UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



Form 10-Q



(Mark One)



[X]

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



For the quarterly period ended September 30, 2006





[ ]

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





For the transition period from _________to _________



Commission file number 0-14569





SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)







Maryland

04-2848939

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)



55 Beattie Place, P.O. Box 1089

Greenville, South Carolina  29602

(Address of principal executive offices)



(864) 239-1000

(Registrant's telephone number)





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. YesX No___



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Exchange Act Rule 12b-2). Large Accelerated [ ], Accelerated Filer [ ], Non-Accelerated Filer [X]



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







PART I  FINANCIAL INFORMATION



ITEM 1.

FINANCIAL STATEMENTS



SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)





|                                                |               |             
|----------------------------------------------- | ------------- | ------------
|                                                | September 30, | December 31,
|                                                | 2006          | 2005        
|                                                | (Unaudited)   | (Note)      
|Assets                                          |               |             
|Cash and cash equivalents                       | $    238      | $  3,725    
|Receivables and deposits                        | 1,164         | 1,026       
|Restricted escrows                              | 663           | 1,349       
|Other assets                                    | 3,688         | 2,658       
|Investment property:                            |               |             
|Land                                            | 5,833         | 5,833       
|Buildings and related personal property         | 138,991       | 133,031     
|                                                | 144,824       | 138,864     
|Less accumulated depreciation                   | (99,470)      | (94,106)    
|                                                | 45,354        | 44,758      
|                                                | $51,107       | $53,516     
|Liabilities and Partners' Deficit               |               |             
|Liabilities                                     |               |             
|Accounts payable                                | $  1,367      | $    590    
|Tenant security deposit liabilities             | 752           | 707         
|Other liabilities                               | 528           | 565         
|Due to affiliates (Note B)                      | 1,441         | --          
|Mortgage note payable                           | 113,500       | 113,500     
|                                                | 117,588       | 115,362     
|                                                |               |             
|Minority interest (Note C)                      | --            | --          
|                                                |               |             
|Partners' Deficit                               |               |             
|General partners                                | (3,363)       | (3,131)     
|Investor limited partners (649 units issued and |               |             
|outstanding)                                    | (63,118)      | (58,715)    
|                                                | (66,481)      | (61,846)    
|                                                | $51,107       | $53,516     







Note:

The consolidated balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.







See Accompanying Notes to Consolidated Financial Statements



















SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per unit data)





|                                       |                    |                   |          |         | 
|-------------------------------------- | ------------------ | ----------------- | -------- | ------- | 
|                                       | Three Months Ended | Nine Months Ended
|                                       | September 30,      | September 30,    
|                                       | 2006               | 2005              | 2006     | 2005   
|                                       |                    |                   |          |        
|Revenues:                              |                    |                   |          |        
|Rental income                          | $ 8,057            | $ 8,036           | $24,088  | $23,538
|Other income                           | 597                | 528               | 1,696    | 1,347  
|Casualty gains (Note D)                | --                 | 36                | --       | 191    
|Total revenues                         | 8,654              | 8,600             | 25,784   | 25,076 
|                                       |                    |                   |          |        
|Expenses:                              |                    |                   |          |        
|Operating                              | 4,300              | 3,826             | 12,615   | 11,397 
|General and administrative             | 162                | 144               | 489      | 392    
|Depreciation                           | 1,794              | 1,833             | 5,364    | 5,567  
|Interest                               | 1,670              | 1,171             | 4,656    | 3,107  
|Property taxes                         | 737                | 675               | 2,104    | 1,895  
|Bad debt expense                       | 91                 | 87                | 177      | 214    
|Total expenses                         | 8,754              | 7,736             | 25,405   | 22,572 
|                                       |                    |                   |          |        
|(Loss) income before minority interest | (100)              | 864               | 379      | 2,504  
|                                       |                    |                   |          |        
|Distributions to minority interest     |                    |                   |          |        
|partner in excess of investment        |                    |                   |          |        
|(Note C)                               | --                 | --                | (649)    | (375)  
|                                       |                    |                   |          |        
|Net (loss) income                      | $(100)             | $864              | $(270)   | $2,129 
|                                       |                    |                   |          |        
|Net (loss) income allocated to general |                    |                   |          |        
|partners (5%)                          | $    (5)           | $    43           | $   (14) | $   106
|                                       |                    |                   |          |        
|Net (loss) income allocated to limited |                    |                   |          |        
|partners (95%)                         | (95)               | 821               | (256)    | 2,023  
|                                       | $(100)             | $864              | $(270)   | $2,129 
|                                       |                    |                   |          |        
|Net (loss) income per limited          |                    |                   |          |        
|partnership unit                       | $(146)             | $1,265            | $(394)   | $3,117 
|                                       |                    |                   |          |        
|Distributions per limited partnership  |                    |                   |          |        
|unit                                   | $--                | $--               | $6,390   | $3,669 







See Accompanying Notes to Consolidated Financial Statements



















SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT

(Unaudited)

(in thousands, except unit data)







|                               |             |          |           |          
|------------------------------ | ----------- | -------- | --------- | ---------
|                               | Limited     |          | Investor  |          
|                               | Partnership | General  | Limited   |          
|                               | Units       | Partners | Partners  | Total    
|                               |             |          |           |          
|Original capital contributions | 649         | $--      | $40,563   | $40,563  
|                               |             |          |           |          
|Partners' deficit at           |             |          |           |          
|December 31, 2005              | 649         | $(3,131) | $(58,715) | $(61,846)
|                               |             |          |           |          
|Distributions to partners      | --          | (218)    | (4,147)   | (4,365)  
|                               |             |          |           |          
|Net loss for the nine months   |             |          |           |          
|ended September 30, 2006       | --          | (14)     | (256)     | (270)    
|                               |             |          |           |          
|Partners' deficit at           |             |          |           |          
|September 30, 2006             | 649         | $(3,363) | $(63,118) | $(66,481)











See Accompanying Notes to Consolidated Financial Statements













SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



|                                                        |                   |            
|------------------------------------------------------- | ----------------- | -----------
|                                                        | Nine Months Ended
|                                                        | September 30,    
|                                                        | 2006              | 2005       
|Cash flows from operating activities:                   |                   |            
|Net (loss) income                                       | $   (270)         | $  2,129   
|Adjustments to reconcile net (loss) income to net cash  |                   |            
|provided by operating activities:                       |                   |            
|Distributions to minority interest partner in excess of |                   |            
|investment                                              | 649               | 375        
|Depreciation                                            | 5,364             | 5,567      
|Casualty gain                                           | --                | (191)      
|Amortization of loan costs                              | 106               | 106        
|Bad debt expense, net                                   | 177               | 214        
|Change in accounts:                                     |                   |            
|Receivables and deposits                                | (315)             | (51)       
|Other assets                                            | (1,136) (95       | (1,095) (95
|Accounts payable                                        | 621               | 242        
|Tenant security deposit liabilities                     | 45                | 47         
|Due to affiliates                                       | 48                | --         
|Other liabilities                                       | (37)              | 87         
|Net cash provided by operating activities               | 5,252             | 7,430      
|                                                        |                   |            
|Cash flows from investing activities:                   |                   |            
|Insurance proceeds received                             | --                | 205        
|Property improvements and replacements                  | (5,804)           | (4,373)    
|Net withdrawals from restricted escrows                 | 686               | 70         
|Net cash used in investing activities                   | (5,118)           | (4,098)    
|                                                        |                   |            
|Cash flows from financing activities:                   |                   |            
|Distributions to partners                               | (4,365)           | (2,506)    
|Distributions to minority interest partner              | (649)             | (375)      
|Advances from affiliate                                 | 1,393             | --         
|Net cash used in financing activities                   | (3,621)           | (2,881)    
|                                                        |                   |            
|Net (decrease) increase in cash and cash equivalents    | (3,487)           | 451        
|Cash and cash equivalents at beginning of period        | 3,725             | 1,502      
|                                                        |                   |            
|Cash and cash equivalents at end of period              | $238              | $1,953     
|                                                        |                   |            
|Supplemental disclosure of cash flow information:       |                   |            
|Cash paid for interest                                  | $4,649            | $3,017     
|Supplemental disclosure of non-cash information:        |                   |            
|Property improvements and replacements included in      |                   |            
|accounts payable                                        | $469              | $182       



At December 31, 2005 and 2004 approximately $313,000 and $135,000 of property improvements and replacements were included in accounts payable which are included in property improvements and replacements at September 30, 2006 and 2005, respectively.





See Accompanying Notes to Consolidated Financial Statements













SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note A - Basis of Presentation



The accompanying unaudited consolidated financial statements of Springhill Lake Investors Limited Partnership (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of AIMCO/Springhill Lake Investors GP, LLC ("AIMCO LLC" or the Managing General Partner), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2005. The Managing General Partner is a wholly owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust.



The accompanying consolidated financial statements include the accounts of the Partnership and the operating partnerships. Theodore N. Lerner's ownership in the operating partnerships has been reflected as a minority interest in the accompanying consolidated financial statements (see Note C  Minority Interest). All significant interpartnership accounts and transactions have been eliminated in consolidation.



Note B  Transactions with Affiliated Parties



The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities.  The Limited Partnership Agreement provides for (i) certain payments to affiliates for services, (ii) reimbursements of certain expenses incurred by affiliates on behalf of the Partnership, (iii) an annual asset management fee of $100,000 and (iv) an annual administration fee of $10,000.



Affiliates of the Managing General Partner receive 3% of residential rent collections and 5% of commercial income from the Partnerships property as compensation for providing property management services. The Partnership paid to such affiliates approximately $766,000 and $731,000 for the nine months ended September 30, 2006 and 2005, respectively, which is included in operating expense.



An affiliate of the Managing General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $333,000 and $275,000 for the nine months ended September 30, 2006 and 2005, respectively, which is included in general and administrative expenses. At September 30, 2006, approximately $36,000 of these accountable administrative expenses remain unpaid and are included in due to affiliates.



In accordance with the Partnership Agreement, the Managing General Partner earned approximately $75,000 in asset management fees and approximately $8,000 in administrative fees for both the nine month periods ended September 30, 2006 and 2005. These fees are included in general and administrative expenses. At September 30, 2006 approximately $9,000 of these fees remain unpaid and are included in due to affiliates.











Note B  Transactions with Affiliated Parties (continued)



The Partnership insures its property up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty, general liability and vehicle liability.  The Partnership insures its property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the nine months ended September 30, 2006 and 2005,  the Partnership was charged by AIMCO and its affiliates approximately $511,000 and $313,000 for insurance coverage and fees associated with policy claims administration.



During the nine months ended September 30, 2006, an affiliate of the Managing General Partner advanced approximately $1,393,000 to the Partnership to cover real estate taxes and capital expenditures. There were no such advances during the nine months ended September 30, 2005.  Interest accrues at the prime rate plus 2% (10.25% at September 30, 2006). Interest expense amounted to approximately $3,000 for the nine months ended September 30, 2006. The total balance of advances and accrued interest due to an affiliate of the Managing General Partner was approximately $1,396,000 and is included in due to affiliates on the accompanying balance sheet. Subsequent to September 30, 2006, an affiliate of the Managing General Partner advanced the Partnership approximately $415,000 for property operating expenses.



Note C - Minority Interest



The limited partnership interest of Theodore N. Lerner in the operating partnerships is reflected as a minority interest in the accompanying consolidated financial statements. Minority interest in net earnings of the operating partnerships recorded by the Partnership was zero for the nine months ended September 30, 2006 and 2005. During the nine months ended September 30, 2006 and 2005, the Partnership did not recognize any minority interest in net earnings of the operating partnerships as previous distributions to the minority partner during 2002 reduced the minority partner's interest balance to zero. For the nine months ended September 30, 2006 and 2005, distributions to the minority interest partner of approximately $649,000 and $375,000, respectively, were made in excess of the minority partner's investment in the operating partnerships. When the operating partnerships make distributions in excess of the minority partners investment balance, the Partnership, as the majority partner, records a charge equal to the minority partners excess distribution over the investment balance.



The charge is classified as distributions to the minority partner in excess of investment on the accompanying consolidated statements of operations. Cumulative distributions to the minority partner in excess of investment totaled approximately $5,844,000 and $5,195,000 at September 30, 2006 and 2005, respectively. No income is allocated to the minority partner until all previous losses recognized by the majority partner are recovered. For the nine months ended September 30, 2006 and 2005, approximately $332,000 and $603,000, respectively, in earnings were allocated to the majority partner to recover previous losses recognized. Earnings will











Note C - Minority Interest (continued)



continue to be allocated to the majority partner to recover previous losses recognized until such time as the net amount of approximately $2,503,000 at September 30, 2006 is recovered.



Note D  Casualty Gains



During the nine months ended September 30, 2005, a casualty gain of approximately $93,000 was recorded at the Partnerships investment property related to a power loss to one of the propertys chillers which resulted in some flooding damage. The gain was the result of the receipt of insurance proceeds of approximately $93,000. The damaged equipment was fully depreciated.



During the nine months ended September 30, 2005, a casualty gain of approximately $62,000 was recorded at the Partnerships investment property related to a fire that occurred in September 2004 which caused damage to the business office at the property. The gain was the result of the receipt of insurance proceeds of approximately $71,000 offset by the write off of approximately $9,000 of undepreciated property improvements and replacements.



During the three and nine months ended September 30, 2005, a casualty gain of approximately $36,000 was recorded at the Partnerships investment property related to stolen copper fire sprinkler pipings and fittings from 37 buildings which occurred in July 2005.  The gain was the result of the receipt of insurance proceeds of approximately $41,000 offset by the write off of approximately $5,000 of undepreciated property and improvements.



Note E - Contingencies



AIMCO Properties L.P. and NHP Management Company, both affiliates of the ManagingGeneral Partner, are defendants in a lawsuit alleging that they willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The complaint, filed in the United States District Court for the District of Columbia, attempts to bring a collective action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call." Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management Company failed to comply with the FLSA in compensating maintenance workers for time that they worked in excess of 40 hours in a week.   In June 2005 the court conditionally certified the collective action on both the on-call and overtime issues.  Approximately 1,049 individuals opted in to the class. The defendants moved to decertify the collective action on both issues and the plaintiffs have responded.  Because the court denied plaintiffs motion to certify state subclasses, in September 2005, the plaintiffs filed a class action with the same allegations in the Superior Court of California (Contra Costa County), and in November 2005 in Montgomery County Maryland Circuit Court.  The California and Maryland cases have been stayed pending the outcome of the decertification motion in the District of Columbia case.  Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnerships consolidated financial condition or results of operations.











Note E  Contingencies (continued)



The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment property that are not of a routine nature arising in the ordinary course of business.



Environmental



Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its property, the Partnership could potentially be liable for environmental liabilities or costs associated with its property.



Mold



The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements.  The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure.  Affiliates of the Managing General Partner have implemented a national policy and procedures to prevent or eliminate mold from its properties and the Managing General Partner believes that these measures will minimize the effects that mold could have on residents.  To date, the Partnershiphas not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions.  Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnerships consolidated financial condition or results of operations.











ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission.



The Partnership's sole asset is a 2,877 unit apartment complex, which consists of apartment and townhouse units and a four-store shopping center, known as Springhill Lake Apartments located in Greenbelt, Maryland. Average occupancy for the nine months ended September 30, 2006 and 2005 was 94% and 93%, respectively.



The Partnerships financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnerships financial results.



Results of Operations



The Partnerships net loss for the nine months ended September 30, 2006 was approximately $270,000 compared to net income of approximately $2,129,000 for the corresponding period in 2005. Income before minority interest for the nine months ended September 30, 2006 was approximately $379,000 compared to approximately $2,504,000 for the corresponding period in 2005. The Partnerships net loss for the three months ended September 30, 2006 was approximately $100,000 compared to net income of approximately $864,000 for the corresponding period in 2005. Loss before minority interest for the three months ended September 30, 2006 was approximately $100,000 compared to approximately $864,000 of income for the corresponding period in 2005. The decrease in income before minority interest for the three and nine months ended September 30, 2006 is primarily due to an increase in total expenses partially offset by an increase in total revenues.  The increase in total revenues for both periods is due to an increase in both rental and other income partially offset by a decrease in the recognition of casualty gains. Rental income increased for both periods due to an increase in the average rental rate and occupancy at the Partnerships investment property. Other income increased for both periods due to











an increase in resident utility reimbursements at the Partnerships investment property and an increase in interest income.



During the nine months ended September 30, 2005, a casualty gain of approximately $93,000 was recorded at the Partnerships investment property related to a power loss to one of the propertys chillers which resulted in some flooding damage. The gain was the result of the receipt of insurance proceeds of approximately $93,000. The damaged equipment was fully depreciated.



During the nine months ended September 30, 2005, a casualty gain of approximately $62,000 was recorded at the Partnerships investment property related to a fire that occurred in September 2004 which caused damage to the business office at the property. The gain was the result of the receipt of insurance proceeds of approximately $71,000 offset by the write off of approximately $9,000 of undepreciated property improvements and replacements.



During the three and nine months ended September 30, 2005, a casualty gain of approximately $36,000 was recorded at the Partnerships investment property related to stolen copper fire sprinkler pipings and fittings from 37 buildings which occurred in July 2005.  The gain was the result of the receipt of insurance proceeds of approximately $41,000 offset by the write off of approximately $5,000 of undepreciated property and improvements.



Total expenses for the nine months ended September 30, 2006 increased due to increases in operating, general and administrative, interest and property tax expenses partially offset by decreases in depreciation and bad debt expenses.  Operating expense increased due to an increase in property, administrative and insurance expenses. Property expense increased due to increases in salaries and related employee benefits and utility costs, mainly natural gas and electricity.  Administrative expense increased due to increases in training and travel and legal fees. Insurance expense increased due to an increase in hazard insurance premiums. Interest expense increased due to a change in the monthly variable interest rate on the propertys mortgage.  Property tax expense increased due to an increase in the assessed value of the Partnerships investment property by the local taxing authority. Depreciation expense decreased due to assets becoming fully depreciated. Bad debt expense decreased due to an increase in rental collections.



Total expenses for the three months ended September 30, 2006 increased due to increases in operating, general and administrative, interest and property tax expenses partially offset by a decrease in depreciation expense. Bad debt expense remained relatively constant for the three months ended September 30, 2006. Operating expense increased due to an increase in property, administrative, insurance and maintenance expenses partially offset by a decrease in advertising expense. Property expense increased due to increases in utility costs, mainly natural gas and electricity. Administrative expense increased due to increases in legal fees and temp agency help. Maintenance expense increased due to increases in contract services, plumbing supplies, trash removal and pool expenses. Advertising expense decreased due to decreases in periodicals and radio and television advertising. Insurance, interest and property tax expenses increased as discussed above. Depreciation expense decreased due to assets becoming fully depreciated.



General and administrative expenses increased for both the three and nine months ended September 30, 2006 due to an increase in accountable reimbursements charged to the Partnership in accordance with the Partnership Agreement. Costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included in general and administrative expenses.



The limited partnership interest of Theodore N. Lerner in the operating partnerships is reflected as a minority interest in the accompanying consolidated











financial statements. Minority interest in net earnings of the operating partnerships recorded by the Partnership was zero for the nine months ended September 30, 2006 and 2005. During the nine months ended September 30, 2006 and 2005, the Partnership did not recognize any minority interest in net earnings of the operating partnerships as previous distributions to the minority partner during 2002 reduced the minority interest partner's investment balance to zero. For the nine months ended September 30, 2006 and 2005, distributions to the minority interest partner of approximately $649,000 and $375,000, respectively, were made in excess of the minority partner's investment in the operating partnerships. When the operating partnerships make distributions in excess of the minority partners investment balance, the Partnership, as the majority partner, records a charge equal to the minority partners excess distribution over the investment balance.



The charge is classified as distributions to the minority partner in excess of investment on the accompanying consolidated statements of operations. Cumulative distributions to the minority partner in excess of investment totaled approximately $5,844,000 and $5,195,000 at September 30, 2006 and 2005, respectively. No income is allocated to the minority partner until all previous losses recognized by the majority partner are recovered. For the nine months ended September 30, 2006 and 2005, approximately $332,000 and $603,000, respectively, in earnings were allocated to the majority partner to recover previous losses recognized. Earnings will continue to be allocated to the majority partner to recover previous losses recognized until such time as the net amount of approximately $2,503,000 at September 30, 2006 is recovered.



Liquidity and Capital Resources



At September 30, 2006, the Partnership had cash and cash equivalents of approximately $238,000 as compared to approximately $1,953,000 at September 30, 2005. Cash and cash equivalents decreased approximately $3,487,000 from December 31, 2005 due to approximately $5,118,000 and $3,621,000 of cash used in investing and financing activities, respectively, partially offset by approximately $5,252,000 of cash provided by operating activities. Cash used in investing activities consisted of property improvements and replacements partially offset by net withdrawals from restricted escrows. Cash used in financing activities consisted of distributions to partners offset by advances received from an affiliate of the Managing General Partner. The Partnership invests its working capital reserves in interest bearing accounts.



The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance.  For example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance. Capital improvements planned for the Partnership's property are detailed below.



During the nine months ended September 30, 2006, the Partnership completed approximately $5,960,000 of capital improvements at Springhill Lake Apartments consisting primarily of land improvements and entitlements, major landscaping, building and structural improvements, appliances, HVAC and water and sewer upgrades, and roof and floor covering replacements. These improvements were funded from operations, replacement reserves and advances from an affiliate of the Managing General Partner. The Partnership regularly evaluates the capital improvement needs of the property during the year. During 2006, the Partnership completed the repairs and improvements at the property required to be made in connection with the July 2004 refinancing of the mortgage encumbering the property.











In connection with the refinancing, approximately $675,000 was deposited in an escrow account to fund such repairs and improvements. At September 30, 2006, the funds from the escrow account were fully used. In addition during 2006, the Partnership will complete renovations to one building which was damaged by a fire in June 2005 and complete the clean up work for two other buildings which were destroyed in the fire and will not be rebuilt. The Partnership received insurance proceeds of approximately $1,453,000 during 2005 related to this casualty, of which approximately $663,000 is being held in escrow by the mortgage company. Any portion of the insurance proceeds not used for renovations or clean up costs will be applied to the principal balance of the existing mortgage encumbering the property. Additional improvements and routine capital expenditures are anticipated during 2006.  Such capital expenditures will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property.  The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves.  To the extent that capital improvements are completed the Partnerships distributable cash flow, if any, may be adversely affected at least in the short term.



The Partnership has taken steps to obtain approval from local government authorities for a proposed redevelopment of Springhill Lake Apartments, which includes an increase in the number of units from 2,877 to up to 5,800. As part of the approval process, the Managing General Partner submitted a Conceptual Site Plan (CSP) to local government authorities. On January 12, 2006, the Managing General Partner was notified that approval of the CSP was administratively certified by the local government authorities, effective January 11, 2006.



Prior to moving forward with the proposed redevelopment, the Partnership must obtain approval of a Detailed Site Plan (DSP), which precisely describes the proposed site, buildings and infrastructure, and a Preliminary Plan of Subdivision (PPS). The Managing General Partner estimates that approval of the DSP and PPS by local government authorities could take up to one year. No assurances can be made regarding whether the necessary approvals will be obtained, whether the Partnership will move forward with the proposed redevelopment if such approvals are obtained, or whether there will be any resulting change in the value of the property.



The Partnership's assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness of $113,500,000 requires monthly payments of interest until its maturity. The mortgage bears interest at a variable rate and has a balloon payment of $113,500,000 due on August 1, 2011. The interest rate on the variable rate loan is the Freddie Mac discounted mortgage-backed security index plus 63 basis points. The rate was 5.77% at September 30, 2006. The Managing General Partner may attempt to refinance such indebtedness and/or sell the property prior to such maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing the property through foreclosure.



The Partnership distributed the following amounts during the nine months ended September 30, 2006 and 2005 (in thousands, except per unit data):



|           |                    |             |                    |            
|---------- | ------------------ | ----------- | ------------------ | -----------
|           | Nine Months        | Per Limited | Nine Months        | Per Limited
|           | Ended              | Partnership | Ended              | Partnership
|           | September 30, 2006 | Unit        | September 30, 2005 | Unit       
|           |                    |             |                    |            
|Operations | $4,365             | $6,390      | $2,506             | $3,669     



Future cash distributions will depend on the levels of net cash generated from operations, the timing of the debt maturity, property sale and/or refinancing. The Partnership's cash available for distribution is reviewed on a monthly basis. There











can be no assurance that the Partnership will generate sufficient funds from operations after required capital improvement expenditures to permit significant additional distributions to its partners during 2006 or subsequent periods.



Other



AIMCO and its affiliates owned 523.65 limited partnership units (the "Units") in the Partnership representing 80.69% of the outstanding Units at September 30, 2006. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 80.69% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.



Critical Accounting Policies and Estimates



The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.



Impairment of Long-Lived Asset



The Partnership's investment property is recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of the property may be impaired, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnerships estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.



Real property investment is subject to varying degrees of risk.  Several factors may adversely affect the economic performance and value of the Partnerships investment property.  These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing.  Any adverse changes in these factors could cause impairment of the Partnerships asset.



Capitalized Costs Related to Redevelopment and Construction Projects













The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects. Costs associated with redevelopment projects are capitalized in accordance with Statement of Financial Accounting Standards (SFAS) No. 67, Accounting for Costs and the Initial Rental Operations of Real Estate Properties. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.  The Partnership capitalizes interest, property taxes and operating costs during periods in which redevelopment and construction projects are in progress.



Revenue Recognition



The Partnership generally leases apartment units for twelve-month terms or less.  Commercial building lease terms are generally for terms of 3 to 10 years or month to month. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease.  The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.



ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The Partnership is exposed to market risks from adverse changes in interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Partnerships cash and cash equivalents as well as interest paid on its indebtedness. As a policy, the Partnership does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. The Partnership is exposed to changes in interest rates primarily as a result of its borrowing activities used to maintain liquidity and fund business operations. The debt encumbering the Property bears interest at a variable rate. Based on interest rates at September 30, 2006, a 100 basis point increase or decrease in market interest rates would affect net (loss) income by approximately $1.1 million.



The Partnerships debt obligations at September 30, 2006 consists of a mortgage of $113,500,000 which is due on August 1, 2011.  The mortgage bears interest at a variable rate and requires monthly payments of interest only.  The interest rate on the variable rate loan is the Freddie Mac discounted mortgage-backed security index (DMBS) plus 63 basis points.  The rate was 5.77% at September 30, 2006 and resets monthly. Management believes that the fair value of the Partnerships debt approximates its carrying value as of September 30, 2006.



ITEM 4.

CONTROLS AND PROCEDURES



(a)

Disclosure Controls and Procedures. The Partnerships management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnerships principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnerships disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnerships principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnerships disclosure controls and procedures are effective.













(b)

Internal Control Over Financial Reporting. There have not been any changes in the Partnerships internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.













PART II - OTHER INFORMATION





ITEM 1.

LEGAL PROCEEDINGS



AIMCO Properties L.P. and NHP Management Company, both affiliates of the Managing General Partner, are defendants in a lawsuit alleging that they willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The complaint, filed in the United States District Court for the District of Columbia, attempts to bring a collective action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call." Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management Company failed to comply with the FLSA in compensating maintenance workers for time that they worked in excess of 40 hours in a week.   In June 2005 the court conditionally certified the collective action on both the on-call and overtime issues.  Approximately 1,049 individuals opted in to the class. The defendants moved to decertify the collective action on both issues and the plaintiffs have responded.  Because the court denied plaintiffs motion to certify state subclasses, in September 2005, the plaintiffs filed a class action with the same allegations in the Superior Court of California (Contra Costa County), and in November 2005 in Montgomery County Maryland Circuit Court.  The California and Maryland cases have been stayed pending the outcome of the decertification motion in the District of Columbia case.  Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnerships consolidated financial condition or results of operations.



ITEM 5.

OTHER INFORMATION



None.



ITEM 6.

EXHIBITS



See Exhibit Index.











SIGNATURES







Pursuant to the requirements 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.







|                        |                                              
|----------------------- | ---------------------------------------------
|                        | SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
|                        |                                              
|                        | By:   AIMCO/Springhill Lake Investors GP, LLC
|                        | Managing General Partner                     
|                        |                                              
|Date: November 13, 2006 | By:   /s/Martha L. Long                      
|                        | Martha L. Long                               
|                        | Senior Vice President                        
|                        |                                              
|Date: November 13, 2006 | By:   /s/Stephen B. Waters                   
|                        | Stephen B. Waters                            
|                        | Vice President                               













Springhill Lake Investors Limited Partnership



Index to Exhibits



3.4

Amended and Restated Limited Partnership Agreement and Certificate of Amendment of Springhill Lake Investors Limited Partnership(1)



3.4

(a)

Amendment to Amended and Restated Limited Partnership Agreement of Springhill Lake Investors Limited Partnership dated August 23, 1995 (2)



10

(a)

Amended and Restated Limited Partnership Agreement and Certificate of Amendment of First Springhill Lake Limited Partnership (Partnership Agreements of Second - Ninth Springhill Lake Limited Partnerships are substantially identical)(1)



(p)

Maryland Amended and Restated Multifamily Note dated July 22, 2004 between Springhill Lake Investors Limited Partnership and GMAC Commercial Mortgage Corporation (3)



(q)

Amended and Restated Limited Guaranty dated July 22, 2004 by AIMCO Properties, L.P., for the benefit of GMAC Commercial Mortgage Corporation (3)



(r)

Amended and Restated Payment Guaranty dated July 22, 2004 by the Operating Partnerships (3)



(s)

Repair Escrow Agreement dated July 22, 2004 between the Springhill Lake Investors Limited Partnership and the Operating Partnerships and GMAC Commercial Mortgage Corporation (3)



(t)

Replacement Reserve Agreement dated July 22, 2004 between the Springhill Lake Investors Limited Partnership and the Operating Partnerships and GMAC Commercial Mortgage Corporation (3)



(u)

Maryland Amended and Restated Promissory Note dated July 22, 2004 between Springhill Lake Investors Limited Partnership and the Operating Partnerships (3)



31.1

Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



31.2

Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.1

Certification of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



(1)

Incorporated herein by reference to the Registrant's Registration Statement on Form 10 dated April 30, 1986, as thereafter amended.



(2)

Incorporated herein by reference to the Registrants Current Report on Form 8-K dated August 23, 1995, as filed September 5, 1995.



(3)

Incorporated herein by reference to the Registrants Current Report on Form 8-K dated July 22, 2004, as filed August 4, 2004.











Exhibit 31.1

CERTIFICATION

I, Martha L. Long, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Springhill Lake Investors Limited Partnership;

2.

Based on my knowledge, this report does not contain any untrue statement of a 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 period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this 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 report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused 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 report is being prepared;



(b)

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 report based on such evaluation; and



(c)

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 financial reporting; and



5.

The registrant's other certifying officer(s) 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:  November 13, 2006

/s/Martha L. Long

Martha L. Long

Senior Vice President of AIMCO/Springhill Lake Investors GP, LLC, equivalent of the chief executive officer of the Partnership











Exhibit 31.2

CERTIFICATION

I, Stephen B. Waters, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Springhill Lake Investors Limited Partnership;

2.

Based on my knowledge, this report does not contain any untrue statement of a 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 period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this 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 report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused 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 report is being prepared;



(b)

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 report based on such evaluation; and



(c)

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 financial reporting; and



5.

The registrant's other certifying officer(s) 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:  November 13, 2006

/s/Stephen B. Waters

Stephen B. Waters

Vice President of AIMCO/Springhill Lake Investors GP, LLC equivalent of the chief financial officer of the Partnership











Exhibit 32.1





Certification of CEO and CFO

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002







In connection with the Quarterly Report on Form 10-Q of Springhill Lake Investors Limited Partnership (the "Partnership"), for the quarterly period ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the Chief Executive Officer of the Partnership, and Stephen B. Waters, as the equivalent of the Chief Financial Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:



(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.





| |                        
| | -----------------------
| | /s/Martha L. Long      
| | Name: Martha L. Long   
| | Date: November 13, 2006
| |                        
| | /s/Stephen B. Waters   
| | Name: Stephen B. Waters
| | Date: November 13, 2006





This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.