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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREEAND SIX MONTHS ENDED JUNE 30, 2017 AND 2016

General

The consolidated financial statements for the three and six months ended June 30,March 31, 2018 and 2017 and 2016 reflect the operations of one wholly owned industrial flex property located in Maple Grove, Minnesota and a 30% interest in Omaha.

Registrant’sRegistrant’s wholly owned property located in Maple Grove, Minnesota is 100% leased to a single tenant whose lease expires October 31, 2019. The tenant has an ongoing option to terminate the lease under certain conditions. 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. As of June 30, 2017,March 31, 2018, Registrant has not received any notice from the tenant. 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 108 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 June 30, 2017March 31, 2018 increased $5,000$7,000 to approximately $268,000$274,000 as compared to approximately $263,000$267,000 for the three months ended June 30, 2016.March 31, 2017. Total revenues increased due to an increase in base rental income and interest income. Base rental income increased $6,000$5,000 to approximately $179,000$184,000 for the three months ended June 30, 2017March 31, 2018 as compared to the same period in 20162017 due to an increase in base rent at Registrant’s property located in Maple Grove, MN. Interest income increased due to an increase in interest rates. Other rental income decreased slightly. Interest income increased slightly.

The Registrant reported a net loss from operations of approximately $130,000$126,000 for the three months ended June 30, 2017,March 31, 2018, an increaseimprovement of $3,000$2,000 as compared to a net loss from operations of approximately $127,000$128,000 for the same period in 2016. Net loss from operations consists of net income from the Maple Grove property offset by partnership income and expenses. The increase of loss from operations was due to higher total expenses partially offset by higher total revenues. Total expenses from operations for 2017 increased $8,000 to approximately $398,000 from approximately $390,000 in 2016, due primarily to increases in real estate operating expenses and management fee expense of $6,000 and $5,000, respectively.

Total revenues from continuing operations for the six months ended June 30, 2017 increased $10,000 to approximately $535,000 as compared to approximately $525,000 for the six months ended June 30, 2016. Total revenues increased due to an increase in base rental income. Base rental income increased $11,000 to approximately $358,000 for the six months ended June 30, 2017 as compared to the same period in 2016 due to an increase in base rent at Registrant’s property located in Maple Grove, MN. Other rental income decreased slightly. Interest income increased slightly.

The Registrant reported a net loss from operations of approximately $258,000 for the six months ended June 30, 2017, an improvement of $21,000 as compared to a net loss from operations of approximately $279,000 for the same period in 2016.2017. Net loss from operations consists of net income from the Maple Grove property offset by partnership income and expenses. The decrease of loss from operations was due to lower total expenses combined with higher total revenues.revenues partially offset by higher total expenses. Total expenses from operations for 2017 decreased $11,0002018 increased $4,000 to approximately $794,000$400,000 from approximately $805,000$396,000 in 2016,2017, due primarily to decreases in real estate operating expenses and professional fees. This decrease was partially offset by an increase in management fee expense of $9,000.$6,000 partially offset by a decrease in professional fees of $2,000.

The Registrant has a 30% non-controlling interest in Omaha that is accounted for on a fair value basis. Under the terms of its unsecured bank loan Omaha is precluded from making distributions to its investors, including the Registrant, until its unsecured loan is paid in full. Net increase in net assets increased $406,000decreased $7,794,000 to approximately $17,947,000$3,705,000 for the sixthree months ended June 30, 2017March 31, 2018 compared to net increase in net assets of approximately $17,541,000$11,499,000 for the same period in 2016. Due to the global financial crisis, stagnant real estate market and slowing economy, Omaha reported a net write-down of the value of its real estate portfolio of approximately $100,852,000 during 2008 to 2014.2017. During 2015 and 2016 capitalization rates for older properties in tertiary markets where Omaha owns most of its properties, generally were lower than for the prior years. Physical and economic occupancy improved at the properties during 2015 and market rates increased during 2016. However, occupancy at two large properties which rely on tenants from a local military base declined due to deployments during 2016. Job growth continued to improve but at a slow pace. For the years 2015 and 2016, as real estate values recovered Omaha reported an increase in the value of its portfolio of $88,512,000. During the second quarter of 2017, Omaha sold its garden apartment property in Daytona, Florida and sold both garden apartment properties located in Fayetteville, North Carolina. Net sales proceeds in each transaction were used to first pay selling expenses and pay off each property’s secured mortgagemortgage. Remaining net sales proceeds were used to reduce Omaha’s unsecured loan. During the twelve months ended December 31, 2017, Omaha reported a net increase in the value of its remaining real estate portfolio of $33,815,000. During the quarter ended March 31, 2018, Omaha sold its garden apartment property in Asheville, North Carolina and remainingits garden apartment property in Fresno, California. Net sales proceeds in each transaction were used to first pay selling expenses and pay off each property’s secured mortgage. Remaining net sales proceeds were used to pay downoff Omaha’s unsecured loan. During the first sixthree months of 2017,ended March 31, 2018, Omaha reported a net increase in the value of its remaining real estate portfolio of $16,269,000. $1,075,000.

During 2017 the floating rates on Omaha loans increased as short term LIBOR rates increased. The one month LIBOR rate increased from an average of (0.7164%) during December 2016 the net operating income reported for Omaha’s properties continued to improve which allowed Omaha to continue to make payments on its unsecured loan. However, Omaha’s mortgages and unsecured loan are encumbered with floatingan average of (1.4925%) during December 2017. Fixed mortgage interest rates which startedfor multi-family properties of similar class and location as Omaha’s portfolio also increased during 2017 from an approximate range of 4.10% to increase4.15% in early 2017 to 4.35% to 4.50% near the end of 20162017. Mortgage interest rates are expected to continue to increase in 2018 as the U.S. Federal Reserve continues a policy to increase the Federal Funds Rate. Although increases in fixed mortgage rates do not impact the operating cash flow of the Omaha properties directly, increases in fixed and duringfloating rates on commercial mortgage debt can have a negative impact on capitalization rates and the first halfsales prices Sentinel Omaha may achieve in the future.

As noted above, Registrant’s only wholly owned property is 100% leased to a single tenant. If the tenant does not renew or if the tenant exercises its termination option, the Registrant would have no internal source of 2017. As mentioned above,funds until the space is released to a new tenant or Registrant receives distributions from Sentinel Omaha. Registrant may have to consider that it would be in the best interests of the limited partners to sell its investment in Sentinel Omaha during the second quarter of 2017 madeand/or sell its wholly owned property. Registrant would not have considered a pay downsale of its 30% non-controlling investment in Omaha in prior years due to Omaha’s unsecured debt. Selling the investment in Omaha while Omaha had a significant unsecured loan using net sales proceeds fromwith an upcoming maturity would have likely realized a sale price for the sale of three properties. Omaha’sinvestment that would be heavily discounted reflecting the unsecured loan which as of June 30, 2017 has a balance of $27,034,322 has a maturity date of December 31, 2017.debt risk. However, since Sentinel Omaha has one option to extendin the maturity date to June 30, 2018. It is unlikely Omaha will be able to paypast two years paid off the unsecured loan from net operating cash flow or refinancing proceeds. Omaha will havedebt along with improving performance at the properties, the debt risk is estimated to sell one or more of the remaining properties which will reduce its net cash flow from operations which could be available for distributionlower. The investment in a 30% non-controlling interest would still be valued at a discount due to the investors afterlack of liquidity. Registrant will continue to report a reserve on the value of Omaha on its books but due to the payoff of Omaha's unsecured loan in 2017, the reserve is paid off. Registrant had in 2015 recognized a value in the Omaha investment equal to Registrant’s 30% portion of the equity reported on Omaha’s balance sheetreduced from 25% as of December 31, 2015 less a 50% reserve. However the above mentioned improvement in Omaha’s real estate values and operations had allowed Registrant2017 to reduce the reserve in 2016 to 35%20% as of DecemberMarch 31, 2016 and further in 2017. Registrant as of June 30, 2017 has recognized a value in the Omaha investment equal to Registrant’s 30% portion of the equity reported on Omaha’s balance sheet as of June 30, 2016 less a 30% reserve.2018.

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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’sRegistrant’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, 2016.2017. There were no significant changes to such policies in 2017.2018. 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 June 30, 2017,March 31, 2018, the Registrant had cash and cash equivalents of approximately $1,348,000.$1,505,000. These balances are approximately $21,000$55,000 higher than cash and cash equivalents held on December 31, 2016.2017. Cash and cash equivalents increased slightly during the sixthree months ended June 30, 2017March 31, 2018 due to cash flow generated from operating activities at Registrant’s wholly owned property partially offset by partnership expenses and pay down of the loan payable.expenses.

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 fund 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 June 30, 2017March 31, 2018 consists of Note B at $5,726,590. Under the terms of the Loan Agreement, when Note A was repaid, interest on the Note B stopped accruing. Note B matures April 29, 2018. Registrant has three one-year options to extend the maturity date if certain conditions are satisfied. On January 30, 2018, the Partnership sent notice to Holder to exercise its first one year option to extend the maturity date to April 29, 2019, which Holder has acknowledged. 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) or other sources, if available. 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.

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Eagle Lake Business Center IV (Maple Grove, Minnesota)

Total revenues for the three months ended June 30, 2017March 31, 2018 increased $4,000$5,000 to approximately $266,000$271,000 as compared to approximately $262,000$266,000 for the three months ended June 30, 2016. The property reported higher base rental income and slightly lower other rental income. Base rental income was higher in 2017 due to a scheduled increase in the base rent. Net operating income, which includes deductions for depreciation, increased $1,000 for the three months ended June 30, 2017 to approximately $158,000 from approximately $157,000 for the three months ended June 30, 2016 due primarily to higher total revenues offset by higher operating expenses. Operating expenses were higher due to higher repairs expenses and insurance premiums.

Total revenues for the six months ended June 30, 2017 increased $9,000 to approximately $532,000 as compared to approximately $523,000 for the six months ended June 30, 2016.March 31, 2017. The property reported higher base rental income and slightly lower other rental income. Base rental income was higher in 20172018 due to a scheduled increase in the base rent. Net operating income, which includes deductions for depreciation, increased $13,000decreased $4,000 for the sixthree months ended June 30, 2017March 31, 2018 to approximately $323,000$161,000 from approximately $310,000$165,000 for the sixthree months ended June 30, 2016March 31, 2017 due primarily to higher operating expenses partially offset by higher total revenues combined with lower operating expenses.revenues. Operating expenses were lowerhigher due to lowerhigher utilities expenses and real estate taxes.repairs expenses.

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Investment in Sentinel Omaha, LLC

Comparison of three months ended June 30, 2017March 31, 2018 to June 30, 2016:March 31, 2017:

As of June 30, 2017,March 31, 2018, the Omaha portfolio consisted of 119 multi-family properties located in 86 markets.

Omaha’s total revenues for the three months ended June 30, 2017March 31, 2018 were approximately $10,463,000.$9,341,000. Income before realized losses and net unrealized income was approximately $3,272,000.$2,931,000. Major expenses included approximately $1,667,000$1,586,000 for interest expense, $976,000$705,000 for repairs and maintenance, $1,353,000$1,283,000 for payroll, and $1,400,000$1,209,000 for real estate taxes. Omaha reported realizednet unrealized losses of $20,794,000approximately $9,145,000 and net unrealized incomerealized gains of approximately $23,969,000$9,919,000 resulting in a net increase in net assets of approximately $6,447,000.$3,705,000. For the three months ended June 30, 2017,March 31, 2018, the Registrant’s 30% equity interest in the net increase in net assetsincome of Omaha was approximately $1,934,000.$1,112,000. Registrant recognized a reserve of 30%reserves 20% of the reported value of Omaha on its balance sheet. sheet for March 31, 2018.

The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended June 30, 2017.March 31, 2018. As a result, Registrant reported net income from equity interest in net increase in net assetsincome of Omaha for the quarter ended June 30, 2017March 31, 2018 of $3,466,000.$3,395,000.

Omaha’sOmaha’s total revenues for the three months ended June 30, 2016March 31, 2017 were approximately $10,944,000.$11,287,000. Income before net unrealized income was approximately $4,103,000.$3,922,000. Major expenses included approximately $1,614,000$1,626,000 for interest expense, $964,000$820,000 for repairs and maintenance, $1,442,000$1,664,000 for payroll, and $1,061,000$1,342,000 for real estate taxes. Omaha reported net unrealized income of approximately $6,862,000$7,577,000 resulting in a net increase in net assets of approximately $10,965,000.$11,499,000. For the three months ended June 30, 2016,March 31, 2017, the Registrant’s 30% equity interest in the net increase in net assetsincome of Omaha was approximately $3,290,000.$3,450,000. Registrant reserved 50%35% of the reported value of Omaha on its balance sheet.sheet as of March 31, 2017.

 The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended June 30, 2016. As a result, Registrant reported net equity in net increase in net assets of Omaha for the quarter ended June 30, 2016 of $1,645,000.

Comparison of six months ended June 30, 2017 to June 30, 2016:

Omaha’s total revenues for the six months ended June 30, 2017 were approximately $21,750,000. Income before realized losses and net unrealized income was approximately $7,193,000. Major expenses included approximately $3,293,000 for interest expense, $1,796,000 for repairs and maintenance, $3,017,000 for payroll, and $2,742,000 for real estate taxes. Omaha reported realized losses of $20,794,000 and net unrealized income of approximately $31,548,000 resulting in net increase in net assets of approximately $17,947,000. For the six months ended June 30, 2017, the Registrant’s 30% equity interest in the net increase in net assets of Omaha was approximately $5,384,000. Registrant recognized a reserve of 30% 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 six months ended June 30,March 31, 2017. As a result, Registrant reported net income from equity interest in net increase in net assetsincome of Omaha for the six monthsquarter ended June 30,March 31, 2017 of $5,708,000.

Omaha’s total revenues for the six months ended June 30, 2016 were approximately $21,774,000. Income before net unrealized income was approximately $8,148,000. Major expenses included approximately $3,270,000 for interest expense, $1,746,000 for repairs and maintenance, $2,932,000 for payroll, and $2,211,000 for real estate taxes. Omaha reported net unrealized income of approximately $9,393,000 resulting in net increase in net assets of approximately $17,541,000. For the six months ended June 30, 2016, the Registrant’s 30% equity interest in the net increase in net assets of Omaha was approximately $5,262,000. Registrant reserved 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 six months ended June 30, 2016. As a result, Registrant reported net equity in net increase in net assets of Omaha for the six months ended June 30, 2016 of $2,631,000.$2,242,000.

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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.

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SIGNATURES

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