SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                    FORM 10-K

                 FORM 10-K.-ANNUAL REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 2003
                          --------------------------------------------------
                                       or

[ ]Transition Report Pursuant to Section 13 or 15(d)
   of the Securities Exchange Act of 1934 [No Fee Required]
For the transition period from                     to
                               -------------------    ----------------------
Commission file Number: 0-8952
                        ----------------------------------------------------

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

             New York                                     13-6294787
--------------------------------------            --------------------------
(State of other Jurisdiction of                     (I.R.S. Employer
  incorporation or organization)                        Identification No.)


1251 Avenue of the Americas, N.Y., N.Y.                     10020
---------------------------------------           --------------------------
(Address of principal executive offices)                 (Zip Code)


Registrant's telephone number, including area code (212) 408-5000
                                                  --------------------------

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

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

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

                     Units of Limited Partnership Interests
----------------------------------------------------------------------------
                                (Title of Class)


<PAGE>2

     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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (sec.229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. (x)
(Amended by Exch Act Rel No. 28869,eff. 5/1/91.)

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

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

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

                                 Not Applicable
                                 --------------

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [] Yes [] NO

                                 Not Applicable
                                 --------------

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

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

                                 Not Applicable
                                 --------------

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

                                      None
                                      ----

<PAGE>3
                                    PART I
                                    ------
ITEM 1.  BUSINESS
         --------
Description of SB Partners (the "Registrant")
---------------------------------------------

The Registrant is a New York limited partnership engaged in acquiring, operating
and holding for investment a varying portfolio of real estate interests. The
Registrant's initial public offering was in 1971, the year it began operations.
As of December 31, 2003, the Registrant owned apartment communities in St.
Louis, Missouri; Greenville, South Carolina; and Holiday and Orlando, Florida;
as well as an industrial flex property in Maple Grove, Minnesota, 13.9 acres of
land in Holiday, Florida, and a 75% non-controlling interest in a partnership
that owns an apartment property in West Chester, Pennsylvania.

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

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


Recent Developments and Real Estate Investment Factors
------------------------------------------------------

For the second consecutive year, the multifamily market in the United States was
heavily influenced by the capital markets as low interest rates on home
mortgages have made the purchase of single-family homes and condominiums an
attractive alternative for many who would otherwise rent. Home ownership levels
are at an all-time high of approximately 68% of dwelling units, with
single-family home construction also reaching all-time highs. As a result, more
concessions were offered to tenants at each of the Registrant's apartment
communities. On a same-store basis, rent concessions increased by 68% to
$662,000 in 2003 from $395,000 in 2002. Despite a significant increase in
concessions average occupancy for the apartment portfolio declined on a
same-store basis in 2003 to 88.3% from 90.1%, although overall rent increased
1.5%.

(Please refer to Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations.)



<PAGE>4


General Real Estate Risks
-------------------------

This report on Form 10-K includes statements that constitute "forward looking
statements" within the meaning of Section 27(A) of the Securities Act of 1933
and Section 21(E) of the Securities Exchange Act of 1934 and that are intended
to come within the safe harbor protection provided by those sections. By their
nature, all forward looking statements involve risks and uncertainties. Actual
results may differ materially from those contemplated by the forward looking
statements for a number of reasons, including, but not limited to, those risks
described below:

General
-------

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


Risks of Liability and Loss
---------------------------

The development and ownership of real estate may result in liability to third
parties due to conditions existing on a property which may result in injury. In
addition, real estate may suffer a loss in value due to casualties such as fire
or hurricane. Such liability or loss may be uninsurable in some circumstances,
such as loss caused by the presence of mold, or may exceed the limits of
insurance maintained at typical amounts for the type and condition of the
property. Real estate may also be taken, in whole or in part, by public
authorities for public purposes in eminent domain proceedings. Awards resulting
from such proceedings may not adequately compensate the Registrant for the value
lost.

Value and Non-liquidity of Real Estate
--------------------------------------

Real estate investments are relatively non-liquid. The Registrant's ability to
vary its portfolio in response to changes in economic and other conditions will
therefore be limited. If the Registrant must sell an investment, there can be no
assurance that it will be able to dispose of the investment in the time period
it desires or that the sales price of the investment will recoup or exceed the
amount of the Registrant's cost of the investment.


<PAGE>5


Potential Adverse Effect on Results of Operations Due to Operating Risks
------------------------------------------------------------------------

The Registrant's properties are subject to operating risks common to real estate
in general, any and all of which may adversely affect occupancy or rental rates.
The Registrant's properties are subject to increases in operating expenses such
as cleaning, electricity, heating, ventilation, air conditioning, and
maintenance; insurance and administrative costs; marketing and payroll costs;
and other general costs associated with security, landscaping, repairs and
maintenance. The Registrant must bear all such increased expenses of apartment
communities, except in those markets where passing the cost of certain utilities
to tenants is customary. If operating expenses increase, the local rental market
may limit the extent to which rents may be increased to meet such additional
expenses without lowering occupancy rates. While the Registrant implements
cost-saving incentive measures at each of its properties, should any of the
foregoing occur, the Registrant's results of operations, financial condition and
its ability to pay distributions to Unitholders could be adversely affected.
Furthermore, the inability of existing tenants to meet their obligations under
the terms of their leases may in turn adversely affect the performance and
financial condition of the Registrant.


Debt Servicing and Financing
----------------------------

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

Environmental Issues
--------------------

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


<PAGE>6


Competition
-----------

The Registrant competes for tenants with many other real estate owners. The
success of the Registrant in attracting tenants for its properties will depend
upon its ability to maintain its properties and their attractiveness to tenants,
neighborhood conditions, changing demographic trends, et cetera. All of the
Registrant's properties are located in developed areas that include other,
similar properties. The number of competitive properties in a particular area
could have a material effect on the Registrant's ability to lease apartment
units or industrial flex space at its properties and on the rents charged at
such properties. In addition, other forms of housing, including manufactured
housing community properties and single-family housing, provide alternatives to
potential residents of multi-family residential properties.

Tax Matters
-----------

There were no changes in the tax laws or the extent to which such legislation
impacts the Registrant or the partners during the year ended December 31, 2003.
Unitholders are urged to consult their own tax advisors with respect to the tax
consequences arising under the federal law and the laws of any state,
municipality or other taxing jurisdiction, including tax consequences arising
from such Unitholder's own tax characteristics.

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

There are approximately 45 full and part-time on-site project personnel employed
at the Registrant's properties.

The Registrant's real estate investments are not generally subject to seasonal
fluctuations, although net income (loss) may vary somewhat from quarter to
quarter based upon changes in utility consumption and seasonal maintenance
expenditures at each property.

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


<PAGE>7


ITEM 2.PROPERTIES
       ----------

The properties owned by the Registrant as of December 31, 2003 are as follows:

<TABLE>
                                                          SB PARTNERS
                                                     Summary of Properties
                                                    As of December 31, 2003
<CAPTION>
                                                                                                       Occupancy
                                                          Description         Acquisition    Percent      at        Mortgage
           Property                  Location        Sq. Ft.   Units   Acres      Date      Ownership  12/31/03      Payable
<S>                           <S>                   <C>         <C>     <C>    <S>           <C>        <C>         <C>
Apartments:

Holiday Park Apts.             Holiday, FL             220,000     244   21.5   Jan 1991      100%       90.6%       $ 3,526,935
Cypress Key Apts.              Orlando, FL             323,000     360   22.7   Aug 1998      100%       83.9%       $16,167,261
Halton Place Apts.             Greenville, SC          233,000     246   20.6   Dec 1998      100%       92.7%       $ 3,200,000
Le Coeur du Monde Apts.        St. Louis, MO           177,000     192   12.3   Sep 1999      100%       88.5%       $ 9,879,679
Waterview Apartments           West Chester, PA        168,000     203   19.7   Apr 2002       75%       81.6%       $         0
                                                     ---------   -----   ----
                                                     1,121,000   1,245   96.8
                                                     =========   =====   ====
Industrial Flex:

Eagle Lake Business
Center IV                      Maple Grove, MN          60,000     n/a   5.15   Jun 2002      100%       100%        $         0

Land:

Unimproved land (a)            Holiday, FL                 n/a     n/a   13.9   Jul 1978      100%        n/a        $         0

Additional information regarding properties owned by the Registrant:
<CAPTION>
                                                   2003     2002     2001     2000    1999
                                                   ----     ----     ----     ----    ----
<S>                                             <C>       <C>      <C>      <C>     <C>
Average Occupancy (b)
-----------------
Meadowwood Apts.                                   n/a       n/a     96.3%    93.5%   91.5%
Holiday Park Apts.                                94.5%     90.9%    91.6%    91.5%   91.0%
Cypress Key Apts.                                 89.7%     90.4%    92.1%    94.0%   91.0%
Halton Place Apts.                                84.5%     87.2%    88.5%    91.6%   91.0%
Le Coeur du Monde Apts.                           86.7%     93.0%    93.0%    89.0%   96.%
Eagle Lake Business Center IV                    100.0%    100.0%     n/a      n/a     n/a

Effective Annual Rent
--------------------
Meadowwood Apts. (c)                               n/a     $7,013   $6,962   $6,454  $6,143
Holiday Park Apts. (c)                           $5,261    $5,056   $5,038   $4,861  $4,772
Cypress Key Apts. (c)                            $7,469    $7,706   $8,016   $7,866  $7,661
Halton Place Apts. (c)                           $5,685    $6,095   $6,477   $6,610  $6,333
Le Coeur du Monde Apts. (c)                      $8,358    $9,164   $8,963   $8,513  $9,383
Eagle Lake Business Center IV (d)                $   14    $   12     n/a      n/a     n/a

<FN>
(a) Land is adjacent to Holiday Park Apartments.
(b) For period of ownership.
(c)  Per apartment unit. Gross potential rent, less concessions and vacancies,
     divided by the total number of units at the property. Annualized for
     periods of ownership of less than one year.
(d)  Per square foot. Gross potential rent plus escalations, divided by the
     total number of square feet at the property. Annualized for periods of
     ownership of less than one year.

</FN>
</TABLE>

<PAGE>8

ITEM 3.LEGAL PROCEEDINGS
       -----------------

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

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF UNITHOLDERS
       ----------------------------------------------
NONE.

                                    PART II
                                    -------

ITEM 5.MARKET FOR REGISTRANT'S UNITS OF PARTNERSHIP
       INTEREST AND RELATED UNITHOLDER MATTERS
       --------------------------------------------

The transfer of Units or Participations (equivalent to one-half Unit) is subject
to certain limitations, including the consent of the General Partner. There is
no public market for the Units and it is not anticipated that any such public
market will develop. The number of Unitholders as of December 31, 2003 was
3,266.

At various times, the Registrant has generated and distributed cash to the
Unitholders. With the repositioning of the portfolio, the Registrant was able to
resume distributions to the limited partners in 1999. A distribution of $500 per
unit totaling $3,876,750 was paid in March 2003 to Unitholders of record on
December 31, 2002. In addition, a distribution of $40 per unit, totaling
$310,140 was paid on March 8, 2004 to Unitholders of record as of
December 31,2003. Including the latest distribution, cumulative distributions
since inception have totaled $105,157,475, however, there is no requirement to
make such distributions nor can there be any assurance that future operations
will generate cash available for distribution.


<PAGE>9

ITEM 6.SELECTED FINANCIAL DATA
       -----------------------
<TABLE>
SELECTED FINANCIAL DATA

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

<CAPTION>
                                                                               For the Years Ended December 31,
                                                                  2003        2002         2001         2000         1999
                                                                --------    --------     --------     --------     --------
                                                                                 (In Thousands, Except Unit Data)
<S>                                                            <C>         <C>          <C>          <C>          <C>
Income Statement Data:
Rental, Interest and Other Revenues                             $ 8,188     $  9,871     $ 12,888     $ 12,501     $11,063
Operating Expenses, less
  Depreciation and Amortization                                  (7,800)     (10,261)     (11,047)     (11,052)     (9,854)
Depreciation and Amortization                                    (1,677)      (1,680)      (2,150)      (2,415)     (2,123)
                                                                -------     --------     --------     --------     -------
Loss from Operations                                             (1,289)      (2,070)        (309)        (966)       (914)

Gain on Sale of Investments in Real Estate                            0       17,481            0            0           0
Equity in Net Loss of Joint Venture                                (239)         (93)           0            0           0
                                                                -------     --------     --------     --------     -------
Net Income (Loss)                                               $(1,528)    $ 15,318     $   (309)    $   (966)    $  (914)
                                                                =======     ========     ========     ========     =======

Net Income (Loss) per Unit of Partnership Interest              $  (197)    $  1,976     $    (40)    $   (125)    $  (118)
                                                                =======     ========     ========     ========     =======

Distributions paid per Unit of Partnership Interest             $   500     $    100     $    100     $    115     $   100
                                                                =======     ========     ========     ========     =======
Weighted Average Number of
  Partnership Units Outstanding                                   7,754        7,754        7,754        7,754       7,754

Balance Sheet Data at Year End:

Real Estate, net                                                $53,237     $ 54,171     $ 50,445     $ 51,281     $52,039
Real Estate Assets Held for Sale                                $     0     $      0     $ 13,723     $ 14,064     $14,648
Total Assets                                                    $57,811     $ 60,508     $ 67,005     $ 67,791     $70,301
Mortgage Notes Payable, net                                     $32,774     $ 30,239     $ 51,146     $ 50,913     $51,627

</TABLE>

<PAGE>10


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
       CONDITION AND RESULTS OF OPERATIONS
       -------------------------------------------------

COMPANY OVERVIEW
----------------

The Registrant is a New York limited partnership engaged in acquiring, operating
and holding for investment a varying portfolio of real estate interests. The
Registrant's initial public offering was in 1971, the year it began operations.
As of December 31, 2003, the Registrant owned apartment communities in St.
Louis, Missouri; Greenville, South Carolina; and Holiday and Orlando, Florida;
as well as an industrial flex property in Maple Grove, Minnesota, 13.9 acres of
land in Holiday, Florida, and a 75% non-controlling interest in a partnership
that owns an apartment property in West Chester, Pennsylvania.

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


CRITICAL ACCOUNTING ESTIMATES
-----------------------------

In preparing the consolidated financial statements, management has made
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.

Set forth below is a summary of the accounting policies that management believes
are critical to the preparation of the consolidated financial statements. The
summary should be read in conjunction with the more complete discussion of
significant accounting policies included in Note 1 to the consolidated financial
statements for the year ended December 31, 2003.


Real Estate
-----------

Real estate is carried at cost, net of accumulated depreciation and
amortization. Maintenance and repairs are charged to operations as incurred.
Depreciation requires an estimate by management of the useful life of each
property as well as an allocation of the costs associated with a property to its
various components. If the Partnership does not allocate these costs
appropriately or incorrectly estimates the useful lives of its real estate,
depreciation expense may be misstated.

The Partnership's properties are regularly evaluated on a property-by-property
basis for impairment. Impairment is determined by calculating the sum of the
estimated undiscounted future cash flows including the projected undiscounted
future net proceeds from the sale of the property. In the event such sum is less
than the net carrying value of the property, the property will be written down
to estimated fair value. If the Partnership incorrectly estimates the value of
the asset or the undiscounted cash flows, the impairment charges may be
different from those, if any, in the consolidated financial statements.


Joint Venture
--------------

The Partnership has a non-controlling interest in a joint venture that is
accounted for under the equity method of accounting because the other venture
partner has substantive participative rights regarding the venture's operations.
Were the Partnership deemed to control this entity, it would have to be
consolidated and therefore would impact the balance sheet, statement of
operations and related ratios. The ultimate realization of the investment in the
joint venture is dependent on a number of factors, including the performance of
the investee and market conditions. If the venture determines that the real
estate held by its investee is impaired, then an impairment charge would be
recorded by the venture and the Partnership would record its share of loss.


<PAGE>11


Revenue Recognition
-------------------

Rental income is recognized when earned pursuant to the terms of the leases.
Base rents and reimbursement of the tenants' share of certain operating expenses
are generally recognized when due from tenants. Before the Partnership can
recognize revenue, it is required to assess, among other things, its
collectibility. The Partnership continually analyzes the collectibility of its
revenue and will reserve against its revenue if conditions warrant such action.


Off-Balance Sheet Arrangements
------------------------------

None.


Recently Issued Accounting Pronouncements
-----------------------------------------
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." The Interpretation elaborates on the disclosures to be
made by a guarantor in its financial statements about its obligations under
certain guarantees that it has issued. It also clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The disclosure
provisions of this Interpretation were effective for the Registrant's December
31, 2002 consolidated financial statements. The initial recognition and initial
measurement provisions of this Interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The adoption of
this Interpretation does not have a current impact the Registrant's consolidated
financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150
addresses the standards for issuers to use to classify and measure certain
financial instruments with characteristics of both liabilities and equity, and
requires the issuer to classify a financial instrument that is within the scope
of SFAS No. 150 as a liability (or asset in some circumstances). SFAS No. 150
became effective for financial instruments issued or modified after May 31, 2003
and is otherwise effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of this Statement did not have a
material impact on the Registrant's consolidated financial statements.

In January of 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, which was amended by FIN 46 (R) in December 2003.
This Interpretation clarifies the application of existing accounting
pronouncements to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. As it applies to the
Registrant, FIN 46 (R) will be immediately effective for all variable interests
in variable interest entities created after December 31, 2003, and to all
variable interest entities on March 31, 2004. The adoption of this
Interpretation is expected to have no impact on the Registrant's consolidated
financial statements.


CONTRACTUAL OBLIGATIONS
-----------------------

As of December 31, 2003, the Registrant's contractual obligations consisted of
mortgage notes payable. Principal payments under the mortgage notes payable are
due as follows:

For the year ending December 31,
                                2004      $   445,243
                                2005        3,677,325
                                2006          511,732
                                2007          548,635
                                2008        3,746,721
                                2009       23,844,219
                                          -----------
                                Total     $32,773,875
                                          ===========


<PAGE>12


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

As of December 31, 2003, the Registrant had cash and cash equivalents of
approximately $186,000, in addition to approximately $668,000 of deposits held
in escrow by certain lenders for the payment of insurance, real estate taxes and
certain capital and maintenance costs. These balances are approximately
$1,430,000 less then the cash, cash equivalents and deposits held in escrow as
of December 31, 2002. Lower cash balances are due primarily to capital additions
to the real estate properties and scheduled mortgage principal reductions,
partially offset by higher cash flow from operating activities. Operations, net
of an increase of approximately $77,000 of deposits held in escrow by lenders,
provided approximately $516,000 of cash. Uses of cash during the year included
distributions amounting to approximately $3,877,000 that were paid to
Unitholders of record as of December 31, 2002. Capital additions to existing
real estate properties totaled approximately $677,000 during the year, and
principal reductions of approximately $415,000 were made on mortgage notes
payable.

In March 2001, the Registrant entered into a revolving credit facility with a
bank in the amount of $7,500,000, which is secured by Halton Place Apartments.
At December 31, 2003, $3,200,000 was outstanding under the credit facility. The
term of the credit facility has been extended to July 1, 2004. Borrowings bear
interest at LIBOR plus 1.95%.

Total outstanding debt at December 31, 2003 consisted of approximately
$29,574,000 of long-term nonrecourse first mortgage notes and $3,200,000 under
the revolving credit facility, all secured by real estate owned by the
Registrant. Scheduled maturities through regularly scheduled monthly payments
will be approximately $445,000 in 2004. The terms of certain mortgage notes
require escrow of estimated annual real estate tax, insurance and reserves for
repairs, maintenance and improvements to the secured property, in addition to
the payment of principal and interest. The Registrant generally has no other
debt except normal trade accounts payable and accrued interest on mortgage notes
payable.

Inflation and changing prices during the current period did not significantly
affect the markets in which the Registrant conducts its business, or the
Registrant's business overall.

In March 2004, the Registrant made a distribution of $40 per Unit to Unitholders
of record as of December 31, 2003. This is the sixth consecutive annual
distribution since the repositioning of the portfolio in the late 1990's.
However, there is no requirement to make such distributions, nor can there be
any assurance that future operations will generate cash available for
distribution.

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


<PAGE>13


MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
------------------------------------------------
2003 VS. 2002
-------------

Total revenues decreased $1,683,000 to approximately $8,188,000 in 2003 from
approximately $9,871,000 in 2002. The Registrant generated a net loss of
approximately $1,528,000 in 2003 as compared with net income of approximately
$15,318,000 in 2002.

The changes in total revenues and net income are the result of the changes in
the composition of the portfolio that were made in 2002, as well as decreases in
revenues and net income for the properties owned for the entire years of 2003
and 2002. On April 30, 2002, the Registrant purchased a 75% non-controlling
interest in a partnership that owns Waterview Apartments, a 203-unit apartment
community in West Chester, Pennsylvania. On May 9, 2002, the Registrant sold
Meadowwood Apartments, a 704-unit apartment community in Reno, Nevada, for
$31,350,000 in an all cash transaction, and retired the mortgage note payable
that had been secured by the property. In addition, on June 12, 2002, the
Registrant purchased Eagle Lake Business Center IV, a 60,345 square foot
industrial flex property in Maple Grove, Minnesota, for $4,700,000, in an all
cash transaction.

There were no revenues from Meadowwood Apartments in 2003, however, revenues
from Meadowwood Apartments totaled approximately $1,783,000 for the period the
property was owned during 2002. The decrease in revenues from Meadowwood
Apartments was partially offset by additional revenues from Eagle Lake Business
Center IV, which was purchased in June 2002. Revenues from the industrial flex
property were approximately $466,000 higher in 2003, as the property was owned
for a full year, whereas it was only owned for six and one-half months in the
prior year.

Interest expense was approximately $1,725,000 lower for the year ended December
31, 2003 than 2002. In 2002, the Registrant made a yield maintenance payment of
approximately $1,056,000 when the mortgage note that had been secured by
Meadowwood Apartments was retired at the time the property was sold. This yield
maintenance payment was included in interest expense for the year ended December
31,2002. The reduction in periodic interest payments resulting from the
retirement of the loan were partially offset by additional interest that accrued
as a result of additional borrowings under the secured revolving credit
agreement.

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

Holiday Park Apartments (Holiday, Florida)
-----------------------

Total revenues increased $44,000, to approximately $1,399,000 in 2003 from
approximately $1,355,000 in 2002. Net income, which includes deductions for
depreciation and mortgage interest expense, increased $20,000, to approximately
$156,000 in 2003 from approximately $136,000 in 2002.

The increase in total revenues was due to a 3% increase in rental rates
implemented at the property on new and renewing leases and a 21% improvement in
vacancy loss, partially offset by increased concessions offered to new and
renewing tenants totaling $28,000. Occupancy averaged 94.5% for 2003, which was
an improvement of 3.6% over average occupancy of 90.9% in 2002. Operating
expenses excluding interest expense and depreciation rose $24,000 over 2002 due
to higher real estate taxes, insurance costs and professional fee expenses,
partially offset by lower payroll and repair costs.

Holiday Park Apartments is located in Holiday, Florida, a city that is included
in the Tampa-St. Petersburg, Florida Metropolitan Statistical Area ("MSA"). The
MSA was one of the few areas in the nation that exhibited job growth during 2003
and its unemployment rate of less than 5% was below the national average
estimated to be approximately 6% for 2003. Lower construction of multifamily
apartment communities than levels in the previous three years and the
aforementioned job growth helped keep the overall apartment vacancy rate in the
MSA somewhat stable at approximately 8.5% for 2003.


<PAGE>14


Cypress Key Apartments (Orlando, Florida)
----------------------

Total revenues decreased $113,000 to approximately $2,802,000 in 2003 from
approximately $2,915,000 in 2002. Net loss, which includes deductions for
depreciation and mortgage interest expense, increased $83,000 to approximately
$533,000 in 2003 from approximately $450,000 in 2002.

The decrease in total revenues is due primarily to increased tenant concessions
at the property of $120,000. A new apartment community built directly across
from Cypress Key Apartments in 2002 continues to be very aggressive in its
leasing efforts, which necessitated greater concessions on new and renewing
leases. Rental rates increased a nominal 1.2% over the prior year on new and
renewing leases, and average property vacancy increased slightly to 10.3% from
the rate a year earlier of 9.6%. Net loss increased as a result of lower
revenues in the current year offset by a decrease in expenses of $29,000.
Payroll expense decreased $26,000 during the current year, reflecting longer
downtime between restaffing positions and repairs and maintenance costs
decreased $22,000.  Insurance expense increased again in 2003 by $23,000
due to higher premiums.

The Orlando economy was estimated to have generated 14,000 new jobs in 2003
while it's unemployment rate stabilized at approximately 5% during the year.
Multifamily construction in the market produced 4,700 new units, which is nearly
60% below 2000's total of nearly 12,000 units constructed and delivered. Rent
increases during 2003 were estimated to have increased market wide by
approximately 1.5%. Market vacancy rates were up for the third consecutive year
to approximately 9% despite lower new unit deliveries reflecting increasing
single-family home purchases from the low interest rate environment.


Halton Place Apartments (Greenville, South Carolina)
-----------------------

Total revenues decreased $108,000, to approximately $1,430,000 in 2003 from
approximately $1,538,000 in 2002. Net income, which includes deductions for
depreciation and mortgage interest expense, decreased $202,000, to approximately
$105,000 in 2003 from approximately $307,000 in 2002.

The decrease in total revenues is due primarily to an increase in tenant
concessions at the property of $59,000. Average occupancy decreased 2.7%, to
84.5% in 2003 from 87.2% in 2002, which reduced rental revenue $57,000. The
decrease in net income was due primarily to a decrease in revenues and an
increase in expenses. Payroll expense increased $19,000, due to higher staffing
costs. Insurance expense increased $18,000 after the policies were renewed,
reflecting an overall increase in insurance premiums. Utility expenses increased
by $15,000 due to higher utility rates. Interest expense increased by $42,000
due to increased borrowings under the secured revolving credit agreement.

Halton Place Apartments is located within the Greenville-Spartanburg-Anderson,
South Carolina MSA. The MSA employment base contracted at an average annual rate
of 0.9% for the one-year period ended October 31, 2003 or an overall loss of
4,400 jobs. The manufacturing sector, which has been historically strong in this
market, lost the most jobs due to the continued relocation trend of textile
labor to overseas markets. The average occupancy rate in the market was 87.5% at
the end of November 2003 reflecting a decrease of 1.8% from the prior year
occupancy rate of 89.3%. The decrease reflects the continuing trend of
single-family home buying and newly constructed apartment communities entering
the market.

<PAGE>15


Le Coeur du Monde Apartments (St. Louis, Missouri)
----------------------------

Total revenues decreased $155,000, to approximately $1,682,000 in 2003 from
approximately $1,837,000 in 2002. Net loss, which includes deductions for
depreciation and mortgage interest expense, increased $175,000, to approximately
$296,000 in 2003 from approximately $121,000 in 2002.

Average occupancy for the current year decreased 6.3% from 93.0% to 86.7%,
although base rents were approximately 1.5% or $30,000 higher than the previous
year. In addition, tenant concessions were significantly higher in 2003, which
reduced revenues $60,000. The increase in net loss is due to the aforementioned
decrease in revenues, increases in real estate taxes of $23,000 and insurance
expense of $17,000, and partially offset by savings in repairs and maintenance
and property management fees.

While some research reports indicate that the St. Louis MSA has weathered the
nationwide economic slowdown better than most Midwestern markets, the area is
still experiencing job losses. Through the end of 2003, job losses were reported
to be 1%, or 11,300 jobs, primarily from the decline of airline activity from
the sale of TWA to American Airlines in 2001 and continuing manufacturing sector
job losses. This is the third consecutive year of reported job losses in the
MSA. As with many markets across the nation, single-family home buying activity
continues to negatively impact occupancy and rent levels in St. Louis. Reported
market vacancy at December 31, 2003 was 5.2% as compared with 5.6% for the year
earlier.


Eagle Lake Business Center IV (Maple Grove, Minnesota)
-----------------------------

On June 12, 2002, the Registrant purchased Eagle Lake Business Center IV, a
60,345 square foot industrial flex property located in Maple Grove, Minnesota,
for $4,700,000, in an all cash transaction. (Refer also to Footnotes 3 and 4 of
the Consolidated Financial Statements.)

Total revenues for 2003 were approximately $861,000 as compared with $395,000
for the period of ownership during 2002. Net income, which includes deductions
for depreciation expense, was approximately $440,000 for 2003 as compared with
$212,000 for the period of ownership in 2002. Total revenue for 2003 and 2002
respectively was comprised of rental income of approximately $547,000 and
$302,000, respectively, and escalation income of approximately $313,000 and
$93,000, respectively. Expenses for 2003 and 2002 related primarily to real
estate taxes of approximately $177,000 and $53,000, respectively, depreciation
expense of approximately $110,000 and $64,000, respectively, and other property
operating expenses of $133,000 and $65,000 respectively.

Eagle Lake Business Center IV is an office/showroom industrial property located
in the northwest Minneapolis, Minnesota suburb of Maple Grove. The Twin Cities
economy, which includes St. Paul, showed no change in the unemployment rate as
of December 31, 2003 from year-earlier levels of 4.1%, which was well below the
national average of approximately 6%. Leasing activity for office/showroom space
in the Northwest Minneapolis submarket has shown signs of improvement during
2003 as seen by an improvement in the market vacancy rate from 13.5% in June
2003 to 11.5% in December 2003. New construction has also slowed as only 375,000
square feet of industrial space was in development during the first half of 2003
as compared with the construction of 19 million square feet of industrial space
in the previous six years.


Investment in Joint Venture
---------------------------

On April 30, 2002, the Registrant purchased a 75% non-controlling interest in a
partnership that owns Waterview Apartments in West Chester, Pennsylvania.
Waterview Apartments comprises 203 apartment units and 6,000 square feet of
commercial space. (Refer also to Footnotes 4 and 5 of the Consolidated Financial
Statements.)

Equity in net loss of joint venture for 2003 was approximately $239,000 as
compared with $93,000 for the period of ownership in 2002. Equity in net loss of
joint venture is net of the Registrant's portion of deductions for depreciation
of approximately $364,000 and $236,000, for the year ended December 31, 2003 and
the period of ownership ended December 31, 2002, respectively.


<PAGE>16


MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
------------------------------------------------
2002 VS. 2001
-------------


Total revenues decreased $3,017,000, to approximately $9,871,000 in 2002 from
approximately $12,888,000 in 2001. Net income increased $15,627,000, to net
income of approximately $15,318,000 in 2002 from net loss of approximately
$309,000 in 2001.

The changes in financial condition, total revenues and net income are the result
of the changes from 2001 to 2002 in the composition of the portfolio. On April
30, 2002, the Registrant purchased a 75% non-controlling interest in a
partnership that owns Waterview Apartments, a 203-unit apartment community in
West Chester, Pennsylvania. On May 9, 2002, the Registrant sold Meadowwood
Apartments, a 704-unit apartment community in Reno, Nevada, for $31,350,000 in
an all cash transaction, and retired the mortgage note payable that had been
secured by the property. In addition, on June 12, 2002, the Registrant purchased
Eagle Lake Business Center IV, a 60,345 square foot industrial flex property in
Maple Grove, Minnesota, for $4,700,000, in an all cash transaction.

Due to the sale of Meadowwood Apartments by the Registrant, the reporting period
for the property ended on May 9, 2002. Lower revenues are due substantially to
the shortened reporting period. Revenues from Meadowwood Apartments were
approximately $3,219,000 lower for the year ended December 31, 2002 than in
2001. The decrease in revenues from Meadowwood Apartments was partially offset
by the revenues from Eagle Lake Business Center IV which was purchased in June
2002, and added approximately $395,000 to total revenues for the year ended
December 31, 2002.

As of December 31, 2001, Meadowwood Apartments was under contract of sale, and,
as such, was classified as a "real estate asset held for sale" on the
consolidated balance sheet. In accordance with accounting principles generally
accepted in the United States of America, depreciation expense is no longer
recorded once a property is so classified. The elimination of depreciation
reduced depreciation expense approximately $642,000 for the year ended December
31, 2002. Interest expense was approximately $168,000 higher for the year ended
December 31, 2002 as a yield maintenance payment of approximately $1,056,000 was
paid when the loan that had been secured by Meadowwood Apartments was retired
prior to its scheduled maturity. As a majority of the proceeds from the sale of
Meadowwood Apartments was used to purchase Eagle Lake Business Center IV and the
75% non-controlling joint venture interest in Waterview Apartments, no debt or
interest expense has been incurred by the Registrant in connection with these
two new investments.



Meadowwood Apartments (Reno, Nevada)
---------------------

  On May 9, 2002, the Registrant sold Meadowwood Apartments in Reno, Nevada, for
$31,350,000 in an all cash transaction. Proceeds from the sale were used, in
part, to retire the mortgage note of approximately $19,600,000 that had been
secured by the property. The sale of Meadowwood Apartments resulted in a net
gain for financial reporting purposes of approximately $17,100,000. (Please
refer to Form 8-K filed May 24, 2002, in connection with this transaction.) The
gain for tax purposes will be computed using the tax basis of the assets sold,
and will differ from the gain reported on the consolidated financial statements.
Earlier in the year, the Registrant sold the water rights at Meadowwood
Apartments for approximately $389,000.

Total revenues decreased $3,219,000, to approximately $1,783,000 in 2002 from
approximately $5,002,000 in 2001. Loss before gain on sale and after deductions
for depreciation and mortgage interest expense increased $1,595,000, to
approximately $869,000 from income of approximately $726,000 in 2001.

Due to the sale of the property by the Registrant, the reporting period for
Meadowwood Apartments ended on May 9, 2002. The changes in revenues and income
are due substantially to the shortened reporting period. Furthermore, as
Meadowwood Apartments was classified as a real estate asset held for sale as of
August 2001, no depreciation was charged to expense during the current year,
which decreased depreciation expense $642,000. Interest expense was $168,000
higher in 2002 than in 2001 as a yield maintenance payment of approximately
$1,056,000 was paid when the loan that had been secured by the property was
retired prior to its scheduled maturity. Amortization expense increased $57,000
as the balance of the costs incurred in connection with the mortgage note was
written off.


<PAGE>17


Holiday Park Apartments (Holiday, Florida)
-----------------------

Total revenues increased $31,000, to approximately $1,355,000 in 2002 from
approximately $1,324,000 in 2001. Net income, which includes deductions for
depreciation and mortgage interest expense, decreased $6,000, to approximately
$136,000 in 2002 from approximately $142,000 in 2001.

The increase in total revenues was due to increases in rental rates implemented
at the property on new and renewing leases, which added approximately $40,000 to
revenues. This increase in revenues was partially offset by increased
concessions at the property, which reduced revenues $23,000. In addition,
average occupancy for 2002 decreased 0.7%, to 90.9% in 2002 from 91.6% in 2001,
which resulted in a decrease in rental income of $12,000. Receipts from the
water and sewer billback program raised utility income $8,000 in the current
year. Miscellaneous income increased $18,000 due primarily to an increase in fee
income. The decrease in net income is due primarily to an increase in expenses
of approximately $37,000, partially offset by the increase in revenues. Payroll
costs increased $27,000 as staff positions that remained open in the prior year
were filled in the current year. Insurance expense increased $22,000 after the
policies were renewed, reflecting a general increase in rates by the insurance
industry. Depreciation expense increased $4,000 as additional assets were placed
into service over the course of the current year. These increases in expenses
were partially offset by a decrease of $16,000 in repairs and maintenance costs,
primarily due to lower replacement costs in 2002.


Cypress Key Apartments (Orlando, Florida)
----------------------

Total revenues decreased $187,000, to approximately $2,915,000 in 2002 from
approximately $3,102,000 in 2001. Net loss, which includes deductions for
depreciation and mortgage interest expense, increased $302,000, to approximately
$450,000 in 2002 from approximately $148,000 in 2001.

The decrease in total revenues is due primarily to increased tenant concessions
at the property of $118,000. A new apartment community built directly across
from Cypress Key Apartments has been very aggressive in its leasing efforts,
which necessitated greater concessions on new and renewing leases. Although
increased rental rates were implemented at the property on new and renewing
leases, which added $50,000 to total revenues, average occupancy decreased 1.7%,
to 90.4% in 2002 from 92.1% in 2001, which decreased revenues $47,000.
Collection losses were $38,000 higher in the current year and miscellaneous
income was $34,000 lower as application and other fees were waived in an effort
to induce tenants to enter into leases. Net loss increased as a result of lower
revenues in the current year and an increase in expenses of $116,000. Payroll
expense increased $21,000 during the current year, reflecting a general increase
in labor costs. Repairs and maintenance costs increased $70,000 primarily as a
result of higher turnover and replacement costs incurred as vacated apartments
were prepared for new tenants. Insurance expense increased $42,000 due to higher
premiums in the current year. Depreciation expense increased $11,000 as
additional assets were placed into service over the course of the current year.
These increases in expenses were partially offset by a decrease in real estate
taxes of $13,000 which resulted from a successful appeal, as well as a decrease
in interest expense of $15,000, as cumulative payments on the outstanding
principal reduced the cost of the debt.


<PAGE>18


Halton Place Apartments (Greenville, South Carolina)
-----------------------

Total revenues decreased $107,000, to approximately $1,538,000 in 2002 from
approximately $1,645,000 in 2001. Net income, which includes deductions for
depreciation and mortgage interest expense, decreased $111,000, to approximately
$307,000 in 2002 from approximately $418,000 in 2001.

The decrease in total revenues is due primarily to an increase in tenant
concessions at the property of $88,000. Average occupancy decreased 1.3%, to
87.2% in 2002 from 88.5% in 2001, which reduced rental revenue $20,000. Although
rental rates were increased which raised revenues $13,000, fees were waived
which reduced revenues $12,000. The decrease in net income was due primarily to
a decrease in revenues and a slight increase in expenses. Payroll expense
increased $30,000, as a full-time groundskeeper was hired in 2002. Insurance
expense increased $16,000 after the policies were renewed, reflecting an overall
increase in insurance premiums. In addition, depreciation expense increased
$14,000 as additional assets were placed in service over the course of the year,
and amortization increased $4,000 as financing costs were amortized over the
course of the entire year. These increases in expenses were partially offset by
a decrease in interest expense of $12,000, as the average balance outstanding
under the credit facility secured by the property was lower over the course of
the year, and a decrease in real estate taxes of $17,000 which resulted from a
successful appeal. Utility costs decreased $9,000, repairs and maintenance
expense decreased $4,000, and other miscellaneous expenses decreased $12,000.


Le Coeur du Monde Apartments (St. Louis, Missouri)
----------------------------

Total revenues increased $61,000, to approximately $1,837,000 in 2002 from
approximately $1,776,000 in 2001. Net loss, which includes deductions for
depreciation and mortgage interest expense, decreased $31,000, to approximately
$121,000 in 2002 from approximately $152,000 in 2001.

Although the average occupancy for the current year was comparable to that of
the prior year, rental revenue was $23,000 higher due primarily to increased
occupancy for the first three quarters of 2002 as compared to the same period in
2001. Marginal increases in rental rates on new and renewing leases increased
revenue $7,000. In addition, tenant concessions were lower in 2002, which
increased revenues $10,000. Other miscellaneous income increased $21,000, due
primarily to additional receipts of fees. The decrease in net loss is due to an
increase in revenues partially offset by an increase in expenses of $28,000.
Payroll expense increased $17,000 as temporary positions were filled with
full-time employees. Repairs and maintenance costs increased $21,000 due
primarily from an increase in apartment turnover costs. Additional insurance
costs of $9,000 resulted from higher premiums charged when policies were renewed
in the current year. Depreciation expense increased $19,000 as additional assets
were placed in service over the course of the year. The increase in expenses was
partially offset by a decrease in real estate taxes of $22,000 which resulted
from a successful appeal, a decrease in utility expense of $5,000, and a
decrease of $3,000 in various administrative expenses. Interest expense
decreased $8,000 as cumulative payments on the mortgage have reduced the cost of
the debt.


<PAGE>19


Eagle Lake Business Center IV (Maple Grove, Minnesota)
-----------------------------

On June 12, 2002, the Registrant purchased Eagle Lake Business Center IV, a
60,345 square foot industrial flex property located in Maple Grove, Minnesota,
for $4,700,000, in an all cash transaction. (Refer also to Footnotes 3 and 4 of
the Consolidated Financial Statements.) The property is currently 100% occupied.

Total revenues for 2002 were approximately $395,000. Net income, which includes
deductions for depreciation expense, was approximately $212,000 for 2002. Total
revenue for 2002 was comprised of rental income of approximately $302,000 and
escalation income of approximately $93,000. Expenses for 2002 related primarily
to real estate taxes of approximately $53,000, depreciation expense of
approximately $64,000, repairs and maintenance expenses of approximately
$16,000, insurance expense of approximately $6,000 and miscellaneous expenses
which totaled approximately $44,000.

Investment in Joint Venture
---------------------------

On April 30, 2002, the Registrant purchased a 75% non-controlling interest in a
partnership that owns Waterview Apartments in West Chester, Pennsylvania.
Waterview Apartments comprises 203 apartment units and 6,000 square feet of
commercial space. (Refer also to Footnotes 4 and 5 of the Consolidated Financial
Statements.)

Equity in net loss of joint venture for 2002 was approximately $93,000.


ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        ----------------------------------------------------------

On March 1, 2001, the Registrant entered into a revolving credit facility
agreement with a bank under which borrowings bear interest at rates that
fluctuate with LIBOR. As such, the Registrant has market risk to the extent
interest rates fluctuate during the term and funds are advanced by the bank
under the agreement. Based on the weighted average outstanding balance under the
credit facility for the year ended December 31, 2003, a 1% change in LIBOR would
impact the Registrant's annual net income and cash flows by approximately
$25,600.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
       -------------------------------------------

The Financial Statements required by this item, together with the Independent
Auditors' Report thereon, are contained herein on pages 28 through 40 of this
annual report on Form 10-K. Supplementary financial information required by this
item is contained herein on pages 41 through 42 of this report.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ------------------------------------------------
        ACCOUNTING AND FINANCIAL DISCLOSURE
        -----------------------------------

None.


ITEM 9A. CONTROLS AND PROCEDURES
         -----------------------

(a)  The President and the Chief Financial Officer of the general partner of SB
     Partners have evaluated the disclosure controls and procedures relating to
     the Registrant's Annual Report on Form 10-K for the year ended December
     31, 2003 as filed with the Securities and Exchange Commission and have
     judged such controls and procedures to be effective.

(b)  There have been no changes in the Registrant's internal controls during
     the year ended December 31, 2003 that could significantly affect those
     controls subsequent to the date of evaluation.


<PAGE>20

                                   PART III
                                   --------
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
        --------------------------------------------------

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

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

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

         Name                     Age       Position
         ----                     ---       --------

         John H. Streicker         61       President & Director

         Michael J. Weinberger     68       Director

         Millie C. Cassidy         58       Director

         David Weiner              68       Director

         Elizabeth B. Longo        52       Treasurer

         Anita Breslin             47       First Vice President

         Jacques Lewis             54       Vice President

         Martin Cawley             47       Vice President

         George N. Tietjen         43       Vice President

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

Mr. Weinberger,  a Certified Property Manager, joined the General Partner in
February  1973,  and has been a Director  since April 1984.  He is the
residential portfolio manager for the Southeastern region.

Ms. Cassidy joined the General Partner in August 1982.  She has been a Director
of the General Partner since March 1988.

Mr. Weiner joined the General Partner in April 1984.  He is a portfolio manager
and manager of investor relations.  He has been a Director of the General
Partner since March 1988.

Ms. Longo joined the General Partner in 1988 and serves as its chief financial
officer. She is a certified public accountant with over twenty-eight years of
real estate related financial experience.

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

Mr. Lewis joined the General Partner in 1994.  He is the portfolio manager
responsible for residential property transactions and management for the
Northwestern region.

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

Mr. Tietjen joined the general partner in 1990 and serves as its principal
accounting officer. He is a certified public accountant with over 22 years of
real estate related financial, accounting and reporting experience.


<PAGE>21


ITEM 11.EXECUTIVE COMPENSATION
        ----------------------
The Registrant has no executive officers or directors.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN
        -----------------------------
        BENEFICIAL OWNERS AND MANAGEMENT
        --------------------------------

(a)  At December 31, 2003, an institutional investor of record owned 7.13% of
     the outstanding Units of Limited Partnership Interests. On January 13,
     1993, a group of Unitholders of record, including the institutional
     investor referred to above, entered into a collective agreement with
     respect to their ownership interest in the Registrant. The aggregate number
     of Units beneficially owned by the group is 676 Units, representing 8.7% of
     the total number of outstanding Units of Limited Partnership Interest on
     that date. Each Unitholder has disclaimed beneficial ownership of all Units
     owned by the other Unitholders in this group. The foregoing information is
     based upon a 13-D filing made by the respective Unitholders.

(b)  As of December 31, 2003, none of the Directors of the General Partner owned
     any outstanding Units of Limited Partnership Interest. However, an
     Assistant Secretary of the General Partner owned four Units of Limited
     Partnership Interest. No Officers or Directors of SHC owned any outstanding
     Units of Limited Partnership Interest. SRE Clearing Services, Inc., an
     affiliate of the General Partner, owned 1,499.75 Units of Limited
     Partnership Interest, representing 19.35% of the outstanding number of
     Units on December 31, 2003. In accordance with SEC regulations, SRE
     Clearing Services filed Form 13-D/A on August 28, 2003, when the total
     number of Units held reached 19% of the outstanding number of Units.

(c)  During the year ended December 31, 2003, there were no changes in control
     of the Registrant or the General Partner.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

The General Partner, among other things, furnishes services and advice to the
Registrant and is paid a variable annual fee for such services based on
calculations prescribed in the Registrant's Partnership Agreement. For these
services, the General Partner receives a management fee equal to 2% of the
average amount of capital invested in real estate plus cumulative mortgage
amortization payments, and 0.5% of capital not invested in real estate, as
defined in the partnership agreement. The management fee amounted to $711,984,
$794,498, and $826,453 for the years ended December 31, 2003, 2002, and 2001,
respectively. In addition, the General Partner is entitled to 25% of cash
distributions in excess of the annual distribution preference, as defined in the
partnership agreement. No such amounts were due for the years ended December 31,
2003, 2002 or 2001.

Certain affiliates of the General Partner oversee the management and operations
of various real estate properties, including those owned by the Registrant.
Services performed by these affiliates applicable to the Registrant's properties
are billed at actual or allocated cost, or percentage of revenues. The costs of
such services are believed to be competitive with charges for similar services
provided by unrelated management companies. Fees charged by these affiliates
totaled $600,677, $689,131, and $826,641 in 2003, 2002, and 2001, respectively.

In connection with the mortgage financing of certain properties, the respective
lenders required the Registrant to place the assets and liabilities of these
properties into single asset limited partnerships or land trusts which hold
title to these properties. A trust company affiliated with the General Partner
holds the general partner interest in each single asset limited partnership as
trustee for the Registrant. An affiliate of the General Partner is also the
trustee of the land trust. For its services, the affiliate is paid an annual
fee, which aggregated $25,824, $47,580, and $84,645 in 2003, 2002, 2001,
respectively, and is based upon the trust company's standard rate schedule.

Reference is made to Items 10 and 11, and Notes 2 and 9 in the consolidated
financial statements.


<PAGE>22
                                    PART IV
                                    -------

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
         --------------------------------------

1.   Audit Fees. The aggregate fees billed for professional services rendered by
     the principal accountant for the audit of the Partnership's annual
     financial statements and review of financial statements included in the
     Partnership's Form 10-Q or services that are normally provided by the
     accountant in connection with statutory and regulatory filings or
     engagements for those fiscal years were approximately $150,000 and $129,500
     for the years ended December 31, 2003 and 2002, respectively.

2.   Audit-Related Fees. No fees were billed by the principal accountant during
     the years ended December 31, 2003 and 2002 for assurance and related
     services that are reasonably related to the performance of the audit or
     review of the Partnership's financial statements that are not reported
     under subparagraph (1) of this section.

3.   Tax Fees. The aggregate fees billed for professional services rendered by
     the principal accountant for tax compliance, tax advice, and tax planning
     were $20,000 and $20,000 for the years ended December 31, 2003 and 2002,
     respectively. This work included reviewing year-end tax projections as well
     as the Registrant's tax returns prepared by the Registrant for the
     respective years.

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

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

6.   Not Applicable.

7.   Not Applicable.

8.   Not Applicable.



ITEM 15. EXHIBITS, FINANCIAL STATEMENT
         -----------------------------
         SCHEDULES AND REPORTS ON FORM 8-K
         ---------------------------------

(a)  (1) Financial statements - The Registrant's 2003 Annual Audited
         Consolidated Financial Statements are included in this annual
         report on Form 10-K.

     (2) Financial statement schedules - See Index to Consolidated Financial
         Statement Schedules on page 27. All other financial statement schedules
         are inapplicable or the required subject matter is contained in the
         consolidated financial statements or notes thereto.


 (b) Exhibits Incorporated by Reference -

                             Incorporated by
Description                  Reference to
-----------                  ---------------
Agreement of                 Exhibit A to Registration Statement
 Limited Partnership         on Form S-11 as filed with the
                             Securities and Exchange Commission on May 16, 1985

<PAGE>23


SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                          SB PARTNERS
                                          -----------

                                      By: SB PARTNERS REAL ESTATE CORPORATION
                                          -----------------------
                                          GENERAL PARTNER


April 14, 2004                            /s/ John H. Streicker
                                          --------------------------
                                      By: John H. Streicker
                                          President, Chief Executive Officer



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



Signature                             Position                       Date
---------                             --------                       ----

/s/ John H. Streicker          Chief Executive Officer
---------------------                and Director                April 14, 2004
John H. Streicker



/s/ Elizabeth B. Longo         Chief Financial Officer
----------------------      (Principal Financial Officer)        April 14, 2004
Elizabeth B. Longo



/s/ George N. Tietjen              Vice President
-------------------------   (Principal Accounting Officer)       April 14, 2004
George N. Tietjen III



<PAGE>24

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


I, John H. Streicker, certify that:

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

      (2) Based on my knowledge, this annual report does not contain any untrue
          statement of material fact or omit to state a material fact necessary
          to make the statements made, in light of the circumstances under which
          such statements were made, not misleading with respect to the year
          covered by this annual report;

      (3) Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

      (4) The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rule 13a-15(e)() and 15d-15(e)()) and internal
          control over financial reporting (as defined in Exchange Act Rule
          13a-15(f) and 15d-15(f)) for the registrant and have:

          (a)  designed such disclosure controls and procedures, or cause such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made
               known to us by others within those entities, particularly during
               the period in which this annual report is being prepared;

          (b)  designed such internal control over financial reporting, or cause
               such internal control over financial reporting to be designed
               under our supervision, to provide reasonable assurance regarding
               the reliability of financial reporting and the preparation of
               financial statements for external purposes in accordance with
               generally accepted accounting principles;

          (c)  evaluated the effectiveness of the registrant's disclosure
               controls and procedures and presented in this report our
               conclusions about the effectiveness of the disclosure controls
               and procedures, as of the end of the period covered by this
               annual report based on such evaluation; and

          (d)  disclosed in this report any change in the registrant's internal
               control over financial reporting that occurred during the
               registrant's most recent fiscal quarter (the registrant's fourth
               fiscal quarter in the case of an annual report) that has
               materially affected, or is reasonably likely to materially
               affect, the registrant's internal control over financing
               reporting; and

      (5) The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation of internal control over financial
          reporting, to the registrant's auditors and the audit committee of the
          Registrant's board of directors (or persons performing the equivalent
          functions):

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

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




Date: April 14, 2004                                /s/ John H. Striecker
                                                    ---------------------
                                                    John H. Streicker
                                                    President

<PAGE>25

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

I, Elizabeth B. Longo, certify that:

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

      (2) Based on my knowledge, this annual report does not contain any untrue
          statement of material fact or omit to state a material fact necessary
          to make the statements made, in light of the circumstances under which
          such statements were made, not misleading with respect to the year
          covered by this annual report;

      (3) Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

      (4) The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rule 13a-15(e)(4) and 15d-15(e)(4)) and
          internal control over financial reporting (as defined in Exchange Act
          Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

          (a)  designed such disclosure controls and procedures, or cause such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made
               known to us by others within those entities, particularly during
               the period in which this annual report is being prepared;

          (b)  disclosed in this report any change in the registrant's internal
               control over financial reporting that occurred during the
               Registrant's most recent fiscal quarter (the registrant's fourth
               fiscal quarter in the case of an annual report) that has
               materially affected, or is reasonably likely to materially
               affect, the registrant's internal control over financing
               reporting;

          (c)  evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date wihin 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          (d)  disclosed in this report any change in the registrant's internal
               control over financial reporting that occurred during the
               Registrant's most recent fiscal quarter (the registrant's fourth
               fiscal quarter in the case of an annual report) that has
               materially affected, or is reasonably likely to materially
               affect, the registrant's internal control over financing
               reporting;

      (5) The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation of internal control over financial
          reporting, to the Registrant's auditors and the audit committee of the
          Registrant's board of directors (or persons performing the equivalent
          functions):

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

          (b)  any fraud, whether or not material, that involves management or
               other employees who have a significant role in the Registrant's
               internal control over financial reporting.



Date: April 14, 2004                                /s/ Elizabeth B. Longo
                                                    ----------------------
                                                    Elizabeth B. Longo
                                                    Chief Financial Officer


<PAGE>26

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

I, John H. Streicker, certify that:
      (1) the Annual Report on Form 10-K of the registrant for the annual
          period ended December 31, 2003, as filed with the Securities and
          Exchange Commission (the "Report"), fully complies with the
          requirements of Section 13(a) or 15(d) of the Securities Exchange Act
          of 1934;

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



Date: April 14, 2004                                /s/ John H. Streicker
                                                    ---------------------
                                                    John H. Streicker
                                                    President



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

I, Elizabeth B. Longo, certify that:

      (1) the Annual Report on Form 10-K of the registrant for the annual
          period ended December 31, 2003, as filed with the Securities and
          Exchange Commission (the "Report"), fully complies with the
          requirements of Section 13(a) or 15(d) of the Securities Exchange Act
          of 1934;

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



Date: April 14, 2004                                /s/ Elizabeth B. Longo
                                                    ----------------------
                                                    Elizabeth B. Longo
                                                    Chief Financial Officer


<PAGE>27


                                   SB PARTNERS

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

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                   -------------------------------------------

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                 ----------------------------------------------
                    SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE
                    -----------------------------------------

Independent Auditors' Report - Deloitte & Touche LLP..........................28

Report of Independent Public Accountants - Arthur Andersen LLP................29

Balance Sheets as of December 31, 2003 and 2002...............................30

Statements of Operations
       for the years ended December 31, 2003, 2002 and 2001...................31

Statements of Changes in Partners' Capital
       for the years ended December 31, 2003, 2002 and 2001...................32

Statements of Cash Flows
       for the years ended December 31, 2003, 2002 and 2001...................33

Notes to Financial Statements............................................34 - 40

Supplemental Financial Statement Schedule:

Schedule III -- Real Estate and Accumulated Depreciation
       December 31, 2003.................................................41 - 42


<PAGE>28
                         INDEPENDENT AUDITORS' REPORT


To the Partners of SB Partners:


       We have audited the accompanying consolidated balance sheets of SB
Partners and subsidiaries (collectively, the "Partnership") as of December 31,
2003 and 2002, and the related consolidated statements of operations, changes in
partners' capital and cash flows for the years then ended. Our audits also
included the financial statement schedules listed in the foregoing Table of
Contents. These financial statements and financial statement schedules are the
responsibility of the Partnership's general partner. Our responsibility is to
express an opinion on these financial statements based on our audits. The
consolidated financial statements and financial statement schedules of the
Partnership for the year ended December 31, 2001 was audited by other auditors
who have ceased operations. Those auditors expressed an unqualified opinion on
that consolidated financial statement and financial statement schedules in their
report dated January 30, 2002.

       We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the general partner, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

       In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the SB
Partners and subsidiaries as of December 31, 2003 and 2002, and the results of
their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedules for 2003 and 2002, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.




/s/ Deloitte & Touche LLP


New York, New York
March 25, 2004


<PAGE>29


The following audit report of Arthur Andersen LLP ("Arthur Andersen") is a copy
of the original report dated January 30, 2002 previously issued by Arthur
Andersen in connection with the audit of the Partnership's consolidated
financial statements included in the Partnership's annual report on Form 10-K
for the year ended December 31, 2001. This audit report has not been reissued by
Arthur Andersen as they have ceased operations. The Partnership is including
this copy of the Arthur Andersen audit report pursuant to Rule 2-02(e) of
regulation S-X under the Securities Act of 1933, as amended.


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of SB Partners:

       We have audited the accompanying consolidated balance sheets of SB
Partners (a New York limited partnership) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of operations, changes in
partners' capital and cash flows for each of the three years in the period ended
December 31, 2001. These financial statements and the schedule referred to below
are the responsibility of the general partner. Our responsibility is to express
an opinion on these financial statements based on our audits.

       We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the general partner, as well as evaluating the overall
financial statement presentation. We believe that our audits provides a
reasonable basis for our opinion.

       In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of SB Partners and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.

       Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for the purpose of complying with Securities
and Exchange Commission rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.


/s/ Arthur Andersen LLP

New York, New York
January 30, 2002


<PAGE>30

<TABLE>


                                        SB PARTNERS
                                        -----------
                                CONSOLIDATED BALANCE SHEETS
                                ---------------------------
<CAPTION>                                                   December 31,
                                                         2003           2002
                                                     ---------------------------
<S>                                                 <C>             <C>
ASSETS:
  Investments -
    Real estate, at cost
      Land                                           $ 5,780,842     $ 5,780,842
      Buildings, furnishings and improvements         56,233,849      55,557,251
      Less - accumulated depreciation                 (8,777,534)     (7,166,894)
                                                     -----------     -----------
                                                      53,237,157      54,171,199

  Investment in joint venture                          3,100,596       3,385,182
                                                     -----------     -----------
                                                      56,337,753      57,556,381
  Other assets -
    Cash and cash equivalents                            186,390       1,693,069
    Cash held by lenders in escrow                       667,561         590,631
    Other                                                619,006         668,275
                                                     -----------     -----------
          Total assets                               $57,810,710     $60,508,356
                                                     ===========     ===========
LIABILITIES:
  Mortgage notes payable                             $32,773,875     $30,239,203
  Accounts payable and accrued expenses                  857,312         712,056
  Tenant security deposits                               272,302         245,221
                                                     -----------     -----------
          Total liabilities                           33,903,489      31,196,480
                                                     -----------     -----------

PARTNERS' CAPITAL:
  Units of partnership interest without par value;
     Limited partners - 7,753 units                   23,922,573      29,326,531
     General partner - 1 unit                            (15,352)        (14,655)
                                                     -----------     -----------
          Total partners' capital                     23,907,221      29,311,876
                                                     -----------     -----------
          Total liabilities and partners' capital    $57,810,710     $60,508,356
                                                     ===========     ===========
<FN>

                   See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>31

<TABLE>

                                             SB PARTNERS
                                             -----------
                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                -------------------------------------
<CAPTION>
                                                     For The Years Ended December 31,
                                                     2003           2002          2001
                                                 -----------     -----------  -----------
<S>                                             <C>             <C>          <C>
Revenues:
   Rental income                                 $ 7,459,419     $ 9,254,574  $12,267,295
   Other rental income                               720,208         576,112      585,077
   Interest on short-term investments                  8,282          40,227       35,866
                                                 -----------     -----------  -----------
     Total revenues                                8,187,909       9,870,913   12,888,238
                                                 -----------     -----------  -----------
Expenses:
   Real estate operating expenses                  3,742,091       4,434,546    5,109,704
   Interest on mortgage notes payable              2,175,439       3,900,873    3,705,511
   Depreciation and amortization                   1,677,294       1,679,854    2,150,121
   Real estate taxes                                 978,557         945,169    1,127,689
   Management fees                                   711,984         794,498      826,453
   Other                                             191,457         185,700      277,642
                                                 -----------     -----------  -----------
     Total expenses                                9,476,822      11,940,640   13,197,120
                                                 -----------     -----------  -----------
Loss from operations                              (1,288,913)     (2,069,727)    (308,882)

Equity in net loss of joint venture                 (238,992)        (92,798)           0

Net gain on sale of investment in real estate
 property, including $379,725 net gain
   on sale of water rights                                 0      17,480,880            0
                                                 -----------     -----------  -----------
Net income (loss)                                 (1,527,905)     15,318,355     (308,882)

   Income (loss) allocated to general partner           (197)          1,976          (40)
                                                 -----------     -----------  -----------
   Income (loss) allocated to limited partners   $(1,527,708)    $15,316,379  $  (308,842)
                                                 ===========     ===========  ===========

Net Income (Loss)
 Per Unit of Limited Partnership Interest        $      (197)    $     1,976  $       (40)
(Basic and Diluted)                              ===========     ===========  ===========


  Weighted Average Number of Units of Limited
         Partnership Interest Outstanding              7,753           7,753        7,753
                                                 ===========     ===========  ===========
<FN>

                        See notes to consolidated financial statements.

</FN>
</TABLE>


<PAGE>32

<TABLE>

                                                        SB PARTNERS
                                                        -----------
                                  CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                                  -------------------------------------------------------
                                   For The Years Ended December 31, 2003, 2002, and 2001
                                   -----------------------------------------------------

Limited Partners:
<CAPTION>

                                                     Units of
                                                    Partnership
                                                     Interest                  Cumulative          Accumulated
                                              ------------------------            Cash              Earnings
                                              Number         Amount           Distributions         (Losses)             Total
                                              ------      ------------        -------------       ------------        -----------
<S>                                         <C>          <C>                 <C>                  <C>                <C>
Balance, January 1, 2001                      7,753       $119,968,973        $ (99,395,111)       $(4,704,368)       $15,869,494
    Cash distributions                            0                  0             (775,250)                 0           (775,250)
    Net loss for the year                         0                  0                    0           (308,842)          (308,842)
                                              -----       ------------        -------------        -----------        -----------
Balance, December 31, 2001                    7,753        119,968,973         (100,170,361)        (5,013,210)        14,785,402
    Cash distributions                            0                  0             (775,250)                 0           (775,250)
    Net income for the year                       0                  0                    0         15,316,379         15,316,379
                                              -----       ------------        -------------        -----------        -----------
Balance, December 31, 2002                    7,753        119,968,973         (100,945,611)        10,303,169         29,326,531
    Cash distributions                            0                  0           (3,876,250)                 0         (3,876,250)
    Net loss for the year                         0                  0                    0         (1,527,708)        (1,527,708)
                                              -----       ------------        -------------        -----------        -----------
Balance, December 31, 2003                    7,753       $119,968,973        $(104,821,861)       $ 8,775,461        $23,922,573
                                              =====       ============        =============        ===========        ===========


General Partner:
<CAPTION>

                                                     Units of
                                                    Partnership
                                                     Interest                  Cumulative          Accumulated
                                              ------------------------            Cash              Earnings
                                              Number            Amount        Distributions         (Losses)             Total
                                              ------           -------        -------------       ------------        -----------
<S>                                          <C>         <C>                 <C>                  <C>                <C>
Balance, January 1, 2001                          1            $10,000             $(24,774)           $(1,617)          $(16,391)
    Cash distributions                            0                  0                 (100)                 0               (100)
    Net loss for the year                         0                  0                    0                (40)               (40)
                                               ----            -------             --------            -------           --------
Balance, December 31, 2001                        1             10,000              (24,874)            (1,657)           (16,531)
    Cash distributions                            0                  0                 (100)                 0               (100)
    Net income for the year                       0                  0                    0              1,976              1,976
                                               ----            -------             --------            -------           --------
Balance, December 31, 2002                        1             10,000              (24,974)               319            (14,655)
    Cash distributions                            0                  0                 (500)                 0               (500)
    Net loss for the year                         0                  0                    0               (197)              (197)
                                               ----            -------             --------            -------           --------
Balance, December 31, 2003                        1            $10,000             $(25,474)           $   122           $(15,352)
                                               ====            =======             ========            =======           ========

<FN>


                                               See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>33

<TABLE>
                                                 SB PARTNERS
                                      (A New York Limited Partnership)
                                       ------------------------------
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    ------------------------------------
<CAPTION>
                                                                   For the years Ended December 31,
                                                              -----------------------------------------
                                                                  2003           2002           2001
                                                              -----------    ------------    ----------
<S>                                                          <C>            <C>             <C>
Cash Flows From Operating Activities:
 Net income (loss)                                            $(1,527,905)   $ 15,318,355    $ (308,882)
  Adjustments to reconcile net income (loss)
   to net cash provided by operating activities:
    Net gain on sale of investment in real estate property,
         including net gain on sale of water rights                     0     (17,480,880)            0
    Equity in net loss of joint venture                           238,992          92,798             0
    Distributions received from joint venture                      50,000               0             0
    Depreciation and amortization                               1,677,294       1,679,854     2,150,121
    Net (increase) decrease in operating assets                   (94,315)        788,992      (280,531)
    Net increase (decrease) in operating liabilities              172,337        (132,509)       65,153
                                                              -----------    ------------    ----------
         Net cash provided by operating activities                516,403         266,610     1,625,861
                                                              -----------    ------------    ----------

Cash Flows From Investing Activities:
     Proceeds from sale of investment in
       real estate property, including sale of water rights             0      31,389,975             0
     Acquisition of real estate property                                0      (4,713,385)            0
     Investment in joint venture                                   (4,406)     (3,477,980)            0
     Capital additions to real estate owned                      (676,598)       (723,782)     (879,547)
                                                              -----------    ------------    ----------
         Net cash provided by (used in) investing activities     (681,004)     22,474,828      (879,547)
                                                              -----------    ------------    ----------
Cash Flows From Financing Activities:
     Retirement of mortgage note payable                                0     (19,591,390)            0
     Repayments of borrowings under revolving
        credit facility                                                 0      (4,500,000)            0
     Borrowings under revolving credit facility                 2,950,000       3,750,000     1,000,000
     Principal payments on mortgage notes payable                (415,328)       (565,658)     (767,035)
     Distributions paid to partners                            (3,876,750)       (775,350)     (775,350)
     Increase in deferred financing costs                               0               0       (44,589)
                                                              -----------    ------------    ----------
         Net cash used in financing activities                 (1,342,078)    (21,682,398)     (586,974)
                                                              -----------    ------------    ----------
Net increase (decrease) in cash and cash equivalents           (1,506,679)      1,059,040       159,340
   Cash and cash equivalents at beginning of year               1,693,069         634,029       474,689
                                                              -----------    ------------    ----------
   Cash and cash equivalents at end of year                   $   186,390    $  1,693,069    $  634,029
                                                              ===========    ============    ==========

Supplemental disclosure of cash flow information:
    Cash paid during the year for interest                    $ 2,175,439    $  3,963,237    $3,697,390
                                                              ===========    ============    ==========
<FN>


                                     See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>34

SB PARTNERS
Notes to Consolidated Financial Statements

(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
         SB Partners, a New York limited partnership, and its subsidiaries
         (collectively, the "Partnership"), have been engaged since April 1971
         in acquiring, operating, and holding for investment a varying portfolio
         of real estate interests. SB Partners Real Estate Corporation (the
         "General Partner") serves as the general partner of the Partnership.
         The significant accounting and financial reporting policies of the
         Partnership are as follows:
         (a) The accompanying consolidated financial statements include the
             accounts of SB Partners and its subsidiaries.  All significant
             intercompany accounts and transactions have been eliminated.  The
             consolidated financial statements are prepared using the accrual
             basis of accounting in accordance with accounting principles
             generally accepted in the United States of America.  Revenues are
             recognized as earned and expenses are recognized as incurred. The
             preparation of financial statements in conformity with such
             principles requires management to make estimates and assumptions
             that affect the reported amounts of assets and liabilities and
             disclosure of contingent assets and liabilities at the date of
             the financial statements and the reported amounts of revenues and
             expenses during the reporting period.  Actual results could differ
             from those estimates.
         (b) In connection with the mortgage financing on certain of its
             properties, the Partnership placed the assets and liabilities of
             the properties into single asset limited partnerships, limited
             liability companies or land trusts which hold title to the
             properties. The Partnership has effective control over such
             entities and holds 100% of the beneficial interest. Accordingly,
             the financial statements of these subsidiaries are consolidated
             with those of the Partnership.
         (c) Depreciation of buildings, furnishings and improvements is computed
             using the straight-line method of depreciation, based upon the
             estimated useful lives of the related properties, as follows:
                           Buildings and improvements     5 to 40 years
                           Furnishings                    5 to 7 years
             Investments in real estate are carried at historical cost and
             reviewed periodically for impairment. Expenditures for
             maintenance and repairs are expensed as incurred. Expenditures
             for improvements, renewals and betterments, which increase the
             useful life of the real estate, are capitalized. Upon retirement
             or sale of property, the related cost and accumulated
             depreciation are removed from the accounts. Amortization of
             deferred financing and refinancing costs is computed by
             amortizing the cost on a straight-line basis over the terms of
             the related mortgage notes.
         (d) Real estate properties are regularly evaluated on a property by
             property basis to determine if it is appropriate to write down
             carrying values to recognize an impairment of value. Impairment
             is determined by calculating the sum of the estimated undiscounted
             future cash flows including the projected undiscounted future net
             proceeds from the sale of the property.  In the event such sum is
             less than the net carrying value of the property, the property will
             be written down to estimated fair value less costs to sell. Based
             on the Partnership's long-term hold strategy for its investments in
             real estate, the carrying value of its properties at
             December 31, 2003 is estimated to be fully realizable.
         (e) Real estate held for sale is carried at the lower of cost or fair
             value less selling costs.  Upon determination that a property is
             held for sale, depreciation of such property is no longer charged
             to the books.
         (f) For financial reporting purposes, the Partnership considers all
             highly liquid, short-term investments with maturities of three
             months or less when purchased to be cash equivalents.
         (g) The Partnership accounts for its investment in joint venture under
             the equity method of accounting as the Partnership exercises
             significant influence, but not control, over the joint venture.

<PAGE>35

         (h) Tenant leases at the residential properties generally have terms of
             one year or less. Rental income at the residential properties is
             recognized when earned pursuant to the terms of the leases with
             tenants.  Tenant leases at the industrial flex property have terms
             that exceed one year.  Rental income at the industrial flex
             property is recognized on a straight-line basis over the terms of
             the leases.
         (i) Gains on sales of investments in real estate are recognized in
             accordance with accounting principles generally accepted in the
             United States of America applicable to sales of real estate which
             require minimum levels of initial and continuing investment by the
             purchaser, and certain other tests be met, prior to the full
             recognition of profit at the time of the sale.  When the tests are
             not met, gains on sales are recognized on either the installment or
             cost recovery methods.
         (j) Each partner is individually responsible for reporting its share of
             the Partnership's taxable income or loss. Accordingly, no provision
             has been made in the accompanying consolidated financial statements
             for Federal, state or local income taxes.
         (k) Net income (loss) per unit of partnership interest has been
             computed based on the weighted average number of units of
             partnership interest outstanding during each year. There were no
             potentially dilutive securities outstanding during each year.
         (l) The Partnership is engaged in only one industry segment, real
             estate investment, and therefore information regarding industry
             segments is not applicable and is not included in these
             consolidated financial statements.
         (m) On January 1, 2002, the Partnership adopted Statement of Financial
             Accounting Standards ("SFAS") No. 144, "Accounting for the
             Impairment or Disposal of Long-Lived Assets" (the "Statement").
             The Statement requires the operations related to properties that
             have been sold or properties that are intended to be sold be
             presented as discontinued operations in the statements of
             operations for all periods presented, and that properties intended
             to be sold be designated as "held for sale" on the balance sheet.
             However, long-lived assets classified as held for sale prior to the
             initial application of the Statement are required to continue to be
             accounted for in accordance with the prior pronouncement applicable
             for that disposal.  As such, Meadowwood Apartments, which was held
             for sale in 2001, is reflected in these consolidated financial
             statements in accordance with SFAS No. 121, and is not shown as
             discontinued operations.
         (n) In April 2002, the Financial Accounting Standards Board ("FASB")
             issued SFAS No. 145, "Rescission of SFAS No. 4, 22 and 64,
             Amendment of SFAS No. 13 and Technical Corrections". SFAS No. 145,
             among other things, rescinds SFAS No. 4, "Reporting Gains and
             Losses from Extinguishment of Debt", and accordingly, the reporting
             of gains or losses from the early extinguishment of debt as
             extraordinary items will only be required if they meet the specific
             criteria for extraordinary items included in Accounting Principles
             Board Opinion No. 30, "Reporting the Results of Operations".
             Although the rescission of SFAS No. 4 was mandatory as of
             January 1, 2003, management elected to adopt SFAS No. 145 in 2002
             (See Note 4).
         (o) In November 2002, the FASB issued Interpretation No. 45,
             "Guarantor's Accounting and Disclosure Requirements for Guarantees,
             Including Indirect Guarantees of Indebtedness of Others". In
             May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
             Financial Instruments with Characteristics of Both Liabilities and
             Equity". The adoption of these accounting pronouncements did not
             have a material affect on the Partnership's financial position or
             results of operations. In January of 2003, the FASB issued
             Interpretation No. 46, Consolidation of Variable Interest Entities,
             which was amended by FIN 46 (R) in December 2003.  The Partnership
             does not believe the adoption of FIN 46 (R) will have a material
             affect on its financial position or results of operations.
         (p) Certain prior year amounts have been reclassified to conform with
             the current year presentation.

<PAGE>36

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

         For these services, the General Partner receives a management fee equal
         to 2% of the average amount of capital invested in real estate plus
         cumulative mortgage amortization payments, and 0.5% of capital not
         invested in real estate, as defined in the partnership agreement.  The
         management fee amounted to $711,984, $794,498, and $826,453 for the
         years ended December 31, 2003, 2002, and 2001, respectively.  In
         addition, the General Partner is entitled to 25% of cash distributions
         in excess of the annual distribution preference, as defined in the
         partnership agreement.  No such amounts were due for the years ended
         December 31, 2003, 2002 or 2001.


(3) INVESTMENTS IN REAL ESTATE
         As of December 31, 2003 and 2002, the Partnership owned apartment
         projects in St. Louis, Missouri; Greenville, South Carolina; and
         Holiday and Orlando, Florida; as well as an industrial flex property in
         Maple Grove, Minnesota and 13.9 acres of land in Holiday, Florida. The
         following is the cost basis and accumulated depreciation of the real
         estate investments owned by the Partnership as of December 31, 2003 and
         2002:

<TABLE>
<CAPTION>
                                                                       Real Estate at Cost
                         No.of    Year of                           -------------------------
Type                     Prop.  Acquisition   Description           12/31/03         12/31/02
----                     -----  -----------  -------------          --------         --------
<S>                       <C>    <C>         <C>                 <C>              <C>
Residential properties     4      1991-99     1,042 Apts.         $57,208,641      $56,539,616
Industrial flex property   1      2002        60,345 sf             4,761,663        4,754,090
Undeveloped land           1      1978        13.9 Acres               44,387           44,387
                                                                  -----------      -----------
Total cost                                                         62,014,691       61,338,093
Less: accumulated depreciation                                     (8,777,534)      (7,166,894)
                                                                  -----------      -----------
Net book value                                                    $53,237,157      $54,171,199
                                                                  ===========      ===========
</TABLE>


<PAGE>37

(4) REAL ESTATE TRANSACTIONS
         In February 2002, the Partnership sold the water rights at Meadowwood
         Apartments for $389,725.  As there was no identifiable cost basis for
         the rights, the receipt, net of costs incurred in the transaction, was
         recognized as income and is a component of gain on sale of investment
         in real estate property on the accompanying consolidated statements of
         operations.

         On April 30, 2002, the Partnership purchased a 75% non-controlling
         interest in a partnership that owns Waterview Apartments located in
         West Chester, Pennsylvania. The Partnership paid approximately
         $3,270,000 in cash for this non-controlling interest.  (See also
         Footnote 5.)

         On May 9, 2002, the Partnership sold Meadowwood Apartments in Reno,
         Nevada for $31,350,000 in an all cash transaction.  The proceeds from
         the sale were used, in part, to retire the mortgage note of
         approximately $19,600,000 that had been secured by the property. In
         accordance with SFAS No. 145, the Partnership included the yield
         maintenance payment on the mortgage note, approximately $1,056,000, in
         interest expense in the consolidated statement of operations for the
         year ended December 31, 2002.  The sale of Meadowwood Apartments
         resulted in a net gain for financial reporting purposes of
         approximately $17,100,000.

         On June 12, 2002, the Partnership purchased Eagle Lake Business
         Center IV in Maple Grove, Minnesota for approximately $4,700,000 in an
         all cash transaction.  The property contains approximately
         60,000 square feet of industrial flex space.

(5)      INVESTMENT IN JOINT VENTURE
         On April 30, 2002, the Partnership purchased a 75% non-controlling
         interest in a partnership that owns Waterview Apartments located in
         West Chester, Pennsylvania.  The Partnership paid approximately
         $3,270,000 in cash for this non-controlling interest.  The purchase
         price reflects an agreed upon value of $18,500,000 for the apartment
         property, net of a non-recourse first mortgage loan of approximately
         $14,230,000 and certain related assets and liabilities. Waterview
         Apartments comprises 203 apartment units and 6,000 square feet of
         commercial space.

         The following are the condensed financial statements (000's omitted) of
         the joint venture as of and for the year ended December 31, 2003 and as
         of and for the period from April 30, 2002 (date of purchase) through
         December 31, 2002:

                                      BALANCE SHEETS
                                                         2003          2002
                                                         ----          ----
            Investment in real estate, net             $ 17,826      $ 18,235
            Current assets                                  521           445
            Mortgage note payable                       (14,012)      (14,145)
            Current liabilities                            (418)         (281)
                                                       --------      --------
            Venturers' capital                         $  3,917      $  4,254
                                                       ========      ========

                                 STATEMENTS OF OPERATIONS

            Rent and other income                      $  2,825      $  1,992
            Real estate operating expenses,
                before depreciation and amortization     (2,658)       (1,804)
            Depreciation and amortization                  (485)         (314)
                                                       --------      --------
            Net loss                                   $   (318)     $   (126)
                                                       ========      ========

<PAGE>38

(6) MORTGAGE NOTES PAYABLE
       Mortgage notes payable consist of the following non-recourse first liens:
<TABLE>
<CAPTION>
                                                                               Net Carrying Amount
                                            Annual                                 December 31,
                    Interest  Maturity    Installment     Amount Due      ----------------------------
Property              Rate       Date     Payments(a)     at Maturity         2003             2002
------------------------------------------------------------------------------------------------------
<S>                  <C>        <C>    <C>               <C>             <C>              <C>
Halton Place(b)       3.390%     09/05  Interest Only     $ 3,200,000     $ 3,200,000      $   250,000

Holiday Park          6.895%     02/08        300,169       3,277,785       3,526,935        3,581,850

Cypress Key           6.605%     01/09      1,322,707      14,772,418      16,167,261       16,413,232

Le Coeur du Monde     7.805%     10/09        890,447       9,075,763       9,879,679        9,994,121
                                                                          -----------      -----------
                                                                          $32,773,875      $30,239,203
                                                                          ===========      ===========

<FN>
(a) Annual installment payments include principal and interest. Scheduled
principal payments on mortgage notes payable are $445,243 for 2004; $3,677,325
for 2005; $511,732 for 2006; $548,635 for 2007; $3,746,721 for 2008 and
$23,844,219 thereafter.
(b) On March 1, 2001, the Partnership entered into a revolving credit facility
agreement with a bank in the amount of $7,500,000 which is secured by Halton
Place Apartments. The credit facility was for a term of two years, which has
been extended to September 1, 2005. Borrowings bear interest at LIBOR plus
1.95%. The agreement requires the Partnership to maintain a ratio of NOI, as
defined, to actual debt service, as defined, of 1.2 to 1. As of
December 31, 2003, the Partnership is in compliance with the covenant. In
connection with this credit facility, the Partnership is subject to market risk
relating to potential future changes in interest rates.
</FN>
</TABLE>


(7)      QUARTERLY FINANCIAL INFORMATION - UNAUDITED
<TABLE>
<CAPTION>
                                                  Net Income         Earnings
                                    Revenues         (Loss)           Per Unit
                                   ----------     -----------        ---------
<S>                               <C>            <C>               <C>
Year Ended December 31, 2003
----------------------------
First Quarter                      $2,070,943     $  (346,829)      $  (44.73)
Second Quarter                      1,998,333        (401,974)         (51.84)
Third Quarter                       2,080,358        (340,967)         (43.98)
Fourth Quarter                      2,038,275        (438,135)         (56.51)

Year Ended December 31, 2002
----------------------------
First Quarter                      $3,225,698      $   441,415       $   56.93
Second Quarter                      2,508,351       15,670,352        2,021.07
Third Quarter                       2,110,526         (222,868)         (28.74)
Fourth Quarter                      2,026,338         (570,544)         (73.59)

<FN>
Net income in the second quarter of 2002 includes a $17,100,000 gain on sale of
Meadowwood Apartments and a $1,056,000 yield maintenance payment required upon
retirement of the associated mortgage note payable.
</FN>
</TABLE>


<PAGE>39

(8) FEDERAL INCOME TAX INFORMATION
         A reconciliation of net income (loss) for financial reporting purposes
         to net income (loss) for Federal income tax reporting purposes is as
         follows:
<TABLE>
<CAPTION>
                                                                     For the Years Ended December 31,
                                                                    2003          2002          2001
                                                                -----------    -----------    ---------
<S>                                                            <C>            <C>            <C>
Net income (loss) for financial reporting purposes              $(1,527,905)   $15,318,355    $(308,882)
Adjustment to net gain on sale of investment in real estate
   property to reflect differences between tax and financial
   reporting bases of assets and liabilities sold                         0      6,837,298            0
Difference between tax and financial statement equity in net
   loss of joint venture                                           (175,056)         1,113            0
Difference between tax and financial statement depreciation         (70,510)      (179,218)     308,244
                                                                -----------    -----------    ---------
Net income (loss) for Federal income tax reporting purposes     $(1,773,471)   $21,977,548    $    (638)
                                                                ===========    ===========    =========

Net ordinary loss
  for Federal income tax reporting purposes:                    $(1,773,471)   $(2,340,630)   $    (638)
Net capital (Sec. 1231) gain
  for Federal income tax reporting purposes:                              0     24,318,178            0
                                                                -----------    -----------    ---------
Net income (loss) for Federal income tax reporting purposes     $(1,773,471)   $21,977,548    $    (638)
                                                                ===========    ===========    =========
Weighted average number of units of limited partnership
  interest outstanding                                                7,753          7,753        7,753
                                                                ===========    ===========    =========
</TABLE>

         As of December 31, 2003 and 2002, the tax bases of the Partnership's
         assets and liabilities were approximately $59,953,099 and $62,394,000
         of assets, and $34,417,097 and $31,196,000 of liabilities,
         respectively.


(9) MANAGEMENT SERVICES
         Certain affiliates of the General Partner oversee the management and
         operation of various real estate properties, including those owned by
         the Partnership. Services performed by affiliates are billed at actual
         or allocated cost, percentage of revenues or net equity. For the years
         ended December 31, 2003, 2002 and 2001 such billings to the partnership
         amounted to $600,677, $689,131, and $826,641, respectively, and are
         included in real estate operating expenses.

         In connection with the mortgage financing of certain properties, the
         respective lenders required the Registrant to place the assets and
         liabilities of these properties into single asset limited partnerships
         which hold title to these properties. A trust company affiliated with
         the General Partner holds the general partner interest in each single
         asset limited partnership as trustee for the Registrant. For its
         services, the affiliate is paid an annual fee, which aggregated
         $25,824, $47,580, and $84,645 in 2003, 2002, 2001, respectively, and is
         based upon the trust company's standard rate schedule.


<PAGE>40


(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
         The Partnership's financial instruments include cash, cash equivalents
         and mortgage notes payable. The carrying amount of the cash and cash
         equivalents are reasonable estimates of fair value. Mortgage notes
         payable have been valued by discounting future payments required under
         the terms of the obligations at rates currently available to the
         Partnership for debt with similar maturities, terms and underlying
         collateral. The fair value of the mortgage notes payable is estimated
         to be $31,542,142 and $31,519,331 at December 31, 2003 and 2002,
         respectively.


(11) COMMITMENTS AND CONTINGENCIES
         The Partnership is a party to certain actions directly arising from its
         normal business operations. While the ultimate outcome is not presently
         determinable with certainty, the Partnership believes that the
         resolution of these matters will not have a material adverse effect on
         its financial position or results of operations.

         The Partnership leases its properties to tenants under operating lease
         agreements, certain of which require tenants at the industrial flex
         property to pay all or part of certain operating and other expenses of
         the property. The minimum future rentals to be received in respect of
         non-cancelable commercial operating leases with unexpired terms in
         excess of one year as of December 31, 2003 are $520,977 for 2004;
         $446,706 for 2005; $446,706 for 2006; $446,706 for 2007; and $73,167
         for 2008.


(12)     SUBSEQUENT EVENT
         On March 1, 2004, the Partnership made a distribution of $40 per unit,
         totaling $310,140, to Unitholders of record as of December 31, 2003.

<PAGE>41

<TABLE>
 SB PARTNERS
 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
 DECEMBER 31, 2003
<CAPTION>
                  Column A                     Column B                    Column C                     Column D
                                                                Initial Cost to the Registrant            Costs
                                                              -----------------------------------      Capitalized
                                                                        Buildings and                 Subsequent to
                Description                  Encumbrances      Land      Improvements     Total        Acquisition
<S>                                         <C>             <C>          <C>           <C>              <C>
MULTI FAMILY RESIDENTIAL
  Florida -
   Holiday (Holiday Park -
      including undeveloped land)            $ 3,526,935     $  458,342   $ 4,043,354   $ 4,501,696      $1,154,303
   Orlando (Cypress Key)                      16,167,261      2,260,000    20,404,725    22,664,725       1,118,000
  South Carolina -
   Greenville (Halton Place)                   3,200,000      1,260,000    11,364,343    12,624,343       1,062,200
  Missouri -
   St. Louis (Le Coeur du Monde)               9,879,679      1,332,500    12,039,635    13,372,135         755,626
                                             -----------     ----------   -----------   -----------      ----------
                                              32,773,875      5,310,842    47,852,057    53,162,899       4,090,129

INDUSTRIAL FLEX
  Minnesota -
   Maple Grove
     (Eagle Lake Business Center IV)             n/a            470,000     4,243,385     4,713,385          48,278
                                             -----------     ----------   -----------   -----------      ----------
                                             $32,773,875     $5,780,842   $52,095,442   $57,876,284      $4,138,407
                                             ===========     ==========   ===========   ===========      ==========
</TABLE>

<TABLE>
 SB PARTNERS
 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
 DECEMBER 31, 2003
<CAPTION>

                  Column A                                  Column E                      Column F
                                                              Gross
                                                         amount at which
                                                        Carried at End of
                                                        Year (Notes a & c)
                                             ----------------------------------------   Accumulated
                                                           Buildings and                Depreciation
                Description                     Land        Improvements     Total     (Notes b & d)
<S>                                         <C>            <C>           <C>            <C>
MULTI FAMILY RESIDENTIAL
  Florida -
   Holiday (Holiday Park -
      including undeveloped land)            $  458,342     $ 5,197,657   $ 5,655,999    $2,471,208
   Orlando (Cypress Key)                      2,260,000      21,522,725    23,782,725     3,035,706
  South Carolina -
   Greenville (Halton Place)                  1,260,000      12,426,543    13,686,543     1,645,102
  Missouri -
   St. Louis (Le Coeur du Monde)              1,332,500      12,795,261    14,127,761     1,451,568
                                             ----------     -----------   -----------    ----------
                                              5,310,842      51,942,186    57,253,028     8,603,584

INDUSTRIAL FLEX
  Minnesota -
   Maple Grove
     (Eagle Lake Business Center IV)            470,000       4,291,663     4,761,663       173,950
                                             ----------     -----------   -----------    ----------
                                             $5,780,842     $56,233,849   $62,014,691    $8,777,534
                                             ==========     ===========   ===========    ==========
</TABLE>

<PAGE>42

<TABLE>
 SB PARTNERS
 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
 DECEMBER 31, 2003
<CAPTION>

                  Column A                     Column G       Column H          Column I

                                                                             Life on which
                                                                            Depreciation in
                                                                            Latest Statement
                                                Date of         Date         of Operations
                Description                  Construction     Acquired        is Computed
<S>                                         <S>              <S>            <S>
MULTI FAMILY RESIDENTIAL
  Florida -
   Holiday (Holiday Park -
      including undeveloped land)             1972 - 1975     Jan 1991       7 to 30 years
   Orlando (Cypress Key)                         1988         Aug 1998       7 to 40 years
  South Carolina -
   Greenville (Halton Place)                     1986         Dec 1998       7 to 40 years
  Missouri -
   St. Louis (Le Coeur du Monde)               1988-1989      Sept 1999      7 to 40 years



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

</TABLE>

<TABLE>
     NOTES TO SCHEDULE III:
<CAPTION>
                                                                2003          2002          2001
                                                            -----------   -----------   -----------
<S>                                                        <C>           <C>           <C>
 (a) Reconciliation of amounts shown in Column E:
       Balance at beginning of year                         $61,338,093   $69,810,021   $69,572,785
       Additions -

         Acquisitions                                                 0     4,713,385             0
         Cost of improvements                                   676,598       723,782       879,547

       Deductions -
         Sales                                                        0   (13,909,095)            0
         Reclass accumulated depreciation
           of real estate asset held for sale                         0             0      (642,311)
                                                            -----------   -----------   -----------
       Balance at end of year                               $62,014,691   $61,338,093   $69,810,021
                                                            ===========   ===========   ===========

 (b) Reconciliation of amounts shown in Column F:
       Balance at beginning of year                         $ 7,166,894   $ 5,641,349   $ 4,227,425
       Additions -
         Depreciation expense for year                        1,610,640     1,525,545     2,056,235

       Deductions -
         Reclass accumulated depreciation
           of real estate asset held for sale                         0             0      (642,311)
                                                            -----------   -----------   -----------
       Balance at end of year                               $ 8,777,534   $ 7,166,894   $ 5,641,349
                                                            ===========   ===========   ===========
 (c) Aggregate cost basis for Federal
       income tax reporting purposes                        $62,208,559   $61,531,952   $87,812,859
                                                            ===========   ===========   ===========
 (d) Accumulated depreciation for Federal
       income tax reporting purposes                        $ 8,870,403   $ 7,189,253   $30,130,243
                                                            ===========   ===========   ===========
</TABLE>