SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q – QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

Or

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

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

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No

Not Applicable

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Not Applicable

SB PARTNERS

INDEX

ITEM 1. FINANCIAL STATEMENTS

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to consolidated financial statements

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)

For the Three Months Ended March 31, 2016 (Unaudited)

Limited Partners:

General Partner:

See notes to consolidated financial statements.

SB PARTNERS

(A New York Limited Partnership)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See notes to consolidated financial statements

SB PARTNERS

Notes to Consolidated Financial Statements (Unaudited)

ITEM 2.                              

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

General

The consolidated financial statements for the three months ended March 31, 2016 reflect the operations of one wholly owned industrial flex property located in Maple Grove, Minnesota and a 30% interest in Omaha. The consolidated financial statements for the three months ended March 31, 2015 reflect the operations of the industrial flex property located in Maple Grove, Minnesota and one warehouse distribution center located in Lino Lakes, Minnesota as well as a 30% interest in Omaha. The warehouse distribution space was sold on September 17, 2015.

Registrant’s wholly owned property located in Maple Grove, Minnesota is 100% leased to a single tenant whose lease expires October 31, 2019. However, tenant has on ongoing option to terminate the lease after July 31, 2017 under certain conditions as set forth in the lease terms as amended. One of the conditions is the payment of an early termination penalty the calculation of which is based on the remaining time period in the lease. Another condition is the tenant must provide notice twelve months prior to the termination. The tenant pays fixed base rent which increases approximately 3% each year. The tenant pays directly or reimburses Registrant for all utilities, real estate taxes, insurance and most of the property operating expenses and property management fees.

Sentinel Omaha LLC’s portfolio consists of 13 garden apartment properties and one high rise apartment property. Leases generally are for one year or less. Tenants generally pay fixed rent plus utilities used by tenant.

Results of Operations

Total revenues from continuing operations for the three months ended March 31, 2016 increased $14,000 to approximately $262,000 as compared to approximately $248,000 for the three months ended March 31, 2015. Total revenues increased due to an increase in base rental income. Base rental income increased $13,000 to approximately $173,000 for the three months ended March 31, 2016 as compared to the same period in 2015 due to an increase in base rent at Registrant’s property located in Maple Grove, MN. Other rental income and interest income increased slightly.

The Registrant reported a net loss from operations of approximately $152,000 for the three months ended March 31, 2016, an improvement of $140,000 as compared to a net loss from operations of approximately $292,000 for the same period in 2015. Net loss from operations consists of net income from the Maple Grove property partially offset by partnership income and expenses. The decrease of loss from operations was due to lower total expenses combined with higher total revenues. Total expenses from operations for 2016 decreased $126,000 to approximately $415,000 from approximately $541,000 in 2015, due primarily to a decrease in interest expense of $124,000 combined with small decreases in administration expenses and real estate operating expenses. This decrease was partially offset by an increase in depreciation and amortization expense of $8,000.

The Registrant has a 30% non-controlling interest in Omaha that is accounted for on a fair value basis. Under the terms of the unsecured loan extension Omaha signed effective July 1, 2009, as extended and modified, Omaha is precluded from making distributions to its investors until its unsecured loan is paid. Equity in net increase in net assets increased $2,733,000 to approximately $6,576,000 for the three months ended March 31, 2016 compared to net income of approximately $3,843,000 for the same period in 2015. Omaha reports on a fair value basis and due to the mortgage crisis, stagnant real estate market and slow economy, Omaha reported a significant write-down in the value of its real estate portfolio of approximately $100,852,000 during 2008 to 2014. For 2015, Omaha reported an increase in the value of its portfolio of $72,315,000.

On September 30, 2015, Omaha refinanced six properties which had been encumbered by a single secured credit facility with a high fixed interest rate. Previously, a refinancing of the secured credit facility would have required significant prepayment penalties which made a refinancing cost prohibitive. On September 30, 2015, the prepayment penalties were low enough that combined with higher valuations, each property’s borrowing capacity was sufficient to support a new separate mortgage with enough combined proceeds to pay off the credit facility and the prepayment penalties. The six new mortgages have lower interest rates than the loan they replaced although the new interest rates are floating rates, subject to changes in the credit markets. Based on a review of the 2015 property operations and applying the terms of the new mortgages and barring any unforeseen downturn in the real estate and capital markets, Registrant anticipates Omaha has a more likely than not chance to improve the operations of the real estate assets, sell the assets at values sufficient to pay off the mortgages and after paying off the unsecured bank loan, make distributions to its investors for a portion of the original capital invested. Therefore, Registrant as of the period ended March 31, 2016 and as of the year ended December 31, 2015 has recognized a value in the Omaha investment equal to Registrant’s 30% portion of the equity reported on Omaha’s balance sheet for each period less a 50% reserve.

On September 17, 2015, Registrant sold its warehouse distribution property located in Lino Lakes, Minnesota. The results of operations for this property for the three months ended March 31, 2015 are reflected as income from discontinued operations in the accompanying consolidated statements of operations.

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

This report on Form 10-Q includes statements that constitute "forward looking statements" within the meaning of Section 27(A) of the Securities Act of 1933 and Section 21(E) of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. By their nature, all forward looking statements involve risks and uncertainties as further described in the Registrant’s latest annual report on Form 10-K. Actual results may differ materially from those contemplated by the forward looking statements.

CRITICAL ACCOUNTING POLICIES

The Registrant’s critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2015. There were no significant changes to such policies in 2016 except as described in Note 2 to the financial statements. There are no accounting pronouncements or interpretations that have been issued, but not yet adopted, that Registrant believes will have a material impact on its consolidated financial statements.

Liquidity and Capital Resources

As of March 31, 2016, the Registrant had cash and cash equivalents of approximately $1,233,000. These balances are approximately $26,000 higher than cash and cash equivalents held on December 31, 2015. Cash and cash equivalents increased during the three months ended March 31, 2016 due to cash flow generated from operating activities at Registrant’s wholly owned property partially offset by partnership expenses.

Restricted cash as of December 31, 2015 consisted of a portion of net proceeds from the sale of the Lino Lakes property. $200,000 of net sales proceeds had been held in reserve pending the expiration of the representations and warranties period as stipulated in the sales contract. On March 15, 2016, the representation and warranties period expired. There were no charges made against this reserve, therefore in March 2016, the $200,000 was used to further pay down the principal balance of the Note B in accordance with the terms of the Loan Agreement.

Currently, Registrant’s only source of cash is rental income received from the tenant who leases 100% of the leasable space at Registrant’s wholly owned property in Maple Grove. The tenant reimburses Registrant for real estate taxes, insurance and most of the properties’ operating expenses leaving a significant portion of the base rent received available to pay capital improvements and partnership administrative expenses. A portion of any remaining annual cash flow is used to pay down the principal balance of Note B in accordance with the Loan Agreement while the remaining cash income is retained by Registrant as cash reserves. As part of Registrant and the Holder restructuring the bank loan in 2011, Registrant set aside $500,000 in escrow to be held and used only to pay the costs to re-tenant the space at Registrant’s wholly owned property if Registrant’s tenant defaults on its lease or exercises its right to terminate the lease early or fails to renew.

Total outstanding debt at March 31, 2016 consists of Note B at $5,786,888. Under the terms of the Bank Loan Agreement, when the A Note was paid off, interest on the Note B stopped accruing. Note B loan matures April 2018. If the Registrant does not have funds on hand sufficient to repay its indebtedness at maturity, the Registrant may need to refinance such indebtedness with new debt financing or provide necessary funds through equity offering(s). The Registrant may be unable to obtain a loan which will be sufficient to retire the existing loan. If it is unable to refinance this indebtedness on acceptable terms, the Registrant may be forced to liquidate its remaining assets upon disadvantageous terms, which could result in losses to the Registrant and adversely affect the amount of cash reserves. If 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. The Registrant has no other debt except normal trade accounts payable and accrued investment management fees.

During the quarter, inflation and changing prices did not significantly affect the markets in which the Registrant conducts its business, or the Registrant's business overall.

Registrant anticipates cash flow generated from the property located in Maple Grove and current cash reserves will be sufficient to cover operating and capital improvement costs and other working capital requirements of the Registrant so long as the tenant remains in place.

Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues for the three months ended March 31, 2016 increased $14,000 to approximately $262,000 as compared to approximately $248,000 for the three months ended March 31, 2015. The property reported higher base rental income and slightly higher other rental income. Base rental income was higher in 2016 due to an increase in the base rent when the tenant’s lease was extended in 2015. Net operating income, which includes deductions for depreciation, increased $12,000 for the three months ended March 31, 2016 to approximately $152,000 from approximately $140,000 for the three months ended March 31, 2015 due primarily to higher total revenues partially offset by higher operating expenses. Operating expenses were higher due to higher depreciation expenses partially offset by lower repair and maintenance costs.

435 Park Court (Lino Lakes, Minnesota)

On September 17, 2015, Registrant sold its warehouse distribution property located in Lino Lakes, Minnesota. The results of operations for this property for the three months ended March 31, 2015 are reflected as income from discontinued operations in the accompanying consolidated statements of operations. Registrant did not report any activity for this property in 2016.

Investment in Sentinel Omaha, LLC

As of March 31, 2016, the Omaha portfolio consisted of 14 multi-family properties located in 10 markets. Omaha’s total revenues for the three months ended March 31, 2016 were approximately $10,829,000. Income before net unrealized income was approximately $4,045,000. Major expenses included approximately $1,618,000 for interest expense, $782,000 for repairs and maintenance, $1,490,000 for payroll, and $1,150,000 for real estate taxes. Omaha reported net unrealized income of approximately $2,531,000 resulting in net income of approximately $6,576,000. For the three months ended March 31, 2016, the Registrant’s 30% equity interest in the income of Omaha was approximately $1,973,000. Registrant continues to reserve 50% of the reported value of Omaha on its balance sheet. The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended March 31, 2016. As a result, Registrant reported net income from equity interest in income of Omaha for the quarter ended March 31, 2016 of $986,000.

Omaha’s total revenues for the three months ended March 31, 2015 were approximately $10,012,000. Income before net unrealized income was approximately $1,440,000. Major expenses included approximately $2,238,000 for interest expense, $760,000 for repairs and maintenance, $1,388,000 for payroll, $1,254,000 for financing costs and $1,137,000 for real estate taxes. Omaha reported net unrealized income of approximately $2,403,000 resulting in net income of approximately $3,843,000. For the three months ended March 31, 2015, the Registrant’s equity interest in the income of Omaha was approximately $1,153,000. Registrant had reserved 100% of the reported value of Omaha on its balance sheet as of March 31, 2015. The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended March 31, 2015. As a result, Registrant reported a net zero income from equity interest in income of Omaha for the quarter ended March 31, 2015.

ITEM 3.

None

ITEM 4.

CONTROLS AND PROCEDURES

PART II – OTHER INFORMATION

ITEM 6.

EXHIBITS

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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