SecProbe.io

CORRESP
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October 7, 2005

Mr. Jim
B. Rosenberg

Senior
Assistant Chief Accountant

Mail
Stop 6010

U.S.
Securities and Exchange Commission

100
F Street, N.E.

Washington,
DC 20549

Re:                             Security Capital Corporation

Form 10-K for Fiscal Year Ended December 31, 2004

Filed June 28, 2005

File No. 001-07921

Dear
Mr. Rosenberg:

This letter is submitted on behalf of Security
Capital Corporation (the “Company”) in response to your letter dated September 23,
2005 relating to the above-mentioned filing by the Company.  For convenience, the Staff’s comment is set
forth below prior to the Company’s response.

Notes to Consolidated Financial Statements, Note 4.  Significant Accounting Policies, Assignment
Development Costs, page 39

Comment No. 1

We note your response to comment number 1.  Please tell us how your exclusion from the
income statement of assignment development costs incurred and reimbursement of
these costs complies with U.S. GAAP.
Please address EITF 99-19 and EITF 01-14 in your response.  In your response, tell us, for each period
presented the amount of assignment development costs incurred.

Registrant’s Response

A.            Facts

At the time that a franchisee (the “Franchisee”)
enters into a Franchise Agreement (the “Franchise Agreement”) with Primrose
School Franchising Company (“PSFC”), a wholly owned

subsidiary
of Primrose Holdings Inc. (“Primrose”), the Company’s 98.5%-owned subsidiary,
the Franchisee may also enter into an Agreement to Assign Real Estate Purchase
Agreement (the “Assignment Agreement”).
Upon execution of the Franchise Agreement, the Franchisee makes a
payment of $50,000 to PSFC, which PSFC is entitled to retain if the Franchisee
defaults under either the Franchise Agreement or the Assignment Agreement.

As franchisor, PSFC’s initial services to the
Franchisee under the Assignment Agreement involve providing management
consulting assistance to the Franchisee with respect to various matters
relating to site location and preparation for the construction of the Franchisee’s
Primrose School (“Development Services”).
Alternatively, the Franchisee may provide the Development Services
itself, or retain someone other than PSFC to provide such Development Services.  Under the Assignment Agreement, PSFC provides
pre-construction assistance to the Franchisee in (i) locating a site
suitable for the Franchisee’s Primrose School; (ii) preparing a site location
analysis, including a description of the property, a demographic profile, a
competitive analysis, and community information; (iii) obtaining a title
commitment from a title insurance company; (iv) providing the Franchisee’s
lender with requested information to facilitate the lender’s approval; (v) working
with the site architect, surveyor, engineer, and other professionals to prepare
environmental and soil reports, drawings, and other documentation necessary to
obtain building and zoning permits from local government authorities; and (vi) coordinating
all closing matters, including the work of the title company, the settlement
attorney, the appraiser, and the lender, necessary for the Franchisee to
purchase the land for its Primrose School.

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1.             Development Services Fixed Fees

Under the Assignment Agreement, PSFC provides
Development Services for a fixed fee of $20,000.  PSFC uses its own employees to provide
Development Services, expenses its own direct costs as incurred, and recognizes
its fixed fee as income when the Franchisee’s purchase of the property for its
Primrose School closes.  The Franchisee
pays PSFC $15,000 of the $20,000 fixed fee for Development Services upon
execution of the Assignment Agreement, with the Company treating that $15,000
payment as deferred revenue until the closing.

In addition to paying PSFC’s $20,000 fixed fee for
Development Services, under the Assignment Agreement the Franchisee is also
obligated to reimburse PSFC for any independent third-party costs it incurs on
behalf of the Franchisee with respect to the siting and preparation for construction
of the Franchisee’s Primrose School.
Such third-party costs incurred on behalf of the Franchisee may be
broken down into three categories:

2.             Third-Party Professional Costs

As noted above, for its $20,000 fixed fee, PSFC performs a management
consulting role, including providing assistance to the Franchisee with respect
to securing and coordinating the services of various licensed professionals who
are critical to the site location and pre-construction process for a Primrose School.  While PSFC may, for example, provide a location
analysis prepared by its own employees as part of the Development Services
provided for its fixed fee, PSFC is not licensed to perform — and, therefore,
its employees cannot perform — various required professional services that can
only be performed in a given jurisdiction by licensed professionals, such as an
architect, surveyor, engineer, appraiser, attorney, or other licensed independent
professionals (“Third-Party Professionals”).
In such cases, the Assignment Agreement makes it clear that PSFC’s Development
Services, covered by the $20,000 fixed fee, do not include the costs of the
professional services that need to be performed by Third-Party Professionals;
that PSFC will procure such services of Third-Party Professionals on the
Franchisee’s behalf; that the Third-Party Professionals will be made aware that
their services are being performed for the benefit of the

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Franchisee; that the
Franchisee will have assigned recourse against the Third-Party Professionals if
any issues arise as to the quality of the professional services they performed;
and that, at the closing, the Franchisee will reimburse PSFC, without markup,
additional fees, or other adjustment, for any funds that PSFC has advanced on
the Franchisee’s behalf to pay the costs of the services provided by
Third-Party Professionals.

In a typical case, the total costs of the services of Third-Party
Professionals involved with the site location and pre-construction process for
a given Primrose School range from $80,000 to $140,000.  Of that amount, PSFC typically advances
between 70% and 90% of those total costs to the Third-Party Professionals for
services invoiced prior to the closing, with the Franchisee paying the
Third-Party Professionals directly for services invoiced at or after the
closing.  The Company records the costs of
Third-Party Professionals that it incurs on behalf of a Franchisee as a
liability on its balance sheet, with an offsetting receivable from the Franchisee.

In the usual case, PSFC is obligated to pay the Third-Party Professionals
for services invoiced to PSFC, irrespective of whether the Franchisee
reimburses PSFC for those costs incurred on the Franchisee’s behalf.  PSFC does not, however, engage the services
of the Third-Party Professionals until the Franchisee executes both the
Franchise Agreement and the Assignment Agreement, the Franchisee has paid PSFC the
$50,000 payment under the Franchise Agreement and $15,000 of PSFC’s $20,000
fixed fee for Development Services, and the Franchisee is contractually
obligated to pay PSFC the remainder of its $20,000 Development Services fee and
to reimburse PSFC for the costs that it incurs for third-party services procured
on behalf of the Franchisee.

In the event that the Franchisee defaults, and the closing does not occur,
or the closing does occur, but the Franchisee fails to reimburse PSFC for the
total costs of the Third-Party Professional services that PSFC has paid on
behalf of the Franchisee, PSFC has legal rights against the Franchisee for the
funds that PSFC has paid Third-Party Professionals for services rendered on
behalf of the Franchisee, including

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retention of the
Franchisee’s $50,000 payment under the Franchise Agreement.  At the time PSFC records its liability to the
Third-Party Professionals and its corresponding receivable from the Franchisee,
PSFC also offsets in part its receivable from the Franchisee with a reserve
reflecting PSFC’s experience with defaults or other instances in which the
Franchisee fails to fully reimburse PSFC for its payments to Third-Party
Professionals on behalf of the Franchisee.
That reserve is treated as an expense that reduces the Company’s income,
but PSFC’s payment of Third-Party Professional costs on behalf of the
Franchisee and the Franchisee’s reimbursement of those amounts do not otherwise
flow through the Company’s income statement.

3.             Incidental Out-of-Pocket Costs

In addition to the costs of Third-Party Professionals that PSFC incurs on
behalf of the Franchisee, PSFC also incurs other incidental out-of-pocket
costs, primarily travel costs for PSFC employees (“Incidental Out-of-Pocket
Costs”), which are also reimbursable by the Franchisee under the Assignment
Agreement.  The Incidental Out-of-Pocket
Costs incurred by PSFC in providing Development Services for a given Primrose
School typically range from $1,000 to $2,000.

PSFC incurs a significant portion of the Incidental Out-of-Pocket Costs
after the Franchisee has executed both the Franchise Agreement and the Assignment
Agreement; PSFC itself is obligated to pay the Incidental Out-of-Pocket Costs
to the third-party vendor, such as an airline; and the Assignment Agreement
requires the Franchisee to reimburse PSFC for these costs without markup,
additional fees, or other adjustment.
Unlike the case with Third-Party Professional services, however, the
vendors for the Incidental Out-of-Pocket Costs are not made aware of the
existence of the Franchisee on whose behalf PSFC is rendering Development Services
necessitating the incurrence of the Incidental Out-of-Pocket Costs, and the
Franchisee does not have recourse against the vendor if a claim should arise
with respect to the vendor’s services.
As was the case with Third-Party Professional services, Incidental
Out-of-Pocket Costs are recorded as liabilities; the Franchisee’s obligation to
reimburse PSFC for those costs is recorded as a

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receivable; PSFC sets up a reserve against that receivable;
and, other than the reserve being recorded as an expense, the amounts do not
flow through the Company’s income statement.

4.             Land Acquisition Costs

The third category of costs sometimes incurred by PSFC on behalf of
Franchisees under the Assignment Agreement is land acquisition costs (“Land
Acquisition Costs”).  In almost all
cases, Franchisees purchase the land on which to construct their Primrose
Schools directly from the landowner.  In
such cases, PSFC does not take title to the land, even as agent for the Franchisee,
and the acquisition costs for the land are not advanced by PSFC.

In certain instances, however, PSFC has taken temporary title to the land
from the landowner for the benefit of a Franchisee to facilitate the transfer
to a Franchisee that has yet to secure financing.  On average, PSFC maintained title for less
than four months before the Franchisee received financing and purchased the
land from PSFC.

PSFC incurs Land Acquisition Costs only when the purchase agreement with
the landowner is about to expire and building permit or zoning issues remain to
be resolved before the Franchisee can secure the financing needed to purchase
the land for its Primrose School.  In
such cases, PSFC may take temporary title to the land for the benefit of the
Franchisee; the Franchisee is obligated under the Assignment Agreement to
purchase the land from PSFC as soon as the Franchisee’s financing goes through;
PSFC is obligated to transfer title to the Franchisee at the same cost that
PSFC paid for the land, without markup, fees, or other adjustment (other than
interest for the period, which the Company records as interest income); and the
Franchisee is obligated to reimburse PSFC for its Land Acquisition Costs.

PSFC never purchases such land on a speculative basis, but only to
facilitate the transfer of a specific piece of property to a specific
Franchisee who has executed both a Franchise Agreement and an Assignment
Agreement.  PSFC carries no inventory of
land for later sale to Franchisees.  PSFC
makes no profit from the purchase on behalf of and sale of land to Franchisees.

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B.            Analysis

In determining the proper accounting treatment for
the independent third-party costs incurred by PSFC on behalf of Franchisees in
performing Development Services for Franchisees, the Company has referred to SFAS
45,  Accounting for Franchise
Fee Revenue, as well as EITF 99-19, Reporting
Revenue Gross as a Principal versus Net as an Agent, and EITF 01-14,
Income Statement Characterization of Reimbursements
Received for “Out-of-Pocket” Expenses Incurred.

1.             Specific Guidance Under SFAS 45

In determining not to have PSFC’s third-party costs
incurred on behalf of Franchisees and Franchisees’ reimbursement of those costs
flow through the Company’s income statement, the Company starts with the
franchisor-franchisee nature of the relationship between PSFC and the
Franchisee.  The Third-Party
Professional, Incidental Out-of-Pocket, and Land Acquisition Costs described above
are incurred on behalf of a Franchisee that has executed both a Franchise
Agreement and an Assignment Agreement.

As with other areas with specialized accounting
rules, U.S. GAAP has specific rules to address the unique legal nature of
the franchisor-franchisee relationship.
Those specific rules are found in SFAS 45.

Paragraph 16 of SFAS 45 provides that, when
franchisors engage in transactions for franchisees — such as placing orders for
inventory and equipment, or selling products and services acquired from third
parties on behalf of the franchisee — at no profit to the franchisor, the
franchisor is, in substance, acting as the agent of the franchisee.  In such cases, the franchisor accounts for
such transactions as receivables and payables in its balance sheet, and not as items
of revenue and expense.

In other words, one defining aspect characterizing
the franchisor-franchisee relationship is the franchisor’s performing such
procurement services on behalf of its franchisees at no profit to the franchisor.  Under SFAS 45, that fact alone indicates — given
the inherent nature of the franchise

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relationship — that the relationship between
the franchisor and franchisee is in substance an agency relationship with
respect to such third-party products and services.

Thus, under SFAS 45, PSFC, as the franchisor, is
acting as the agent for the Franchisee when PSFC incurs third-party costs on
behalf of the Franchisee.  By entering
into the Franchise Agreement and the Assignment Agreement, the Franchisee has
elected to have PSFC assist it in completing the required Development
Services.  The Franchisee is not
obligated to retain PSFC and can elect to perform Development Services on its
own or retain another agent.  For its
services, PSFC receives a fixed fee plus reimbursement of its third-party
costs.  PSFC does not earn any profit on
the Third-Party Professional, Incidental Out-of-Pocket, and Land Acquisition Costs
it incurs on behalf of the Franchisee under the Assignment Agreement.  Accordingly, the Company’s accounting
treatment for these costs is in accordance with SFAS 45.

2.             General Guidance Under EITF 99-19 and 01-14

Even if the relationship between PSFC and the
Franchisee were not a franchisor-franchisee relationship governed by SFAS 45,
the result would be the same under general U.S. GAAP principles governing gross
revenue reporting as principal versus net revenue reporting as agent.  Under both EITF 99-19 and EITF 01-14, the
Emerging Issues Task Force (“EITF”) takes the position that, when the “gross”
versus “net” reporting issue is not governed by another, more specific
accounting authority — such as SFAS 45 — the matter should be resolved by an
analysis of the facts and circumstances at hand to determine whether various