SB PARTNERS - FORM 10-K - June 17, 2011

Attached files

file	filename
EX-99.15 OTH FIN ST - OMAHA AUDIT REPORT 2010 - SB PARTNERS	sbp10k2010omahafs.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FORM 10-K - ANNUAL REPORT PURSUANT TO SECTION 13

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended	December 31, 2010

or

[ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________________ to ______________________


Commission file Number: 0-8952

SB Partners
(Exact name of registrant as specified in its charter)

New York		13-6294787

(State of other Jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


1 New Haven Avenue, Suite 207, Box 11, Milford, Ct.		06460
(Address of principal executive offices)		(Zip Code)


Registrant's telephone number, including area code			(203) 283-9593


Securities registered pursuant to Section 12(b) of the Act:

Title of each Class		Name of each exchange on which registered
NONE


Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interests
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. [ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act from their obligations under those sections. [ ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the proceeding twelve months (or for such shorter period that the Registrant was required to submit and post such files). [ ] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this

Form 10-K. [ ]

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

[ ] Large Accelerated Filer [ ] Accelerated Filer [X] Non-Accelerated Filer [ ] Smaller Reporting Company

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

NOTE: If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.

Not Applicable

APPLICABLE ONLY TO REGISTRANTS 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 Section 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 REGISTRANTS)

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

Not Applicable

DOCUMENTS INCORPORATED BY REFERENCE.

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g. annual report to security holders for fiscal year ended December 24, 1980).

None

PART I

ITEM 1. BUSINESS

Description of SB Partners (the “Registrant”)

The Registrant is a New York limited partnership engaged in acquiring, operating and holding for investment a varying portfolio of real estate interests. The Registrant's initial public offering was in 1971, the year it began operations. As of December 31, 2010, the Registrant owns an industrial flex property in Maple Grove, Minnesota, and a warehouse distribution property in Lino Lakes, Minnesota. In addition, the Registrant has a thirty percent interest in Sentinel Omaha, LLC (“Omaha”). Omaha is a real estate investment company which as of December 31, 2010 owned 24 multifamily properties in 17 markets. Omaha is an affiliate of the Registrant’s general partner.

The principal objectives of the Registrant are, first, to obtain capital appreciation through equity investments in real estate; second, to generate cash available for distribution, a portion of which may not be currently taxable; and third, to the extent still permitted under the Internal Revenue Code of 1986, as amended, to generate tax losses which may offset the limited partners' income from the Registrant and certain other sources.

The Registrant does not maintain a Website. However, the Registrant’s filings with the Securities and Exchange Commission (the “SEC”) are available on the SEC’s Website.

Recent Developments and Real Estate Investment Factors

The Registrant has no direct investment in the multifamily market as of December 31, 2010. However, Omaha invests primarily in the multifamily market. During 2010, due largely to low borrowing rates, capitalization rates started to decline in the latter half of the year which has led to an increase in values. The stagnant national economy had caused unemployment to remain higher and prevented economic growth in most markets where Omaha owns properties which had a negative effect on rental apartment operations during 2009 and early 2010. However, during the latter half of 2010, most of Omaha’s markets reported improved although slow job growth and lower unemployment. Omaha reports on a fair value basis and due to the mortgage crisis, stagnant real estate market and slowing economy, Omaha reported a write-down of the value of its real estate portfolio of approximately $69,749,000 (-15%) for the twelve months ended December 31, 2009 in addition to the approximately $58,203,000 (-10%) write-down recorded in 2008. For 2010, Omaha reported a write-up in the value of its real estate portfolio of approximately $12,450,000 (4%) from $336,300,000 as of December 31, 2009 to $348,750,000 as of December 31, 2010. The total real estate portfolio value of $336,300,000 as of December 31, 2009 consists of the same properties which makes up Omaha’s portfolio as of December 31, 2010 and exclude the two properties Omaha sold during 2010. However, Omaha reported that as of December 31, 2010 the combined fair value of its real estate properties is still less than the combined face value of its mortgages and unsecured loan. Also, under the terms of the unsecured loan extension Omaha signed effective July 1, 2009, Omaha is precluded from making distributions to its investors until its unsecured loan is paid. As a result of the aforementioned, Registrant does not anticipate receiving any distributions from Omaha during the foreseeable future and has reserved 100% of the reported value of its investment in Omaha on the balance sheet as of December 31, 2010 and 2009. On April 14, 2010, Omaha executed the fourth amendment to its unsecured loan which reduced the blended interest rate on the loan from LIBOR plus 585 basis points to LIBOR plus 386 basis points, as of February 1, 2010. Additionally, Omaha’s financial ratio requirements were waived at December 31, 2009 and March 31, 2010 and were relaxed prospectively. Furthermore, the maturity date of the unsecured loan was extended from May 31, 2011 to May 31, 2012 with an option for an additional one year extension at which time an extension fee is to be paid on a portion of any remaining balance of the unsecured loan. However, Omaha is still precluded from making distributions to its investors until its unsecured loan is paid.

The industrial market also has suffered from the effects of the debt crisis and the slowing economy. The primary drivers of demand for industrial space continued to be impacted during 2010. According to a report by CB Richard Ellis, national economic growth continues to be gradual. Employment continues to be the missing component in sustaining economic recovery and growth in the real estate sector. Registrant owns industrial properties in the Minneapolis Metropolitan Statistical Area (“MSA”). The Minneapolis industrial market reported higher vacancy rates and lower market rents in 2009 and 2010. However, many of the active industrial tenants are becoming more willing to commit to longer term leases in an effort to lock-in reduced rental rates. Industrial construction in the Minneapolis MSA is at a standstill, providing landlords with some negotiating strength.

Occupancy for the industrial flex portfolio owned by the Registrant remained at 100% during 2010. (Please refer to Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations.)

During the third quarter 2010, Registrant commenced a marketing plan to sell 175 Ambassador Drive in Naperville, Il. As of September 30, 2010, Registrant designated 175 Ambassador Drive as real estate held for sale. On November 29, 2010, Registrant executed a contract to sell the property for $19,500,000 to an unrelated buyer in an all cash transaction. The sale closed on December 3, 2010. A portion of the sales proceeds were used to pay off the mortgage securing the property. Accordingly, this property was included in real estate held for sale on the consolidated balance sheet as of December 31, 2009. Assets and liabilities of this property were reflected as other assets and liabilities in discontinued operations on the consolidated balance sheet and its results of operations for 2010, 2009 and 2008 were reflected as income from discontinued operations on the consolidated statements of operations.

Registrant’s $22,000,000 unsecured credit facility (“Loan”) matured October 1, 2008. The holder of the unsecured debt (“Holder”) formally extended the maturity to February 28, 2009 and had entered into discussions with Registrant as to options for curing the default. On July 1, 2009 Registrant received written notice from the Holder of the Loan which made demand for the immediate payment of the Loan. The Holder and Registrant continued to discuss options for curing the default. On April 29, 2011, the Holder and Registrant executed a new Loan Agreement (“Loan Agreement”). See Item 1A. Debt Servicing and Financing.

Registrant did not make any other direct changes to its portfolio during 2010 or 2009. However, Omaha sold one multifamily property and its only industrial property in 2010 and sold two multifamily properties in 2009 to further its continuing goal of reducing the level of its debt. Omaha did not acquire any new properties in 2010 or 2009. As of December 31, 2010, Omaha consists of 24 wholly owned multifamily residential properties.

ITEM 1A. Risks Factors

This report on Form 10-K 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. Actual results may differ materially from those contemplated by the forward looking statements for a number of reasons, including, but not limited to, those risks described below:

General

The Registrant's investments generally consist of investments in real property and as such will be subject to varying degrees of risk generally incident to the ownership of real estate assets. The underlying value of the Registrant's real estate investments and the Registrant's financial condition will be dependent upon its ability to operate its properties in a manner sufficient to maintain or increase revenues and to generate sufficient income in excess of ownership and operating expenses. Income from the properties may be adversely affected by changes in national and local economic conditions such as oversupply of industrial flex, warehouse distribution spaces or apartments in the Registrant's markets, the attractiveness of the properties to tenants, changes in interest rates and in the availability, cost and terms of mortgage financing, the ongoing need for capital improvements, particularly in older structures, changes in real estate tax rates, adverse changes in governmental rules and fiscal policies, adverse changes in zoning laws, civil unrest, acts of God, including natural disasters (which may result in uninsured losses), and other factors which are beyond the control of the Registrant. If the Registrant were unable to promptly renew or re-let the leases of a significant number of tenants, or, if the rental rates upon such renewal or re-letting were significantly lower than expected rates, the Registrant's results of operations, financial condition and ability to make distributions to Unit holders may be adversely affected.

Risks of Liability and Loss

The development and ownership of real estate may result in liability to third parties due to conditions existing on a property which may result in injury. In addition, real estate may suffer a loss in value due to casualties such as fire or natural disaster. Such liability or loss may be uninsurable in some circumstances, such as a loss caused by the presence of mold, or may exceed the limits of insurance maintained at typical amounts for the type and condition of the property. Real estate may also be taken, in whole or in part, by public authorities for public purposes in

eminent domain proceedings. Awards resulting from such proceedings may not adequately compensate the Registrant for the value lost.

Value and Non-liquidity of Real Estate

Real estate investments are relatively non-liquid. The Registrant's ability to vary its portfolio in response to changes in economic and other conditions will therefore be limited. If the Registrant must sell an investment,

there can be no assurance that it will be able to dispose of the investment in the time period it desires or that the sales price of the investment will recoup or exceed the amount of the Registrant's cost of the investment.

Potential Adverse Effect on Results of Operations Due to Operating Risks

The Registrant's properties are subject to operating risks common to real estate in general, any and all of which may adversely affect occupancy or rental rates.

Debt Servicing and Financing

The real estate market continues to suffer through one of its worst debt crises. Interest rates remain higher and some borrowers still find it difficult to secure debt at acceptable terms as lenders have imposed stricter terms on borrowers. If the Registrant does not have funds sufficient to repay its indebtedness at maturity, the Registrant may need to refinance such indebtedness with new debt financing or through equity offerings. The Registrant may be restricted from obtaining a loan which will be sufficient to retire the existing loan and which may be based on lower debt service coverage. If it is unable to refinance this indebtedness on acceptable terms, the Registrant may be forced to dispose of properties upon disadvantageous terms, which could result in losses to the Registrant and adversely affect the amount of cash available for distribution to Unit holders. If prevailing interest rates or general economic conditions result in higher interest rates at a time when the Registrant must refinance its indebtedness, the Registrant's interest expense could increase, which would adversely affect the Registrant's results of operations and financial condition and its ability to pay distributions to Unit holders. Further, if any of the Registrant's properties are mortgaged to secure payment of indebtedness and the Registrant is unable to meet mortgage payments, mortgagee could foreclose or otherwise transfer the property, with a consequent loss of income and asset value to the Registrant.

Registrant’s $22,000,000 unsecured credit facility matured October 1, 2008. The Holder of the Loan formally extended the maturity to February 28, 2009 and had entered into discussions with Registrant as to options for curing the default. On July 1, 2009 Registrant received written notice from the Holder of the Loan which made demand for the immediate payment of the Loan. The Holder and Registrant continued to discuss options for curing the default. On April 29, 2011, the Holder and Registrant executed a new Loan Agreement (“Loan Agreement”) on the following terms:

In connection with the execution of the Loan Agreement, Registrant was required to make an immediate payment to Holder of $11,930,430, reducing the balance due under the unsecured credit facility to $10,069,570. The payment was made from proceeds resulting from the sale of 175 Ambassador Drive. Additional proceeds from the sale were used to pay Holder’s legal and appraisal costs and to fund a reserve account for future tenant improvement and leasing costs, as needed. The remaining outstanding obligation in the amount of $10,069,570 was divided into two notes (“Note A” and “Note B;” together, the “Notes”).

Note A in the amount of $4,069,570 has a maturity of July 31, 2014. Registrant has two 1-year options to extend the maturity if certain conditions are satisfied. Note A requires monthly payments of accrued interest at an annual fixed rate of 5% until paid in full. If extended, Registrant is required to make an additional fixed principal payment of $9,570 on April 1, 2015 and $30,000 thereafter until paid in full.

Note B in the amount of $6,000,000 has a maturity date of April 29, 2018. Registrant has three 1-year options to extend the maturity date if certain conditions are satisfied. Note B accrues interest at an annual fixed rate of 5% but only until all interest and principal have been paid in full on Note A. Thereafter Note B does not accrue any interest. Payments of interest and principal are deferred until Sentinel Omaha LLC (“Omaha”) pays distributions to Registrant. Distributions from Omaha would be used first to pay accrued interest on the Note B obligation, then principal on the Note B obligation. If there are no distributions from Omaha prior to the Note B maturity, all interest and principal is due at maturity, subject to the above mentioned extensions.

4)	The Notes may be voluntarily prepaid upon notice to the Holder, subject to certain requirements as to the application of payments. Registrant’s obligations under the Notes may be accelerated upon default.

repayment of Notes while retaining the other portion to increase cash reserves. While the obligations under the Notes are outstanding, Registrant is precluded from making distributions to its partners.

6)	Registrant, its general partner and the Holder also entered into a Management Subordination Agreement accruing a portion of the investment management fee payable by Registrant to its general partner so long as the Notes remain outstanding.

As additional security for Registrant’s payment of its obligations under the Loan Agreement, Registrant, through its wholly-owned subsidiary Eagle IV Realty, LLC, has executed a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement (“Eagle IV Security Agreement”) and a Pledge Agreement (“Eagle IV Pledge Agreement”) in favor of Holder. The Eagle IV Security Agreement provides Holder with a security interest on Registrant’s property located in Maple Grove, Minnesota (“Eagle IV”) of up to $5,000,000. The Eagle IV Pledge Agreement pledges to Holder Registrant’s membership interest in Eagle IV Realty, LLC, the direct owner of Eagle IV. Registrant has no other debt obligation secured by Eagle IV. The Loan Agreement also provides for a negative pledge on Registrant’s remaining properties and investments.

See Registrant’s Form 8-K dated April 29, 2011.

Registrant had a $6,477,001 mortgage secured by the property located at 175 Ambassador Drive which matured on October 5, 2010. On October 1, 2010, the Registrant executed the Forbearance Agreement related to the mortgage. The holder had agreed not to pursue its rights or remedies between October 5, 2010 and December 30, 2010. The Registrant continued to make payments to the holder of principal and interest under the original terms of the mortgage and on December 3, 2010, Registrant sold 175 Ambassador Drive and used a portion of the sales proceeds to pay off the mortgage securing the property.

Environmental Issues

Under various federal, state and local environmental laws, ordinances and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. These laws often impose environmental liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate their presence, may adversely affect the owner's or operator's ability to sell or rent the property or to borrow using the property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain third parties may seek recovery from owners or operators of such properties or persons who arranged for the disposal or treatment of hazardous or toxic substances and, therefore, are potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property.

Competition

The Registrant competes for tenants with many other real estate owners. The success of the Registrant in attracting tenants for its properties will depend upon its ability to maintain its properties and their attractiveness to tenants, new property developments, local conditions, and changing demographic trends. All of the Registrant's properties are located in developed areas that include other, similar properties. The number of competitive properties in a particular area could have a material effect on the Registrant's ability to lease industrial flex or warehouse distribution space at its properties and on the rents charged at such properties.

Tax Matters

There were no significant changes in the tax laws or the extent to which such legislation impacts the Registrant or the partners during the year ended December 31, 2010. Unit holders are urged to consult their own tax advisors with respect to the tax consequences arising under the federal law and the laws of any state, municipality or other taxing jurisdiction, including tax consequences arising from such Unit holder's own tax characteristics.

General

Efforts required in complying with federal, state and local environmental regulations may have and may continue to have an adverse effect on the Registrant's operations in the future, although such costs have not historically been significant in amount.

The Registrant considers itself to be engaged in only one industry segment, real estate investment, and therefore information regarding industry segments is not applicable and has not been provided.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The properties owned by the Registrant as of December 31, 2010 are as follows:


		Description							Percent Ownership			Occupancy at
Property	Location	Sq. Ft.		Units		Acres		Acquisition Date	Ownership			12/31/2010			Mortgage Payable

Industrial Flex:
Eagle Lake Business Center IV	Maple Grove, MN		60,000		n/a		5.15	Jun 02		100	%		100	%	$	0

Warehouse Distribution Center:
435 Park Court (b)	Lino Lakes, MN		266,000		n/a		13.47	Oct 05		100	%		100	%	$	10,000,000

Additional information regarding properties owned by the Registrant:

	2010			2009			2008			2007			2006

Average Occupancy (d)

Holiday Park Apts.(e)		n/a			n/a			n/a			n/a			97.17	%
Halton Place Apts. (f)		n/a			n/a			n/a			n/a			96.59	%
Le Coeur du Monde Apts. (a)		n/a			n/a			n/a			93.90	%		95.97	%
Eagle Lake Business Center IV		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%
435 Park Court (b)		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%
175 Ambassador Drive (c) (g)		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

Effective Annual Rent (d)

Holiday Park Apts. (e) (h)		n/a			n/a			n/a			n/a		$	6,583
Halton Place Apts. (f) (h)		n/a			n/a			n/a			n/a		$	6,895
Le Coeur du Monde Apts. (a) (h)		n/a			n/a			n/a		$	9,026		$	9,577
Eagle Lake Business Center IV (i)	$	16		$	15		$	13		$	14		$	15
435 Park Court (b)(i)	$	6		$	6		$	6		$	6		$	6
175 Ambassador Drive (c) (i) (g)	$	4		$	4		$	4		$	4		$	4

(a) Property was sold on April 24, 2007.

(b) Property was purchased on October 5, 2005.

(d) For period of ownership.

(e) Property was sold on May 2, 2006.

(f) Property was sold on December 20, 2006.

(g) Property was sold December 3, 2010.

(h) Per apartment unit. Gross potential rent, less concessions and vacancies, divided by

the total number of units at the property. Annualized for periods of ownership of less than one year.

(i) Per square foot. Base rent plus escalations, divided by the total number of square feet at

the property. Annualized for periods of ownership of less than one year.

ITEM 3. LEGAL PROCEEDINGS

None

ITEM 4.

(Removed and Reserved).

PART II

ITEM 5. MARKET FOR REGISTRANT'S UNITS OF PARTNERSHIP

INTEREST AND RELATED UNITHOLDER MATTERS

The transfer of Units or Participations (equivalent to one-half Unit) is subject to certain limitations, including the consent of the General Partner. There is no public market for the Units and it is not anticipated that any such public market will develop. The number of Unit holders as of December 31, 2010 was 2,727.

On August 21, 2008, MacKenzie Patterson Fuller, LP (“MPF”) and certain of its affiliated funds initiated an unsolicited tender offer to buy up to 1,500 units of limited partnership interests at a price of $700 per Unit. In a letter to Unit holders dated September 5, 2008, the general partner recommended that Unit holders reject the offer. On June 26, 2009, MPF sent a letter to those unit holders who had executed assignments to transfer their units to MPF, returning the assignments back to the unit holders and terminated the offer.

At various times, the Registrant has generated and distributed cash to the unit holders. On March 1, 2008, the Registrant made a distribution of $110 per unit, totaling $852,885, to unit holders on record as of December 31, 2007. In view of the continuing economic downturn and constricting capital markets, the Registrant did not declare a distribution for 2008, 2009 or 2010 in order to begin building cash reserves to respond to future capital needs. Cumulative distributions since inception have totaled $111,747,950. However, there is no requirement to make such distributions nor can there be any assurance that future operations will generate cash available for distribution. In addition, while the obligations under the Notes are outstanding, Registrant is precluded from making distributions to its partners.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data regarding the Registrant's financial condition and results of operations determined in accordance with accounting principles generally accepted in the United States of America. This data should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this annual report on Form 10-K. Certain prior year amounts have been reclassified to make them comparable to the current year presentation. See Note 2 to the consolidated financial statements.


	For the Years Ended December 31,
	2010			2009			2008			2007			2006
				(In Thousands, Except Unit Data)
				(As Restated)			(As Restated)			(As Restated)			(As Restated)
Income Statement Data:
Rental, Interest and Other Revenues	$	2,612		$	2,582		$	2,400		$	3,040		$	2,886
Operating Expenses, Less Depreciation
and Amortization		(3,161	)		(3,222	)		(3,739	)		(3,189	)		(2,570	)
Depreciation and Amortization		(493	)		(497	)		(532	)		(519	)		(488	)

Loss from Operations		(1,042	)		(1,137	)		(1,871	)		(668	)		(172	)
Equity in Net (Loss) of Investment		(416	)		(18,326	)		(13,370	)		(973	)		(26	)
Reserve for Value of Investment		416			(4,525	)		0			0			0

(Loss) from Continuing Operations		(1,042	)		(23,988	)		(15,241	)		(1,641	)		(198	)

Income from Discontinued Operations		465			384			324			233			866
(Loss) Gain on Sale of Investments
in Real Estate		(46	)		-			-			2,518			12,376

Net Income (Loss)	$	(623	)	$	(23,604	)	$	(14,917	)	$	1,110		$	13,044

(Loss) from Continuing Operations
per Unit of Partnership Interest:	$	(134	)	$	(3,094	)	$	(1,966	)	$	(212	)	$	(26	)

Distributions paid per Unit
of Partnership Interest	$	-		$	-		$	110		$	350		$	350

Weighted Average Number of
Partnership Units Outstanding		7,754			7,754			7,754			7,754			7,754

Balance Sheet Data at Year End:

Real Estate, net	$	17,602		$	18,092		$	18,552		$	19,025		$	19,212
Real Estate Assets Held for Sale	$	-		$	19,542		$	20,028		$	20,514		$	33,458
Other Assets in Discontinued Operations	$	-		$	41		$	56		$	84		$	153
Total Assets	$	30,603		$	37,895		$	62,069		$	78,347		$	67,013
Mortgage Note and Unsecured Loan Payable	$	32,000		$	32,000		$	32,000		$	32,000		$	522
Mortgage Note in Discontinued Operations				$	6,635		$	6,806		$	6,943		$	16,563
Other Liabilities in Discontinued Operations	$	-		$	138		$	101		$	-		$	161

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

COMPANY OVERVIEW

The Registrant is a New York limited partnership engaged in acquiring, operating and holding for investment a varying portfolio of real estate interests. The Registrant's initial public offering was in 1971, the year it began operations. As of December 31, 2010, the Registrant owned an industrial flex property in Maple Grove, Minnesota, and a warehouse distribution center in Lino Lakes, Minnesota. The Registrant also has a thirty percent interest in Sentinel Omaha, LLC. Omaha is a real estate investment company which as of December 31, 2010 owns 24 multifamily properties in 17 markets. Omaha is an affiliate of the Registrant’s general partner.

CRITICAL ACCOUNTING ESTIMATES

In preparing the 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 consolidated financial statements. The summary should be read in conjunction with the more complete discussion of significant accounting policies included in Note 1 to the consolidated financial statements for the year ended December 31, 2010.

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 Registrant does not allocate these costs appropriately or incorrectly estimates the useful lives of its real estate, depreciation expense may be misstated.

Registrant's properties are regularly evaluated on a property-by-property basis for impairment. 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 will be written down to estimated fair value. 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.

Investment in Sentinel Omaha, LLC

The Registrant has a 30% non-controlling interest in Omaha that is accounted for at fair value. During 2009 and 2008, Omaha reported significant write-downs of its real estate portfolio of $69,749,000 (-15%) and $58,203,000 (-10%), respectively. In 2010 Omaha reported a small recovery of the value of its remaining real estate portfolio of $12,450,000 (4%) from $336,300,000 as of December 31, 2009 to $348,750,000 as of December 31, 2010. The total real estate portfolio value of $336,300,000 as of December 31, 2009 consists of the same properties which makes up Omaha’s portfolio as of December 31, 2010 and exclude the two properties Omaha sold during 2010. In 2009 and 2010 Registrant reviewed its own analysis of the current and projected financial condition of Omaha. On July 1, 2009, Omaha executed an extension of its unsecured loan. The extension, among other items, increased the spread on the interest rate on the unsecured debt by approximately 390 basis points. However, on April 14, 2010, Omaha executed the fourth amendment to its unsecured loan which reduced the blended interest rate on the loan from LIBOR plus 585 basis points to LIBOR plus 386 basis points as of February 1, 2010. Additionally, Omaha’s financial ratio requirements were waived at December 31, 2009 and March 31, 2010 and were relaxed prospectively. Furthermore, the maturity date of the unsecured loan was extended from May 31, 2011 to May 31, 2012 with an option for an additional one year extension at which time an extension fee is to be paid on a portion of any remaining balance of the unsecured loan. However, Omaha is still precluded from making distributions to its investors until its unsecured loan is

paid. As a result of the aforementioned, Registrant does not anticipate receiving any distributions from Omaha during the foreseeable future and has reserved 100% of the reported value of its investment in Omaha on the balance sheet as of December 31, 2010 and 2009. For the year 2010, the Registrant’s interest in the net investment income and realized loss from the sale of properties of Omaha was $1,159,896 and ($4,488,434), respectively. In addition, Registrant’s interest in the net unrealized appreciation of real estate properties, mortgages, and interest rate protection agreements was $2,912,198 for 2010. For the year 2009, the Registrant’s interest in income before net unrealized depreciation and appreciation and realized gain and loss and net realized gain from mortgage notes and the sale of properties of Omaha were $684,929 and $159,952, respectively. In addition, Registrant’s interest in the net unrealized depreciation of real estate properties, mortgages, and interest rate protection agreements was ($19,177,009) for 2009. For the year 2008, the Registrant’s interest in income before net unrealized depreciation and appreciation and net realized loss from the sale of properties, mortgage notes and interest rate protection agreements of Omaha were $561,757 and ($504,803), respectively. In addition, Registrant’s interest in the net unrealized depreciation of real estate properties, mortgages and interest rate protection agreements was ($13,426,622) for 2008.

Determination of the fair value of Omaha involves numerous estimates and subjective judgments that are subject to change in response to current and future economic and market conditions, including, among other things, demand for residential apartments, competition, and operating cost levels such as labor, energy costs, real estate taxes and market interest rates. Judgments regarding these factors are not subject to precise quantification or verification and may change from time to time as economic and market factors change.

Estimated fair value is based on the criteria outlined in Financial Accounting Standards Board Accounting Standard Codification No. 820-10, “Fair Value Measurements and Disclosures” (ASC 820-10). ASC 820-10 established a "three-tier" valuation hierarchy to prioritize the assumptions used in valuation techniques to measure fair value. The three levels of fair value hierarchy under ASC 820-10 are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities;

Level 2 - Quoted prices in active markets for similar assets and liabilities or quoted prices in less active dealer or broker markets;

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable.

Estimated fair value calculations were prepared by Omaha's management utilizing Level 3 inputs.

Further, the investment in Omaha is not consolidated because other investors have substantive ownership and participative rights regarding Omaha’s operations and therefore control does not vest in the Registrant. Were the Registrant deemed to control Omaha, it would have to be consolidated and therefore would impact the financial statements and related ratios.

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 Registrant can recognize revenue, it is required to assess, among other things, its collectability. Registrant continually analyzes the collectability of its revenue and will reserve against its revenue if conditions warrant such action.

Off-Balance Sheet Arrangements

None.

Recently Issued Accounting Pronouncements

In February 2010, the FASB issued ASU 2010-09, Amendments to Certain Recognition and Disclosure Requirements (Topic 855) – Subsequent Events. This ASU, which was effective upon issuance, removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated. This change removes potential conflicts with SEC requirements. The adoption of this update did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements (Topic 820) – Fair Value Measurement and Disclosures. This ASU requires additional disclosures about significant transfers into and out of level 1 and 2 fair value measurements, to describe the reasons for the transfers, and to present separately information about purchases, sales, issuances, and settlements for fair value measurements using significant unobservable inputs (Level 3). ASU 2010-06 was effective January 1, 2010, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which will be effective January 1, 2011. The adoption of this update did not have, and is not expected to have, a material impact on our consolidated financial statements.

CONTRACTUAL OBLIGATIONS

As of December 31, 2010, the Registrant’s contractual obligations consisted of mortgage notes and unsecured loan payable. Principal payments under the mortgage notes and unsecured loan payable, reflecting the Loan Agreement executed April 29, 2011, are due as follows:

For the year ending December 31,
2011	$	11,930,430
2012		-
2013		-
2014		4,069,570
2015		10,000,000
Thereafter		6,000,000

Total	$	32,000,000

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2010, Registrant had cash and cash equivalents of approximately $12,932,000. These balances are approximately $12,784,000 higher than the cash and cash equivalents as of December 31, 2009. Cash and cash equivalents increased primarily due to the net proceeds generated from the sale of Registrant’s warehouse distribution property located in Naperville, Il. on December 3, 2010. Operating activities combined with a capital improvement reimbursement also increased cash and cash equivalents by approximately $247,000 during 2010. The aforementioned increases in cash and cash equivalents were slightly reduced by debt principal payments of approximately $154,000 during 2010. On April 29, 2011, Registrant’s paid $12,539,983 to the holder of the unsecured credit facility as part of replacing the unsecured credit facility with the new loan agreement significantly reducing Registrant’s cash and cash equivalents.

Total outstanding debt at December 31, 2010 consisted of $10,000,000 of a long-term non-recourse first mortgage note, secured by real estate owned by the Registrant due in October 2015 and $22,000,000 under an unsecured credit facility (see Notes 8 and 15 to the Consolidated Financial Statements). The Registrant has no other debt except normal trade accounts payable and accrued interest on mortgage notes payable.

Registrant’s unsecured credit facility matured October 1, 2008. The Holder of the unsecured debt formally extended the maturity to February 28, 2009 and had entered into discussions with Registrant as to options for curing the default. On July 1, 2009 Registrant received written notice from the Holder of the Loan which made demand for the immediate payment of the Loan. The Holder and Registrant continued to discuss options for curing the default. On April 29, 2011, the Holder and Registrant executed a new Loan Agreement (see Item 1.A., Debt Service and Financing).

Inflation and changing prices during the current period did not significantly affect the markets in which the Registrant conducts its business, or the Registrant’s business overall. However, the real estate market continues to suffer through one of its worst debt crises. Interest rates have increased and some borrowers still find it difficult to secure debt at acceptable terms as lenders have imposed stricter terms on borrowers.

The downturn in the debt market had led to a significant slowing of the national economy during 2008, 2009 and early 2010. Companies have contracted or gone out of business leading to an increase in unemployment, significantly in some markets where Omaha owns multifamily properties. The stagnant economic growth and increase in unemployment has lead to increases in vacancies and lower rental growth during 2008 to mid 2010. During the latter half of 2010 most of the markets where Omaha has properties have reported an improvement in employment and job growth although only a small improvement. This combined with a decline in apartment development has led to an increase in average physical and economic occupancy in the Omaha portfolio. Although the two remaining commercial properties owned by the Registrant are 100% occupied, the stagnant

market increases the risk that one or more tenants could default on their lease. The economic slowdown has increased the amount of vacant industrial space available to leasing prospects and has decreased the pool of potential leasing prospects. Registrant may require a longer time period to replace one of the tenants at its properties should a default occur.

Registrant did not pay a distribution in 2010 in order to continue building cash reserves to respond to future capital needs. There is no requirement to make such distributions, nor can there be any assurance that future operations

will generate cash available for distribution. While the obligations under the Notes are outstanding, Registrant is precluded from making distributions to its partners.

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

MANAGEMENT’S DISCUSSION OF RESULTS OF OPERATIONS

2010 VS. 2009 (As amended to reflect the reclassification discussed in Note 2 to the consolidated financial statements)

Total revenues from continuing operations increased $30,000 to approximately $2,612,000 in 2010 from approximately $2,582,000 in 2009 due to higher rental income and interest income on short term investments partially offset by lower other income. Rental income increased due to scheduled increases in base rent for each tenant at Registrant’s two remaining wholly owned properties. The increase in interest income is due to higher cash funds available for short term investment near the end of 2010. Cash and cash equivalents increased significantly in December 2010 due to the net proceeds generated from the sale of 175 Ambassador Drive. Other rental income decreased due to lower real estate tax reimbursements at the Lino Lakes property partially offset by higher operating expense reimbursements at Eagle Lake IV. The decrease in real estate tax reimbursement at Lino Lakes was due to lower tax expense. The increase in operating expense reimbursements from Eagle Lake IV was due to higher tenant charges for operating costs incurred in the prior year.

The Registrant reported a net loss from continuing operations of approximately $1,042,000, an improvement of $22,946,000 as compared to a net loss of approximately $23,988,000 in 2009. The improvement was primarily the result of the Registrant’s interest in the loss from Omaha. The net loss of investment reported by Omaha for 2010 was significantly lower than the net loss of investment reported by Omaha in 2009. In addition, Registrant recorded a charge against earnings in 2009 by reserving 100% of the reported value of Omaha. Total expenses from continuing operations for 2010 decreased $65,000 to approximately $3,654,000 from approximately $3,719,000 in 2009, primarily due to decreases in real estate taxes, interest expense and other expenses of $48,000, $19,000 and $18,000, respectively. Real estate tax expense decreased by approximately $48,000 due to lower tax assessments for Lino Lakes and Eagle Lake IV. Interest expense is lower due to lower average float rates applied to the unsecured debt.

In addition, equity in net loss of investments improved $17,910,000 to a loss of approximately $416,000 for 2010 from a loss of approximately $18,326,000 for 2009. Omaha reports on a fair value basis and due to the mortgage crisis, stagnant real estate market and slowing economy, Omaha reported a significant write-down in the value of its real estate portfolio of approximately $69,749,000 (-15%) during 2009 in addition to the write-down reported of $58,203,000 (-10%) in 2008. In 2010 Omaha reported a small recovery of the value of its real estate portfolio of $12,450,000 (4%) from $336,300,000 as of December 31, 2009 to $348,750,000 as of December 31, 2010. The total real estate portfolio value of $336,300,000 as of December 31, 2009 consists of the same properties which makes up Omaha’s portfolio as of December 31, 2010 and exclude the two properties Omaha sold during 2010. On July 1, 2009, Omaha executed an extension of its unsecured loan. The extension, among other items, increased the spread on the interest rate on the unsecured debt by approximately 390 basis points. On April 14, 2010, Omaha executed the fourth amendment to its unsecured loan which reduced the blended interest rate on the loan from LIBOR plus 585 basis points to LIBOR plus 386 basis points as of February 1, 2010. Additionally, Omaha’s financial ratio requirements were waived at December 31, 2009 and March 31, 2010 and were relaxed prospectively. Furthermore, the maturity date of the unsecured loan was extended from May 31, 2011 to May 31, 2012 with an option for an additional one year extension at which time an extension fee is to be paid on a portion of any remaining balance of the unsecured loan. However, Omaha is still precluded from making distributions to its investors until its unsecured loan is paid. As a result of the aforementioned, Registrant does not anticipate receiving any distributions from Omaha during the foreseeable future and has reserved 100% of the reported value of its investment in Omaha on the balance sheet as of December 31, 2010 and 2009.

For additional analysis, please refer to the discussions of the individual properties below.

Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues increased $25,000, to approximately $953,000 in 2010 compared with approximately $928,000 in 2009. Net income, which includes deductions for depreciation, increased $34,000, to approximately $485,000 in 2010 from approximately $451,000 in 2009. Occupancy for both years was 100%. The increase in total revenue was due to higher scheduled rent collected from the tenant and an increase in expense reimbursements collected from the tenant. The increase in net income was due to the increase in revenues combined with a decrease in expenses of $9,000. The decrease in expenses was primarily due to decreases in real estate taxes of $22,000.

Space absorption in the Minneapolis-St. Paul industrial market for 2010 was approximately positive 289,000 square feet while construction is at a standstill with only one project in process for 77,000 square feet.

435 Park Court (Lino Lakes, Minnesota)

Total revenues decreased $2,000, to approximately $1,652,000 in 2010 compared with approximately $1,654,000 in 2009 due to lower expense reimbursements offset by higher rental income. Net income, which includes deductions for depreciation and mortgage interest expense, increased $28,000, to approximately $185,000 in 2010 from approximately $157,000 in 2009. Occupancy for both years was 100%. The increase in net income was mostly due to the decrease in real estate tax expense of $26,000. The property reported small increases and decreases in the other components of net income.

The Minneapolis-St. Paul industrial market reported a vacancy rate for the 4th quarter of 2010 of 7.6% which is slightly higher than the 7.2% reported in December 2009 according to a research report by CB Richard Ellis. Space absorption in the Minneapolis-St. Paul industrial market for 2010 was approximately positive 289,000 square feet while construction is at a standstill with only one project in process for 77,000 square feet.

175 Ambassador Drive (Naperville, Illinois)

On December 3, 2010, the Registrant sold 175 Ambassador Drive for approximately $16,500,000 to an unrelated party in an all cash transaction. The net proceeds from the sale were used, in part, to retire the mortgage note of approximately $6,477,001 that had been secured by the property. The loss on sale of 175 Ambassador Drive is approximately $46,000.

175 Ambassador Drive had been designated as real estate held for sale as of September 30, 2010. The results of operations from the property are reflected as income from discontinued operations in the accompanying consolidated statement of operations. Total revenues for the twelve months ended December 31, 2010, decreased $89,000 to approximately $1,313,000 from approximately $1,402,000 for 2009 as a result of sale of the property. The net income before gain on sale, which includes deductions for depreciation and mortgage interest expense, for the twelve months ended December 31, 2010, increased $81,000 to approximately $465,000 as compared to net income of approximately $384,000 for 2009.

Due to the sale of the property by the Registrant, the reporting period for 175 Ambassador Drive ended on December 2, 2010. The changes in revenue and income are due to the shortened reporting period. In addition, as 175 Ambassador Drive was a real estate asset held for sale as of September 30, 2010, no depreciation was charged to expense after September 30, 2010, which decreased depreciation expense approximately $121,000 in 2010 from 2009.

Investments

During 2007, the Registrant made a total investment in the amount of $37,200,000 in Omaha representing a thirty percent ownership interest. The Registrant’s investment in Omaha is accounted for at fair value.

On September 18, 2007, Omaha acquired all the outstanding common shares of America First Apartment Investors, Inc., a publicly held real estate investment trust, in a transaction valued at approximately $532 million, including the assumption of outstanding debt and excluding transactions costs. Omaha consisted of 31 wholly owned multifamily residential properties, a wholly owned commercial property and a wholly owned multifamily property that was under development. During 2010 Omaha sold one multifamily property in Phoenix, Arizona and

its commercial property in Palm Bay, Florida to further its continuing goal of reducing the level of its debt obligations. During 2009 Omaha sold two multifamily properties in Omaha, Nebraska and Oklahoma City, Oklahoma. During 2008, Omaha sold five multifamily properties in Bristol, Tennessee; Tulsa, Oklahoma; Newport News, Virginia; Ann Arbor, Michigan and Southfield, Michigan. Prior to September 18, 2007, there were no ongoing operations of Omaha, except for those necessary for the acquisition.

Total revenues for 2010 were approximately $46,479,000. Net investment income before net unrealized depreciation and appreciation, and realized gains and losses was $3,866,000. Major expenses included $16,431,000 of interest expense, $4,927,000 for repairs and maintenance, $6,868,000 for payroll and $4,510,000 for real estate taxes.

In addition, Omaha reported a realized net loss on the sale of one multifamily property, the sale of one commercial property and the satisfaction of their related mortgages of $14,961,000 and net unrealized appreciation on the valuation of the remaining real estate assets, related mortgages, and interest rate protection agreements of $9,707,000. For the year 2010, the Registrant’s interest in the loss of Omaha was $416,000.

2009 VS. 2008 (As amended to reflect the reclassification discussed in Note 2 to the consolidated financial statements)

Total revenues from continuing operations increased $182,000 to approximately $2,582,000 in 2009 from approximately $2,400,000 in 2008 due to higher rental income and higher other rental income partially offset by lower interest income on short term investments. Rental income increased due to scheduled increases in base rent for each tenant at Registrant’s two remaining wholly owned properties. Other rental income increased due to higher real estate tax reimbursements at the Lino Lakes property and operating expense reimbursements at the Eagle Lake IV property. The reduction in interest income is due to lower cash funds available for short term investment during 2009. The increase in real estate tax reimbursement at Lino Lakes was due to higher tax expense. The increase in operating expense reimbursements from Eagle Lake IV was due to higher tenant charges for operating costs incurred in the prior year.

The Registrant reported a net loss from continuing operations of approximately $23,988,000, a decline of $8,747,000 as compared to a net loss of approximately $15,241,000 in 2008. The decline was primarily the result of the Registrant’s interest in the loss from Omaha as well as Registrant reserving 100% of the reported value of Omaha. Total expenses from continuing operations for 2009 decreased $552,000 to approximately $3,719,000 from approximately $4,271,000 in 2008, primarily due to decreases in interest expense, depreciation and amortization and real estate operating expenses of $524,000, $35,000 and $29,000, respectively. In addition, equity in net loss of investments increased $4,956,000 to approximately $18,326,000 for 2009 from approximately $13,370,000 for 2008. Omaha reports on a fair value basis and due to the mortgage crisis, stagnant real estate market and slowing economy, Omaha reported a significant write-down in the value of its real estate portfolio of approximately $69,749,000 (-15%) during 2009 in addition to the write-down in value of $58,203,000 (-10%) in 2008. On July 1, 2009, Omaha executed an extension of its unsecured loan. On April 14, 2010, Omaha executed the fourth amendment to its unsecured loan which reduced the blended interest rate on the loan from LIBOR plus 585 basis points to LIBOR plus 386 basis points as of February 1, 2010. Additionally, Omaha’s financial ratio requirements were waived at December 31, 2009 and March 31, 2010 and were relaxed prospectively. Furthermore, the maturity date of the unsecured loan was extended from May 31, 2011 to May 31, 2012 with an option for an additional one year extension at which time an extension fee is to be paid on a portion of any remaining balance of the unsecured loan. However, Omaha is still precluded from making distributions to its investors until its unsecured loan is paid. As a result of the aforementioned, Registrant did not anticipate receiving any distributions from Omaha during the foreseeable future and had reserved 100% of the reported value of its investment in Omaha on the balance sheet as of December 31, 2009.

Interest expense from continuing operations was approximately $524,000 lower for 2009 as compared to 2008. This is primarily due to a decrease in interest expense incurred of approximately $574,000 for the $22,000,000 unsecured credit facility due to a decrease in the average LIBOR rate. The unsecured credit facility was used to partially finance the investment in Sentinel Omaha, LLC in 2007.

For additional analysis, please refer to the discussions of the individual properties below.

Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues increased $134,000, to approximately $928,000 in 2009 compared with approximately $794,000 in 2008. Net income, which includes deductions for depreciation, increased $139,000, to approximately $451,000 in

2009 from approximately $312,000 in 2008. Occupancy for both years was 100%. The increase in total revenue was due to higher scheduled rent collected from the tenant and an increase in expense reimbursements collected from the tenant. The increase in net income was due to the increase in revenues plus a slight decrease in expenses of $5,000. The decrease in expenses was primarily due to decreases in repairs and maintenance of $17,000 partially offset by increases in real estate taxes and amortization expense of $4,000 and $7,000, respectively.

The Minneapolis-St. Paul industrial market reported a vacancy rate for the 4th quarter of 2009 of 7.6% which is 1.7 percentage points higher than the 5.9% reported in December 2008 according to a research report by CB Richard Ellis. Space absorption in the Minneapolis-St. Paul industrial market for 2009 was approximately negative 2,554,000 square feet.

435 Park Court (Lino Lakes, Minnesota)

Total revenues increased $78,000, to approximately $1,654,000 in 2009 compared with approximately $1,576,000 in 2008 due to higher rental income combined with higher expense reimbursements. Net income, which includes deductions for depreciation and mortgage interest expense, decreased $31,000, to approximately $157,000 in 2009 from approximately $188,000 in 2008. Occupancy for both years was 100%. The decrease in net income was mostly due to the increase in real estate tax expense and mortgage interest of $119,000 and $50,000, respectively partially offset due to higher income from higher expense reimbursements and higher rental income.

175 Ambassador Drive (Naperville, Illinois)

On December 2, 2010, the Registrant sold 175 Ambassador Drive for approximately $19,500,000 to an unrelated buyer in an all cash transaction. 175 Ambassador Drive had been designated as real estate held for sale as of September 30, 2010. The results of operations from the property for 2009 and 2008 are reflected as income (loss) from discontinued operations in the accompanying consolidated statement of operations.

Total revenues increased approximately $42,000 to $1,402,000 in 2009, as compared to $1,360,000 in 2008. Net income, which includes deductions for depreciation and mortgage interest expense, increased approximately $60,000 to $384,000 in 2009 as compared to $324,000 in 2008. Expenses decreased approximately $18,000 primarily due to reductions in interest expense and insurance of $7,000 and $4,000, respectively. Total revenues increased $42,000 due to a scheduled increase in base rental income collected from the tenant.

The Chicago industrial market ended 2009 reporting an all-time high vacancy rate of 12.1%, an increase of 1.9 percentage points from 2008 according to a research report produced by Grubb and Ellis. The State of Illinois lost over 70,000 manufacturing jobs in 2009. The Grubb and Ellis report predicts 2010 will be a year when industrial and manufacturing companies evaluate market conditions and proceed cautiously.

Investments

On September 18, 2007, Omaha acquired all the outstanding common shares of America First Apartment Investors, Inc.

Total revenues for 2009 were approximately $50,119,000. Income before net unrealized depreciation and appreciation and realized gains and losses was $2,283,000. Major expenses included $18,162,000 of interest expense, $5,401,000 for repairs and maintenance, $7,213,000 for payroll and $5,114,000 for real estate taxes.

In addition, Omaha reported a net realized gain on the sale of two multifamily properties and the satisfaction of their related mortgages of $533,000 and net unrealized depreciation on the valuation of the remaining real estate assets, related mortgages, and interest rate protection agreements of $63,923,000. For the year 2009, the Registrant’s interest in the loss of Omaha was $18,332,000.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

On September 17, 2007, the Registrant entered into an unsecured credit facility agreement with a bank under which interest incurred is determined based on current market rates that fluctuate with LIBOR. As such, the Registrant has market risk to the extent interest rates fluctuate during the term of the credit facility. Based on the

weighted average outstanding balance under the credit facility for the three months ended December 31, 2010, a 1% change in LIBOR would impact the Registrant’s three and twelve month net loss and cash flows by $55,000 and $220,000, respectively

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements required by this item, together with the Report of Independent Registered Public Accounting Firm thereon, are contained herein on pages 26 through 42 of this Annual Report on Form 10-K. Supplementary financial information required by this item is contained herein on pages 43 through 44 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a)

The Chief Executive Officer and the Chief Financial Officer of the general partner of Registrant have evaluated the disclosure controls and procedures relating to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 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 year ended December 31, 2010 that could significantly affect those controls subsequent to the date of evaluation.

Registrant’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.

Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was effective as of December 31, 2010.

This Annual Report does not include an attestation report of the Registrant’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Registrant’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit Registrant to provide only management’s report in this Annual Report.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Registrant has no executive officers or directors. All of its business affairs are handled by its General Partner, SB Partners Real Estate Corporation (the "General Partner").

The directors and executive officers of the General Partner are elected by Sentinel Holdings Corporation ("SHC") as its sole shareholder to serve until their successors are duly elected and qualified. The limited partners of the Registrant are not entitled to vote in their election.

The directors and executive officers of the General Partner who are active in the Registrant's operations are:

Name	Age	Position


John H. Streicker	68	President & Director

Millie C. Cassidy	65	Vice President & Director

David Weiner	75	Chief Executive Officer & Director

Anita Breslin	54	First Vice President

Robert Leniart	54	Vice President
George N. Tietjen	50	Vice President
Martin Cawley	54	Vice President
Leland J. Roth	47	Treasurer
John H. Zoeller	51	Chief Financial Officer

Mr. Streicker joined the General Partner in May 1976. He has been a Director since April 1984. He is Chairman of SHC and its parent company, The Sentinel Corporation.

Ms. Cassidy joined the General Partner in August 1982. She has been a Director of the General Partner since March 1988. She is President of SHC and its parent company, The Sentinel Corporation.

Mr. Weiner joined the General Partner in April 1984. He has been a Director of the General Partner since March 1988. He is Vice Chairman of SHC and its parent company, The Sentinel Corporation.

Ms. Breslin joined the General Partner in 1978. She is the regional manager responsible for residential property transactions and management for the Eastern region.

Mr. Leniart joined the General Partner in 1983. He is responsible for overseeing major capital projects for the real estate properties.

Mr. Tietjen joined the General Partner in 1990. He is the regional manager responsible for residential property transactions and management for the Western region.

Mr. Cawley joined the General Partner in 1994. He is the regional manager responsible for commercial property transactions and management.

Mr. Roth joined the General Partner in 1994 and serves as its treasurer. He is a certified public accountant with over 25 years of real estate related financial, accounting and reporting experience.

Mr. Zoeller joined the General Partner in 1994 and serves as its principal financial and accounting officer. He is a certified public accountant with over 29 years of real estate related financial, accounting and reporting experience.

ITEM 11. EXECUTIVE COMPENSATION

The Registrant has no executive officers or directors.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

(a)

At December 31, 2010, an institutional investor of record owned 7.13% of the outstanding Units of Limited Partnership Interests. On January 13, 1993, a group of Unit holders of record, including the institutional investor referred to above, entered into a collective agreement with respect to their ownership interest in the Registrant. The aggregate number of Units beneficially owned by the group is 606 Units, representing 7.8% of the total number of outstanding Units of Limited Partnership Interest on that date. Each Unit holder has disclaimed beneficial ownership of all Units owned by the other Unit holders in this group. The foregoing information is based upon a 13-D filing made by the respective Unit holders.

(b)

As of December 31, 2010, none of the Directors of the General Partner owned any outstanding Units of Limited Partnership Interest. However, an Assistant Secretary of the General Partner owned four Units of Limited Partnership Interest. No Officers or Directors of SHC owned any outstanding Units of Limited Partnership Interest. SRE Clearing Services, Inc., an affiliate of the General Partner, owned 2,680 Units of Limited Partnership Interest, representing 34.57% of the outstanding number of Units on December 31, 2010. In accordance with SEC regulations, SRE Clearing Services, Inc. filed Form 13-D/A on October 15, 2009, when the total number of Units held reached 34% of the outstanding number of Units.

(c)	During the year ended December 31, 2010, there were no changes in control of the Registrant or the General Partner.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The General Partner, among other things, furnishes services and advice to the Registrant and is paid a variable annual fee for such services based on calculations prescribed in the Registrant's Partnership Agreement. For these services, the General Partner receives a management fee equal to 2% of the average amount of capital invested in real estate plus cumulative mortgage amortization payments, and 0.5% of capital not invested in real estate, as defined in the partnership agreement. The management fee amounted to $867,583, $826,573 and $851,590 for the years ended December 31, 2010, 2009, and 2008, respectively. In addition, the General Partner is entitled to 25% of cash distributions in excess of the annual distribution preference, as defined in the partnership agreement. No such amounts were due for the years ended December 31, 2010, 2009 or 2008.

Certain affiliates of the General Partner oversee the management and operations of various real estate properties, including those owned by the Registrant. Services performed by these affiliates applicable to the Registrant's properties are billed at actual or allocated cost, or percentage of revenues. The costs of such services are believed to be competitive with charges for similar services provided by unrelated management companies. Fees charged by these affiliates totaled $195,907, $196,780 and $186,594 in 2010, 2009, and 2008, respectively.

On June 22, 2007, the Registrant made an initial investment in the amount of $5,000,000 in Omaha, an affiliate of the Registrant’s general partner. Additionally, $2,800,000, $9,500,000 and $19,900,000 were invested on July 27, September 14 and September 17, 2007, respectively, for a total investment of $37,200,000, representing a thirty percent ownership interest in Omaha. For the years 2010, 2009 and 2008, the Registrant’s equity interest in the net loss of Omaha was $416,000, $18,326,000 and $13,370,000, respectively.

In connection with the mortgage financing of certain properties, the respective lenders required the Registrant to place the assets and liabilities of these properties into single asset limited partnerships or land trusts which hold title to these properties. A trust company affiliated with the General Partner holds the general partner interest in each single asset limited partnership as trustee for the Registrant. An affiliate of the General Partner is also the trustee of the land trust. For its services, the affiliate was not paid an annual fee in 2010, 2009 or 2008.

Reference is made to Items 10 and 11, and Notes 3, 7, 9, 12 and 14 in the consolidated financial statements.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements and review of financial statements included in the Partnership’s Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were approximately $115,000 and $113,000 for the years ended December 31, 2010 and 2009, respectively.

Audit-Related Fees. No fees were billed by the principal accountant during the years ended December 31, 2010 and 2009 for assurance and related services that are reasonably related to the performance of the audit or review of Registrant's financial statements that are not reported under subparagraph (1) of this section.

Tax Fees. The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were approximately $15,000 for each for the years ended December 31, 2010 and 2009, respectively. This work included reviewing year-end tax projections as well as the Registrant’s tax returns prepared by the Registrant for the respective years.

4.	All Other Fees. No other fees were billed in either of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in subparagraphs (1) through (3) of this section.

(i)The selection of the independent auditors to audit the annual financial statements and perform review procedures on the quarterly reports filed with the SEC by the Registrant is made by the general partner of Registrant. Fees quoted by the independent auditors are approved by the general partner prior to their acceptance by the Registrant.

(ii) Not Applicable.

6.	Not Applicable.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT

SCHEDULES

(a)

(1)

Financial statements - The Registrant's 2010 Annual Audited Consolidated Financial Statements are included in this Annual Report on Form 10-K.

(2)

Financial statement schedules - See Index to Consolidated Financial Statement Schedules on page 25. All other financial statement schedules are inapplicable or the required subject matter is contained in the consolidated financial statements or notes thereto.

(b) Exhibits -

Exhibit

No. Description

3.1	Agreement of Limited Partnership (incorporated by reference to Exhibit A to Registration Statement on form S-11 as filed with the Securities and Exchange Commission on May 16, 1985)

31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.1 Audited Financial Statements of Sentinel Omaha, LLC

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities 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

	By:	SB PARTNERS REAL ESTATE CORPORATION
		General Partner

		Chief Executive Officer
Dated: June 17, 2011	By:	/s/ David Weiner
		David Weiner

		Principal Financial & Accounting Officer
Dated: June 17, 2011	By:	/s/ John H. Zoeller
		John H. Zoeller
		Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Position	Date

/s/ David Weiner	Chief Executive Officer	June 17, 2011
David Weiner

	Chief Financial Officer
/s/ John H. Zoeller	(Principal Financial & Accounting Officer)	June 17, 2011
John H. Zoeller

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David Weiner, certify that:

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

(2)

Based on my knowledge, this annual report does not contain any untrue statement of 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 year covered by this annual report;

(3) Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;

(4) Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal controls 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 annual report is being prepared;

(b)

designed such internal control over financial reporting, 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 annual report based on such evaluation; and

(d)

disclosed in this 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 financing reporting; and

(5)

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of 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 functions):

(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.

		Chief Executive Officer
Dated: June 17, 2011	By:	/s/ David Weiner
		David Weiner

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John H. Zoeller, certify that:

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

(2)

(3)

Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 Rule 13a-15(e) and 15d-15(e) and internal controls 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 annual report is being prepared;

(b) designed such internal control over financial reporting, 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 annual report based on such evaluation; and

(d) disclosed in this 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 financing reporting; and

(5)

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of 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 functions):

(a)

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

(b)

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

Dated: June 17, 2011	By:	Principal Financing & Accounting Officer
Dated: June 17, 2011	By:	/s/ John H. Zoeller
		John h. Zoeller
		Chief Financial Officer

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, David Weiner, certify that:

(1)

the Annual Report on Form 10-K of the registrant for the annual period ended December 31, 2010, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

		Chief Executive Officer
Dated: June 17, 2011	By:	/s/ David Weiner
		David Weiner

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, John H. Zoeller, certify that:

(1)

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

Dated: June 17, 2011	By:	Principal Financing & Accounting Officer
Dated: June 17, 2011	By:	/s/ John H. Zoeller
		John H. Zoeller
		Chief Financial Officer

SB PARTNERS

ITEMS 8 and 14 (a) (1) and (2)


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE


Report of Independent Registered Public Accounting Firm	26

Consolidated Balance Sheets as of December 31, 2010 and 2009	27

Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008	28

Consolidated Statements of Changes in Partners' Capital (Deficit) for the years ended December 31, 2010, 2009 and 2008	29

Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	30

Notes to Consolidated Financial Statements	31 – 42

Supplemental Financial Statement schedule:

Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2010	43-44

Report of Independent Registered Public Accounting Firm

To the Partners

SB Partners

We have audited the accompanying consolidated balance sheets of SB Partners and subsidiaries (collectively, the “Partnership”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in partners’ capital (deficit), and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Partnership’s general partner. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the general partner, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

In connection with our audit of the financial statements referred to above, we audited the supplemental financial statement schedule listed in the foregoing table of contents. In our opinion, the supplemental financial statement schedule presents fairly, in all material respects, the information stated therein, when considered in relation to the financial statements taken as a whole.

/s/ Dworken, Hillman, LaMorte and Sterczala, P.C.

Shelton, Connecticut

June 10, 2011

SB PARTNERS
(A New York Limited Partnership)

CONSOLIDATED BALANCE SHEETS

			December 31,
			2010			2009
						(As Restated)
Assets:
Investments -
	Real estate, at cost
	Land		$	1,985,000		$	1,985,000
	Buildings, furnishings and improvements			18,560,518			18,560,518
	Less - accumulated depreciation			(2,943,492	)		(2,453,136	)
				17,602,026			18,092,382

	Real estate held for sale			-			19,541,666
	Investment in Sentinel Omaha, LLC, net of reserve
	for fair value of $4,109,076 and $4,525,416 at
	December 31, 2010 and 2009, respectively			-			-
				17,602,026			37,634,048

Other Assets -
	Cash and cash equivalents			12,932,100			148,077
	Other			68,629			71,508
	Other assets in discontinued operation			-			41,192

		Total assets	$	30,602,755		$	37,894,825

Liabilities:
	Mortgage note and unsecured loan payable		$	32,000,000		$	32,000,000
	Mortgage note in discontinued operation			-			6,634,550
	Accounts payable and accrued expenses			159,366			58,461
	Tenant security deposits			106,830			104,032
	Other liabilities in discontinued operation			-			138,106

		Total liabilities		32,266,196			38,935,149

Partners' Deficit:
	Units of partnership interest without par value;
	Limited partner - 7,753 units			(1,644,791	)		(1,021,754	)
	General partner - 1 unit			(18,650	)		(18,570	)

		Total partners' deficit		(1,663,441	)		(1,040,324	)

		Total liabilities and partners' deficit	$	30,602,755		$	37,894,825

See notes to consolidated financial statements

SB PARTNERS
(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Years Ended December 31,
				(As Restated)			(As Restated)
	2010			2009			2008
Revenues:
Base rental income	$	1,732,609		$	1,690,449		$	1,610,290
Other rental income		871,999			891,098			778,162
Interest on short-term investments and other		7,498			165			11,120

Total revenues		2,612,106			2,581,712			2,399,572

Expenses:
Real estate operating expenses		423,806			439,852			469,002
Interest on mortgage notes and unsecured loan payable		1,078,274			1,097,164			1,621,380
Depreciation and amortization		492,721			497,499			532,356
Real estate taxes		602,097			649,996			601,474
Management fees		867,583			826,573			851,590
Other		189,879			207,683			195,112

Total expenses		3,654,360			3,718,767			4,270,914

Loss from operations		(1,042,254	)		(1,137,055	)		(1,871,342	)

Equity in net loss of investment		(416,340	)		(18,325,791	)		(13,369,669	)

Reserve for value of investment		416,340			(4,525,416	)		-

Loss from continuing operations		(1,042,254	)		(23,988,262	)		(15,241,011	)

Income from discontinued operations		465,182			383,729			324,291

Net loss on sale of investment in real estate property		(46,045	)		-			-

Net loss		(623,117	)		(23,604,533	)		(14,916,720	)

Loss allocated to general partner		(80	)		(3,045	)		(1,924	)

Loss allocated to limited partners	$	(623,037	)	$	(23,601,488	)	$	(14,914,796	)

(Loss) earnings per unit of limited partnership interest
(basic and diluted)

Continuing operations	$	(134.43	)	$	(3,094.06	)	$	(1,965.82	)

Discontinued operations (including gain on sale)	$	54.06		$	49.49		$	41.83

Net loss	$	(80.37	)	$	(3,044.57	)	$	(1,923.99	)

Weighted Average Number of Units of Limited
Partnership Interest Outstanding		7,753			7,753			7,753


See notes to consolidated financial statements

SB PARTNERS
(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 2010, 2009, and 2008

Limited Partners:
	Units of Partnership Interest

	Number		Amount		Cumulative Cash Distributions			Accumulated Earnings (Losses)			Total

Balance, January 1, 2008		7,753		119,968,973		(110,868,811	)		29,247,143			38,347,305
Cash distributions		-		-		(852,775	)		-			(852,775	)
Net loss for the year		-		-		-			(14,914,796	)		(14,914,796	)
Balance, December 31, 2008		7,753		119,968,973		(111,721,586	)		14,332,347			22,579,734
Net loss for the year		-		-		-			(23,601,488	)		(23,601,488	)
Balance, December 31, 2009		7,753		119,968,973		(111,721,586	)		(9,269,141	)		(1,021,754	)
Net loss for the year		-		-		-			(623,037	)		(623,037	)
Balance, December 31, 2010		7,753	$	119,968,973	$	(111,721,586	)	$	(9,892,178	)	$	(1,644,791	)




General Partner:
	Units of Partnership Interest

	Number		Amount		Cumulative Cash Distributions			Accumulated Earnings (Losses)			Total

Balance, January 1, 2008		1		10,000		(26,254	)		2,763			(13,491	)
Cash distributions		-		-		(110	)		-			(110	)
Net loss for the year		-		-		-			(1,924	)		(1,924	)
Balance, December 31, 2008		1		10,000		(26,364	)		839			(15,525	)
Net loss for the year		-		-		-			(3,045	)		(3,045	)
Balance, December 31, 2009		1		10,000		(26,364	)		(2,206	)		(18,570	)
Net loss for the year		-		-		-			(80	)		(80	)
Balance, December 31, 2010		1	$	10,000	$	(26,364	)	$	(2,286	)	$	(18,650	)


See notes to consolidated financial statements.

SB PARTNERS
(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2010			2009			2008
				(As Restated)			(As Restated)
Cash Flows From Operating Activities:
Net loss	$	(623,117	)	$	(23,604,533	)	$	(14,916,720	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Net loss on sale of investment in real estate property		46,045			-			-
Equity in net loss of investment		416,340			18,325,791			13,369,669
Reserve for fair value of investment		(416,340	)		4,525,416			-
Depreciation and amortization		879,548			1,001,891			1,036,588
Net (increase) in operating assets		(16,127	)		(35,510	)		(9,295	)
Net (increase) decrease in operating assets in
discontinued operation		41,192			(3,812	)		28,206
Net increase (decrease) in operating liabilities		100,905			(436,743	)		259,184
Net increase in tenant security deposits		2,798			2,217			-
Net increase (decrease) in operating liabilities in
discontinued operation		(138,106	)		36,576			101,530

Net cash provided by (used in) operating activites		293,138			(188,707	)		(130,838	)

Cash Flows From Investing Activities:
Net proceeds from sale of investment in real estate property		19,016,985			-			-
Capital reimbursements (additions) to real estate owned		113,950			(35,917	)		(14,102	)

Net cash provided by (used in) investing activites		19,130,935			(35,917	)		(14,102	)

Cash Flows From Financing Activities:
Repayments of mortgage notes payable		(6,480,402	)		-			-
Principal payments on mortgage notes payable		(154,148	)		(171,540	)		(137,086	)
Payment of deferred financing cost		(5,500	)		-			-
Distributions paid to partners		-			-			(852,885	)

Net cash (used in) financing activities		(6,640,050	)		(171,540	)		(989,971	)

Net change in cash and cash equivalents		12,784,023			(396,164	)		(1,134,911	)

Cash and cash equivalents at beginning of year		148,077			544,241			1,679,152

Cash and cash equivalents at end of year	$	12,932,100		$	148,077		$	544,241


Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	1,428,721		$	1,412,275		$	1,940,925


See notes to consolidated financial statements

SB PARTNERS

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 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 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 the 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

Investments in real estate are carried at historical cost and reviewed periodically for impairment. 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 will be 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 December 31, 2010 is estimated to be fully realizable.

(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, depreciation of such property is no longer recorded.

(f)	For financial reporting purposes, the Partnership considers all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents.

(g)

The Partnership accounts for its investment in Sentinel Omaha, LLC at fair value. Determination of the fair value of Omaha involves numerous estimates and subjective judgments that are subject to change in response to current and future economic and market conditions, including, among other things, demand for residential apartments, competition, and operating cost levels such as labor, energy costs and real estate taxes. Judgments regarding these factors are not subject to precise quantification or verification and may change from time to time as economic and market factors change. (see Note 7)

(h)

Tenant leases at the multifamily properties owned by Omaha generally have terms of one year or less. Rental income at the multifamily properties is recognized when earned pursuant to the terms of the leases with tenants. Tenant leases at the industrial flex and warehouse distribution properties have terms that exceed one year. Rental income at the industrial flex and warehouse

distribution properties is recognized on a straight-line basis over the terms of the leases.

(i)

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 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 consolidated financial statements for Federal, state or local income taxes.

(k)	Net income 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 each year.

(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 consolidated financial statements.

(m)	Certain prior year amounts have been reclassified to conform with the current year presentation (see Note 2).

(2) RECLASSIFICATIONS

As of September 30, 2010, the Partnership designated 175 Ambassador Drive as real estate held for sale. Accordingly, this property was included in real estate held for sale on the consolidated balance sheet as of December 31, 2009. Assets and liabilities of this property were reflected as other assets and liabilities in discontinued operations on the consolidated balance sheet and its results of operations was reflected as income from discontinued operations on the consolidated statements of operations.

The consolidated financial statements as of December 31, 2009 and for the years ended December 31, 2009 and 2008, as amended, have been retrospectively adjusted to reflect this reclassification as follows:


			December 31, 2009


			As	To reflect reclassification	As
			originally	to real estate held for sale	retrospectively
			reported	as of September 30, 2010	adjusted
Assets:
Investments -
	Real estate, at cost
		Land	$ 4,065,000	$ (2,080,000)	$ 1,985,000
		Buildings, furnishings and improvements	37,524,235	(18,963,717)	18,560,518
		Less - accumulated depreciation	(3,955,187)	1,502,051	(2,453,136)
			37,634,048	(19,541,666)	18,092,382

	Real estate held for sale		-	19,541,666	19,541,666
	Investment in Sentinel Omaha, LLC		4,525,416	-	4,525,416
	Less - reserve for fair value of investment
	in Sentinel Omaha, LLC		(4,525,416)	-	(4,525,416)
			37,634,048	-	37,634,048
Other Assets -
	Cash and cash equivalents		148,077	-	148,077
	Other		112,700	(41,192)	71,508
	Other assets in discontinued operation		-	41,192	41,192

		Total assets	$ 37,894,825	$ -	$ 37,894,825

Liabilities:
	Mortgage note and unsecured loan payable		$ 38,634,550	$ (6,634,550)	$ 32,000,000
	Mortgage note in discontinued operation		-	6,634,550	6,634,550
	Accounts payable and accrued expenses		196,567	(138,106)	58,461
	Tenant security deposits		104,032	0	104,032
	Other liabilities in discontinued operations		-	138,106	138,106

		Total liabilities	38,935,149	-	38,935,149

Partners' Deficit:
	Limited partner - 7,753 units		(1,021,754)	-	(1,021,754)
	General partner - 1 unit		(18,570)	-	(18,570)

		Total partners' deficit	(1,040,324)	-	(1,040,324)

		Total liabilities and partners' deficit	$ 37,894,825	$ -	$ 37,894,825

			For the Year Ended December 31, 2009

			As	To reflect reclassification	As
			originally	to real estate held for sale	retrospectively
			reported	as of September 30, 2010	adjusted
Revenues:
	Rental income		$ 3,023,526	$ (1,333,077)	$ 1,690,449
	Other rental income		959,854	(68,756)	891,098
	Interest on short-term investments and other		165	-	165

		Total revenues	3,983,545	(1,401,833)	2,581,712

Expenses:
	Real estate operating expenses		557,015	(117,163)	439,852
	Interest on mortgage notes and unsecured
	loan payable		1,493,958	(396,794)	1,097,164
	Depreciation and amortization		1,001,891	(504,392)	497,499
	Real estate taxes		649,996	-	649,996
	Management fees		826,573	-	826,573
	Other		207,438	245	207,683

		Total expenses	4,736,871	(1,018,104)	3,718,767

	Loss from operations		(753,326)	(383,729)	(1,137,055)
	Equity in net loss of investment		(18,325,791)	-	(18,325,791)
	Reserve for value of investment		(4,525,416)	-	(4,525,416)

	Loss from continuing operations		(23,604,533)	(383,729)	(23,988,262)
	Income from discontinued operations		-	383,729	383,729

Net loss			(23,604,533)	-	(23,604,533)

	Loss allocated to general partner		(3,045)	-	(3,045)
	Loss allocated to limited partners		$ (23,601,488)	$ -	$ (23,601,488)

	Earnings per unit of limited partnership interest (basic and diluted):
	Continuing operations		$ (3,044.57)	$ (49.49)	$ (3,094.06)
	Discontinued operations		$ -	$ 49.49	$ 49.49
	Net Loss per unit of Limited Partnership Interest		$ (3,044.57)	$ -	$ (3,044.57)

			For the Year Ended December 31, 2008

			As	To reflect reclassification	As
			originally	to real estate held for sale	retrospectively
			reported	as of September 30, 2010	adjusted
Revenues:
	Rental income		$ 2,901,867	$ (1,291,577)	$ 1,610,290
	Other rental income		846,950	(68,788)	778,162
	Interest on short-term investments and other		11,120	-	11,120

		Total revenues	3,759,937	(1,360,365)	2,399,572

Expenses:
	Real estate operating expenses		596,053	(127,051)	469,002
	Interest on mortgage notes and
	unsecured loan payable		2,025,406	(404,026)	1,621,380
	Depreciation and amortization		1,036,588	(504,232)	532,356
	Real estate taxes		601,474	-	601,474
	Management fees		851,590	-	851,590
	Other		195,877	(765)	195,112

		Total expenses	5,306,988	(1,036,074)	4,270,914

	Loss from operations		(1,547,051)	(324,291)	(1,871,342)
	Equity in net loss of investment		(13,369,669)	-	(13,369,669)

	Loss from continuing operations		(14,916,720)	(324,291)	(15,241,011)
	Income from discontinued operations		-	324,291	324,291

Net loss			(14,916,720)	-	(14,916,720)

	Loss allocated to general partner		(1,924)	-	(1,924)
	Loss allocated to limited partners		($14,914,796)	$ -	($14,914,796)

	Earnings per unit of limited partnership interest (basic and diluted):
	Continuing operations		$ (1,923.99)	$ (41.83)	$ (1,965.82)
	Discontinued operations		$ -	$ 41.83	$ 41.83
	Net loss per unit of Limited Partnership Interest		$ (1,923.99)	$ -	$ (1,923.99)

(3) INVESTMENT MANAGEMENT AGREEMENT

The Partnership entered into a management agreement with the General Partner. Under the terms of this agreement, the General Partner is responsible for the acquisition, management and disposition of all investments, as well as performance of the day-to-day administrative operations and provision of office space for the Partnership.

For these services, the General Partner receives a management fee equal to 2% of the average amount of capital invested in real estate plus cumulative mortgage amortization payments, and 0.5% of capital not invested in real estate, as defined in the partnership agreement. The management fee amounted to $867,583, $826,573, and $851,590, for the years ended December 31, 2010, 2009, and 2008, respectively. In addition, the General Partner is entitled to 25% of cash distributions in excess of the annual distribution preference, as defined in the partnership agreement. No such amounts were due for the years ended December 31, 2010, 2009 or 2008.

(4) INVESTMENTS IN REAL ESTATE

During 2010 and 2009, the Partnership owned an industrial flex property in Maple Grove, Minnesota, warehouse distribution properties in Lino Lakes, Minnesota; and Naperville, Illinois. On December 3, 2010, the Partnership sold its warehouse distribution property located in Naperville, Il. The following is the cost basis and accumulated depreciation of the real estate investments owned by the Partnership as of December 31, 2010 and 2009:


				Real Estate at Cost
	No. of	Year of
Type	Prop.	Acquisition	Description	12/31/10	12/31/09


Industrial flex property	1	2002	60,345 sf	$ 5,270,128	$ 5,270,128

Warehouse distribution property	1	2005	226,000 sf	15,275,390	15,275,390

Total cost				20,545,518	20,545,518

Less: Accumulated depreciation				(2,943,492)	(2,453,136)

				17,602,026	18,092,382

Real estate held for sale (a)				-	19,541,666

Net book value				$17,602,026	$37,634,048

(a) at December 31, 2009, real estate held for sale includes 175 Ambassador Drive.

(5) REAL ESTATE HELD FOR SALE

During September 2010, the Partnership initiated marketing 175 Ambassador Drive, its industrial flex property located in Naperville, IL for sale. 175 Ambassador Drive was sold on December 3, 2010. 175 Ambassador Drive is reflected as real estate held for sale on the accompanying consolidated balance sheet at December 31, 2009. Other assets and the liabilities of this property are reflected as other assets and liabilities in discontinued operations on the accompanying consolidated balance sheet at December 31, 2009. The results of operations from this property are reflected as income from discontinued operations in the accompanying consolidated statements of operations. The various components of revenue and expenses from discontinued operations for the years ended December 31, 2010, 2009 and 2008 are as follows:



	2010	2009	2008

Operating revenue	$1,313,239	$1,401,833	$1,360,365

Operating expenses	848,057	1,018,104	1,036,074

Income from discontinued operations	$465,182	$383,729	$324,291

(6) REAL ESTATE TRANSACTIONS

On December 3, 2010, the Partnership sold 175 Ambassador Drive to an unrelated buyer for $19,500,000 in an all cash transaction. The net proceeds from the sale were used, in part, to retire the mortgage note of approximately $6,477,000 that had been secured by the property. The carrying value at the time of the sale was approximately $19,063,029 which resulted in a net loss for financial reporting purposes of $46,045 after closing costs of $483,016. The historical cost of the property at the time of the sale was $20,929,767

(7) INVESTMENT SENTINEL OMAHA, LLC

On June 22, 2007, the Registrant made an initial investment in the amount of $5,000,000 in Sentinel Omaha, LLC (“Omaha”). Omaha is a real estate investment company which as of December 31, 2010 owns 24 multifamily properties in 17 markets. Omaha is an affiliate of the Partnership’s general partner. Additionally, $2,800,000, $9,500,000 and $19,900,000 were invested on July 27, September 14 and September 17, 2007, respectively for a total investment of $37,200,000 representing a thirty percent ownership interest in Omaha. The Omaha annual audited financial statements are filed as an exhibit to the Partnership’s annual Form 10-K filed with the SEC.

With respect to its investment in Omaha, the Registrant elected to early adopt SFAS No. 159, as codified in Accounting Standards Codification Topic 825. Accordingly, the investment is presented at fair value. Early adoption was elected, in part, because the audited financial statements of Omaha are presented at fair value and it was believed that a similar presentation would best reflect the value of the Registrant’s investment from its inception.

The following are the audited condensed financial statements (000’s omitted) of Omaha as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010.


Balance Sheet	2010	2009

Investment in real estate properties, at fair value	$348,750	$355,200
Other assets	10,438	13,787
Debt	(337,935)	(344,361)
Other liabilities	(7,556)	(9,541)
Members' equity	$13,697	$15,085


Statement of Operations	2010	2009	2008

Rent and other income	$46,479	$50,119	$54,555
Real estate operating expenses	(24,872)	(28,131)	(30,257)
Other income and expenses	(17,741)	(19,705)	(22,425)
Net unrealized gains and (losses)	9,707	(63,923)	(44,755)
Net realized gains and (losses)	(14,961)	533	(1,683)

Net loss	($1,388)	($61,107)	($44,565)

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities;

Level 2 - Quoted prices in active markets for similar assets and liabilities or quoted prices in less active dealer or broker markets;

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable.

Estimated fair value calculations were prepared by Omaha's management utilizing Level 3 inputs.

Further, the investment in Omaha is not consolidated because other investors have substantive ownership and participative rights regarding Omaha’s operations and therefore control does not vest in the Registrant. Were the Partnership deemed to control Omaha, it would have to be consolidated and therefore would impact the financial statements and related ratios.

Under the terms of the loan extension Omaha signed effective July 1, 2009, Omaha is precluded from making distributions to its investors until its unsecured loan is paid. On April 14, 2010, Omaha executed the fourth amendment to its unsecured loan which reduced the blended interest rate on the loan from LIBOR plus 5.85% to LIBOR plus 3.86%, as of February 1, 2010. Additionally, Omaha’s financial ratio requirements were waived at December 31, 2009 and March 31, 2010 and were relaxed prospectively. Furthermore, the maturity date of the unsecured loan was extended from May 31, 2011 to May 31, 2012 with an option for an additional one year extension at which time an extension exit fee is to be paid on a portion of any remaining balance of the unsecured loan. However, Omaha is still precluded from paying distributions to its investors until the unsecured loan is paid. As a result of the aforementioned, the Partnership does not anticipate receiving any distributions from Omaha during the foreseeable future and has reserved 100% of the reported value of its investment in Omaha on the balance sheet as of December 31, 2010 and 2009.

(8) MORTGAGE NOTES AND UNSECURED LOAN PAYABLE

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

					Net Carrying Amount
			Annual		December 31,
			Installment	Amount Due
Property	Interest Rate	Maturity Date	Payments	at Maturity	2010	2009

Mortgage note and unsecured loan payable:
Lino Lakes (a)	5.80%	October, 2015	$580,000	$10,000,000	$10,000,000	$10,000,000

Bank Loan:
Unsecured (b)					22,000,000	22,000,000
					32,000,000	32,000,000

Mortgage note in discontinued operation:
Ambassador Drive (c)	5.88%	October, 2010	554,178	6,508,785	-	6,634,550


					$ 32,000,000	$ 38,634,550

(a) Annual installment payments include interest only.

(b) On September 17, 2007, the Partnership entered into a bank loan (the “Loan”) with a bank (“Holder”) in the amount of $22,000,000, which matured on October 1, 2008 and provides for interest only monthly payments based upon LIBOR plus 1.95%. The outstanding amount of the loan at December 31, 2010 and 2009 was $22,000,000. The loan provides for a pledge of the proceeds of sale or refinancing of the industrial flex property located in Maple Grove, Minnesota which is currently unencumbered. The Holder of the unsecured debt formally extended the maturity to February 28, 2009 and had entered into discussions as to terms for extending the debt on a longer term basis. On July 1, 2009 the Partnership received written notice from the Holder of the Loan which makes demand for the immediate payment of the Loan. The Holder and the Partnership continue to discuss options for curing the default. On April 29, 2011, the Partnership and Holder executed the new loan agreement (“Loan Agreement”) which replaced the unsecured credit facility (see Note 15 Subsequent Events).

(c) Annual installment payments include principal and interest. On December 2, 2010, the Partnership sold 175 Ambassador Drive. The net proceeds from the sale were used, in part, to retire the mortgage note of approximately $6,477,000 that had been secured by the property.

Scheduled principal payments on mortgage notes and unsecured loan payable, reflecting the Loan Agreement executed on April 29, 2011, are as follows:



	2011		$ 11,930,430
	2012		-
	2013		-
	2014		4,069,570
	2015		10,000,000
	Thereafter		6,000,000

	Total		$ 32,000,000

(9) LEASE EXTENSION

On January 9, 2009, the Partnership signed an amendment to extend the lease with the sole tenant at the Maple Grove, MN property. The extension is for two years to July 31, 2015 and requires annual rent payments of $622,157 and $640,864 for the first and second years, respectively. The Partnership paid an affiliate $41,001 as a leasing commission for procuring the lease extension.

(10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

						Loss from			Equity Income
			Loss from			Operations			(Loss) on
Year ended December 31, 2010	Revenues		Operations			Per Unit			Investment

First Quarter	$	607,560	$	(302,331	)	$	(38.99	)	$	(2,192,013	)
Second Quarter		722,668		(188,233	)		(24.28	)		656,566
Third Quarter		637,190		(291,129	)		(37.55	)		78,404
Fourth Quarter		644,688		(260,561	)		(33.61	)		1,040,703


Year ended December 31, 2009

First Quarter	$	611,665	$	(257,422	)	$	(33.20	)	$	(5,942,376	)
Second Quarter		729,900		(165,155	)		(21.30	)		1,939,415
Third Quarter		610,301		(225,315	)		(29.06	)		(4,636,927	)
Fourth Quarter		629,846		(489,163	)		(63.09	)		(9,685,903	)

(11) FEDERAL INCOME TAX INFORMATION (UNAUDITED)

A reconciliation of net (loss) for financial reporting purposes to net (loss) for Federal income tax reporting purposes is as follows:

		For the Years Ended December 31,
		2010	2009	2008

Net loss for financial reporting purposes		$ (623,117)	$ (23,604,533)	$ (14,916,720)

Adjustment to net loss on sale of investment in real estate
	property to reflect differences between tax and financial
	reporting bases of assets and liabilities	(3,080,162)	(1,237,500)	1,130,134

Difference between tax and financial statement equity in net
	loss of investment	(3,250,897)	19,396,228	7,236,549

Difference between tax and financial statement depreciation		(297,481)	(288,857)	(321,619)

Net loss for Federal income tax reporting purposes		$ (7,251,657)	$ (5,734,662)	$ (6,871,656)

Net ordinary loss for Federal income tax reporting purposes:		$ (4,125,450)	$ (4,657,114)	$ (6,871,656)
Net capital (Sec. 1231) (loss) for Federal income tax reporting purposes:		(3,126,207)	(1,077,548)	-

		$ (7,251,657)	$ (5,734,662)	$ (6,871,656)


Weighted average number of units of limited partnership interest outstanding		7,753	7,753	7,753

As of December 31, 2010 and 2009, the tax bases of the Partnership's assets and liabilities were approximately $35,888,158 and $52,981,874 of assets, and $32,266,196 and $38,935,149 of liabilities, respectively.

(12) MANAGEMENT SERVICES

Certain affiliates of the General Partner oversee the management and operation of various real estate properties, including those owned by the Partnership. Services performed by affiliates are billed at actual or allocated cost, percentage of revenues or net equity. For the years ended December 31, 2010, 2009 and 2008 billings to the Partnership amounting to $195,907, $196,780 and $186,594, respectively, and are included in real estate operating expenses.

In connection with the mortgage financing of certain properties, the respective lenders required the Partnership to place the assets and liabilities of these properties into single asset limited partnerships which hold title to these properties. A trust company affiliated with the General Partner holds the general partner interest in each single asset limited partnership as trustee for the Partnership. For its services, the affiliate is paid an annual fee, which aggregated $0 in 2010, 2009, and 2008, respectively, and is based upon the trust company's standard rate schedule.

(13) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Partnership’s financial instruments include cash, cash equivalents, and mortgage notes payable and unsecured loan. The carrying amount of cash and cash equivalents are reasonable estimates of fair value. Mortgage notes and unsecured loans payable have been valued by discounting future payments required under the terms of the obligations at rates currently available to the Partnership for debt with similar maturities, terms and underlying collateral. The fair value of the mortgage notes and unsecured loan payable is estimated to be $32,000,000 and $38,581,739 at December 31, 2010 and 2009, respectively.

(14) COMMITMENTS AND CONTINGENCIES

The Partnership is a party to certain actions directly arising from its normal business operations. While the ultimate outcome is not presently determinable with certainty, the Partnership believes that the resolution of these matters will not have a material adverse effect on its financial statements.

The Partnership leases its properties to tenants under operating lease agreements, certain of which require tenants at the industrial flex and warehouse distribution properties to pay all or part of certain operating and other expenses of the property. The minimum future rentals to be received in respect of non-cancelable commercial operating leases with unexpired terms in excess of one year as of December 31, 2011 are $1,748,900, $1,765,666 for 2012; $1,791,136 for 2013; $1,844,537 for 2014; $1,615,523 for 2015; $1,241,688 for 2016; and $931,266 for 2017.

Pursuant to the original investment agreement, the Partnership may be called upon to contribute, in cash, an additional $3,720,000 to the capital of Omaha, as and when required, as determined by the Manager. In addition, the Partnership shall not have any liability to restore any negative balance in its capital account.

Should a default occur by Omaha on its unsecured credit facility, the lender would not have any recourse to the Partnership and will look solely to Omaha’s membership interest in Sentinel White Plains LLC. Sentinel White Plains LLC is a wholly owned subsidiary of Sentinel Omaha LLC and holds the assets and liabilities of the Omaha properties through wholly owned single asset limited partnerships or limited liability companies.

(15) SUBSEQUENT EVENTS

On April 29, 2011, the holder of the unsecured credit facility and the Partnership executed a new Loan Agreement (“Loan Agreement”) on the following terms:

Note B in the amount of $6,000,000 has a maturity date of April 29, 2018. Registrant has three 1-year options to extend the maturity date if certain conditions are satisfied. Note B accrues interest at an annual fixed rate of 5% but only until all interest and principal have been paid in full on Note A. Thereafter Note B does not accrue any interest. Payments of interest and principal are deferred until Registrant’s investment in Sentinel Omaha LLC (“Omaha”) pays distributions to Registrant. Distributions from Omaha would be used first to pay accrued interest on the Note B obligation, then principal on the Note B obligation. If there are no distributions from Omaha prior to the Note B maturity, all interest and principal is due at maturity, subject to the above mentioned extensions.

4)	The Notes may be voluntarily prepaid upon notice to the Holder, subject to certain requirements as to the application of payments. Registrant’s obligations under the Notes may be accelerated upon default.

Until Registrant’s obligations under the Notes are satisfied in full, Registrant is required to pay a portion of its net operating income (after payment of certain permitted expenses), and the net proceeds from the sale, transfer or refinancing of its remaining properties and investments, toward the Notes while retaining the other portion to increase cash reserves. While the obligations under the Notes are outstanding Registrant is precluded from making distributions to its partners.

6)	Registrant, its general partner and the Holder also entered into a Management Subordination Agreement accruing a portion of the investment management fee payable by Registrant to its general partner so long as the Notes remain outstanding.

SB PARTNERS

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2010

Column A

Column B

Column C

Column D

Initial Cost to the Registrant

Costs

Capitalized

Buildings and

Subsequent

Description

Encumbrances

Land

Improvements

Total

to Acquisition

INDUSTRIAL FLEX

Minnesota -

Maple Grove (Eagle Lake Business Center IV)

$ -

$ 470,000

$ 4,243,385

$ 4,713,385

$ 556,743

DISTRIBUTION CENTER

Minnesota -

Lino Lakes (435 Park Court)

10,000,000

1,515,000

13,760,390

15,275,390

$ 10,000,000

$ 1,985,000

$ 18,003,775

$ 19,988,775

$ 556,743


Column A				Column E		Column F

			Gross amount at which Carried at End of Year
			(Notes a & c)
						Accumulated
				Buildings and		Depreciation
Description			Land	Improvements	Total	(Notes b & d)

INDUSTRIAL FLEX
	Minnesota -
		Maple Grove (Eagle Lake Business Center IV)	$ 470,000	$ 4,800,128	$ 5,270,128	$ 1,086,277

DISTRIBUTION CENTER
	Minnesota -
		Lino Lakes (435 Park Court)	1,515,000	13,760,390	15,275,390	1,857,215

			$ 1,985,000	$ 18,560,518	$ 20,545,518	$ 2,943,492

SB PARTNERS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 2010

Column A			Column G	Column H	Column I

					Life on which
					Depreciation in
					Latest Statement
			Date of	Date	of Operations
Description			Construction	Acquired	is Computed

INDUSTRIAL FLEX
	Minnesota -
		Maple Grove (Eagle Lake Business Center IV)	2000	Jun 2002	7 to 39 years

DISTRIBUTION CENTER
	Minnesota -
		Lino Lakes (435 Park Court)	2004	Oct 2005	7 to 39 years

NOTES TO SCHEDULE III:

				2010	2009	2008

(a)	Reconciliation of amounts shown in Column E:
	Balance at beginning of year			$ 41,589,235	$ 41,553,318	$ 41,539,216
		Additions -
			Acquisitions	0	0	0
			Cost of improvements (reimbursements)	(113,950)	35,917	14,102

		Deductions -
			Sales	(20,929,767)	0	0

	Balance at end of year			$ 20,545,518	$ 41,589,235	$ 41,553,318


(b)	Reconciliation of amounts shown in Column F:
	Balance at beginning of year			$ 3,955,187	$ 2,973,803	$ 2,000,624
		Additions -
			Depreciation expense for the year	855,043	981,384	973,179

		Deductions -
			Sales	(1,866,738)	0	0

				$ 2,943,492	$ 3,955,187	$ 2,973,803

(c)	Aggregate cost basis for Federal
		income tax reporting purposes		$ 20,037,050	$ 41,398,976	$ 41,423,246

(d)	Accumulated depreciation for Federal
		income tax reporting purposes		$ 3,615,472	$ 5,070,466	$ 3,822,990

Attached files

SB PARTNERS Reports

Also read