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)
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, |
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 or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1 New Haven Avenue, Suite 102A, Milford, CT. | 06460 | |
(Address of principal executive offices) | (Zip Code) |
(203) 283-9593 |
(Registrant's telephone number, including area code) |
(Former name, former address and former fiscal year, if changed since last report.) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,”filer”, “accelerated filer,” “smallerfiler”, “non-accelerated filer”, “small reporting company,”company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
[ ] large accelerated filer [ ] accelerated filer [X] non-accelerated filer [ ] small reporting company [ ] emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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
Part I | ||
Item 1 | ||
Consolidated Balance Sheets as of June 30, | 1 | |
2 | ||
3 | ||
4 | ||
5 – | ||
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3 |
| |
Item 4T |
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Part II |
| |
| ||
Exhibit 31 | ||
| Exhibit 32 |
1
(A New York Limited Partnership) |
CONSOLIDATED BALANCE SHEETS |
June 30, | December 31, | June 30, | December 31, | |||||||||||||
2018 (Unaudited) | 2017 (Audited) | 2019 (Unaudited) | 2018 (Audited) | |||||||||||||
Assets: | ||||||||||||||||
Investments - | ||||||||||||||||
Real estate, at cost | ||||||||||||||||
Land | $ | 470,000 | $ | 470,000 | $ | 470,000 | $ | 470,000 | ||||||||
Buildings, furnishings and improvements | 5,081,365 | 5,081,365 | 5,247,109 | 5,239,859 | ||||||||||||
Less - accumulated depreciation | (2,164,376 | ) | (2,084,846 | ) | (2,320,940 | ) | (2,249,190 | ) | ||||||||
3,386,989 | 3,466,519 | 3,396,169 | 3,460,669 | |||||||||||||
Investment in Sentinel Omaha, LLC, net of reserve for fair value of $10,466,844 and $12,526,608 at June 30, 2018 and December 31, 2017, respectively | 41,867,378 | 37,579,824 | ||||||||||||||
Investment in Sentinel Omaha, LLC, net of reserve for fair value of $9,270,695 and $10,709,724 at June 30, 2019 and December 31, 2018, respectively | 37,082,754 | 42,838,890 | ||||||||||||||
45,254,367 | 41,046,343 | 40,478,923 | 46,299,559 | |||||||||||||
Other Assets - | ||||||||||||||||
Cash and cash equivalents | 1,466,693 | 1,449,927 | 1,725,979 | 338,239 | ||||||||||||
Cash in escrow | 508,140 | 504,778 | ||||||||||||||
Other | 1,072 | 7,019 | 1,140 | 7,789 | ||||||||||||
Total assets | $ | 47,230,272 | $ | 43,008,067 | $ | 42,206,042 | $ | 46,645,587 | ||||||||
Liabilities: | ||||||||||||||||
Loan payable, net of unamortized deferred finance costs of $0 and $7,279 at June 30, 2018 and December 31, 2017, respectively | $ | 5,693,876 | $ | 5,719,311 | ||||||||||||
Accounts payable | 486,496 | 516,793 | $ | 190,774 | $ | 561,800 | ||||||||||
Tenant security deposit | 102,813 | 101,414 | 105,611 | 104,212 | ||||||||||||
Accrued expenses | 3,164,890 | 2,922,943 | 91,235 | 3,408,317 | ||||||||||||
Total liabilities | 9,448,075 | 9,260,461 | 387,620 | 4,074,329 | ||||||||||||
Partners' Equity (Deficit): | ||||||||||||||||
Units of partnership interest without par value; | ||||||||||||||||
Limited partner - 7,753 units | 37,795,760 | 33,761,689 | 41,831,464 | 42,584,203 | ||||||||||||
General partner - 1 unit | (13,563 | ) | (14,083 | ) | (13,042 | ) | (12,945 | ) | ||||||||
Total partners' equity | 37,782,197 | 33,747,606 | 41,818,422 | 42,571,258 | ||||||||||||
Total liabilities and partners' equity | $ | 47,230,272 | $ | 43,008,067 | $ | 42,206,042 | $ | 46,645,587 |
See notes to consolidated financial statements |
2
(A New York Limited Partnership) |
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Base rental income | $ | 184,203 | $ | 178,772 | $ | 368,406 | $ | 357,544 | $ | 189,785 | $ | 184,203 | $ | 379,570 | $ | 368,406 | ||||||||||||||||
Other rental income | 87,041 | 87,452 | 174,082 | 174,904 | 88,532 | 87,041 | 177,064 | 174,082 | ||||||||||||||||||||||||
Interest income | 5,825 | 1,576 | 8,362 | 2,730 | 676 | 5,825 | 715 | 8,362 | ||||||||||||||||||||||||
Total revenues | 277,069 | 267,800 | 550,850 | 535,178 | 278,993 | 277,069 | 557,349 | 550,850 | ||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||
Real estate operating expenses | 72,007 | 68,704 | 139,794 | 135,832 | 85,743 | 72,007 | 151,651 | 139,794 | ||||||||||||||||||||||||
Amortization of deferred financing costs | 1,820 | 5,460 | 7,279 | 10,920 | - | 1,820 | - | 7,279 | ||||||||||||||||||||||||
Depreciation | 39,765 | 39,345 | 79,530 | 78,690 | 35,875 | 39,765 | 71,750 | 79,530 | ||||||||||||||||||||||||
Real estate taxes | 30,466 | 30,882 | 60,934 | 61,763 | 32,765 | 30,466 | 64,724 | 60,934 | ||||||||||||||||||||||||
Management fees | 228,903 | 221,718 | 455,067 | 442,101 | 250,746 | 228,903 | 503,000 | 455,067 | ||||||||||||||||||||||||
Other | 30,734 | 31,785 | 61,209 | 64,305 | 31,460 | 30,734 | 61,524 | 61,209 | ||||||||||||||||||||||||
Total expenses | 403,695 | 397,894 | 803,813 | 793,611 | 436,589 | 403,695 | 852,649 | 803,813 | ||||||||||||||||||||||||
Loss from operations | (126,626 | ) | (130,094 | ) | (252,963 | ) | (258,433 | ) | (157,596 | ) | (126,626 | ) | (295,300 | ) | (252,963 | ) | ||||||||||||||||
Equity in net income of investment | 1,116,053 | 1,934,067 | 2,227,790 | 5,383,966 | 795,927 | 1,116,053 | 1,204,835 | 2,227,790 | ||||||||||||||||||||||||
(Increase) decrease in reserve | ||||||||||||||||||||||||||||||||
for value of investment | (223,210 | ) | 1,531,594 | 2,059,764 | 324,129 | |||||||||||||||||||||||||||
Decrease (increase) in reserve for value of investment | 1,520,814 | (223,210 | ) | 1,439,029 | 2,059,764 | |||||||||||||||||||||||||||
Net income | 766,217 | 3,335,567 | 4,034,591 | 5,449,662 | 2,159,145 | 766,217 | 2,348,564 | 4,034,591 | ||||||||||||||||||||||||
Income allocated to general partner | 99 | 430 | 520 | 703 | 278 | 99 | 303 | 520 | ||||||||||||||||||||||||
Income allocated to limited partners | $ | 766,118 | $ | 3,335,137 | $ | 4,034,071 | $ | 5,448,959 | $ | 2,158,867 | $ | 766,118 | $ | 2,348,261 | $ | 4,034,071 | ||||||||||||||||
Income per unit of limited partnership interest (basic and diluted) | ||||||||||||||||||||||||||||||||
Net income | $ | 98.83 | $ | 430.23 | $ | 520.39 | $ | 702.91 | $ | 278.49 | $ | 98.83 | $ | 302.92 | $ | 520.39 | ||||||||||||||||
Weighted Average Number of Units of Limited Partnership Interest Outstanding | 7,753 | 7,753 | 7,753 | 7,753 | 7,753 | 7,753 | 7,753 | 7,753 |
See notes to consolidated financial statements |
3
(A New York Limited Partnership) |
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) |
|
Limited Partners:
Units of Partnership Interest | ||||||||||||||||||||
Number | Amount | Cumulative Cash Distributions | Accumulated Income | Total | ||||||||||||||||
Balance, January 1, 2018 | 7,753 | $ | 119,968,973 | $ | (111,721,586 | ) | $ | 25,514,302 | $ | 33,761,689 | ||||||||||
Net income for the period | - | - | - | 4,034,071 | 4,034,071 | |||||||||||||||
Balance, June 30, 2018 | 7,753 | $ | 119,968,973 | $ | (111,721,586 | ) | $ | 29,548,373 | $ | 37,795,760 |
For the Six Months Ended June 30, 2019 | ||||||||||||||||||||
Limited Partners: | ||||||||||||||||||||
Units of Partnership Interest | ||||||||||||||||||||
Number | Amount | Cumulative Cash Distributions | Accumulated Income | Total | ||||||||||||||||
Balance, January 1, 2019 | 7,753 | $ | 119,968,973 | $ | (111,721,586 | ) | $ | 34,336,816 | $ | 42,584,203 | ||||||||||
Net income for the period | - | - | - | 2,348,261 | 2,348,261 | |||||||||||||||
Distribution paid | - | - | (3,101,000 | ) | - | (3,101,000 | ) | |||||||||||||
Balance, June 30, 2019 | 7,753 | $ | 119,968,973 | $ | (114,822,586 | ) | $ | 36,685,077 | $ | 41,831,464 |
|
Units of Partnership Interest | ||||||||||||||||||||
Number | Amount | Cumulative Cash Distributions | Accumulated Income | Total | ||||||||||||||||
Balance, January 1, 2018 | 1 | $ | 10,000 | $ | (26,364 | ) | $ | 2,281 | $ | (14,083 | ) | |||||||||
Net income for the period | - | - | - | 520 | 520 | |||||||||||||||
Balance, June 30, 2018 | 1 | $ | 10,000 | $ | (26,364 | ) | $ | 2,801 | $ | (13,563 | ) |
General Partner: | ||||||||||||||||||||
Units of Partnership Interest | ||||||||||||||||||||
Number | Amount | Cumulative Cash Distributions | Accumulated Income | Total | ||||||||||||||||
Balance, January 1, 2019 | 1 | $ | 10,000 | $ | (26,364 | ) | $ | 3,419 | $ | (12,945 | ) | |||||||||
Net income for the period | - | - | - | 303 | 303 | |||||||||||||||
Distribution paid | - | - | (400 | ) | - | (400 | ) | |||||||||||||
Balance, June 30, 2019 | 1 | $ | 10,000 | $ | (26,764 | ) | $ | 3,722 | $ | (13,042 | ) |
See notes to consolidated financial statements |
4
(A New York Limited Partnership) |
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
For the Six Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2019 | 2018 | |||||||||||||
Cash Flows From Operating Activities: | ||||||||||||||||
Net income | $ | 4,034,591 | $ | 5,449,662 | $ | 2,348,564 | $ | 4,034,591 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Equity in net (income) of investment | (2,227,790 | ) | (5,383,966 | ) | (1,204,835 | ) | (2,227,790 | ) | ||||||||
(Decrease) in reserve for value of investment | (2,059,764 | ) | (324,129 | ) | (1,439,029 | ) | (2,059,764 | ) | ||||||||
Depreciation and amortization | 86,810 | 89,610 | 71,750 | 86,810 | ||||||||||||
Net decrease in operating assets | 5,946 | 6,242 | 6,649 | 5,946 | ||||||||||||
Net (decrease) in accounts payable | (30,297 | ) | (11,464 | ) | (371,026 | ) | (30,297 | ) | ||||||||
Net increase in tenant security deposit | 1,399 | 1,399 | 1,399 | 1,399 | ||||||||||||
Net increase in accrued expenses | 241,947 | 228,982 | ||||||||||||||
Net (decrease) increase in accrued expenses | (3,317,082 | ) | 241,947 | |||||||||||||
Distributions from investment in Sentinel Omaha, LLC | 8,400,000 | - | ||||||||||||||
Net cash provided by operating activites | 52,842 | 56,336 | ||||||||||||||
Net cash provided by operating activities | 4,496,390 | 52,842 | ||||||||||||||
Cash Flows From Investing Activities: | ||||||||||||||||
Capital additions to real estate owned | (7,250 | ) | - | |||||||||||||
Net cash used in investing activities | (7,250 | ) | - | |||||||||||||
Cash Flows From Financing Activities: | ||||||||||||||||
Distribution paid to partners | (3,101,400 | ) | - | |||||||||||||
Repayment of loan payable | (32,714 | ) | (33,883 | ) | - | (32,714 | ) | |||||||||
Net cash (used in) financing activities | (32,714 | ) | (33,883 | ) | ||||||||||||
Net cash used in financing activities | (3,101,400 | ) | (32,714 | ) | ||||||||||||
Net change in cash and cash equivalents and cash in escrow | 20,128 | 22,453 | 1,387,740 | 20,128 | ||||||||||||
Cash and cash equivalents and cash in escrow at beginning of period | 1,954,705 | 1,828,342 | 338,239 | 1,954,705 | ||||||||||||
Cash and cash equivalents and cash in escrow at end of period | $ | 1,974,833 | $ | 1,850,795 | $ | 1,725,979 | $ | 1,974,833 |
See notes to consolidated financial statements |
5
Notes to Consolidated Financial Statements (Unaudited)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
SB Partners, a New York limited partnership, and its subsidiaries (collectively, the "Partnership" or the “Registrant”), have been engaged since April 1971 in acquiring, operating, and holding for investment a varying portfolio of real estate interests. SB Partners Real Estate Corporation (the "General Partner") serves as the general partner of the Partnership.
The consolidated financial statements included herein are unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to a fair presentation of the financial position, results of operations and cash flows for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Partnership’s latest annual report on Form 10-K.
The results of operations for the three and six month periodsperiod ended June 30, 20182019 are not necessarily indicative of the results to be expected for a full year.
For a discussion of the significant accounting and financial reporting policies of the Partnership, refer to the Annual Report on Form 10–K for the year ended December 31, 2017.2018.
(2) RECLASSIFICATION
In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016 – 18, Restricted Cash (ASU 2016 – 18). ASU 2016 – 18 requires the statement of cash flows to explain the change during the period in the total cash and cash equivalents and amounts generally described as restricted cash. ASU 2016 – 18 is effective for annual reporting periods beginning after December 15, 2017. The new guidance has been applied retrospectively to each prior period presented.
(3) INVESTMENTS IN REAL ESTATE
As of June 30, 2018,2019, the Partnership owns an industrial flex property in Maple Grove, Minnesota. The following is the cost basis and accumulated depreciation of the real estate investment owned by the Partnership at June 30, 20182019 and December 31, 2017.2018.
No. of | Year of | Real Estate at Cost | No. of | Year of | Real Estate at Cost | |||||||||||||||||||||||||||||
Type | Prop. | Acquisition | Description | 6/30/2018 | 12/31/2017 | Prop. | Acquisition | Description | 6/30/2019 | 12/31/2018 | ||||||||||||||||||||||||
Industrial flex property | 1 | 2002 | 60,345 sf | $ | 5,551,365 | $ | 5,551,365 | 1 | 2002 | 60,345 sf | $ | 5,717,109 | $ | 5,709,859 | ||||||||||||||||||||
Less: Accumulated depreciation | (2,164,376 | ) | (2,084,846 | ) | (2,320,940 | ) | (2,249,190 | ) | ||||||||||||||||||||||||||
Investment in real estate | $ | 3,386,989 | $ | 3,466,519 | $ | 3,396,169 | $ | 3,460,669 |
The Partnership’s wholly owned property located in Maple Grove, Minnesota is 100% leased to a single tenant to October 31, 2024. The tenant pays fixed base rent which increases approximately 3% each year. The tenant pays directly or reimburses the Partnership for all utilities, real estate taxes, insurance and most of the property operating expenses and property management fees.
(4)(3) ASSETS MEASURED AT FAIR VALUE
The accounting guidance for Fair Value Measurements establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in determining fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level of input that is significant to the fair value measurement.
6
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value is calculated based on the assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.
6
The three levels of fair value hierarchy 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. |
The following major categories of assets were measured at fair value as of June 30, 20182019 and December 31, 2017:2018:
Level 3: | June 30, | Level 3: | June 30, | |||||||||||||
Significant | 2018 | Significant | 2019 | |||||||||||||
Unobservable | (Unaudited) | Unobservable | (Unaudited) | |||||||||||||
Inputs | Total | Inputs | Total | |||||||||||||
Assets | ||||||||||||||||
Investment in Sentinel Omaha, LLC ("Omaha") | $ | 52,334,222 | $ | 52,334,222 | $ | 46,353,449 | $ | 46,353,449 | ||||||||
Reserve for fair value of investment | (10,466,844 | ) | (10,466,844 | ) | (9,270,695 | ) | (9,270,695 | ) | ||||||||
Total assets | $ | 41,867,378 | $ | 41,867,378 | $ | 37,082,754 | $ | 37,082,754 |
Level 3: | December 31, | Level 3: | December 31, | |||||||||||||
Significant | 2017 | Significant | 2018 | |||||||||||||
Unobservable | (Audited) | Unobservable | (Audited) | |||||||||||||
Inputs | Total | Inputs | Total | |||||||||||||
Assets | ||||||||||||||||
Investment in Sentinel Omaha, LLC | $ | 50,106,432 | $ | 50,106,432 | $ | 53,548,614 | $ | 53,548,614 | ||||||||
Reserve for fair value of investment | (12,526,608 | ) | (12,526,608 | ) | (10,709,724 | ) | (10,709,724 | ) | ||||||||
Total assets | $ | 37,579,824 | $ | 37,579,824 | $ | 42,838,890 | $ | 42,838,890 |
The following is a reconciliation of the beginning and ending balances for assets measured at fair value using significant unobservable inputs (Level 3) during the periods ended June 30, 20182019 and December 31, 2017:2018:
Investment in | Reserve for | Investment in | Reserve for | |||||||||||||||||||||
Sentinel | fair value | Sentinel | fair value | |||||||||||||||||||||
Omaha, LLC | of investment | Total | Omaha, LLC | of investment | Total | |||||||||||||||||||
Balance at January 1, 2017 | $ | 38,786,395 | $ | (13,575,238 | ) | $ | 25,211,157 | |||||||||||||||||
Balance at January 1, 2018 | $ | 50,106,432 | $ | (12,526,608 | ) | $ | 37,579,824 | |||||||||||||||||
Equity in net income of investment | 11,320,037 | - | 11,320,037 | 5,842,182 | - | 5,842,182 | ||||||||||||||||||
Distribution from investment | (2,400,000 | ) | - | (2,400,000 | ) | |||||||||||||||||||
Decrease in reserve | - | 1,048,630 | 1,048,630 | - | 1,816,884 | 1,816,884 | ||||||||||||||||||
Balance at December 31, 2017 | 50,106,432 | (12,526,608 | ) | 37,579,824 | ||||||||||||||||||||
Balance at December 31, 2018 | 53,548,614 | (10,709,724 | ) | 42,838,890 | ||||||||||||||||||||
Equity in net income of investment | 2,227,790 | - | 2,227,790 | 1,204,835 | - | 1,204,835 | ||||||||||||||||||
Distribution from investment | (8,400,000 | ) | (8,400,000 | ) | ||||||||||||||||||||
Decrease in reserve | - | 2,059,764 | 2,059,764 | - | 1,439,029 | 1,439,029 | ||||||||||||||||||
Balance at June 30, 2018 | $ | 52,334,222 | $ | (10,466,844 | ) | $ | 41,867,378 | |||||||||||||||||
Balance at June 30, 2019 | $ | 46,353,449 | $ | (9,270,695 | ) | $ | 37,082,754 |
7
(4) INVESTMENT IN SENTINEL OMAHA, LLC
In 2007, the Partnership made an investment in the amount of $37,200,000 in Sentinel Omaha, LLC (“Omaha”). Omaha is a real estate investment company which as of June 30, 2019 owns six multifamily properties in three markets. Omaha is an affiliate of the Partnership’s general partner. The investment represents a 30% ownership interest in Omaha.
The following are the condensed financial statements (000’s omitted) of Omaha as of June 30, 2019 and December 31, 2018 and the six months ended June 30, 2019 and 2018.
(Unaudited) | (Audited) | |||||||
Balance Sheet | June 30, 2019 | December 31, 2018 | ||||||
Investment in real estate, net | $ | 215,700 | $ | 290,500 | ||||
Other assets | 15,417 | 13,960 | ||||||
Debt | (74,155 | ) | (121,481 | ) | ||||
Other liabilities | (2,450 | ) | (4,484 | ) | ||||
Members equity | $ | 154,512 | $ | 178,495 |
(Unaudited) | (Unaudited) | |||||||
Statement of Operations | June 30, 2019 | June 30, 2018 | ||||||
Rent and other income | $ | 14,113 | $ | 17,514 | ||||
Real estate operating expenses | (6,705 | ) | (8,432 | ) | ||||
Other expenses | (2,184 | ) | (2,876 | ) | ||||
Net realized gains | 13,635 | 9,940 | ||||||
Net unrealized (losses) | (14,842 | ) | (8,720 | ) | ||||
Net increase in net assets | $ | 4,017 | $ | 7,426 |
Omaha was precluded from making distributions to its investors until its unsecured loan was paid in full. Omaha’s unsecured loan which, as of December 31, 2017 had a balance of $20,859,322, had a maturity date of December 31, 2017. During 2017, Omaha exercised its one option to extend the maturity date to June 30, 2018. Registrant as of the year ended December 31, 2017 had recognized a value in the Omaha investment equal to Registrant’s 30% portion of the equity reported on Omaha’s balance sheet as of December 31, 2017 less a 25% reserve. During the first quarter of 2018, Omaha sold its garden apartment property in Asheville, North Carolina and its garden apartment property in Fresno, California. Net sales proceeds were used first to paying selling expenses and to pay off the mortgage securing each property. Remaining proceeds were used to fully retire the remaining balance of Omaha’s unsecured loan. Registrant asOn October 16, 2018 Sentinel Omaha paid a distribution to the Partnership in the amount of March 31, 2018 had reduced$2,400,000. The Partnership used these funds to retire the reservePartnership’s unsecured loan. During the quarter ending June 30, 2019, Omaha paid two distributions to 20%.
7$8,400,000 to the Partnership.
(5) INVESTMENT IN SENTINEL OMAHA, LLCACCRUED EXPENSES
In 2007,
The Partnership, its general partner and the holder of the unsecured loan had entered into a Management Subordination Agreement accruing a portion of the investment management fee payable by the Partnership made an investment into its general partner so long as the amountunsecured loan remained outstanding. On October 4, 2018, the Partnership retired the unsecured loan. During the quarter ending June 30, 2019, Omaha paid distributions to the Partnership. A portion of $37,200,000 in Sentinel Omaha, LLC (“Omaha”). Omaha is a real estate investment company which asthe distributions was used to pay down the accrued expenses. As of June 30, 2018 owns nine multifamily properties in six markets. Omaha is an affiliate of the Registrant’s general partner. The investment represents a 30% ownership interest in Omaha.
The following are the condensed financial statements (000’s omitted) of Omaha as of June 30, 20182019 and December 31, 20172018, $91,235 and $3,408,317, respectively of investment management fees have been accrued and are included in accrued expenses on the six months ended June 30, 2018 and 2017.balance sheet.
(Unaudited) | (Audited) | ||||||||||
Balance Sheet | June 30, 2018 | December 31, 2017 | |||||||||
Investment in real estate, net | $ | 298,100 | $ | 368,600 | |||||||
Other assets | 15,595 | 10,556 | |||||||||
Debt | (135,779 | ) | (207,187 | ) | |||||||
Other liabilities | (3,469 | ) | (4,948 | ) | |||||||
Member's equity | $ | 174,447 | $ | 167,021 |
(Unaudited) | (Unaudited) | ||||||||||
Statement of Operations | June 30, 2018 | June 30, 2017 | |||||||||
Rent and other income | $ | 17,514 | $ | 21,750 | |||||||
Real estate operating expenses | (8,432 | ) | (11,094 | ) | |||||||
Other expenses | (2,876 | ) | (3,463 | ) | |||||||
Net realized gains (losses) | 9,940 | (20,794 | ) | ||||||||
Net unrealized (losses) gains | (8,720 | ) | 31,548 | ||||||||
Net increase in net assets | $ | 7,426 | $ | 17,947 |
(6) LOAN PAYABLE
Loan payable consists of the following:DISTRIBUTION TO PARTNERS
Annual | Net Carrying Amount | ||||||||||||||||||||
Interest | Installment | Amount Due | June 30, | December 31, | |||||||||||||||||
Property | Rate | Maturity Date | Payments | at Maturity | 2018 | 2017 | |||||||||||||||
Bank Loan (a): | |||||||||||||||||||||
Note B | 0.000 | % | Apr-19 | - | $ | 5,693,876 | $ | 5,693,876 | $ | 5,726,590 | |||||||||||
Less: unamortized finance costs | - | (7,279 | ) | ||||||||||||||||||
Loan payable | $ | 5,693,876 | $ | 5,719,311 |
On April 16, 2019, the general partner declared a distribution of $400 per full unit for all partners holding units or participations on May 31, 2019. The distribution was paid on June 4, 2019.
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Except as discussed below, payments of principal are deferred until Registrant’s investment in Sentinel Omaha LLC pays distributions to the Partnership or the Partnership sells Eagle Lake Business Center IV or its investment in Omaha. Distributions from Omaha or net proceeds from the sale of Eagle IV or Omaha would be used first to pay the outstanding principal balance of Note B. If there are no distributions from Omaha prior to the Note B maturity, principal is due at maturity, subject to the above mentioned extensions. 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.
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(7) SUBSEQUENT EVENTGeneral
The Partnership’sconsolidated financial statements for the three and six months ended June 30, 2019 and 2018 reflect the operation of one wholly owned industrial flex property located in Maple Grove, Minnesota and a 30% interest in Omaha.
Registrant’s wholly owned property located in Maple Grove, Minnesota is 100% leased to a single tenant whose lease expiresto 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.2024. 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.
On July 26, 2018, the Partnership and the tenant executed the Fifth Amendment to the lease agreement which extends the expiration date to October 31, 2024. The tenant’s base rent will continue to increase 3% each year and the tenant’s option to terminate the lease early has been eliminated. All other significant terms of the lease remain the same.
9
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREEAND SIX MONTHS ENDED JUNE 30, 2018 AND 2017
General
The consolidated financial statements for the three and six months ended June 30, 2018 and 2017 reflect the operations of one wholly owned industrial flex property located in Maple Grove, Minnesota and a 30% interest in Omaha.
Registrant’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. 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.
On July 26, 2018, Registrant and the tenant executed the Fifth Amendment to the lease agreement which extends the expiration date to October 31, 2024. The tenant’s base rent will continue to increase 3% each year and the tenant’s option to terminate the lease early has been eliminated. All other significant terms of the lease remain the same.
Sentinel Omaha LLC’s portfolio consistsas of January 1, 2019 consisted of eight garden apartment properties and one high rise apartment property.located in five markets. Leases generally are for one year or less. Tenants generally pay fixed rent plus utilities used by tenant. On April 6, 2019, Omaha sold its garden apartment property in Independence, Missouri. Net sales proceeds were used to first pay selling expenses and retire the property’s related secured mortgage loan. On May 6, 2019, Omaha sold its garden apartment property in Columbus, Ohio. Net sales proceeds were used to pay selling expenses and were used to retire Omaha’s secured mortgage loan encumbering its garden apartment property located in Charleston, South Carolina to further pay down Omaha’s debt.
Results of Operations
Total revenues from continuing operations for the three months ended June 30, 20182019 increased $9,000$2,000 to approximately $277,000$279,000 as compared to approximately $268,000$277,000 for the three months ended June 30, 2017.2018. Total revenues increased due to an increase in base rental income and interest income. Base rental income increased $5,000$6,000 to approximately $184,000$190,000 for the three months ended June 30, 20182019 as compared to the same period in 20172018 due to a scheduled increase in base rent at Registrant’s property located in Maple Grove, MN. InterestOther income increased due to an increase in interest rates. Other rentalreal estate taxes charged back to the tenant. Interest income decreased slightly.due to a decrease in cash reserves.
The Registrant reported a net loss from operations of approximately $127,000$158,000 for the three months ended June 30, 2018,2019, an improvementincrease of $3,000$31,000 as compared to a net loss from operations of approximately $130,000$127,000 for the same period in 2017.2018. Net loss from operations consists of net income from the Maple Grove property offset by partnership income and expenses. The decreaseincrease of loss from operations was due to higher total revenuesexpenses partially offset by higher total expenses.income. Total expenses from operations for 20182019 increased $6,000$33,000 to approximately $404,000$437,000 from approximately $398,000$404,000 in 2017,2018, due primarily to an increase in management fee expense of $7,000$22,000, an increase in administration expenses of $10,000 and an increase in repairs and maintenance expense of $4,000. This was partially offset by a decrease of mortgage amortization expense of $2,000 and a decrease in amortization costdepreciation expense of $4,000.
Total revenues from continuing operations for the six months ended June 30, 20182019 increased $16,000$6,000 to approximately $551,000$557,000 as compared to approximately $535,000$551,000 for the six months ended June 30, 2017.2018. Total revenues increased due to an increase in base rental income and interestother income. Base rental income increased $10,000$12,000 to approximately $368,000$380,000 for the six months ended June 30, 20182019 as compared to the same period in 20172018 due to a scheduled increase in base rent at Registrant’s property located in Maple Grove, MN. InterestOther income increased due to an increase in interest rates. Other rentalreal estate taxes charged back to the tenant. Interest income decreased slightly.due to a decrease in cash reserves.
The Registrant reported a net loss from operations of approximately $253,000$295,000 for the six months ended June 30, 2018,2019, an improvementincrease of $5,000$42,000 as compared to a net loss from operations of approximately $258,000$253,000 for the same period in 2017.2018. Net loss from operations consists of net income from the Maple Grove property offset by partnership income and expenses. The decreaseincrease of loss from operations was due to higher total revenuesexpenses partially offset by higher total expenses.revenue. Total expenses from operations for 20182019 increased $10,000$49,000 to approximately $804,000$853,000 from approximately $794,000$804,000 in 2017,2018, due primarily to an increase in management fee expense of $13,000$48,000 and an increase in repairs and maintenanceadministration costs of $13,000.$18,000. This increase was partially offset by a decrease in administrativerepair and maintenance expenses of $9,000$5,000, a decrease in depreciation expense of $8,000 and a decrease in amortization cost of $4,000.$7,000.
The Registrant has a 30% non-controlling interest in Omaha that is accounted for on a fair value basis. Net increase in net assets decreased $10,521,000$3,409,000 to approximately $7,426,000$4,017,000 for the threesix months ended June 30, 20182019 compared to net increase in net assets of approximately $17,947,000$7,426,000 for the same period in 2017.2018. During 2017,2018, Omaha sold its garden apartment property located in Daytona, Florida and sold bothAsheville, North Carolina, its garden apartment propertiesproperty located in Fayetteville, North Carolina.Fresno, California and its high rise apartment property located in Omaha, Nebraska. Net sales proceeds in each transaction were used to first pay selling expenses and pay offretire each property’s related secured mortgage.mortgage loan. Remaining net sales proceeds were used to reduceretire Omaha’s unsecured loan.loan and were used to retire Omaha’s secured mortgage loan encumbering its garden apartment property located in Columbus, Ohio to further pay down Omaha’s debt. Retirement of the unsecured loan removed certain restrictions placed on Omaha by the lender including making distributions to its members including Registrant. 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 thefirst six months ended June 30, 2018,of 2019, Omaha sold its garden apartment property located in Asheville, North CarolinaIndependence, Missouri and its garden apartment property located in Fresno, California.Columbus, Ohio. Net sales proceeds in each transaction were used to first pay selling expenses and pay offretire each property’s related secured mortgage.mortgage loan. Remaining net sales proceeds were used to pay off Omaha’s unsecured loan and were used to pay offretire Omaha’s secured mortgage loan encumbering its high risegarden apartment property located in Omaha, NECharleston, South Carolina to further pay down Omaha’s debt. During the six months ended June 30, 2018,2019, Omaha reported a net increasedecrease in the value of its remaining real estate portfolio of $2,775,000.$5,700,000.
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During 20172018 the floatingvariable rates on Omaha loans increased as short term LIBOR rates increased. The one month LIBOR rate increased from an average of (0.7164%(1.4925%) during December 20162017 to an average of (1.4925%(2.4582%) during December 2017.2018. The one month LIBOR rate decreased slightly to an average of (2.4034%) during June 2019. Fixed mortgage interest rates for multi-family properties of similar class and location as Omaha’s portfolio also increased during 20172018 from an approximate range of 4.10% to 4.15% in early 2017 to 4.35% to 4.50% near the end of 2017. Mortgage2017 to 5.05% to 5.10% near the end of 2018. Fixed mortgage interest rates are expectedhave decreased during 2019 to continuean average of 3.57% to increase3.89% in 2018 as the U.S. Federal Reserve continues a policy to increase the Federal Funds Rate.June 2019. Although increaseschanges in fixed mortgage rates do not impact the operating cash flow of the Omaha properties directly, increases in fixed and floating rates on commercial mortgage debt can have a negative impact on capitalization rates and the sales prices Sentinel Omaha may achieve in the future.
Since Omaha has in the past two years paid off the unsecured debt and has shown improving performance at the properties, the debt risk is estimated to be lower. The investment in a 30% non-controlling interest would still beis valued at a discount due to the lack of liquidity and ownership of a non-controlling (minority) interest. Registrant will continue to reporthas reported a reserve on the value of Omaha on its books but dueof 20% since June 30, 2018.
On April 11, 2019, Sentinel Omaha paid a distribution to Registrant in the payoffamount of Omaha's unsecured loan$5,100,000. On April 16, 2019, the general partner declared a distribution of $400 per full unit for all partners holding units or participations on May 31, 2019. The distribution was paid on June 4, 2019. On May 31, 2019, Sentinel Omaha paid a distribution to Registrant in 2017, the reserveamount of $3,300,000. The distribution was reduced from 25% asused to pay accrued investment management fees and accrued expenses and to increase cash reserves of December 31, 2017 to 20% as of March 31, 2018.the Registrant.
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, 2017.2018. There were no significant changes to such policies in 2018.2019. 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, 2018,2019, the Registrant had cash and cash equivalents of approximately $1,467,000.$1,726,000. These balances are approximately $17,000$1,388,000 higher than cash and cash equivalents held on December 31, 2017.2018. Cash and cash equivalents increased slightly during the six months ended June 30, 20182019 due to distributions received from Omaha combined with cash flow generated from operating activities at Registrant’s wholly owned propertyproperty. This increase was partially offset by a distribution paid to the partners and payments of accrued investment management fees and accrued expenses as well as partnership expenses and a partial pay down of Registrant’s Note B.paid.
Currently, Registrant’s only consistent source of cash is rental income received from the tenant whothat 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.
Registrant pays the General Partner and an affiliate of the General Partner fees for services performed. A portion of any remaining annual cash flow isthe fees during 2011 to 2018 were accrued while Registrant’s unsecured loan was outstanding. Since the unsecured loan has been retired, Registrant was allowed to pay the accrued fees and current fees. On April 11, 2019, Sentinel Omaha paid a distribution to Registrant in the amount of $5,100,000. On April 16, 2019, the general partner declared a distribution of $400 per full unit for all partners holding units or participations on May 31, 2019. The distribution was paid on June 4, 2019. On May 31, 2019, Sentinel Omaha paid a distribution to Registrant in the amount of $3,300,000. The distribution was 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 Registrantaccrued investment management fees and the Holder restructuring the bank loan in 2011, Registrant set aside $500,000 in escrow to be heldaccrued expenses 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. On July 26, 2018, Registrant and the tenant executed the Fifth Amendment to the lease agreement which extends the expiration date to October 31, 2024. The tenant’s base rent will continue to increase 3% each year and the tenant’s option to terminate the lease early has been eliminated. All other significant termscash reserves of the lease remainRegistrant. Registrant anticipates cash flow generated from the same.
Total outstanding debt at June 30, 2018 consists of Note B at $5,693,876. Under the terms of the Loan Agreement, when Note A was repaid, interest on the Note B stopped accruing. Note B matured 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 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 whichproperty located in Maple Grove and current cash reserves 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 topay ongoing operating and capital improvement costs, other working capital requirements of the Registrant and adversely affectcurrent fees due to the amount of cash reserves. If general economic conditions resultGeneral Partner and its affiliates as long as the tenant remains 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.place. The Registrant has no other debt except normal trade accounts payable and accrued investment management fees.
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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
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Eagle Lake Business Center IV (Maple Grove, Minnesota)
Total revenues for the three months ended June 30, 20182019 increased $5,000$7,000 to approximately $271,000$278,000 as compared to approximately $266,000$271,000 for the three months ended June 30, 2017.2018. The property reported higher base rental income and slightly lowerhigher other rental income. Base rental income was higher in 20182019 due to a scheduled increase in the base rent. Net operating income, which includes deductions for depreciation, increased $1,000$5,000 for the three months ended June 30, 20182019 to approximately $159,000$164,000 from approximately $158,000$159,000 for the three months ended June 30, 20172018 due primarily to higher total revenues partially offset by higher operating expenses. Operating expenses were higher due to higher repairs and maintenance expense and real estate tax expense.
Total revenues for the six months ended June 30, 2019 increased $15,000 to approximately $557,000 as compared to approximately $542,000 for the six months ended June 30, 2018. The property reported higher base rental income and higher other rental income. Base rental income was higher in 2019 due to a scheduled increase in the base rent. Net operating income, which includes deductions for depreciation, increased $23,000 for the six months ended June 30, 2019 to approximately $343,000 from approximately $320,000 for the six months ended June 30, 2018 due primarily to higher total revenues combined with lower operating expenses. Operating expenses were lower due to lower repairs and maintenance expense and depreciation expense partially offset by higher real estate tax expense.
Investment in Sentinel Omaha, LLC
Comparison of three months ended June 30, 20182019 to June 30, 2017:2018:
As of June 30, 2019, the Omaha portfolio consisted of six multi-family properties located in three markets. Omaha’s total revenues for the three months ended June 30, 2019 were approximately $6,284,000. Income before net unrealized losses and net realized gains was approximately $2,287,000. Major expenses included approximately $1,010,000 for interest expense, $569,000 for repairs and maintenance, $844,000 for payroll, and $468,000 for real estate taxes. Omaha reported net unrealized losses of approximately $13,290,000 and net realized gains of approximately $13,635,000 resulting in a net increase in net assets of approximately $2,631,000. For the three months ended June 30, 2019, the Registrant’s 30% equity interest in the income of Omaha was approximately $796,000. Registrant reserves 20% of the reported value of Omaha on its balance sheet for June 30, 2019. The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended June 30, 2019. As a result, Registrant reported net income from equity interest in income of Omaha for the quarter ended June 30, 2019 of $2,317,000.
As of June 30, 2018, the Omaha portfolio consisted of nine multi-family properties located in six markets.
markets Omaha’s total revenues for the three months ended June 30, 2018 were approximately $8,172,000. Income before net unrealized income and net realized gains was approximately $3,275,000. Major expenses included approximately $1,245,000 for interest expense, $646,000 for repairs and maintenance, $948,000 for payroll, and $821,000 for real estate taxes. Omaha reported net unrealized gains of approximately $425,000 and net realized gains of approximately $21,000 resulting in a net increase in net assets of approximately $3,720,000. For the three months ended June 30, 2018, the Registrant’s 30% equity interest in the income of Omaha was approximately $1,116,000. Registrant reserves 20% of the reported value of Omaha on its balance sheet for June 30, 2018. The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended June 30, 2018. As a result, Registrant reported net income from equity interest in income of Omaha for the quarter ended June 30, 2018 of $893,000.
Comparison of six months ended June 30, 2019 to June 30, 2018:
Omaha’s total revenues for the threesix months ended June 30, 20172019 were approximately $10,463,000.$14,113,000. Income before realizednet unrealized losses and net unrealized incomerealized gains was approximately $3,272,000.$5,224,000. Major expenses included approximately $1,667,000$2,095,000 for interest expense, $976,000$1,128,000 for repairs and maintenance, $1,353,000$1,889,000 for payroll, and $1,400,000$1,420,000 for real estate taxes. Omaha reported realizednet unrealized losses of $20,794,000approximately $14,842,000 and net unrealized incomerealized gains of approximately $23,969,000$13,635,000 resulting in a net increase in net assets of approximately $6,447,000.$4,017,000. For the threesix months ended June 30, 2017,2019, the Registrant’s 30% equity interest in the net increase in net assetsincome of Omaha was approximately $1,934,000.$1,205,000. Registrant recognized a reserve of 30%reserves 20% of the reported value of Omaha on its balance sheet.sheet for June 30, 2019. The reserve for value was adjusted in conjunction with recording the equity income for the quarter ended June 30, 2017.2019. As a result, Registrant reported net income from equity interest in net increase in net assetsincome of Omaha for the quartersix months ended June 30, 20172019 of $3,466,000.$2,644,000.
Omaha’s total revenues for the six months ended June 30, 2018 were approximately $17,514,000. Income before net unrealized losses and net realized gains was approximately $6,206,000. Major expenses included approximately $2,831,000 for interest expense, $1,352,000 for repairs and maintenance, $2,231,000 for payroll, and $2,030,000 for real estate taxes. Omaha reported net unrealized losses of approximately $8,720,000 and net realized gains of approximately $9,940,000 resulting in a net increase in net assets of approximately $7,426,000. For the six months ended June 30, 2018, the Registrant’s 30% equity interest in the income of Omaha was approximately $2,228,000. Registrant reserves 20% of the reported value of Omaha on its balance sheet for June 30, 2018. The reserve for value was adjusted in conjunction with recording the equity income for the six months ended June 30, 2018. As a result, Registrant reported net equity in net increase in net assets of Omaha for the six months ended June 30, 2018 of $4,288,000.
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, 2017. As a result, Registrant reported net equity in net increase in net assets of Omaha for the six months ended June 30, 2017 of $5,708,000.
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None
CONTROLS AND PROCEDURES
(a) | The Chief Executive Officer and the Principal Accounting & Financial Officer of the general partner of SB Partners have evaluated the disclosure controls and procedures relating to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, |
(b) | ||
The Chief Executive Officer and the Principal Accounting and Financial Officer of the general partner of SB Partners have evaluated the internal control over financial reporting relating to the Registrant’s Quarterly Report on form 10-Q for the period ended June 30, |
ITEM 6.
EXHIBITS
Exhibit No. Description |
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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 |
101.INS** | XBRL Instance |
101.SCH** | XBRL Taxonomy Extension Schema |
101.CAL** | XBRL Taxonomy Extension Calculation |
101.DEF** | XBRL Taxonomy Extension Definition |
101.LAB** | XBRL Taxonomy Extension Labels |
101.PRE** | XBRL Taxonomy Extension Presentation |
** 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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Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SB PARTNERS | ||
(Registrant) | ||
By: | SB PARTNERS REAL ESTATE CORPORATION | |
General Partner | ||
Dated: August | By: | /s/ George N. Tietjen III |
George N. Tietjen III | ||
Chief Executive Officer | ||
Principal Financial & Accounting Officer | ||
Dated: August | By: | /s/ John H. Zoeller |
John H. Zoeller | ||
Chief Financial Officer | ||