------------------------------------
Limited Partners:
Units of
Partnership
Interest Cumulative Accumulated
----------- Cash Earnings
Number Amount Distributions (Losses) Total
------ ------------ ------------- ----------- -----------
Balance, January 1, 2002 7,753 $119,968,973 $(100,170,361) $(5,013,210) $14,785,402
Cash distributions 0 0 (775,250) 0 (775,250)
Net income for the period 0 0 0 15,886,850 15,886,850
----- ------------ ------------- ------------ -----------
Balance, September 30, 2002 7,753 $119,968,973 $(100,945,611) $ 10,873,640 $29,897,002
===== ============ ============= ============ ===========
General Partner:
Units of
Partnership
Interest Cumulative Accumulated
----------- Cash Earnings
Number Amount Distributions (Losses) Total
------ ------- ------------- ----------- --------
Balance, January 1, 2002 1 $10,000 $(24,874) $(1,657) $(16,531)
Cash distributions 0 0 (100) 0 (100)
Net income for the period 0 0 0 2,049 2,049
---- ------- -------- ------- --------
Balance, September 30, 2002 1 $10,000 $(24,974) $ 392 $(14,582)
==== ======= ======== ======= ========
See notes to condensed consolidated financial statements.
4
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
-----------------------------------------------------------
For the Nine Months Ended
September 30,
----------------------------
2002 2001
----------- ----------
Cash Flows From Operating Activities:
Net income (loss) $15,888,899 $ (245,042)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Gain on sale of investment in real estate property (17,480,880) 0
Equity in net loss of joint venture 30,560 0
Depreciation and amortization 1,260,885 1,754,937
Net (increase) decrease in operating assets 359,258 (587,642)
Net increase in operating liabilities 205,618 323,633
----------- ----------
Net cash provided by operating activities 264,340 1,245,886
----------- ----------
Cash Flows From Investing Activities:
Acquisition of real estate property (4,713,385) 0
Investment in joint venture (3,477,980) 0
Proceeds from sale of investment in
real estate property, including water rights 31,389,975 0
Capital additions to real estate owned (605,673) (617,834)
----------- ----------
Net cash provided by (used in) investing activities 22,592,937 (617,834)
----------- ----------
Cash Flows From Financing Activities:
Borrowings under revolving credit facility 3,750,000 1,000,000
Repayments of borrowings under revolving
credit facility (4,500,000) 0
Principal payments on mortgage notes payable (466,261) (570,028)
Retirement of mortgage note payable (19,591,390) 0
Distributions paid to partners (775,350) (775,350)
Increase in deferred financing costs 0 (43,958)
----------- ----------
Net cash used in financing activities (21,583,001) (389,336)
----------- ----------
Net increase in cash and cash equivalents 1,274,276 238,716
Cash and cash equivalents at beginning of period 634,029 474,689
----------- ----------
Cash and cash equivalents at end of period $ 1,908,305 $ 713,405
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,430,451 $2,775,383
=========== ==========
See notes to condensed consolidated financial statements.
5
SB PARTNERS
Notes to Condensed Consolidated Financial Statements
(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 condensed consolidated financial statements as of and for the three
and nine month periods ended September 30, 2002 and 2001 included herein are
unaudited; however, the information reflects all adjustments (consisting solely
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 condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Registrant's latest
annual report on Form 10-K.
The results of operations for the three and nine month periods ended
September 30, 2002 and 2001 are not necessarily indicative of the results to be
expected for a full year.
The significant accounting and financial reporting policies of the
Partnership are as follows:
(a) The accompanying condensed consolidated financial statements include
the accounts of SB Partners and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. The condensed consolidated financial statements are
prepared using the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of
America. Revenues are recognized as earned and expenses are
recognized as incurred. The preparation of financial statements in
conformity with such principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(b) In connection with the mortgage financing on certain of its
properties, the Partnership placed the assets and liabilities of
those properties into single asset limited partnerships, limited
liability companies or land trusts which hold title to the
properties. The Partnership has effective control over such entities
and holds 100% of the beneficial interest. Accordingly, the
financial statements of these subsidiaries are consolidated with
those of the Partnership.
(c) Depreciation of buildings, furnishings and improvements is computed
using the straight-line method of depreciation, based upon the
estimated useful lives of the related properties, as follows:
Buildings and improvements 5 to 40 years
Furnishings 5 to 7 years
Expenditures for maintenance and repairs are expensed as incurred.
Expenditures for improvements, renewals and betterments, which
increase the useful life of the real estate, are capitalized. Upon
retirement or sale of property, the related cost and accumulated
depreciation are removed from the accounts. Amortization of deferred
financing and refinancing costs is computed by amortizing the cost
on a straight-line basis over the terms of the related mortgage
notes.
(d) Real estate properties are regularly evaluated on a property by
property basis to determine if it is appropriate to write down
carrying values to recognize an impairment of value. Impairment is
determined by calculating the sum of the estimated undiscounted
future cash flows including the projected undiscounted future net
proceeds from the sale of the property. In the event such sum is
less than the net carrying value of the property, the property is
written down to estimated fair value. Based on the Partnership's
long-term hold strategy for its investments in real estate, the
carrying value of its properties at September 30, 2002 is estimated
to be fully realizable.
6
(e) Real estate held for sale is carried at the lower of cost or fair
value less selling costs. Upon determination that a property is held
for sale, all depreciation of such property is ceased.
(f) For financial reporting purposes, the Partnership considers all
highly liquid, short-term investments with maturities of three
months or less when purchased to be cash equivalents.
(g) The Partnership accounts for its investment in joint venture under
the equity method of accounting as the Partnership owns a
non-controlling interest in the joint venture.
(h) Tenant leases at the residential properties generally have terms of
one year or less. Tenant leases at the industrial flex property have
terms that exceed one year. Rental income is recognized when earned
pursuant to the terms of the leases with tenants.
(i) Gains on sales of investments in real estate are recognized in
accordance with generally accepted accounting principles applicable
to sales of real estate, which require minimum levels of initial and
continuing investment by the purchaser, and certain other tests be
met, prior to the full recognition of profit at the time of the sale.
When the tests are not met, gains on sales are recognized on either
the installment or cost recovery methods.
(j) Each partner is individually responsible for reporting its share of
the Partnership's taxable income or loss. Accordingly, no provision
has been made in the accompanying condensed consolidated financial
statements for Federal, state or local income taxes.
(k) Net income (loss) per unit of partnership interest has been computed
based on the weighted average number of units of partnership interest
outstanding during each year. There were no potentially dilutive
securities outstanding during the periods presented.
(l) The Partnership is engaged in only one industry segment, real estate
investment, and therefore information regarding industry segments is
not applicable and is not included in these condensed consolidated
financial statements.
(m) On January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" (the "Statement"). The Statement
requires the operations related to properties that have been sold or
properties that are intended to be sold be presented as discontinued
operations in the statements of operations for all periods presented,
and that properties intended to be sold be designated as "held for
sale" on the balance sheet. However, long-lived assets classified as
held for sale prior to the initial application of the Statement are
required to continue to be accounted for in accordance with the prior
pronouncement applicable for that disposal. As such, Meadowwood
Apartments is reflected in these condensed consolidated financial
statements in accordance with SFAS No. 121.
(n) In April, 2002, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 145, "Rescission of SFAS No. 4, 22 and 64, Amendment
of SFAS No. 13 and Technical Corrections". SFAS No. 145, among other
things, rescinds SFAS No. 4 "Reporting Gains and Losses from
Extinguishment of Debt", and accordingly, the reporting of gains or
losses from the early extinguishment of debt as extraordinary items
will only be required if they meet the specific criteria for
extraordinary items included in Accounting Principles Board Opinion
No. 30, "Reporting the Results of Operations". Although the
rescission of SFAS No. 4 is mandatory as of January 1, 2003,
management has elected to adopt SFAS No.145 immediately (See Note 3).
In July, 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which is also effective
January 1, 2003. SFAS No. 146 replaces current accounting literature
and requires the recognition of costs associated with exit or
disposal activities when they are incurred rather than at the date of
a commitment to an exit or disposal plan. The Partnership does not
anticipate the adoption of this statement will have a material effect
on the Partnership's condensed consolidated financial statements.
(o) Certain prior year amounts have been reclassified to make them
comparable to the current year presentation.
7
(2) INVESTMENTS IN REAL ESTATE AND REAL ESTATE HELD FOR SALE
As of September 30, 2002, the Partnership owned apartment projects in
St. Louis, Missouri; Greenville, South Carolina; and Holiday and
Orlando, Florida; as well as an industrial flex property in Maple
Grove, Minnesota and 13.9 acres of land in Holiday, Florida. The
following is the cost basis and accumulated depreciation of the real
estate investments owned by the Partnership and the net carrying value
of the real estate asset held for sale at September 30, 2002 and
December 31, 2001:
Real Estate at Cost
No.of Year of ---------------------------
Type Prop. Acquisition Description 9/30/02 12/31/01
- ---- ----- ----------- ------------- ----------- -----------
Residential properties 4 1991-99 1,042 Apts. $56,421,507 $56,042,398
Industrial flex property 1 2002 60,345 sf 4,754,090 0
Undeveloped land 1 1978 13.9 Acres 44,387 44,387
----------- -----------
Total cost 61,219,984 56,086,785
Less: accumulated depreciation (6,766,880) (5,641,349)
----------- -----------
Net book value $54,453,104 $50,445,436
=========== ===========
Real Estate Held for Sale
No.of Year of ---------------------------
Type Prop. Acquisition Description 9/30/02 12/31/01
- ---- ----- ----------- ------------- ----------- -----------
Residential property 1 1983 704 Apts. $ 0 $13,723,236
=========== ===========
In August 2001, the Partnership began actively marketing Meadowwood Apartments
in Reno, Nevada for sale. As such, the Partnership reflected this investment as
a "real estate asset held for sale" on the accompanying condensed consolidated
balance sheet as of December 31, 2001, and, since the change in holding
strategy, the investment in the property was no longer depreciated. The carrying
amount of real estate assets held for sale is the lower of depreciated cost or
fair market value less selling costs and is included above at depreciated cost.
(3) REAL ESTATE TRANSACTIONS
In February 2002, the Partnership sold the water rights at Meadowwood
Apartments for $389,725. As there was no identifiable cost basis for
the rights, the receipt, net of costs incurred in the transaction, has
been taken into income and is included as a component of gain on sale
of investment in real estate property on the accompanying condensed
consolidated statements of operations.
On April 30, 2002, the Partnership purchased a 75% interest in a
partnership that owns Waterview Apartments in Westchester,
Pennsylvania. The Partnership paid approximately $3,270,000 in cash for
this non-controlling interest. The purchase price reflects an agreed
upon value of $18,500,000 for the apartment property, net of a first
mortgage loan of approximately $14,230,000 and certain related assets
and liabilities. Waterview Apartments comprises 203 apartment units and
6,000 square feet of commercial space.
On May 9, 2002, the Partnership sold Meadowwood Apartments in Reno,
Nevada for $31,350,000 in an all cash transaction. The proceeds from
the sale were used, in part, to retire the mortgage note of
approximately $19,600,000 that had been secured by the property. In
accordance with SFAS No. 145, "Recission of SFAS No. 4, 44 and 64,
Amendment of SFAS No. 13, and Technical Corrections", the Partnership
has included the yield maintenance payment on the mortgage note,
approximately $1,000,000, in interest expense in the condensed
consolidated statements of operations for the nine months ended
September 30, 2002. The sale of Meadowwood Apartments resulted in a
net gain for financial reporting purposes of approximately $17,100,000.
On June 12, 2002, the Partnership purchased Eagle Lake Business Center
IV in Maple Grove, Minnesota for approximately $4,700,000 in an all
cash transaction. The property contains approximately 60,000 square
feet of industrial flex space.
8
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following:
Net Carrying Amount
Annual September 30, December 31,
Interest Maturity Installment Amount Due ------------ -----------
Property Rate Date Payments(a) at Maturity 2002 2001
- ----------------------------------------------------------------------------------------------------------
Halton Place(b) 3.770% 2/03 Interest Only $ 250,000 $ 250,000 $ 1,000,000
Holiday Park 6.895% 2/08 $ 300,169 3,277,785 3,594,998 3,633,115
Cypress Key 6.605% 1/09 1,322,707 14,772,418 16,472,235 16,643,524
Le Coeur du Monde 7.805% 10/09 890,447 9,075,763 10,021,367 10,099,997
Meadowwood (c) 0 19,769,615
----------- -----------
$30,338,600 $51,146,251
=========== ===========
(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 is secured by
Halton Place Apartments. The credit facility is for a term of two years.
Borrowings bear interest at one-month LIBOR plus 1.95%. The agreement
requires the Partnership to maintain a ratio of NOI, as defined, to actual
debt service, as defined, of 1.2 to 1. As of September 30, 2002, the
Partnership is in compliance with the covenant. In connection with this
credit facility, the Partnership is subject to market risk relating to
potential future changes in interest rates.
(c) The loan that had been secured by Meadowwood Apartments was retired when
the property was sold on May 9, 2002.
(5) DISTRIBUTIONS
In March 2002, the Partnership paid a cash distribution of $100 per
unit to Unitholders of record as of December 31, 2001, which totaled
$775,350 based on 7,753.5 units outstanding.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
-------------------------------------------------------------------------
General
- -------
The condensed consolidated financial statements as of and for the three
months ended September 30, 2002 reflect the operations of four residential
garden apartment properties, a joint venture interest purchased April 30, 2002
and an industrial flex property purchased June 12, 2002. The condensed
consolidated financial statements as of and for the nine months ended
September 30, 2002 reflect the operations of five residential garden apartment
properties, and the aforementioned joint venture and industrial flex property.
The condensed consolidated financial statements as of and for the three and nine
months ended September 30, 2001 reflect the operations of five residential
garden apartment properties. Meadowwood Apartments was sold on May 9, 2002 (see
Note 3 to the Condensed Consolidated Financial Statements).
Total revenues for the three months ended September 30, 2002 decreased
$1,172,000 to approximately $2,111,000 from approximately $3,283,000 for the
three months ended September 30, 2001. Net loss for the three months ended
September 30, 2002 increased approximately $260,000 to approximately $223,000
from net income of approximately $37,000 for the three months ended September
30, 2001.
Total revenues for the nine months ended September 30, 2002 decreased
approximately $1,818,000 to $7,845,000 from $9,663,000 for the nine months ended
September 30, 2001. Net income for the nine months ended September 30, 2002
increased approximately $16,134,000 to net income of approximately $15,889,000
from net loss of approximately $245,000 for the nine months ended
September 30, 2001.
The changes in total revenues and net income/loss for the three and nine
months ended September 30, 2002, are the result of the changes from 2001 to 2002
in the composition of the portfolio. On April 30, 2002, the Registrant purchased
a 75% interest in a partnership that owns Waterview Apartments, a 203-unit
apartment community in Westchester, Pennsylvania. On May 9, 2002, the Registrant
sold Meadowwood Apartments, a 704-unit apartment community in Reno, Nevada, for
$31,350,000 in an all cash transaction, and retired the mortgage note payable
that had been secured by the property. In addition, on June 12, 2002, the
Registrant purchased Eagle Lake Business Center IV, a 60,345 square foot
industrial flex property in Maple Grove, Minnesota, for $4,700,000, in an all
cash transaction.
Due to the sale of Meadowwood Apartments by the Registrant, the reporting
period for the property ended on May 9, 2002. The lower revenues are due
substantially to the shortened reporting period. Revenues from Meadowwood
Apartments were approximately $1,267,000 and $1,950,000 lower, respectively, in
the three and nine months ended September 30, 2002 than in the comparable
periods in the prior year. The decrease in revenues from Meadowwood Apartments
was partially offset by the purchase of Eagle Lake Business Center IV in June
2002, which added approximately $176,000 and $213,000, respectively, to total
revenues for the three and nine months ended September 30, 2002.
As of December 31, 2001, Meadowwood Apartments was under a contract of
sale, and, as such, was classified as a "real estate asset held for sale" on the
condensed consolidated balance sheet. In accordance with accounting principles
generally accepted in the United States of America, depreciation expense is no
longer recorded once a property is so classified. The elimination of
depreciation reduced depreciation expense approximately $160,000 and $642,000
for the three and nine months ended September 30, 2002, respectively. Interest
expense was $376,000 lower for the three months ended September 30, 2002 than
for the three months ended September 30, 2001 as no interest was incurred for
the loan that had been secured by Meadowwood Apartments after the loan was
retired when the property was sold. Interest expense for the nine months ended
September 30, 2002 is approximately $540,000 higher than for the comparable
period in 2001 as a yield maintenance payment of approximately $1,056,000 was
paid as the loan was retired prior to its scheduled maturity. As the proceeds
from the sale of Meadowwood Apartments was used to purchase Eagle Lake Business
Center IV and the 75% joint venture interest in Waterview Apartments, no debt or
interest expense has been incurred in connection with these two new investments.
For additional analysis, please refer to the discussions of the individual
properties below.
10
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
- ----------------------------
In preparing the condensed consolidated financial statements management
has made estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
Set forth below is a summary of the accounting policies that management
believes are critical to the preparation of the condensed consolidated financial
statements. The summary should be read in conjunction with the more complete
discussion of significant accounting policies included in Note 2 to the
condensed consolidated financial statements and the Partnership's Annual Report
on Form 10-K as of and for the year ended December 31, 2001.
Real Estate
- -----------
Real estate is carried at cost, net of accumulated depreciation and
amortization. Maintenance and repairs are charged to operations as incurred.
Depreciation requires an estimate by management of the useful life of each
property as well as an allocation of the costs associated with a property to its
various components. If the Partnership does not allocate these costs
appropriately or incorrectly estimates the useful lives of its real estate,
depreciation expense may be misstated.
The Partnership's properties are regularly evaluated on a property by
property basis for impairment. If the Partnership incorrectly estimates the
value of the asset or the undiscounted cash flows, the impairment charges may be
different from those, if any, in the consolidated financial statements.
Joint Venture
- --------------
The Partnership has an investment in a joint venture that is accounted for
under the equity method of accounting because the other venture partner has
substantive participative rights regarding the venture's operations. Were the
Partnership deemed to control this entity, it would have to be consolidated and
therefore impact the balance sheet, operations and related ratios. The ultimate
realization of the investment in joint ventures is dependent on a number of
factors including the performance of the investee and market conditions. If the
venture determines that the real estate held by its investee is impaired, then
an impairment charge would be recorded by the venture and Partnership would
record its share of loss.
Revenue Recognition
- -------------------
Rental income is recognized when earned pursuant to the terms of the
leases. Base rents and reimbursement of the tenants' share of certain operating
expenses are generally recognized when due from tenants. Before the Partnership
can recognize revenue, it is required to assess, among other things, its
collectibility. If the Partnership incorrectly determines the collectibility of
its revenue, its net income and assets could be overstated.
11
Liquidity and Capital Resources
- -------------------------------
As of September 30, 2002, the Registrant had cash and cash equivalents of
approximately $1,908,000 in addition to approximately $1,131,000 of deposits
held in escrow by certain lenders for the payment of insurance, real estate
taxes and certain capital and maintenance costs. These balances are
approximately $957,000 more than the cash, cash equivalents and deposits held in
escrow as of December 31, 2001. Higher cash balances are due primarily to the
sale of Meadowwood Apartments which provided approximately $10,600,000 of cash
flow after retiring the mortgage note of approximately $19,600,000 that had been
secured by the property, and paying the costs of the sale and yield maintenance
on the mortgage note. The sale of the water rights at Meadowwood Apartments in
February 2002 provided approximately $380,000 of cash. Operations, net of a
decrease of approximately $317,000 of deposits held in escrow by lenders,
provided approximately $264,000 of cash. Uses of cash during the period included
distributions amounting to approximately $775,000 that were paid to Unitholders
of record as of December 31, 2001. Approximately $4,700,000 was invested in an
industrial flex property, and approximately $3,400,000 was invested in a joint
venture. Capital additions to existing real estate properties totaled
approximately $606,000 during the period, and, in addition to the retirement of
the mortgage note that had been secured by Meadowwood Apartments, principal
reductions of approximately $1,216,000 were made on mortgage notes payable.
Total outstanding debt at September 30, 2002 consisted of $30,088,600 of
long-term non-recourse first mortgage notes, and $250,000 under a revolving
credit facility, all secured by real estate owned by the Registrant (see Note 4
to the CondensedConsolidated Financial Statements). Scheduled maturities through
regularly scheduled monthly payments will be approximately $66,000 for the
remainder of 2002. 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. As of the
balance sheet date, $7,250,000 remained available to the Registrant under the
revolving credit facility.
Meadowwood Apartments in Reno, Nevada, had been classified as a real
estate asset held for sale on the December 31, 2001 condensed consolidated
balance sheet. The Registrant sold the property for $31,350,000 on May 9, 2002.
(Please refer to Form 8-K filed in connection with the sale.) After retirement
of the mortgage note secured by the property and the payment of other costs
associated with the sale, including the yield maintenance payment required under
the terms of the mortgage note, the Registrant realized approximately
$10,600 000 of cash proceeds. A majority of the proceeds have been invested in
an industrial flex space property and a real estate joint venture. (Please refer
to Footnote 3 to the Condensed Consolidated Financial Statements.)
In March 2002, the Registrant made a distribution of $100 per unit to
Unitholders of record as of December 31, 2001. This is the fourth consecutive
annual distribution since the repositioning of the portfolio in the late 1990's.
However, there is no requirement to make such distributions, nor can there be
any assurance that future operations will generate cash available for
distributions.
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.
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.
12
Meadowwood Apartments (Reno, Nevada)
- ---------------------
On May 9, 2002, the Registrant sold Meadowwood Apartments in Reno, Nevada,
for $31,350,000 in an all cash transaction. Proceeds from the sale were used, in
part, to retire the mortgage note of approximately $19,600,000 that had been
secured by the property. The sale of Meadowwood Apartments resulted in a net
gain for financial reporting purposes of approximately $17,100,000. (Please
refer to Form 8-K filed May 24, 2002, in connection with this transaction.) The
gain for tax purposes will be computed using the tax basis of the assets sold,
and will differ from the gain reported on the condensed consolidated financial
statements.
Total revenues for the nine months ended September 30, 2002 decreased
$1,950,000 to $1,780,000 from $3,730,000 for the nine months ended September 30,
2001. Loss before gain on sale and after depreciation and mortgage interest
expense for the nine months ended September 30, 2002 decreased $1,260,000 to a
loss of $872,000 from income of $388,000 for the nine months ended September 30,
2001.
Due to the sale of the property by the Registrant, the reporting period
for Meadowwood Apartments ended on May 9, 2002. The changes in revenues and
income are due substantially to the shortened reporting period. Revenues were
approximately $1,267,000 and $1,950,000 lower, respectively, in the three and
nine months ended September 30, 2002 than in the comparable periods in the prior
year. Furthermore, as Meadowwood Apartments was classified as a real estate
asset held for sale as of August, 2001, no depreciation was charged to expense
in the current periods, which decreased depreciation expense $160,000 and
$642,000, respectively, from the three and nine month periods of the prior year.
Interest expense was $376,000 lower for the three months ended September 30,
2002 than for the three months ended September 30, 2001 as no interest was
incurred for the loan that had been secured by the property after the loan was
retired when the property was sold. Interest expense for the nine months ended
September 30, 2002 is approximately $540,000 higher than for the comparable
period in 2001 as a yield maintenance payment of approximately $1,056,000 was
paid as the loan was retired prior to its scheduled maturity. Amortization
expense increased $57,000 as the balance of the costs incurred in connection
with the mortgage note was written off.
Holiday Park Apartments (Holiday, Florida)
- -----------------------
Total revenues for the three months ended September 30, 2002 increased
$4,000 to $335,000 from $331,000 for the three months ended September 30, 2001.
Net income, which includes deductions for depreciation and mortgage interest
expense, for the three months ended September 30, 2002 decreased $10,000 to
$39,000 from $49,000 for the three months ended September 30, 2001. Increased
revenue is due primarily to higher rental rates for new and renewing leases,
which added $10,000 to total revenues in the current period. The increase in
revenue was partially offset by a decrease in occupancy of 0.9%, to 89.5% from
90.4%, which reduced revenues $4,000, and greater tenant concessions, which
reduced revenues $2,000. The decrease in net income was the result of an
increase in expenses of $14,000, partially offset by the increase in revenues.
Payroll expenses increased $6,000 as staff positions that were open in the
comparable period of the prior year were filled. Insurance expense increased
$6,000 after the policies were renewed, reflecting a general increase in rates
by the insurance industry. Depreciation expense increased $7,000 as additional
assets were placed in service over the course of the current period. These
additional expenses were partially offset by repairs and maintenance costs which
were reduced $5,000 as some appliances and equipment were replaced in the period
prior year, but not the period for the current year.
13
Total revenues for the nine months ended September 30, 2002 increased
$44,000 to $1,027,000 from $983,000 for the nine months ended September 30,
2001. Net income, which includes deductions for depreciation and mortgage
interest expense, for the nine months ended September 30, 2002 increased $13,000
to $125,000 from $112,000 for the nine months ended September 30, 2001. Higher
revenue is due primarily to a rise in rental rates implemented at the property
for new and renewing leases, which generated approximately $32,000 of revenues.
In addition, receipts from the water and sewer billback program raised utility
income $10,000. The increase in net income was the result of higher revenue,
partially offset by an increase in expenses. Payroll expenses increased $18,000
as staff positions that were open in the comparable period of the prior year
were filled. Insurance expense increased $10,000 due to higher premiums in the
current period. Depreciation expense increased $8,000 as additional assets were
placed in service over the course of the year. Real estate tax expense increased
$6,000. These increases in expenses were partially offset by lower repairs and
maintenance expenses of $5,000, primarily resulting from fewer replacements of
appliances and other equipment.
Cypress Key Apartments (Orlando, Florida)
- ----------------------
Total revenues for the three months ended September 30, 2002 decreased
$53,000 to $733,000 from $786,000 for the three months ended September 30, 2001.
Net loss, which includes deductions for depreciation and mortgage interest
expense, for the three months ended September 30, 2002 increased $51,000 to
$93,000 from $42,000 for the three months ended September 30, 2001. Although
rental rates on new and renewing leases were raised which added $9,000 to
revenues, average occupancy decreased 2.5%, to 90.2% from 92.7% for the
comparable period in 2001, which reduced revenues approximately $23,000. In
addition, total revenues declined by $29,000 as more concessions were given to
tenants. Miscellaneous income was $10,000 lower as application and other fees
were waived in an effort to induce tenants to enter into leases. A new apartment
community built directly across from Cypress Key has been very aggressive in its
leasing efforts, which necessitated these concessions on new and renewing
leases. The increase in net loss was a result of lower revenues during the
current period. Although total expenses remained comparable to the same period
in 2001, repairs and maintenance expenses increased $15,000 due primarily to
increased carpet replacement costs. Insurance expense increased $8,000 due to
higher premiums in the current period. These increases in expense were offset by
decreases in real estate taxes of $12,000, interest expense of $4,000, and
utilities expense of $3,000.
Total revenues for the nine months ended September 30, 2002 decreased
$147,000 to $2,213,000 from $2,360,000 for the nine months ended September 30,
2001. Net loss, which includes deductions for depreciation and mortgage interest
expense, for the nine months ended September 30, 2002 increased $173,000 to
$280,000 from $107,000 for the nine months ended September 30, 2001. Average
occupancy decreased 2.4%, to 90.9% from 93.3% for the comparable period in 2001,
reducing revenues $52,000. Although rental rates on new and renewing tenants
were raised, greater concessions were offered to prospective tenants, resulting
in a net decrease in rental revenues of $52,000. Fee income was $25,000 lower
and collection losses $16,000 higher in the nine months ended
September 30, 2002. The net loss was a result of lower revenues and an increase
of $26,000 in expenses. Payroll expenses for the current period increased
$21,000. Repairs and maintenance increased $49,000, primarily as a result of
higher turnover costs incurred as vacated apartments were prepared for new
tenants. Insurance expense increased $13,000 due to higher premiums in the
current period. These increases in expenses were partially offset by a decrease
in real estate taxes of $37,000, a decrease in utility expense of $11,000 and a
decrease in interest expense of $11,000, as cumulative payments on the
outstanding principal have reduced the cost of the debt.
14
Halton Place Apartments (Greenville, South Carolina)
- -----------------------
Total revenues for the three months ended September 30, 2002 decreased
$23,000 to $394,000 from $417,000 for the three months ended September 30, 2001.
Net income, which includes deductions for depreciation and interest expense, for
the three months ended September 30, 2002 decreased $27,000 to $80,000 from
$107,000 for the three months ended September 30, 2001. Average occupancy
increased 1.6%, to 91.0% from 89.4% for the comparable period in 2001, which
increased revenue $9,000. However, in an effort to increase occupancy, more
concessions were given to tenants, which reduced revenues $31,000. The decrease
in net income was caused by the reduction of revenues and an increase in
expenses. Depreciation and amortization expense was $10,000 higher in total,
and payroll costs were $9,000 higher. Real estate taxes decreased $6,000, and
interest expense decreased $8,000 as average borrowings under the revolving
credit facility decreased in the current period.
Total revenues for the nine months ended September 30, 2002 decreased
$72,000 to $1,174,000 from $1,246,000 for the nine months ended September 30,
2001. Net income, which includes deductions for depreciation and mortgage
interest expense, for the nine months ended September 30, 2002 decreased $95,000
to $239,000 from $334,000 for the nine months ended September 30, 2001. The
decrease in total revenues is due primarily to a decrease in occupancy at the
property. Average occupancy decreased 2.3%, to 87.3% from 89.6% for the
comparable period in 2001, which reduced rental revenue $30,000. Although rental
rates were increased which raised revenues $10,000, greater tenant concessions
lowered revenues $49,000, and fees were waived which reduced revenues $4,000.
The decrease in net income was a result of lower revenues and an increase in
expenses of $23,000. Interest expense for the period increased $7,000, as the
average balance outstanding under the credit facility secured by the property
was higher in the current period. In addition, financing costs were amortized
over all nine months in the current period which increased expenses $16,000.
Depreciation expense was $11,000 higher as additional assets were placed in
service over the course of the year. Payroll expense increased $21,000. These
increases were partially offset by a decrease in real estate taxes of $28,000.
Le Coeur du Monde Apartments (St. Louis, Missouri)
- ----------------------------
Total revenues for the three months ended September 30, 2002 decreased
$19,000 to $464,000 from $483,000 for the three months ended September 30, 2001.
Net loss, which includes deductions for depreciation and mortgage interest
expense, for the three months ended September 30, 2002 decreased $50,000 to
$43,000 from net income of $7,000 for the three months ended September 30, 2001.
The decrease in revenues is due primarily to lower occupancy at the property.
Average occupancy for the three months ended September 30, 2002 decreased 4.2%,
to 94.4% from 98.6% for the three months ended September 30, 2001, which reduced
revenues $13,000. Collection losses were $5,000 greater than in the prior
period, and additional concessions to tenants lowered revenues $2,000. The
decrease in net income was a result of lower revenues and an increase in
expenses of $32,000. Repairs and maintenance costs were $18,000 higher primarily
because apartment turnover costs increased as more apartments were painted in
anticipation of renting to new tenants. Depreciation expense increased $7,000 as
additional assets were placed in service over the course of the last year, and
real estate tax expense increased $4,000. Insurance expense also increased
$4,000 as renewal premiums were higher than the prior year. Payroll costs
increased $10,000 as temporary staff positions were filled with full-time
employees. These increases in expenses were partially offset by a decrease in
utility expense of $6,000, and various administrative costs and advertising
costs which in total were $4,000 lower than in the comparable period in the
prior year.
Total revenues for the nine months ended September 30, 2002 increased
$73,000 to $1,399,000 from $1,326,000 for the nine months ended September 30,
2001. Net loss, which includes deductions for depreciation and mortgage interest
expense, for the nine months ended September 30, 2002 decreased $25,000 to
$80,000 from $105,000 for the nine months ended September 30, 2001. Higher
revenues were due primarily to higher average occupancy in the current period.
The average occupancy rate rose 1.9% to 95.0% from 93.1% for the same period in
the prior year, which added $45,000 to total revenues. Tenant concessions were
lower, which increased revenue $16,000. Miscellaneous income was also $11,000
higher in the current period, due primarily to additional receipts from fees.
The decrease in net loss was a result of higher revenues partially offset by an
increase in expenses of $47,000. Depreciation expense increased $15,000 as
additional assets were placed in service over the course of the year, and real
estate tax expense increased $13,000. Repairs and maintenance increased $16,000
due primarily to an increase in apartment turnover costs of $10,000. Additional
insurance costs of $7,000 resulted from higher premiums charged when policies
were renewed in the current year. Payroll expense increased $16,000 as temporary
positions were filled with full-time employees. Interest expense decreased
$6,000 as cumulative principal payments reduced the cost of the debt. Utilities
decreased $6,000, and advertising and promotional costs were down $7,000.
15
Eagle Lake Business Center IV (Maple Grove, Minnesota)
- -----------------------------
On June 12, 2002, the Registrant purchased Eagle Lake Business Center IV,
a 60,345 square foot industrial flex property located in Maple Grove, Minnesota,
for $4,700,000 in an all cash transaction. (Refer also to Footnote 3 of the
Condensed Consolidated Financial Statements.)
Total revenues for the three and nine months ended September 30, 2002 were
$176,000 and 213,000, respectively. Net income, which includes deductions for
depreciation expense, for the three and nine months ended September 30, 2002 was
$99,000 and $118,000, respectively. Total revenues for the three months ended
September 30, 2002 was comprised of rental income of $134,000 and escalation
income of $42,000. Expenses for the three months ended September 30, 2002
related primarily to real estate taxes of $27,000, depreciation expense of
$30,000, repairs and maintenance expenses of $6,000, insurance expense of $4,000
and other miscellaneous expenses of $10,000. As of September 30, 2002, the
property is 100% occupied.
Total revenues for the nine months ended September 30, 2002 was comprised
of rental income of $163,000 and escalation income of $50,000. Expenses for the
nine months ended September 30, 2002 related primarily to real estate taxes of
$32,000, depreciation expense of $35,000, repairs and maintenance expenses of
$8,000, insurance expense of $5,000 and other miscellaneous expenses of $15,000.
Investment in Joint Venture
- ---------------------------
On April 30, 2002, the Registrant purchased a 75% interest in a
partnership that owns Waterview Apartments in Westchester, Pennsylvania.
Waterview Apartments comprises 203 apartment units and 6,000 square feet of
commercial space. (Refer also to Footnote 3 of the Condensed Consolidated
Financial Statements.)
Equity in net loss of joint venture for the three and nine months ended
September 30, 2002 was $17,182 and $30,560, respectively.
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002
----------------------------------------------------------------
On March 1, 2001, the Registrant entered into a revolving credit facility
agreement with a bank under which interest incurred is determined based on
current market rates. As such, the Registrant has market risk to the extent
interest rates fluctuate during the two-year term and funds are advanced by the
bank under the agreement. The Registrant does not believe this limited exposure
to market risk will have a material adverse effect on its financial position or
on results of its operations.
ITEM 4. CONTROLS AND PROCEDURES
(a) The President and the Chief Financial Officer of SB Partners have
evaluated the disclosure controls and procedures relating to the
Registrant's Quarterly Report on Form 10-Q for the period ending
September 30, 2002 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, 2002 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
--------------------------------
Not Applicable
17
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.
Each of the undersigned hereby certifies in his/her capacity as an officer of SB
Partners Real Estate Corporation, the general partner of SB Partners (the
"Partnership"), that the Quarterly Report of the Partnership on Form 10-Q for
the period ended September 30, 2002 fully complies with the requirements of
Section 13(a) of the Securities and Exchange Act of 1934 and that the
information contained in such report fairly presents, in all material respects,
the financial condition of the Partnership at the end of such period and the
results of operations of the Partnership for such period.
SB PARTNERS
-----------------------------
(Registrant)
By: SB PARTNERS REAL ESTATE
CORPORATION
-----------------------------
General Partner
Dated: November 19, 2002 By:/s/ John H. Streicker
-----------------------------
John H. Streicker
President
Dated: November 19, 2002 By:/s/ Elizabeth B. Longo
-----------------------------
Elizabeth B. Longo
Chief Financial Officer
(Principal Financial Officer)
Dated: November 19, 2002 By:/s/ George N. Tietjen III
-----------------------------
George N. Tietjen III
Vice President
(Principal Accounting Officer)
I, John H. Streicker, 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 in order 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-14 and 15d-14) for the registrant
and we have:
(a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and to the
audit committee of the board of directors (or persons fulfilling the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
(6) The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 19, 2002 /s/ John H. Streicker
---------------------
John H. Streicker
President
I, Elizabeth B. Longo, 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 in order 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-14 and 15d-14) for the registrant
and we have:
(a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and to the
audit committee of the board of directors (or persons fulfilling the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
(6) The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 19, 2002 /s/ Elizabeth B. Longo
-----------------------
Elizabeth B. Longo
Chief Financial Officer