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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 March 31, 2004
-------------------------------------
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
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-6294787
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1251 Avenue of the Americas, N.Y., N.Y. 10020
- --------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(212) 408-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (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 (Unaudited)
Consolidated Balance Sheets as of
March 31, 2004 and December 31, 2003.............................1
Consolidated Statements of Operations
for the three months ended March 31, 2004 and 2003...............2
Consolidated Statements of Changes in Partners' Capital
for the three months ended March 31, 2004........................3
Consolidated Statements of Cash Flows
for the three months ended March 31, 2004 and 2003...............4
Notes to Consolidated Financial Statements.......................5 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations...............9 - 14
Quantitative and Qualitative Disclosures about Market Risk..........15
Controls and Procedures.............................................15
Part II
Other Information...................................................15
Signatures..........................................................16
Exhibit 31.....................................................17 - 18
Exhibit 32..........................................................19
1
ITEM 1. FINANCIAL STATEMENTS
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED BALANCE SHEETS(Unaudited)
March 31, 2004 and December 31, 2003
-----------------------------------------------------
March 31, December 31,
2004 2003
----------- ------------
Assets:
Investments -
Real estate, at cost
Land $ 5,780,842 $ 5,780,842
Buildings, furnishings and improvements 56,341,428 56,233,849
Less - accumulated depreciation (9,171,335) (8,777,534)
----------- -----------
52,950,935 53,237,157
Investment in joint venture 2,989,554 3,100,596
----------- ------------
55,940,489 56,337,753
Other assets -
Cash and cash equivalents 251,177 186,390
Cash held by lenders in escrow 806,098 667,561
Other 546,876 619,006
----------- ------------
Total assets $57,544,640 $57,810,710
=========== ============
Liabilities:
Mortgage notes payable $33,365,450 $32,773,875
Accounts payable and accrued expenses 718,317 857,312
Tenant security deposits 235,944 272,302
Deferred revenue 30,000 0
----------- ------------
Total liabilities 34,349,711 33,903,489
----------- ------------
Partners' Capital:
Units of partnership interest without par value;
Limited partners - 7,753 units 23,210,373 23,922,573
General partner - 1 unit (15,444) (15,352)
----------- ------------
Total partners' capital 23,194,929 23,907,221
----------- ------------
Total liabilities and partners' capital $57,544,640 $57,810,710
=========== ============
See notes to consolidated financial statements.
2
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
-------------------------------------------------
For The Three Months
Ended March 31,
-----------------------------
2004 2003
----------- ------------
Revenues:
Base rental income $1,892,571 $ 1,917,907
Other rental income 194,768 148,286
Interest on short-term investments 2,235 4,750
----------- ------------
Total revenues 2,089,574 2,070,943
----------- ------------
Expenses:
Real estate operating expenses 982,850 896,537
Interest on mortgage notes payable 545,317 538,402
Depreciation and amortization 407,259 418,993
Real estate taxes 248,107 254,802
Management fees 176,728 176,533
Other 20,423 11,489
----------- ------------
Total expenses 2,380,684 2,296,756
----------- -----------
Loss from operations (291,110) (225,813)
Equity in net loss of joint venture (111,042) (121,016)
----------- ------------
Net loss (402,152) (346,829)
Loss allocated to general partner (52) (45)
----------- ------------
Loss allocated to limited partners $ (402,100) $ (346,784)
=========== ============
Net Loss Per Unit of Limited Partnership Interest
(Basic and Diluted) $ (51.86) $ (44.73)
=========== ============
Weighted Average Number of Units of Limited
Partnership Interest Outstanding 7,753 7,753
=========== ============
See notes to consolidated financial statements.
3
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN
PARTNERS' CAPITAL For the three months ended
March 31, 2004 (Unaudited)
--------------------------------------------------------
Limited Partners:
Units of
Partnership
Interest Cumulative Accumulated
----------- Cash Earnings
Number Amount Distributions (Losses) Total
------ ------------ -------------- ----------- ------------
Balance, January 1, 2004 7,753 $119,968,973 $(104,821,861) $8,775,461 $23,922,573
Cash distributions 0 0 (310,100) 0 (310,100)
Net loss 0 0 0 (402,100) (402,100)
----- ------------ ------------- ----------- -----------
Balance, March 31, 2004 7,753 $119,968,973 $(105,131,961) $ 8,373,361 $23,210,373
===== ============ ============= =========== ===========
General Partner:
Units of
Partnership
Interest Cumulative Accumulated
----------- Cash Earnings
Number Amount Distributions (Losses) Total
------ ------------ -------------- ------------ ------------
Balance, January 1, 2004 1 $ 10,000 $ (25,474) $ 122 $ (15,352)
Cash distributions 0 0 (40) 0 (40)
Net loss 0 0 0 (52) (52)
----- ------------ ------------- ----------- -----------
Balance, March 31, 2004 1 $ 10,000 $ (25,514) $ 70 $ (15,444)
===== ============ ============= =========== ===========
See notes to consolidated financial statements.
4
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
------------------------------------------------
For the Three Months Ended
March 31,
-------------------------
2004 2003
----------- -----------
Cash Flows From Operating Activities:
Net loss $ (402,152) $ (346,829)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Equity in net loss of joint venture 111,042 121,016
Depreciation and amortization 407,259 418,993
Net increase in operating assets (79,865) (123,122)
Net decrease in operating liabilities (145,353) (41,678)
----------- ------------
Net cash provided by (used in) operating activities (109,069) 28,380
----------- ------------
Cash Flows From Investing Activities:
Additions to real estate owned (107,579) (78,624)
Investment in joint venture 0 (4,407)
----------- ------------
Net cash used in investing activities (107,579) (83,031)
----------- ------------
Cash Flows From Financing Activities:
Borrowings under revolving credit facility 700,000 2,750,000
Principal payments on mortgage notes payable (108,425) (101,141)
Distributions paid to partners (310,140) (3,876,750)
----------- ------------
Net cash provided by (used in) financing activities 281,435 (1,227,891)
----------- ------------
Net increase(decrease) in cash and cash equivalents 64,787 (1,282,542)
Cash and cash equivalents at beginning of period 186,390 1,693,069
----------- ------------
Cash and cash equivalents at end of period $ 251,177 $ 410,527
=========== ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 545,316 $ 538,402
=========== ============
See notes to consolidated financial statements.
5
SB PARTNERS
Unaudited Notes to 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 consolidated financial statements 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. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Partnership's latest annual report on Form 10-K.
The results of operations for the three month periods ended March 31,
2004 and 2003 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 consolidated financial statements include the
accounts of SB Partners and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. The 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 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 March 31, 2004 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) Deferred revenue represents amounts received under a laundry
contract that are recognized as earned over the contract
period.
(i) Tenant leases at the residential properties generally have
terms of one year or less. Rental income at the residential
properties is recognized when earned pursuant to the terms of
the leases. Leases at the industrial flex property have terms
that exceed one year. Rental income at the industrial flex
property is recognized on a straight-line basis over the terms
of the leases.
(j) Gains on sales of investments in real estate are recognized in
accordance with accounting principles generally accepted in the
United States of America applicable to sales of real estate,
which require that the purchaser maintain minimum levels of
initial and continuing investment, and that certain other tests
be met, prior to the full recognition of profit at the time of
the sale.
(k) 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 consolidated
financial statements for Federal, state or local income taxes.
(l) 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 period. There were
no potentially dilutive securities outstanding during the
periods presented.
(m) 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
consolidated financial statements.
(n) 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
SFAS No. 121.
(o) 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
became mandatory as of January 1, 2003, management adopted SFAS
No. 145 prior to that date.
(p) Certain prior year amounts have been reclassified to conform
with the current year presentation.
7
(2) INVESTMENTS IN REAL ESTATE
As of March 31, 2004, 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 at March 31, 2004 and
December 31, 2003:
Real Estate at Cost
No.of Year of ---------------------------
Type Prop. Acquisition Description 3/31/04 12/31/03
- ---- ----- ----------- ------------ ----------- -----------
Residential properties 4 1991-99 1,042 Apts. $57,316,220 $57,208,641
Industrial flex property 1 2002 60,345 sf 4,761,663 4,761,663
Undeveloped land 1 1978 13.9 Acres 44,387 44,387
----------- -----------
Total cost 62,122,270 62,014,691
Less: accumulated depreciation (9,171,335) (8,777,534)
----------- -----------
Net book value $52,950,935 $53,237,157
=========== ===========
8
(3) MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following non-recourse first liens:
Net Carrying Amount
Annual March 31, December 31,
Interest Maturity Installment Amount Due ---------- ------------
Property Rate Date Payments(a) at Maturity 2004 2003
- -------------------------------------------------------------------------------------------------
Halton Place(b) 3.050% 09/05 Interest Only $ 3,900,000 $ 3,900,000 $ 3,200,000
Holiday Park 6.895% 02/08 $ 300,169 3,277,785 3,512,606 3,526,935
Cypress Key 6.605% 01/09 1,322,707 14,772,418 16,103,194 16,167,261
Le Coeur du Monde 7.805% 10/09 890,447 9,075,763 9,849,650 9,879,679
----------- -----------
$33,365,450 $32,773,875
=========== ===========
(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 term of the agreement has been
extended to September 1, 2005. Borrowings bear interest at the 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 not less
than 1.2 to 1. As of March 31, 2004, 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.
(4) DISTRIBUTIONS
In March 2004, the Partnership paid a cash distribution of $40 per unit
to Unitholders of record as of December 31, 2003, which totaled
$310,140 based on 7,753 units outstanding.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
-------------------------------------------------------------------------------
General
- -------
The consolidated financial statements for the three months ended March 31,
2004 and 2003, 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 consolidated financial statements for
the three months ended March 31, 2004 and 2003 reflect the same composition of
the portfolio.
Total revenues for the three months ended March 31, 2004 increased $19,000
to approximately $2,090,000 from approximately $2,071,000 for the three months
ended March 31, 2003. This increase was primarily the result of increased other
income at the Eagle Lake Business Center. Net loss increased $55,000, to
approximately $402,000 for the three months ended March 31, 2004, from
approximately $347,000 for the three months ended March 31, 2003.
Total expenses for the three months ended March 31, 2004 increased
approximately $84,000 from the three months ended March 31, 2003 because
additional costs were incurred for repairs and maintenance, utilities, insurance
and project administrative expenses, as compared to the prior year. The increase
in expenses were offset by the aforementioned increase in revenues.
10
Revenues generated by the apartment property owned by the partnership in
which the Registrant has a 75% non-controlling joint venture interest are not
included in total revenues, nor are the expenses from this investment included
in total expenses. However, the equity in net loss of joint venture is net of
the revenues collected and expenses incurred by Waterview Apartments for the
three months ended March 31, 2004 and 2003.
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 Partnership's critical accounting policies are described in its Annual
Report on Form 10-K for the year ended December 31, 2003; there were no
significant changes to such policies in 2004.
11
Liquidity and Capital Resources
- -------------------------------
As of March 31, 2004, the Registrant had cash and cash equivalents of
approximately $251,177 in addition to approximately $806,098 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 $64,787 less than the
cash, cash equivalents and deposits held in escrow on December 31, 2003. After
adding approximately $139,000 to deposits held in escrow, operating activities
used approximately $(19,069) of cash flow during the three months ended
March 31, 2004. During the same period, the Registrant borrowed an additional
$700,000 under the revolving credit facility that is secured by Halton Place
Apartments. Uses of cash during the period included distributions amounting to
approximately $310,140 that were paid to Unitholders of record as of
December 31, 2003, capital additions to existing real estate properties of
approximately $108,000, and principal payments of approximately $108,000 made
on mortgage notes payable.
Total outstanding debt at March 31, 2004 consisted of approximately
$29,465,000 of long-term non-recourse first mortgage notes, and $3,900,000 under
a revolving credit facility, all secured by real estate owned by the Registrant
(see Note 3 to the Consolidated Financial Statements). The maturity date of the
credit facility has been extended to September 1, 2005. Scheduled maturities
through regularly scheduled monthly payments on non-recourse mortgage notes will
be approximately $337,000 for the remainder of 2004. The terms of certain
mortgage notes require monthly escrow of estimated annual real estate tax,
insurance, and reserves for repairs, maintenance and improvements to the secured
property, in addition to the payment of principal and interest. The Registrant
has no other debt except normal trade accounts payable and accrued interest on
mortgage notes payable.
Inflation and changing prices during the current period did not
significantly affect the markets in which the Registrant conducts its business,
or the Registrant's business overall.
In March 2004, the Registrant made a distribution of $40 per unit to
Unitholders of record as of December 31, 2003. However, there is no requirement
to make such distributions, nor can there be any assurance that future
operations will generate cash available for distributions.
The Registrant's properties are expected to generate sufficient cash flow
to cover operating, financing, capital improvement costs, and other working
capital requirements of the Registrant for the foreseeable future.
12
Holiday Park Apartments (Holiday, Florida)
- -----------------------
Total revenues for the three months ended March 31, 2004 increased
$3,000 to $360,000 from $357,000 for the three months ended March 31, 2003. Net
income, which includes deductions for depreciation and mortgage interest
expense, for the three months ended March 31, 2004 decreased $14,000 to $44,000
from $58,000 for the three months ended March 31, 2003. Lower rental revenues
were due primarily to a decrease in average occupancy of approximately 4.9%, to
91.4% from 96.3% for the three months ended March 31, 2003. Lower net income for
the three months ended March 31, 2004 was primarily the result of a $17,000
increase in expenses primarily due to an increase in repair and maintenance
expenses of $20,000.
Cypress Key Apartments (Orlando, Florida)
- ----------------------
Total revenues for the three months ended March 31, 2004 decreased $3,000
to $709,000 from $712,000 for the three months ended March 31, 2003. Net loss,
which includes deductions for depreciation and mortgage interest expense, for
the three months ended March 31, 2004 increased $24,000 to $138,000 from
$114,000 for the three months ended March 31, 2003. A small decrease in the
property's average occupancy of 0.2%, to 88.1% from 88.3% for the three months
ended March 31, 2003 was further compounded by an increase in rental
concessions. The increase in net loss from the three-month period in the prior
year resulted from the reduction in revenues, and a $21,000 increase in expenses
during the period in the current year. Several major expense categories
were higher in 2004 versus 2003, including, increased repairs and maintenance
costs $13,000 higher, and utilities that were $13,000 higher. These expense
increases were offset by a $3,000 decrease in payroll.
13
Halton Place Apartments (Greenville, South Carolina)
- -----------------------
Total revenues for the three months ended March 31, 2004 increased
$38,000 to $385,000 from $347,000 for the three months ended March 31, 2003. Net
income, which includes deductions for depreciation and interest expense, for the
three months ended March 31, 2004 increased $28,000 to $46,000 from $18,000 for
the three months ended March 31, 2003. The increase in revenues is due primarily
to higher occupancy at the property. Average occupancy for the three months
ended March 31, 2004 increased 8.4%, to 89.9% from 81.5% for the three months
ended March 31, 2003, which added $32,000 to revenues. Higher revenues in 2004
were partially offset by an increase in expenses of $10,000 resulting in the
increase in net income. Interest expense for the three months ended March 31,
2004 increased $14,000, as average borrowings under the revolving credit
facility rose in 2004. Administrative costs increased $8,000 for the period
ended March 31, 2004, and advertising and promotion expenses increased $3,000.
These increased expenses were offset by a $6,000 decrease in real estate taxes.
Le Coeur du Monde Apartments (St. Louis, Missouri)
- ----------------------------
Total revenues for the three months ended March 31, 2004 decreased $10,000
to $412,000 from $422,000 for the three months ended March 31, 2003. Net loss,
which includes deductions for depreciation and mortgage interest expense, for
the three months
ended March 31, 2004 increased $35,000 to $96,000 from $61,000 for the three
months ended March 31, 2003. Average occupancy increased 0.1%, to 86.5% from
86.4% for the same period in 2003, which increased revenues $4,000, however, an
increase in rental concessions for the three month period ended March 31, 2004
reduced revenues $12,000. The increase in net loss for 2004 was a result of
aforementioned lower revenues, in addition to an increase of $25,000 in
expenses. Repairs and maintenance costs increased $8,000 in 2004, payroll was
$8,000 higher and advertising and promotion expenses were $4,000 higher.
14
Eagle Lake Business Center IV (Maple Grove, Minnesota)
- -----------------------------
Total revenues for the three months ended March 31, 2004 decreased $7,000
to $219,000 from $226,000 for the three months ended March 31, 2003 which were
offset by a $10,000 decrease in expenses. Repairs & maintenance expenses were
$7,000 lower, project administration costs were $2,000 lower, and advertising
and promotion expense were $1,000 lower during the period in the current year.
Net income, which includes a deduction for depreciation, for the three months
ended March 31, 2004 increased $3,000 to $119,000 from $116,000, for the three
months ended March 31, 2003.
Investment in Joint Venture (West Chester, Pennsylvania)
- ---------------------------
Equity in net loss of joint venture for the three months ended March 31,
2004 decreased $10,000 to $111,000 from $121,000 for the three months ended
March 31, 2003. Corporate revenue for the three months ended March 31, 2004
increased $53,000 primarily due to a 32% increase in corporate suites income for
the registrant. Operating expenses primarily associated with the corporate suite
revenue increased by $40,000 with depreciation increasing by $3,000 for the
registrant.
15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
AS OF AND FOR THE THREE MONTHS ENDED March 31, 2004
----------------------------------------------------------
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 that fluctuate with LIBOR. As such, the Registrant has
market risk to the extent interest rates fluctuate during the term of the credit
facility and funds are advanced by the bank under the agreement. Based on the
weighted average outstanding balance under the credit facility for the three
months ended March 31, 2004, a 1% change in LIBOR would impact the Registrant's
net loss and cash flows by approximately $8,674.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
(a) The President and the Chief 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 March 31, 2004 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 March 31, 2004 that could
significantly affect those controls subsequent to the date of
evaluation.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Exhibit 31 - Incorporated herein.
Exhibit 32 - Incorporated herein.
16
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: May 14, 2004 By: /s/ John H. Streicker
-----------------------------------
John H. Streicker
President
Dated: May 14, 2004 By: /s/ Elizabeth B. Longo
-----------------------------------
Elizabeth B. Longo
Chief Financial Officer
(Principal Financial Officer)
Dated: May 14, 2004 By: /s/ George N. Tietjen III
-----------------------------------
George N. Tietjen III
Senior Vice President
(Principal Accounting Officer)
17
Exhibit 31
- ----------
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT 0F 2002
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 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) designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under our
supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the
preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles;
(c) 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
(d) 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.
Date: May 14, 2004 /s/ John H. Streicker
----------------------------------
John H. Streicker
President
18
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 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) designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under our
supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the
preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles;
(c) 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
(d) disclosed in this quarterly report any change in the
Registrant's internal control over financial reporting
that occurred during the Registrant's most recent
fiscal quarter (the Registrant's fourth fiscal quarter
in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect,
the Registrant's internal control over financial
reporting;
(5) The Registrant's other certifying officer and I have
disclosed, based on our most recent evaluation over internal
control over financial reporting, to the Registrant's auditors
and the audit committee of the Registrant's board of directors
(or persons performing the equivalent function):
(a) all significant deficiencies and material weaknesses in
the design or operation of internal control which are
reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report
financial information; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Registrant's internal control over
financial reporting.
Date: May 14, 2004 /s/ Elizabeth B. Longo
-----------------------------------
Elizabeth B. Longo
Chief Financial Officer
19
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 March 31, 2004 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.
Date: May 14, 2004 /s/ John H. Streicker
-----------------------------------
John H. Streicker
President
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 March 31, 2004 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:
(3) The report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and (4) The information contained in the
report fairly presents, in all material respects, the financial condition and
results of operations of the Partnership.
Date: May 14, 2004 /s/ Elizabeth B. Longo
-----------------------------------
Elizabeth B. Longo
Chief Financial Officer