LEASE EQUITY APPRECIATION FUND I LP - FORM 10-Q

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EX-32.1 - SECTION 906 CEO CERTIFICATION - LEASE EQUITY APPRECIATION FUND I LP	dex321.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - LEASE EQUITY APPRECIATION FUND I LP	dex312.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - LEASE EQUITY APPRECIATION FUND I LP	dex311.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - LEASE EQUITY APPRECIATION FUND I LP	dex322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-84730

LEASE EQUITY APPRECIATION FUND I, L.P.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

68-0492247

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

110 South Poplar Street, Suite 101, Wilmington Delaware 19801

(Address of principal executive offices)

(800) 819-5556

(Registrant’s telephone number, including area code)

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

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

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

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

There is no public market for the Registrant’s securities.

DOCUMENTS INCORPORATED BY REFERENCE

None

LEASE EQUITY APPRECIATION FUND I, L.P.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q


		PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets – March 31, 2010 and December 31, 2009 (Unaudited)	3
	Consolidated Statements of Operations – Three Months Ended March 31, 2010 and 2009 (Unaudited)	4
	Consolidated Statement of Changes in Partners’ Deficit – Three Months Ended March 31, 2010 (Unaudited)	5
	Consolidated Statements of Cash Flows – Three Months Ended March 31, 2010 and 2009 (Unaudited)	6
	Notes to Consolidated Financial Statements – March 31, 2010 (Unaudited)	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	20
ITEM 4.	Controls and Procedures	20

PART II	OTHER INFORMATION
ITEM 6.	Exhibits	21

SIGNATURES		22

PART 1. FINANCIAL INFORMATION

ITEM I

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Balance Sheets

(In thousands)

(Unaudited)


	March 31, 2010			December 31, 2009

ASSETS
Cash	$	11		$	162
Restricted cash		3,096			3,998
Accounts receivable		21			26
Investment in leases and loans, net		48,085			56,918
Deferred financing costs, net		300			367
Other assets		183			237

Total assets	$	51,696		$	61,708


LIABILITIES AND PARTNERS’ DEFICIT
Liabilities:
Bank debt	$	45,869		$	54,343
Accounts payable and accrued expenses		243			212
Other liabilities		123			205
Derivative liabilities at fair value		1,770			1,987
Due to affiliates		7,505			7,416

Total liabilities	$	55,510		$	64,163


Commitments and contingencies

Partners’ Deficit:
General partner		(168	)		(152	)
Limited partners		(1,876	)		(316	)
Accumulated other comprehensive loss		(1,770	)		(1,987	)

Total partners’ deficit		(3,814	)		(2,455	)

Total liabilities and partners’ deficit	$	51,696		$	61,708

The accompanying notes are an integral part of these consolidated financial statements.

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statements of Operations

(In thousands, except unit and per unit data)

(Unaudited)


	Three Months Ended March 31,
	2010			2009
Revenues:
Interest on equipment financings	$	1,077		$	2,098
Rental income		105			137
Gains on sales of equipment and lease dispositions, net		228			142
Other		167			172

		1,577			2,549


Expenses:
Interest expense		711			1,196
Depreciation on operating leases		86			110
Provision for credit losses		1,641			1,040
General and administrative expenses		334			393
Administrative expenses reimbursed to affiliate		210			327
Management fees to affiliate		—			293

		2,982			3,359

Net loss	$	(1,405	)	$	(810	)

Net loss allocated to limited partners	$	(1,391	)	$	(802	)


Weighted average number of limited partner units outstanding during the period		171,696			171,696

Net loss per weighted average limited partner unit	$	(8.10	)	$	(4.67	)

The accompanying notes are an integral part of these consolidated financial statements.

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statements of Changes in Partners’ Deficit

(In thousands, except unit data)

(Unaudited)


	General Partner			Limited Partners				Accumulated Other Comprehensive			Total Partners’			Comprehensive
	Amount			Units	Amount			Income (Loss)			Deficit			Income (Loss)
Balance, January 1, 2010	$	(152	)	171,696	$	(316	)	$	(1,987	)	$	(2,455	)
Cash distributions		(2	)	—		(169	)		—			(171	)
Net loss		(14	)	—		(1,391	)		—			(1,405	)	$	(1,405	)
Unrealized gain on hedging derivatives		—		—		—			217			217			217

Balance, March 31, 2010	$	(168	)	171,696	$	(1,876	)	$	(1,770	)	$	(3,814	)	$	(1,188	)

The accompanying notes are an integral part of these consolidated financial statements.

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2010			2009
Cash flows from operating activities:
Net loss	$	(1,405	)	$	(810	)

Adjustments to reconcile net loss to net cash provided by operating activities:
Gains on sales of equipment and lease dispositions, net		(228	)		(142	)
Depreciation on operating leases		86			110
Provision for credit losses		1,641			1,040
Amortization of deferred financing costs		67			67
Changes in operating assets and liabilities:
Accounts receivable		5			7
Other assets		54			(21	)
Accounts payable, accrued expenses and other liabilities		(51	)		21
Due to affiliates, net		89			199

Net cash provided by operating activities		258			471


Cash flows from investing activities:
Purchases of leases and loans		—			(3,646	)
Proceeds from leases and loans		7,400			9,646
Security deposits (returned) collected		(66	)		63

Net cash provided by investing activities		7,334			6,063


Cash flows from financing activities:
Borrowings of bank debt		—			4,145
Repayment of bank debt		(8,474	)		(12,387	)
Decrease in restricted cash		902			2,311
Increase in deferred financing costs		—			(2	)
Cash distributions to partners		(171	)		(427	)

Net cash used in financing activities		(7,743	)		(6,360	)


(Decrease) increase in cash		(151	)		174
Cash, beginning of year		162			275

Cash, end of period	$	11		$	449

The accompanying notes are an integral part of these consolidated financial statements.

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements

March 31, 2010

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Lease Equity Appreciation Fund I, L.P. (the “Fund”) is a Delaware limited partnership formed on January 31, 2002 by its General Partner, LEAF Financial Corporation (the “General Partner”). The General Partner manages the Fund. The General Partner is a subsidiary of Resource America, Inc. (“RAI”). RAI is a publicly-traded company (NASDAQ: REXI) that uses industry specific expertise, to evaluate, originate, service and manage investment opportunities through its commercial finance, real estate and financial fund management segments. Through its offering termination date of August 15, 2004, the Fund raised $17.1 million by selling 171,746 of its limited partner units. The Fund commenced operations in March 2003.

The Fund is expected to have a nine-year life, consisting of an offering period of up to two years, a five-year reinvestment period and a subsequent maturity period of two years, during which the Fund’s leases and secured loans will either mature or be sold. The Fund’s five-year reinvestment period has ended and the Fund entered the maturity period in August 2009. In the event the Fund is unable to sell its leases and loans during the maturity period, the Fund expects to continue to return capital to its partners as those leases and loans mature. Substantially all of the Fund’s leases and loans mature by the end of 2013. The Fund will terminate on December 31, 2027, unless sooner dissolved or terminated as provided in the Limited Partnership Agreement.

The Fund acquires diversified portfolios of equipment to finance to end users throughout the United States as well as the District of Columbia and Puerto Rico. The Fund also acquires existing portfolios of equipment subject to existing financings from other equipment finance companies, primarily an affiliate of its General Partner. The primary objective of the Fund is to generate regular cash distributions to its partners from its equipment finance portfolio over the life of the Fund.

As of March 31, 2010 and December 31, 2009, in addition to its 1% general partnership interest, the General Partner also had invested $805,000 for a 6% limited partnership interest in the Fund.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Fund and its wholly-owned subsidiary, LEAF Fund I, LLC. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited financial statements reflect all adjustments that are, in the opinion of management, of a normal and recurring nature and necessary for a fair statement of the Fund’s financial position as of March 31, 2010, and the results of its operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2010 are not necessarily indicative of results of the Fund’s operations for the 2010 fiscal year. The Fund has evaluated subsequent events through the date the financial statements were issued. The financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. These interim financial statements should be read in conjunction with the Fund’s financial statements and notes thereto presented in the Fund’s Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 1, 2010.

Significant Accounting Policies

Investments in Leases and Loans

The Fund’s investments in leases and loans consist of direct financing leases, operating leases and loans.

Direct Financing Leases. Certain of the Fund’s lease transactions are accounted for as direct financing leases (as distinguished from operating leases). Such leases transfer substantially all benefits and risks of equipment ownership to the customer. The Fund’s investment in direct financing leases consists of the sum of the total future minimum lease payments receivable plus the estimated unguaranteed residual value of leased equipment, less unearned finance income. Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted payments plus the estimated unguaranteed residual value over the cost of the related equipment.

Unguaranteed residual value represents the estimated amount to be received at lease termination from lease extensions or ultimate disposition of the leased equipment. The estimates of residual values are based upon the Fund’s history with regard to the realization of residuals, available industry data and the General Partner’s senior management’s experience with respect to comparable

equipment. The estimated residual values are recorded as a component of investments in leases. Residual values are reviewed periodically to determine if the current estimate of the equipment’s fair market value appears to be below its recorded estimate. If required, residual values are adjusted downward to reflect adjusted estimates of fair market values. Upward adjustments to residual values are not permitted.

Operating Leases. Leases not meeting any of the criteria to be classified as direct financing leases are deemed to be operating leases. Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over the equipment’s estimated useful life, generally up to seven years. Rental income consists primarily of monthly periodic rental payments due under the terms of the leases. The Fund recognizes rental income on a straight line basis.

Generally, during the lease terms of existing operating leases, the Fund will not recover all of the cost and related expenses of its rental equipment and, therefore, it is prepared to remarket the equipment in future years. The Fund’s policy is to review, on a quarterly basis, the expected economic life of its rental equipment in order to determine the recoverability of its undepreciated cost. The Fund writes down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds such value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment. There were no write-downs of equipment for the three months ended March 31, 2010, and 2009.

Loans. For term loans, the investment in loans consists of the sum of the total future minimum loan payments receivable less unearned finance income. Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted loan payments over the cost of the related equipment. For all other loans, interest income is recorded at the stated rate on the accrual basis to the extent that such amounts are expected to be collected.

Allowance for Credit Losses. The Fund evaluates the adequacy of the allowance for credit losses (including investments in leases and loans) based upon, among other factors, management’s historical experience on the portfolios it manages, an analysis of contractual delinquencies, economic conditions and trends and equipment finance portfolio characteristics, adjusted for expected recoveries. In evaluating historic performance, the Fund performs a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate charge-off. After an account becomes 180 or more days past due, it is generally fully reserved less an estimated recovery amount and referred to our internal recovery group consisting of a team of credit specialists and collectors. The group utilizes several resources in an attempt to maximize recoveries on charged-off accounts including: 1) initiating litigation against the end user customer and any personal guarantor, 2) referring the account to an outside law firm or collection agency and/or 3) repossessing and remarketing the equipment through third parties. The Fund’s policy is to charge off to the allowance those financings which are in default and for which management has determined the probability of collection to be remote. The Fund discontinues the recognition of revenue for leases and loans for which payments are more than 90 days past due. As of March 31, 2010 and December 31, 2009, the Fund had $3.6 million and $5.8 million, respectively, of leases and loans on non-accrual status. Fees from delinquent payments are recognized when received and are included in other income.

Derivative Instruments

The Fund’s policies permit it to enter into derivative contracts, including interest rate swaps, to add stability to its financing costs and to manage its exposure to interest rate movements or other identified risks. The Fund has designed these transactions as cash flow hedges. The contracts or hedge instruments are evaluated at inception and at subsequent balance sheet dates to determine if they continue to qualify for hedge accounting. The Fund recognizes all derivatives on the consolidated balance sheet at fair value. The Fund records changes in the estimated fair value of the derivative in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.

Interest rate swaps are recorded at fair value based on a value determined by a third-party pricing agent using an income approach and utilizing models that use as their primary basis readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit factors and volatility factors. There can be no assurance that the Fund’s hedging strategies or techniques will be effective, that profitability will not be adversely affected during any period of change in interest rates or that the costs of hedging will not exceed the benefits.

Recent Accounting Standards

Newly Adopted Accounting Principles

The Fund adopted the following accounting standards during the quarter ended March 31, 2010:

Subsequent Events. In February 2010, the FASB issued guidance which removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either a correction of error or retrospective application of U.S. GAAP. This guidance was effective upon issuance.

Fair Value Measurements. In January 2010, the FASB issued guidance that requires new disclosures and clarifies some existing disclosure requirements about fair value measurements. The new pronouncement requires a reporting entity: (1) to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and (2) to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs. In addition, it clarifies the requirements of the following existing disclosures: (1) for purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities, and (2) a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of this guidance did not have a material effect on the Fund’s consolidated financial position or consolidated results of operations.

NOTE 3 – INVESTMENT IN LEASES AND LOANS

The Fund’s investment in leases and loans, net, consists of the following (in thousands):


	March 31, 2010			December 31, 2009
Direct financing leases ^(a)	$	40,214		$	48,563
Loans ^(b)		9,718			11,911
Operating leases		663			854

		50,595			61,328

Allowance for credit losses		(2,510	)		(4,410	)

	$	48,085		$	56,918

(a)	The Fund’s direct financing leases are for initial lease terms generally ranging from 24 to 84 months.

(b)	The interest rates on loans generally range from 6% to 14%.

The components of direct financing leases and loans are as follows (in thousands):


	March 31, 2010						December 31, 2009
	Leases			Loans			Leases			Loans
Total future minimum lease payments	$	44,490		$	11,474		$	53,931		$	14,165
Unearned income		(4,926	)		(1,587	)		(6,042	)		(2,056	)
Residuals, net of unearned residual income ^(a)		1,148			—			1,214			—
Security deposits ^(b)		(498	)		(169	)		(540	)		(198	)

	$	40,214		$	9,718		$	48,563		$	11,911

(a)	Unguaranteed residuals for direct financing leases represent the estimated amounts recoverable at lease termination from lease extensions or disposition of the equipment.

(b)	Included in security deposits are amounts held for maintenance of leased equipment.

The Fund’s investment in operating leases, net, consists of the following (in thousands):


	March 31, 2010			December 31, 2009
Equipment	$	1,422		$	1,820
Accumulated depreciation		(757	)		(964	)
Security deposits		(2	)		(2	)

	$	663		$	854

The following is a summary of the Fund’s allowance for credit losses (in thousands):


	Three Months Ended March 31,
	2010			2009
Allowance for credit losses, beginning of period	$	4,410		$	1,750
Provision for credit losses		1,641			1,040
Charge-offs		(3,579	)		(877	)
Recoveries		38			17

Allowance for credit losses, end of period	$	2,510		$	1,930

NOTE 4 – DEFERRED FINANCING COSTS

As of March 31, 2010 and December 31, 2009, deferred financing costs include $300,000 and $367,000, respectively, of unamortized deferred financing costs which are being amortized over the estimated useful life of the related debt. Accumulated amortization as of March 31, 2010 and December 31, 2009 was $852,000 and $785,000, respectively. Estimated amortization expense of the Fund’s existing deferred financing costs for the years ending March 31 is as follows (in thousands):


2011	$	184
2012		85
2013		27
2014		4

	$	300

NOTE 5 – BANK DEBT

The Fund has a secured term loan agreement with WestLB AG, New York Branch which is collateralized by specific lease receivables and related equipment.

As of March 31, 2010 and December 31, 2009, the outstanding balance under this financing arrangement was $45.9 million and $54.3 million, respectively. Interest and principal are due as payments are received on the underlying leases and loans pledged as collateral, with any remaining balance due in March 2014. Interest on this facility is calculated at London Interbank Offered Rate (“LIBOR”) plus 0.95% per annum. To mitigate fluctuations in interest rates, the Fund has entered into interest rate swap agreements which fix the interest rate on this facility at 5.3%. The interest rate swap agreements terminate at various dates ranging from April 2010 to June 2015. Recourse under this facility is limited to the amount of collateral pledged. As of March 31, 2010, $48.3 million of leases and loans and $2.5 million of restricted cash were pledged as collateral under this facility. As of March 31, 2010, the Fund is in compliance with all covenants under this agreement.

Debt repayments. Annual principal payments on the Fund’s aggregate borrowings over the next five years ended March 31 and thereafter, are as follows (in thousands):


2011	$	22,456
2012		12,234
2013		6,974
2014		1,872
2015		2,076
Thereafter		257

	$	45,869

NOTE 6 – DERIVATIVE INSTRUMENTS

The majority of the Fund’s assets and liabilities are financial contracts with fixed and variable rates. Any mismatch between the re-pricing and maturity characteristics of the Fund’s assets and liabilities exposes it to interest rate risk when interest rates fluctuate. For example, the Fund’s assets are structured on a fixed-rate basis, but since funds borrowed through bank debt are obtained on a floating-rate basis, the Fund is exposed to a certain degree of risk if interest rates rise which in turn will increase the Fund’s borrowing costs. In addition, when the Fund acquires assets, it bases its pricing in part on the spread it expects to achieve between the interest rate it charges its customers and the effective interest cost the Fund will pay when it funds those loans. Increases in interest rates that increase the Fund’s permanent funding costs between the time the assets are originated and the time they are funded could narrow, eliminate or even reverse this spread.

To manage interest rate risk, the Fund employs a hedging strategy using derivative financial instruments such as interest rate swaps which are designated as cash flow hedges. For derivatives designated and qualifying as cash flow hedges, the effective portion of changes in fair value of those derivatives are recorded in accumulated other comprehensive loss and are subsequently reclassified into earnings when the hedged forecasted interest payments are recognized in earnings. The Fund does not use derivative financial instruments for trading or speculative purposes. The Fund manages the credit risk of possible counterparty default in these derivative transactions by dealing primarily with counterparties with investment grade ratings. The Fund has agreements with certain of its derivative counterparties that contain a provision where if the Fund defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Fund could also be declared in default on its derivative obligations. The Fund has agreements with certain of its derivative counterparties that incorporate the loan covenant provisions of the Fund’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in the Fund being in default on any derivative instrument obligations covered by the agreement. As of March 31, 2010, the fair value of derivatives in a net liability position, which excludes any adjustment for nonperformance risk, related to these agreements was $1.9 million. As of March 31, 2010, the Fund has not posted any collateral related to these agreements. If the Fund had breached any of these provisions at March 31, 2010, it could have been required to settle its obligations under the agreements at their termination value of $1.9 million.

Before entering into a derivative transaction for hedging purposes, the Fund determines that a high degree of initial effectiveness exists between the change in the value of the hedged forecasted transactions and the change in the value of the derivative from a movement in interest rates. High effectiveness means that the change in the value of the derivative is expected to provide a high degree of offset against changes in the value of the hedged forecasted transactions caused by changes in interest rate risk. The Fund measures the effectiveness of each cash flow hedge throughout the hedge period. Any hedge ineffectiveness on cash flow hedging relationships, as defined by U.S. GAAP, is recognized in the consolidated statements of operations.

The following tables present the fair value of the Fund’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2010:


	Notional Amount		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate swap contracts	$	44,564	Derivative liabilities at fair value	$	(1,770	)


Derivatives designated as Cash Flow Hedging Relationships	Amount of Gain or Loss Recognized in OCI on Derivatives (Effective Portion)				Location and Amount of Gain or Loss Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended March 31,					Three Months Ended March 31,
	2010		2009			2010			2009
Interest rate products	$	278	$	291	Interest expense	$	(495	)	$	(811	)

For the three months ended March 31, 2010 and 2009, the Fund recognized no gain or loss for hedge ineffectiveness. Assuming market rates remain constant with the rates as of March 31, 2010, $1.3 million of the $1.8 million in accumulated other comprehensive loss is expected to be charged to earnings over the next 12 months.

NOTE 7 – FAIR VALUE MEASUREMENT

For cash, receivables and payables, the carrying amounts approximate fair values because of the short term maturity of these instruments. The carrying value of debt approximates fair market value since interest rates approximate current market rates.

It is not practicable for the Fund to estimate the fair value of the Fund’s leases and loans. They are comprised of a large number of transactions with commercial customers in different businesses, and may be secured by liens on various types of equipment and may be guaranteed by third parties and cross-collateralized. Any difference between the carrying value and fair value of each transaction would be affected by a potential buyer’s assessment of the transaction’s credit quality, collateral value, guarantees, payment history, yield, term, documents and other legal matters, and other subjective considerations. Value received in a fair market sale of a transaction would be based on the terms of the sale, the Fund’s and the buyer’s views of economic and industry conditions, the Fund’s and the buyer’s tax considerations, and other factors.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the measurement date (exit price). U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

•

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

•

Level 2 – Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

•

Level 3 – Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The Fund employs a hedging strategy to manage exposure to the effects of changes in market interest rates. All derivatives are recorded on the consolidated balance sheets at their fair value as either assets or liabilities. Because the Fund’s derivatives are not listed on an exchange, these instruments are valued by a third-party pricing agent using an income approach and utilizing models that use as their primary basis readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit factors and volatility factors. Although the Fund has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, the Fund

has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Fund has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Assets and (liabilities) measured at fair value on a recurring basis included the following (in thousands):


Liabilities:	Fair Value Measurements Using							Liabilities
	Level 1		Level 2			Level 3		At Fair Value
Interest rate swaps at March 31, 2010	$	—	$	(1,770	)	$	—	$	(1,770	)
Interest rate swaps at December 31, 2009	$	—	$	(1,987	)	$	—	$	(1,987	)

NOTE 8 – CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH AFFILIATES

The Fund relies on the General Partner and its affiliates to manage the Fund’s operations and pays the General Partner or its affiliates fees to manage the Fund. The following is a summary of fees and costs of services and materials charged by the General Partner or its affiliates (in thousands):


	Three Months Ended March 31,
	2010		2009
Acquisition fees	$	—	$	77
Management fees		—		293
Administrative expenses		210		327

Acquisition Fees. The General Partner is paid a fee for assisting the Fund in acquiring equipment subject to existing equipment leases equal to 2% of the purchase price the Fund pays for the equipment or portfolio of equipment subject to existing equipment financing.

Administrative Expenses. The General Partner and its affiliates are reimbursed by the Fund for administrative services reasonably necessary to operate which don’t exceed the General Partner’s cost of those fees or services.

Management Fees. The General Partner is paid a subordinated annual asset management fee equal to 3% or 2% of gross rental payments for operating leases or full payout leases, respectively, or a competitive fee, whichever is less. During the reinvestment period, management fees are subordinated to the payment of distributions to the Funds limited partners of a cumulative annual return of 8% on their capital contributions, as adjusted by distributions deemed to be a return of capital. The General Partner waived asset management fees of $197,000 for the three months ended March 31, 2010. It is expected that the General Partner will also waive all future management fees.

Distributions. The General Partner owns a 1% general partner interest and a 6% limited partner interest in us. The General Partner was paid cash distributions of $2,000 and $9,400, respectively, for its general partner and limited partner interests in the Fund for the three months ended March 31, 2010.

Due to Affiliates. Due to affiliates includes amounts due to the General Partner related to acquiring and managing portfolios of equipment from its General Partner, management fees and reimbursed expenses.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Fund is party to various routine legal proceedings arising in the ordinary course of its business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Fund’s financial condition or results of operations.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When used in this Form 10-Q, the words “believes” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties more particularly described in other documents filed with Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release the results of any revisions to forward-looking statements which we may make to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

The following discussion provides an analysis of our operating results, an overview of our liquidity and capital resources and other items related to us. The following discussion and analysis should be read in conjunction with (i) the accompanying interim financial statements and related notes and (ii) Our consolidated financial statements, related notes, and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2009.

As used herein, the terms “we,” “us,” or “our” refer to Lease Equity Appreciation Fund I, L.P. and Subsidiary.

General

We are a Delaware limited partnership formed on January 31, 2002 by our General Partner, LEAF Financial Corporation (the “General Partner”), which manages us. Our General Partner is a subsidiary of Resource America, Inc. (“RAI”). RAI is a publicly-traded company (NASDAQ: REXI) that uses industry specific expertise, to evaluate, originate, service and manage investment opportunities through its commercial finance, real estate and financial fund management segments. Through our offering termination date of August 15, 2004, we raised $17.1 million by selling 171,746 of our limited partner units. We commenced operations in March 2003.

We are expected to have a nine-year life, consisting of an offering period of up to two years, a five year reinvestment period and a subsequent maturity period of two years, during which our leases and secured loans will either mature or be sold. Our five year reinvestment period has ended and we entered the maturity period in August 2009. In the event we are unable to sell our remaining leases and secured loans during the maturity period, we expect to continue to return capital to our partners as those leases and loans mature. Substantially all of our leases and loans mature by the end of 2013. We will terminate on December 31, 2027, unless sooner dissolved or terminated as provided in the Limited Partnership Agreement.

We acquire a diversified portfolio of new, used or reconditioned equipment that we lease to third-parties. We also acquire portfolios of equipment subject to existing leases from other equipment lessors. Our financings are typically acquired from our General Partner. In addition, we may make secured loans to end users to finance their purchase of equipment. We attempt to structure our secured loans so that, in an economic sense, there is no difference to us between a secured loan and a full payout equipment lease. We finance business-essential equipment including, but not limited to, computers, copiers, office furniture, water filtration systems, machinery used in manufacturing and construction, medical equipment and telecommunications equipment. We focus on the small to mid-size business market, which generally includes businesses with:

•

500 or fewer employees;

•

$1 billion or less in total assets; or

•

$100 million or less in total annual sales.

Our principal objective is to generate regular cash distributions to our limited partners.

Our leases consist of direct financing leases and operating leases as defined by U.S. GAAP. Under the direct financing method of accounting, interest income (the excess of the aggregate future rentals and estimated unguaranteed residuals upon expiration of the lease over the related equipment cost) is recognized over the life of the lease using the interest method. Under the operating method, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over its estimated useful life. Rental income on operating leases consists primarily of monthly periodic rentals due under the terms of the leases. Generally, during the lease terms of existing operating leases, we will not recover all of the cost and related expenses of rental equipment and, therefore, we are prepared to remarket the equipment in future years. We discontinue the recognition of revenue for leases and loans for which payments are more that 90 days past due. These assets are classified as non-accrual.

Overview

We continued to be impacted by market uncertainties in the first quarter of 2010. As further discussed in the “Finance Receivables and Asset Quality” section below, the current economic recession in the United States has adversely affected our operations, resulting in higher delinquencies in our portfolio of leases and loans, which may continue until the economy recovers. Additionally, as discussed in the “Liquidity and Capital Resources” section below, the on-going dislocation in the debt markets has also created challenges in maintaining our existing debt facility.

Finance Receivables and Asset Quality

Information about our portfolio of leases and loans is as follows (dollars in thousands):


	March 31, 2010			December 31, 2009
Investment in leases and loans, net	$	48,085		$	56,918

Number of contracts		8,600			8,800
Number of individual end users ^(a)		7,800			8,000
Average original equipment cost	$	18.9		$	19.0
Average initial term (in months)		53			53

States accounting for more than 10% of lease and loan portfolio:
California		10	%		11	%

Types of equipment accounting for more than 10% of lease and loan portfolio:
Medical Equipment		23	%		21	%
Industrial Equipment		23	%		22	%
Office Equipment		15	%		14	%
Water Purification		13	%		12	%

Types of businesses accounting for more than 10% of lease and loan portfolio:
Services		51	%		49	%
Retail Trade		13	%		13	%

(a)	Located in the 50 states as well as the District of Columbia and Puerto Rico. No individual end user or single piece of equipment accounted for more than 4% of our portfolio based on original cost of the equipment.

Historically, we have primarily utilized debt facilities to fund the acquisitions of lease portfolios. As of March 31, 2010 and December 31, 2009, our outstanding debt was $45.9 million and $54.3 million, respectively.

The performance of our lease and loan portfolio is a measure of our General Partner’s underwriting and collection standards, skills, policies and procedures and is an indication of asset quality. The table below provides information about our finance receivables including non-performing assets, which are those assets that are not accruing income due to non-performance or impairment (dollars in thousands):


	As of and for the											As of and for
	Three Months Ended March 31,											Year Ended
							Change					December 31,
	2010			2009			Amount			%		2009
Investment in leases and loans before allowance for credit losses	$	50,595		$	89,479		$	(38,884	)	(43	)%	$	61,328
Less: allowance for credit losses		2,510			1,930			580		30	%		4,410
Investment in leases and loans, net	$	48,085		$	87,549		$	(39,464	)	(45	)%	$	56,918
Weighted average investment in direct financing leases and loans before allowance for credit losses	$	56,979		$	93,074		$	(36,095	)	(39	)%	$	79,469
Non-performing assets		3,597			4,415			(818	)	(19	)%		5,810
Charge-offs, net of recoveries	$	3,541		$	860			2,681		312	%	$	3,072
As a percentage of finance receivables:
Allowance for credit losses		4.96	%		2.16	%							7.19	%
Non-performing assets		7.11	%		4.93	%							9.47	%
As a percentage of weighted average finance receivables:
Charge-offs, net of recoveries		6.21	%		0.92	%							3.87	%

We manage our credit risk by adhering to strict credit policies and procedures, and closely monitoring our receivables. Our General Partner, the servicer of our leases and loans, has responded to the current economic recession by increasing the number of employees in its collection department and implementing earlier intervention techniques in collection procedures

Our allowance for credit losses is our estimate of losses inherent in our commercial finance receivables. The allowance is based on factors which include our historical loss experience on equipment finance portfolios we manage, an analysis of contractual delinquencies, current economic conditions and trends and equipment finance portfolio characteristics, adjusted for recoveries. In evaluating historic performance, we perform a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate charge-off. Our policy is to charge off to the allowance those financings which are in default and for which management has determined the probability of collection to be remote. Substantially all of our assets are collateral for our debt and, therefore, significantly greater delinquencies than anticipated will have an adverse impact on our cash flow and distributions to our partners.

The equipment we finance includes computers, copiers, office furniture, water filtration systems, machinery used in manufacturing and construction, medical equipment and telecommunications equipment. We focus on financing equipment used by small to mid-sized businesses. The current economic recession in the US has made it more difficult for some of our customers to make payments on their financings with us on a timely basis, which has adversely affected our operations in the form of higher delinquencies. These higher delinquencies may continue until the US economy recovers. The increase in delinquencies, as well as the current economic trends, has caused us to conclude that a greater allowance for credit loss is necessary. In addition, our non-performing assets as a percentage of finance receivables have increased from 4.9% at March 31, 2009 to 7.1% at March 31, 2010, due to the increase in customers who are more than 90 days delinquent at March 31, 2010 as compared to March 31, 2009.

Our net charge-offs increased in the three months ended March 31, 2010 compared to the three month ended March 31, 2009 due to the aging of our portfolio of leases and loans as well as the current economic recession as discussed above.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including the allowance for credit losses, the estimated unguaranteed residual values of leased equipment, impairment of long-lived assets and the fair value and effectiveness of interest rate swaps. We base our estimates on historical experience, current economic conditions and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a complete discussion of our critical accounting policies and estimates, see our annual report on Form 10-K for fiscal 2009 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.”

Results of Operations

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009


							Increase (Decrease)
	2010			2009			$		%
Revenues:
Interest on equipment financings	$	1,077		$	2,098		(1,021	)	(49	)%
Rental income		105			137		(32	)	(23	)%
Gains on sales of equipment and lease dispositions, net		228			142		86		61	%
Other		167			172		(5	)	(3	)%

		1,577			2,549		(972	)	(38	)%


Expenses:
Interest expense		711			1,196		(485	)	(41	)%
Depreciation on operating leases		86			110		(24	)	(22	)%
Provision for credit losses		1,641			1,040		601		58	%
General and administrative expenses		334			393		(59	)	(15	)%
Administrative expenses reimbursed to affiliate		210			327		(117	)	(36	)%
Management fees to affiliate		—			293		(293	)	(100	)%

		2,982			3,359		(377	)	(11	)%

Net loss	$	(1,405	)	$	(810	)	(595	)	73	%

Net loss allocated to limited partners	$	(1,391	)	$	(802	)	(589	)	73	%

The decrease in total revenues was primarily attributable to the following:

•

a significant decrease in our weighted average net investment in financing assets to $57.0 million for the three months ended March 31, 2010 as compared to $93.1 million for the three months ended March 31, 2009, a decrease of $36.1 million (39%) as we entered our maturity phase in August 2009. We have not acquired additional leases and loans since the first quarter of 2009. Therefore, our revenues are expected to continue to decline as our weighted average net investment in financing assets declines.

The decrease in total expenses was primarily attributable to the following:

•

a decrease in interest expense primarily due to the decrease in our bank debt caused by the ongoing maturities of the portfolio of lease and loans. There were no borrowings for the three months ended March 31, 2010 as compared to $4.1 million for the three months ended March 31, 2009. Borrowings for the three months ended March 31, 2010 and 2009 were at an effective interest rate of 5.7% and 5.4%, respectively. We amended our debt facility effective March 6, 2009, such that it is now a term facility which is contractually repaid over time. As a result, our interest expense is expected to continue to decrease.

•

a decrease in management fees to affiliate attributable to the decrease in our portfolio of equipment financing assets, since management fees are paid based on lease payments received. Beginning May 1, 2009, the General Partner waived asset management fees. Approximately $197,000 of management fees were waived for the three months ended March 31, 2010. It is expected that the General Partner will also waive all future management fees.

These decreases in expenses were partially offset by the following:

•

a significant increase in our provision for credit losses. We provide for credit losses when losses are likely to occur based on a migration analysis of past due payments and economic conditions. Our provision for credit losses has increased due to the impact of the economic recession in the United States on our customers’ ability to make payments on their leases and loans, resulting in an increase in non-performing assets as a percentage of finance receivables to 7.1% as of March 31, 2010 as compared to 4.9% as of March 31, 2009.

The net loss per limited partner unit, after the net loss allocated to our General Partner, for the three months ended March 31, 2010 and 2009 was $8.10 and $4.67, respectively, based on a weighted average number of limited partner units outstanding of 171,696 and 171,696, respectively.

Liquidity and Capital Resources

General

Our major source of liquidity is excess cash derived from the collection of lease payments, after payment of debt principal and interest on debt. Our other cash requirements, in addition to debt service, are for normal operating expenses and distributions to partners. We plan to fund our other cash requirements for operating expenses and distributions to partners, from cash remaining after payments for debt service.

As noted previously, we entered the maturity phase in August 2009. Accordingly, we will not be purchasing any new leases or loans. We have not made any purchases of leases or loans since the first quarter of 2009. As more fully discussed below, in the first quarter of 2009, we renegotiated our revolving debt facility into a term facility that will be repaid as payments are received on the correlating portfolio of leases and loans with any remaining balance due March 14, 2014. In summary, in return for agreeing to a term loan that accelerates the repayment of the loan, the lender agreed to remove all financial covenants from the loan agreement. The remaining covenants are non-financial in nature.

We believe that our future net cash inflows can be estimated as the total scheduled future payments to be received from leases and loans less our debt service payments. At March 31, 2010, the total future minimum lease payments scheduled to be received was $56.0 million which excludes the $2.5 million allowance for credit losses. The outstanding principal balance owed on our debt facility was $45.9 million. We believe that future net cash inflows will be sufficient and borrowing from the General Partner will not be necessary to either finance operations or meet debt service payments. The following table sets forth our sources and uses of cash for the periods indicated (in thousands):


	Three Months Ended March 31,
	2010		2009
Net cash provided by operating activities	258		471
Net cash provided by investing activities	7,334		6,063
Net cash used in financing activities	(7,743	)	(6,360	)

(Decrease) increase in cash	(151	)	174

Cash decreased by $151,000 primarily due to a net debt repayment of $8.5 million, distributions to our partners of $171,000, offset by net proceeds from leases and loans of $7.3 million. As a result of increased delinquencies, the amount of borrowing availability under our leases and loans was reduced, resulting in a net debt repayment in first quarter of 2010.

Partners’ distributions paid during the three months ended March 31, 2010 and 2009 were $171,000 and $427,000, respectively. In April 2009, the limited partners’ monthly distribution was reduced to 4% per annum of invested capital. Cumulative partner distributions paid from our inception to March 31, 2010 were approximately $8.7 million.

Future cash distributions are dependent on our performance and are impacted by a number of factors which include lease and loan defaults by our customers and prevailing economic conditions. Due to the prolonged economic recession we continue to see higher than expected lease and loan defaults resulting in poorer fund performance than projected.

As of March 31, 2010, $45.9 million was outstanding under our secured term loan agreement with WestLB. No further borrowings are available under the secured term loan agreement. This facility is secured by the pledging of eligible leases and loans. Recourse under this facility is limited to the amount of collateral pledged. As of March 31, 2010, $48.3 million of leases and loans and $2.5 million of restricted cash were pledged as collateral under this facility. Interest on this facility is calculated at LIBOR plus 0.95% per annum. Interest rate swap agreements fix the interest rate on this facility at 5.3%. Interest and principal are due as payments are received on the underlying leases and loans pledged as collateral, with any remaining balance due in March 2014. As of March 31, 2010, we were in compliance with all covenants contained in this agreement.

The General Partner waived management fees beginning May 1, 2009. Accordingly, we did not record any management fee expense for the three months ended March 31, 2010. It is expected that the General Partner will also waive all future management fees. As noted above, we have reduced the annual distribution rate to partners to 4.0% effective in April 2009. The cash savings on management fees and distributions is expected to be used to pay down our liabilities.

As discussed above, our liquidity has been and may continue to be adversely affected by higher than expected equipment lease defaults, which result in a loss of anticipated revenues. These losses affect our ability to make distributions to our partners and, if the level of defaults is sufficiently large, result in our inability to fully recover our investment in the underlying equipment. In evaluating our allowance for losses on uncollectible leases, we consider our contractual delinquencies, economic conditions and trends, lease portfolio characteristics and our General Partner’s management’s prior experience with similar lease assets. At March 31, 2010, our credit evaluation indicated a need for an allowance for credit losses of $2.5 million. As our lease portfolio ages, and if the economy in the United States deteriorates even further or the recession continues for a substantial period of time, we anticipate the need to increase our allowance for credit losses.

Contractual Obligations and Commercial Commitments

The following table sets forth our obligations and commitments as of March 31, 2010 (in thousands):


			Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Bank debt (1)	$	45,869	$	22,456	$	19,208	$	3,948	$	257

(1)

To mitigate interest rate risk on the variable rate debt, we employ a hedging strategy using derivative financial instruments such as interest rate swaps, which fix the interest rate. Not included in the table above are estimated interest payments calculated at rates in effect at March 31, 2010: Less than 1 year: $1.8 million; 1-3 years: $1.3 million; 4-5 years: $241,000; and after 5 years: $7,000. The fair value of the swap liability as of March 31, 2010 is $1.8 million.

The above table does not include expected payments related to the Repurchase Commitment (defined below) as of March 31, 2010. In connection with a sale of leases and loans to a third party, we agreed to repurchase delinquent leases up to maximum of 7.5% of total proceeds received from the sale (the “Repurchase Commitment”). Our maximum exposure under the Repurchase Commitment at March 31, 2010 is $53,000.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of losses arising from changes in values of financial instruments. We are exposed to market risks associated with changes in interest rates and our earnings may fluctuate with changes in interest rates. The lease assets we originate are almost entirely fixed-rate. Accordingly, we seek to finance these assets with fixed interest rate debt. At March 31, 2010, our outstanding debt totaled $45.9 million of variable rate debt. To mitigate interest rate risk on the variable rate debt, we employ a hedging strategy using derivative financial instruments such as interest rate swaps, which fixes the weighted average interest rates at 5.3% for the WestLB debt facility. At March 31, 2010, the notional amounts of the 45 interest rate swaps were $44.6 million. The interest rate swap agreements terminate on various dates ranging from April 2010 to June 2015 which generally coincide with the maturity period of our portfolio of lease and loans.

The following sensitivity analysis table shows, at March 31, 2010, the estimated impact on the fair value of our interest rate-sensitive investments and liabilities of changes in interest rates, assuming rates instantaneously fall 100 basis points or rise 100 basis points (dollars in thousands):


	Interest rates fall 100 basis points			Unchanged			Interest rates rise 100 basis points
Hedging instruments
Fair value	$	(2,338	)	$	(1,770	)	$	(1,317	)
Change in fair value	$	(568	)		—		$	453
Change as a percent of fair value		32	%		—			(26	)%

It is important to note that the impact of changing interest rates on fair value can change significantly when interest rates change beyond 100 basis points from current levels. Therefore, the volatility in the fair value of our assets could increase significantly when interest rates change beyond 100 basis points from current levels. In addition, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, in the event of changes in actual interest rates, the change in the fair value of our assets would likely differ from that shown above and such difference might be material and adverse to our partners.

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our General Partner’s chief executive officer and chief financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our General Partner’s chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level discussed above.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the three months ended March 31, 2010 that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 6 – EXHIBITS


Exhibit No.		Description
3.1		Amended and Restated Agreement of Limited Partnership (1)
3.2		Certificate of Limited Partnership (2)
4.1		Forms of letters sent to limited partners confirming their investment (2)
10.1		Origination and Servicing Agreement among LEAF Financial Corporation, Lease Equity Appreciation Fund I, L.P. and LEAF Funding, Inc., dated April 4, 2003 (4)
10.2		Secured Loan Agreement dated as of December 31, 2004 among LEAF Fund I, LLC, LEAF Funding, Inc., Lease Equity Appreciation Fund I, L.P., LEAF Financial Corporation, U.S. Bank National Association, and WestLB, New York Branch (3)
10.3		First Amendment to WestLB AG, New York Branch, Secured Loan Agreement (6)
10.4		Third Amendment to WestLB AG , New York Branch, Secured Loan Agreement (7)
10.5		Fourth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (5)
10.6		Fifth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (8)
10.7		Seventh Amendment WestLB AG, New York Branch, Secured Loan Agreement (9)
10.8		Eighth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (10)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Filed previously as Appendix A to our Post-Effective Amendment No. 3 to our Registration Statement on Form S-1, filed on January 26, 2004 and by this reference incorporated herein.

(2)	Filed previously as an exhibit to Amendment No. 1 to our Registration Statement on Form S-1 filed on June 7, 2002 and by this reference incorporated herein.

(3)	Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2004 and by this reference incorporated herein.

(4)	Filed previously on Form 8-K, filed on September 19, 2003 and by this reference incorporated herein.

(5)	File previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 and by this reference incorporated herein.

(6)	Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2005 and by this reference incorporated herein.

(7)	Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and by this reference incorporated herein.

(8)	Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2007 and by this reference incorporated herein.

(9)	Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and by this reference incorporated herein.

(10)	Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2008 and by this reference incorporated herein.

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.


	LEASE EQUITY APPRECIATION FUND I, L.P.
	Delaware Limited Partnership
	By:	LEAF Financial Corporation

May 20, 2010	By:	/s/ CRIT S. DEMENT
		CRIT S. DEMENT
		Chairman and Chief Executive Officer

May 20, 2010	By:	/s/ ROBERT K. MOSKOVITZ
		ROBERT K. MOSKOVITZ
		Chief Financial Officer

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