edatax10q1q09.htm

INDEX

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2009 and 2008	2
	Condensed Consolidated Statements of Partners’ Capital and Comprehensive Income (Loss) for the three months ended March 31, 2009 and 2008	3
	Condensed Statement of Cash Flows for the three months ended March 31, 2009 and 2008	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4	Controls and Procedures	29

PART II – OTHER INFORMATION

Item 1A	Risk Factors	30
Item 6	Exhibits	30

SIGNATURES

This report (including, but not limited to, the information contained in “Management's Discussion and Analysis of Financial Condition and Results of Operations") contains forward-looking statements that reflect management's current beliefs and estimates of future economic circumstances, industry conditions, the Company's performance and financial results. All statements, trend analysis and other information concerning possible or assumed future results of operations of the Company and the investments it has made constitute forward-looking statements. Beneficial Unit Certificate (“BUC”) holders and others should understand that these forward-looking statements are subject to numerous risks and uncertainties and a number of factors could affect the future results of the Company and could cause those results to differ materially from those expressed in the forward-looking statements contained herein. These factors include general economic and business conditions such as the availability and credit worthiness of prospective tenants, lease rents, operating expenses, the terms and availability of financing for properties financed by the tax-exempt mortgage revenue bonds owned by the Partnership, adverse changes in the real estate markets from governmental or legislative forces, lack of availability and credit worthiness of counterparties to finance future acquisitions and interest rate fluctuations and other items discussed under “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and in Item 1A of Part II of this report.

	March 31,			December 31,
	2009			2008
Assets
Cash and cash equivalents	$	11,457,659		$	7,196,274
Restricted cash		36,533,465			12,848,614
Interest receivable		1,141,623			769,201
Tax-exempt mortgage revenue bonds, at fair value		48,308,320			44,492,526
Real estate assets:
Land		12,519,551			10,774,790
Buildings and improvements		92,172,466			86,903,743
Real estate assets before accumulated depreciation		104,692,017			97,678,533
Accumulated depreciation		(18,478,464	)		(17,499,670	)
Net real estate assets		86,213,553			80,178,863
Other assets		4,195,104			4,263,937
Assets of discontinued operations		-			8,113,861
Total Assets	$	187,849,724		$	157,863,276

Liabilities
Accounts payable, accrued expenses and other liabilities	$	3,415,697		$	3,380,666
Distribution payable		2,432,327			2,432,327
Debt financing		76,565,237			56,981,577
Mortgages payable		37,372,130			30,908,790
Liabilities of discontinued operations		-			23,264,589
Total Liabilities		119,785,391			116,967,949

Commitments and Contingencies (Note 12)

Partners' Capital
General partner		873,352			261,785
Beneficial Unit Certificate holders		96,288,920			93,277,480
Unallocated deficit of variable interest entities		(29,168,124	)		(52,711,654	)
Total Partners' Capital		67,994,148			40,827,611
Noncontrolling interest (Note 13)		70,185			67,716
Total Capital		68,064,333			40,895,327
Total Liabilities and Capital	$	187,849,724		$	157,863,276

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

		For the Three Months Ended,
		March 31, 2009			March 31, 2008
Revenues:
	Property revenues	$	3,751,243		$	3,313,395
	Mortgage revenue bond investment income		948,344			1,208,564
	Other interest income		34,015			24,430
	Gain on sale of securities		-			3,704
Total Revenues			4,733,602			4,550,093
Expenses:
	Real estate operating (exclusive of items shown below)		2,360,643			1,959,162
	Depreciation and amortization		1,580,872			1,184,524
	Interest		1,190,869			1,158,441
	General and administrative		576,762			431,066
Total Expenses			5,709,146			4,733,193
Loss from continuing operations			(975,544	)		(183,100	)
Income from discontinued operations (including gain on bond redemption of $26,514,809 in 2009)			26,734,754			193,757
Net income			25,759,210			10,657
	Less: net loss attributable to noncontrolling interest		3,860			2,745
Net income - America First Tax Exempt Investors, L. P.		$	25,763,070		$	13,402

Net income allocated to:
	General Partner		574,090			6,662
	BUC holders		1,645,450			659,523
	Unallocated gain (loss) of variable interest entities		23,543,530			(652,783	)
	Noncontrolling interest		(3,860	)		(2,745	)
		$	25,759,210		$	10,657

Limited partners' interest in net income per unit (basic and diluted):
Income from continuing operations		$	0.12		$	0.05
Income from discontinued operations			-			-
Net income, basic and diluted, per unit		$	0.12		$	0.05

Weighted average number of units outstanding,
	basic and diluted		13,512,928			13,512,928

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

				Beneficial Unit Certificate holders					Unallocated									Accumulated Other Comprehensive
									deficit of
	General								variable interest			Noncontrolling
	Partner			# of Units		Amount			entities			Interest			Total			Income (Loss)
Balance at January 1, 2009	$	261,785			13,512,928	$	93,277,480		$	(52,711,654	)	$	67,716		$	40,895,327		$	(16,857,807	)
Comprehensive income (loss):
Noncontrolling interest contribution													6,329			6,329
Net income (loss)		574,090			-		1,645,450			23,543,530			(3,860	)		25,759,210			-
Unrealized gain on securities		38,358			-		3,797,436			-			-			3,835,794			3,835,794
Total comprehensive income (loss)																29,601,333
Distributions paid or accrued		(608,082	)		-		(1,824,245	)		-			-			(2,432,327	)		-
Reclassification of Tier II income		607,201			-		(607,201	)		-			-			-			-
Balance at March 31, 2009	$	873,352			13,512,928	$	96,288,920		$	(29,168,124	)	$	70,185		$	68,064,333		$	(13,022,013	)


				Beneficial Unit Certificate holders					Unallocated									Accumulated Other Comprehensive
									deficit of
	General								variable interest			Noncontrolling
	Partner			# of Units		Amount			entities			Interest			Total			Income (Loss)
Balance at January 1, 2008	$	348,913			13,512,928	$	112,880,314		$	(48,954,760	)	$	48,756		$	64,323,223		$	(3,581,844	)
Comprehensive income (loss):
Net income (loss)		6,662			-		659,523			(652,783	)		(2,745	)		10,657			-
Unrealized loss on securities		(52,131	)		-		(5,160,934	)		-			-			(5,213,065	)		(5,213,065	)
Total comprehensive income (loss)																(5,202,408	)
Distributions paid or accrued		(18,427	)		-		(1,824,245	)		-			-			(1,842,672	)		-
Balance at March 31, 2008	$	285,017			13,512,928	$	106,554,658		$	(49,607,543	)	$	46,011		$	57,278,143		$	(8,794,909	)

	For the three months ended
	March 31, 2009			March 31, 2008
Cash flows from operating activities:
Net income	$	25,759,210		$	10,657
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		1,580,872			1,351,431
Non-cash loss on derivatives		453,366			183,191
Gain on sale of securities		-			(3,704	)
Gain on sale of discontinued operations		(26,514,809	)		-
Changes in operating assets and liabilities, net of effect of acquisitions
Increase in interest receivable		(372,422	)		(242,145	)
Increase in other assets		(527,907	)		(474,407	)
Decrease in accounts payable, accrued expenses and other liabilities		(1,287,916	)		(481,818	)
Net cash (used) provided by operating activities		(909,606	)		343,205
Cash flows from investing activities:
Proceeds from the sale of tax-exempt mortgage revenue bonds		-			3,433,635
Proceeds from sale of discontinued operations		32,000,000			-
Acquisition of tax-exempt mortgage revenue bonds		-			(12,435,000	)
Increase in restricted cash		(189,709	)		(908,867	)
Restricted cash - debt collateral		(23,552,000	)		-
Capital expenditures		(178,536	)		(150,782	)
Acquisition of partnerships, net of cash acquired		(729,964	)		-
Principal payments received on tax-exempt mortgage revenue bonds		20,000			15,000
Principal payments received on taxable loans		-			100,000
Net cash provided (used) by investing activities		7,369,791			(9,946,014	)
Cash flows from financing activities:
Distributions paid		(2,432,327	)		(2,432,327	)
Derivative settlements		(84,388	)		(12,194	)
Increase in liabilities related to restricted cash		189,709			908,867
Principal payments on debt financing and mortgage payable		(36,660	)		-
Net cash used by financing activities		(2,363,666	)		(1,535,654	)
Net increase (decrease) in cash and cash equivalents		4,096,519			(11,138,463	)
Cash and cash equivalents at beginning of period, including cash and cash equivalents of discontinued operations of $164,866 and $145,278, respectively		7,361,140			14,821,946

Cash and cash equivalents at end of period, including cash and cash equivalents of discontinued operations of $0 and $244,434, respectively	$	11,457,659		$	3,683,483
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	1,048,282		$	457,281
Capital expenditures financed through accounts payable	$	-		$	64,066
Liabilites assumed in the acquisition of partnerships	$	6,506,329		$	-
Distributions declared but not paid	$	2,432,327		$	1,842,672

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

America First Tax Exempt Investors, L.P. (the “Partnership”) was formed on April 2, 1998 under the Delaware Revised Uniform Limited Partnership Act for the purpose of acquiring, holding, selling and otherwise dealing with a portfolio of federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential properties. Interest on these bonds is excludable from gross income for federal income tax purposes. As a result, most of the income earned by the Partnership is exempt from federal income taxes. Our general partner is America First Capital Associates Limited Partnership Two (“AFCA 2” or “General Partner”). The Partnership will terminate on December 31, 2050 unless terminated earlier under provisions of its Agreement of Limited Partnership.

Recent economic conditions have been unprecedented and challenging, with significantly tighter credit conditions and slower growth expected for 2009. As a result of these conditions, the cost and availability of credit has been, and may continue to be, adversely affected in all markets in which we operate. Concern about the stability of the markets generally, and the strength of counterparties specifically, has led many lenders and institutional investors to reduce, and in some cases, cease to provide, funding to borrowers. If these market and economic conditions continue, they may limit the Partnership’s ability to replace or renew maturing liabilities on a timely basis, access the capital markets to meet liquidity and capital expenditure requirements and may result in adverse effects on the Partnership’s financial condition and results of operations.

Although the consequences of these conditions and their impact on the Partnership’s ability to pursue its plan to grow through investments in additional tax-exempt bonds secured by first mortgages on affordable multifamily housing projects are not fully known, the Partnership does not anticipate that its existing assets will be adversely affected in the long-term. The Partnership believes the current tightening of credit may create opportunities for additional investments consistent with its investment strategy because it may result in fewer parties competing to acquire tax-exempt bonds issued to finance affordable housing. There can be no assurance that the Partnership will be able to finance additional acquisitions of tax-exempt bonds through either additional equity or debt financing. If uncertainties in these markets continue, the markets deteriorate further or the Partnership experiences further deterioration in the values of its investment portfolio, the Partnership may incur impairments to its investment portfolio which could negatively impact the its financial statements.

The consolidated financial statements of the “Company” reported in this Form 10-Q include the assets and results of operations of the Partnership, the multifamily apartment properties (the “MF Properties”) owned by various limited partnerships in which one of the Partnership’s wholly-owned subsidiaries (each a “Holding Company”) holds a 99% limited partner interest and five other entities in which the Partnership does not hold an ownership interest but which own multifamily apartment properties financed with tax-exempt bonds held by the Partnership and which are treated as variable interest entities of which the Partnership has been determined to be the primary beneficiary (the “VIEs”). Stand alone financial information of the Partnership reported in this Form 10-Q includes only the assets and results of operation of the Partnership and the MF Properties without the consolidation of the VIEs. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership, the MF Properties and the VIEs have been eliminated in consolidation. The Partnership does not presently believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) will impact the Partnership’s tax status, amounts reported to Beneficial Unit Certificate (“BUC”) holders on IRS Form K-1, the Partnership’s ability to distribute tax-exempt income to BUC holders, the current level of quarterly distributions or the tax-exempt status of the underlying mortgage revenue bonds.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying interim unaudited condensed consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. These condensed consolidated financial statements and notes have been prepared consistently with the 2008 Form 10-K with the exception of the reclassification of certain prior-year amounts on the Company’s Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Partners’ Capital and Comprehensive Income (Loss) and Condensed Consolidated Statements of Cash Flows in accordance with the Company’s adoption of SFAS No. 160 (see Note 13) on January 1, 2009, which required retrospective application. In the opinion of management, all normal and recurring adjustments (consisting of normal and recurring accruals) necessary to present fairly the financial position as of March 31, 2009, and the results of operations for all periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

The Agreement of Limited Partnership of the Partnership contains provisions for the distribution of Net Interest Income, Net Residual Proceeds and Liquidation Proceeds, for the allocation of income or loss from operations and for the allocation of income and loss arising from a repayment, sale or liquidation of investments. Income and losses will be allocated to each BUC holder on a periodic basis, as determined by the General Partner, based on the number of BUCs held by each BUC holder as of the last day of the period for which such allocation is to be made. Distributions of Net Interest Income and Net Residual Proceeds will be made to each BUC holder of record on the last day of each distribution period based on the number of BUCs held by each BUC holder as of such date. For purposes of the Agreement of Limited Partnership, cash distributions, if any, received by the Partnership from the Investment in Multifamily Apartment Properties (See Note 4) will be included in the Partnership’s Interest Income and cash distributions received by the Partnership from the sale of such properties will be included in the Partnership Residual Proceeds.

Cash distributions are currently made on a quarterly basis but may be made on a monthly or semiannual basis at the election of AFCA 2. On each distribution date, Net Interest Income is distributed 99% to the BUC holders and 1% to AFCA 2 and Net Residual Proceeds are distributed 100% to BUC holders except that Net Interest Income and Net Residual Proceeds representing contingent interest in an amount equal to 0.9% per annum of the principal amount of the mortgage bonds on a cumulative basis (defined as Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2), respectively) are distributed 75% to the BUC holders and 25% to AFCA 2.

The Agreement of Limited Partnership also allows the General Partner to withhold, from time to time, Interest Income and Residual Proceeds and to place these amounts into a reserve to provide funding for working capital or additional investments. In 2005, the General Partner placed Net Residual Proceeds representing contingent interest of approximately $10.9 million into the reserve. If and when the General Partner determines that this contingent interest is no longer to be held in reserve and is to be distributed, it is anticipated that it will be distributed as Net Residual Proceeds (Tier 2) as defined in the Agreement of Limited Partnership. As such, these funds will be distributed 75% to the BUC holders and 25% to the General Partner. On March 31, 2009, the General Partner determined that approximately $2.4 million of the Net Residual Proceeds previously placed in reserve were no longer to be held in reserve and would be distributed as Net Residual Proceeds (Tier 2). Accordingly, an entry has been recorded in the Company’s consolidated financial statements to allocate such Net Residual Proceeds 75% to the BUC holders and 25% to the General Partner in preparation for such distribution. As of March 31, 2009, approximately $2.3 million representing Tier 2 income has not been distributed and remains in the reserve.

The Partnership operates for the purpose of acquiring, holding, selling and otherwise dealing with a portfolio of federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential apartments. Each multifamily property financed with tax-exempt mortgage bonds held by the Partnership is owned by a separate entity. The Partnership does not hold an equity ownership interest in any of these entities; however, the bonds held by the Partnership create a variable interest in the entities. Under FIN 46R, the Partnership must make an evaluation of these entities to determine if they meet the definition of a VIE. If the underlying entity is determined to be a VIE, the Partnership must then determine if it is the primary beneficiary of the VIE pursuant to the terms of each tax-exempt mortgage revenue bond and the criteria within FIN 46R. FIN 46R is a complex standard that requires significant analysis and judgment.

The Partnership has determined that five of the entities financed by tax-exempt bonds owned by the Partnership at March 31, 2009 are held by VIEs and that the Partnership is the primary beneficiary of these VIEs. The Partnership determined that eight of the entities financed by tax-exempt bonds owned by the Partnership at December 31, 2008 were held by VIEs and that the Partnership was the primary beneficiary of these VIEs. As of December 31, 2008, five of these consolidated VIEs are included in the results from continuing operations while three are presented as discontinued operations.

In February 2009, the three tax-exempt mortgage revenue bonds secured by assets of the VIEs presented as discontinued operations as of December 31, 2008, were redeemed. In order to properly reflect the transaction under FIN 46R, the Company recorded the redemption of the bonds as a sale of the properties as though they were owned by the Company. The transaction was completed for a total purchase price of $32.0 million resulting in a gain on sale for GAAP reporting of approximately $26.5 million. The redemption of the bonds did not result in a taxable gain to the Partnership. The redeemed bonds were collateral on the Company’s tender option bond credit facility (“TOB facility”) agreement with Bank of America. As of March 31, 2009, the Company has placed on deposit with Bank of America $23.6 million in restricted cash as replacement collateral. Such funds on deposit may be used to reduce the amount of debt outstanding on the TOB facility.

On a stand-alone basis, the Partnership received approximately $30.9 million of net proceeds from the bond redemption. These proceeds represent the repayment of the bond par values plus accrued base interest and approximately $2.3 million of contingent interest. The contingent interest represents additional earnings to the Partnership beyond the recurring base interest earned on these bonds. The contingent interest also represents additional Cash Available for Distribution to the BUC holders of approximately $1.7 million, or $0.13 per unit.

The consolidated financial statements of the Company include the assets, liabilities and results of operation of the Partnership and the VIEs. Financial information of the Partnership, on a stand-alone basis, includes only the assets, liabilities and results of operations of the Partnership and the MF Properties without the impact of the consolidation of the VIEs. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership, the MF Properties and the VIEs have been eliminated.

	Partnership as of March 31, 2009			VIEs as of March 31, 2009			Consolidation-Elimination as of March 31, 2009			Total as of March 31, 2009
Assets
Cash and cash equivalents	$	11,359,277		$	98,382		$	-		$	11,457,659
Restricted cash		33,839,650			2,693,815			-			36,533,465
Interest receivable		5,275,484			-			(4,133,861	)		1,141,623
Tax-exempt mortgage revenue bonds		94,561,074			-			(46,252,754	)		48,308,320
Real estate assets:
Land		6,736,351			5,783,200			-			12,519,551
Buildings and improvements		37,059,526			55,112,940			-			92,172,466
Real estate assets before accumulated depreciation		43,795,877			60,896,140			-			104,692,017
Accumulated depreciation		(1,920,273	)		(16,558,191	)		-			(18,478,464	)
Net real estate assets		41,875,604			44,337,949			-			86,213,553
Other assets		15,842,182			1,307,025			(12,954,103	)		4,195,104
Assets of discontinued operations		-			-			-			-
Total Assets	$	202,753,271		$	48,437,171		$	(63,340,718	)	$	187,849,724

Liabilities
Accounts payable, accrued expenses and other	$	1,753,190		$	32,954,990		$	(31,292,483	)	$	3,415,697
Distribution payable		2,432,327			-			-			2,432,327
Debt financing		76,565,237			-			-			76,565,237
Mortgage payable		37,372,130			51,670,000			(51,670,000	)		37,372,130
Liabilities of discontinued operations		-			-			-			-
Total Liabilities		118,122,884			84,624,990			(82,962,483	)		119,785,391
Partners' Capital
General Partner		873,352			-			-			873,352
Beneficial Unit Certificate holders		83,686,850			-			12,602,070			96,288,920
Unallocated deficit of variable interest entities		-			(36,187,819	)		7,019,695			(29,168,124	)
Total Partners' Capital		84,560,202			(36,187,819	)		19,621,765			67,994,148
Noncontrolling interest		70,185			-			-			70,185
Total Capital		84,630,387			(36,187,819	)		19,621,765			68,064,333
Total Liabilities and Partners' Capital	$	202,753,271		$	48,437,171		$	(63,340,718	)	$	187,849,724

	Partnership as of December 31, 2008			VIEs as of December 31, 2008			Consolidation-Elimination as of December 31, 2008			Total as of December 31, 2008
Assets
Cash and cash equivalents	$	7,068,297		$	127,977		$	-		$	7,196,274
Restricted cash		10,836,084			2,012,530			-			12,848,614
Interest receivable		4,249,760			-			(3,480,559	)		769,201
Tax-exempt mortgage revenue bonds		112,991,268			-			(68,498,742	)		44,492,526
Real estate assets:
Land		4,991,590			5,783,200			-			10,774,790
Buildings and improvements		31,877,661			55,026,082			-			86,903,743
Real estate assets before accumulated depreciation		36,869,251			60,809,282			-			97,678,533
Accumulated depreciation		(1,519,845	)		(15,979,825	)		-			(17,499,670	)
Net real estate assets		35,349,406			44,829,457			-			80,178,863
Other assets		16,332,459			1,383,674			(13,452,196	)		4,263,937
Assets of discontinued operations		-			8,113,861			-			8,113,861
Total Assets	$	186,827,274		$	56,467,499		$	(85,431,497	)	$	157,863,276

Liabilities and Owners' Equity
Accounts payable, accrued expenses and other	$	1,571,177		$	31,565,556		$	(29,756,067	)	$	3,380,666
Distribution Payable		2,432,327			-			-			2,432,327
Debt financing		76,565,237			-			(19,583,660	)		56,981,577
Mortgage payable		30,908,790			51,670,000			(51,670,000	)		30,908,790
Liabilities of discontinued operations		-			42,900,305			(19,635,716	)		23,264,589
Total Liabilities		111,477,531			126,135,861			(120,645,443	)		116,967,949
Partners' Capital
General Partner		261,785			-			-			261,785
Beneficial Unit Certificate holders		75,020,242			-			18,257,238			93,277,480
Unallocated deficit of variable interest entities		-			(69,668,362	)		16,956,708			(52,711,654	)
Total Partners' Capital		75,282,027			(69,668,362	)		35,213,946			40,827,611
Noncontrolling interest		67,716			-			-			67,716
Total Capital		75,349,743			(69,668,362	)		35,213,946			40,895,327
Total Liabilities and Partners' Capital	$	186,827,274		$	56,467,499		$	(85,431,497	)	$	157,863,276

	Partnership			VIEs			Consolidation-Elimination For the Three Months Ended			Total
	For the Three			For the Three						For the Three
	Months Ended			Months Ended						Months Ended
	Mar. 31, 2009			Mar. 31, 2009			Mar. 31, 2009			Mar. 31, 2009
Revenues:
Property revenues	$	1,631,698		$	2,119,545		$	-		$	3,751,243
Mortgage revenue bond investment income		4,643,013			-			(3,694,669	)		948,344
Other interest income		34,015			-			-			34,015
Gain on sale of securities		(127,495	)		-			127,495			-
Total Revenues	$	6,181,231		$	2,119,545		$	(3,567,174	)	$	4,733,602
Expenses:
Real estate operating (exclusive of items shown below)		1,035,657			1,324,986			-			2,360,643
Loan loss expense		74,999			-			(74,999	)		-
Depreciation and amortization		1,005,711			589,615			(14,454	)		1,580,872
Interest		1,272,422			1,510,844			(1,592,397	)		1,190,869
General and administrative		576,762			-			-			576,762
Total Expenses	$	3,965,551		$	3,425,445		$	(1,681,850	)	$	5,709,146
Income (loss) from continuing operations		2,215,680			(1,305,900	)		(1,885,324	)		(975,544	)
Income (loss) from discontinued operations		-			34,786,444			(8,051,690	)		26,734,754
Net income (loss)	$	2,215,680		$	33,480,544		$	(9,937,014	)	$	25,759,210
Less: net loss attributable to noncontrolling interest		3,860			-			-			3,860
Net income (loss) - America First Tax Exempt Investors, L. P.	$	2,219,540		$	33,480,544		$	(9,937,014	)	$	25,763,070
	Partnership			VIEs			Consolidation-Elimination For the Three Months Ended			Total
	For the Three			For the Three						For the Three
	Months Ended			Months Ended						Months Ended
	Mar. 31, 2008			Mar. 31, 2008			Mar. 31, 2008			Mar. 31, 2008
Revenues:
Property revenues	$	1,093,036		$	2,220,359		$	-		$	3,313,395
Mortgage revenue bond investment income		2,636,138			-			(1,427,574	)		1,208,564
Other interest income		24,430			-			-			24,430
Gain on the sale of securities		3,704			-			-			3,704
Total Revenues	$	3,757,308		$	2,220,359		$	(1,427,574	)	$	4,550,093
Expenses:
Real estate operating (exclusive of items shown below)		509,049			1,450,113			-			1,959,162
Depreciation and amortization		630,198			571,086			(16,760	)		1,184,524
Interest		1,523,555			1,467,861			(1,832,975	)		1,158,441
General and administrative		431,066			-			-			431,066
Total Expenses	$	3,093,868		$	3,489,060		$	(1,849,735	)	$	4,733,193
Income (loss) from continuing operations		663,440			(1,268,701	)		422,161			(183,100	)
Income (loss) from discontinued operations		-			(226,609	)		420,366			193,757
Net income (loss)	$	663,440		$	(1,495,310	)	$	842,527		$	10,657
Less: net loss attributable to noncontrolling interest		2,745			-			-			2,745
Net income (loss) - America First Tax Exempt Investors, L. P.	$	666,185		$	(1,495,310	)	$	842,527		$	13,402

	March 31, 2009
Description of Tax-Exempt			Unrealized		Unrealized			Estimated
Mortgage Revenue Bonds	Cost		Gain		Loss			Fair Value

Clarkson College	$	5,998,333	$	-	$	(925,674	)	$	5,072,659
Bella Vista		6,785,000		-		(1,384,276	)		5,400,724
Woodland Park		15,715,000		-		(3,438,442	)		12,276,558
Gardens of DeCordova		4,870,000		-		(1,179,173	)		3,690,827
Gardens of Weatherford		4,702,000		-		(1,138,495	)		3,563,505
Runnymede Apartments		10,825,000		-		(2,199,748	)		8,625,252
Bridle Ridge Apartments		7,885,000		-		(1,721,217	)		6,163,783
Woodlynn Village		4,550,000		-		(1,034,988	)		3,515,012
	$	61,330,333	$	-	$	(13,022,013	)	$	48,308,320

	December 31, 2008
Description of Tax-Exempt			Unrealized		Unrealized			Estimated
Mortgage Revenue Bonds	Cost		Gain		Loss			Fair Value

Clarkson College	$	6,018,333	$	-	$	(1,241,441	)	$	4,776,892
Bella Vista		6,785,000		-		(1,821,433	)		4,963,567
Woodland Park		15,715,000		-		(4,507,533	)		11,207,467
Gardens of DeCordova		4,870,000		-		(1,493,142	)		3,376,858
Gardens of Weatherford		4,702,000		-		(1,566,989	)		3,135,011
Runnymede Apartments		10,825,000		-		(2,902,074	)		7,922,926
Bridle Ridge Apartments		7,885,000		-		(2,047,419	)		5,837,581
Woodlynn Village		4,550,000		-		(1,277,776	)		3,272,224
	$	61,350,333	$	-	$	(16,857,807	)	$	44,492,526

Valuation - - As all of the Company’s investments in tax-exempt mortgage revenue bonds are classified as available-for-sale securities, they are carried on the balance sheet at their estimated fair values. Due to the limited market for the tax-exempt bonds, these estimates of fair value do not necessarily represent what the Company would actually receive in a sale of the bonds. There is no active trading market for the bonds and price quotes for the bonds are not generally available. As of March 31, 2009 and December 31, 2008, all of the Company’s tax-exempt mortgage revenue bonds were valued using discounted cash flow and yield to maturity analyses performed by management. Management’s valuation encompasses judgment in its application. The key assumption in management’s yield to maturity analysis is the range of effective yields on the individual bonds. At March 31, 2009, the range of effective yields on the individual bonds was 7.7% to 8.05%. Additionally, the Company calculated the sensitivity of the key assumption used in calculating the fair values of these bonds. Assuming an immediate 10 percent adverse change in the key assumption, the effective yields on the individual bonds would increase to a range of 8.5% to 8.85% and would result in additional unrealized losses on the bond portfolio of approximately $1.2 million. This sensitivity analysis is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. If available, the general partner may also consider price quotes on similar bonds or other information from external sources, such as pricing services. Pricing services, broker quotes and management’s analyses provide indicative pricing only.

Unrealized gains or losses on these tax-exempt bonds are recorded in accumulated other comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the underlying properties. As of March 31, 2009, all of the current bond investments have been in an unrealized loss position for greater than twelve months. The current unrealized losses on the bonds are not considered to be other-than-temporary because the Company has the intent and ability to hold these securities until their value recovers or until maturity, if necessary. The unrealized gain or loss will continue to fluctuate each reporting period based on the market conditions and present value of the expected cash flow.

In general, credit and capital markets have deteriorated over the past 12 to 18 months. The deterioration has negatively impacted the fair value of the bonds over that same time period. Although valuations have improved in the first quarter, if uncertainties in these markets continue, the markets deteriorate further or the Company experiences further deterioration in the values of its investment portfolio, or if the Company’s intent and ability to hold certain bonds changes, the Company may recognize impairments to its investment portfolio through earnings which would negatively impact the Company’s results of operations.

In April 2009, the Company acquired the Cross Creek Apartments tax-exempt mortgage revenue bond and a construction loan for $6.6 million which represented 100% of the bond issuance and outstanding construction loans. The bond par value is $8.85 million and the bond earns interest at an annual rate of 6.15% with semi-annual interest payments and a stated maturity date of March 1, 2049. The bond was issued for the construction of the Cross Creek Apartments, a 144 unit multifamily apartment complex located in Beaufort, South Carolina. At the time of acquisition the bonds were in technical default as the property construction was not completed, the property had not reached stabilization and the property was not current on debt service. The Company expects to make a taxable loan to the property owner to allow for the completion of construction, lease up and stabilization of the property and the payment of bond debt service. America First Property Management Company, LLC (“Properties Management”), an affiliate of AFCA 2, has been retained to manage the property and will begin marketing and leasing activities for the property in the second quarter of 2009. The Company is currently evaluating whether the underlying entity that owns the Cross Creek Apartments meets the definition of a VIE and accordingly, whether its financial statements are to be consolidated into the Company’s consolidated financial statements under FIN 46R.

In April 2009, the Company acquired the Series A and B Oak Grove Commons Apartments tax-exempt mortgage revenue bonds for $2.5 million which represented 100% of the bond issuance. Both the Series A and B bonds earn interest at an annual rate of 7.0% with semi-annual interest payments and stated maturity dates of December 1, 2041. The Series A bond par value is $5.6 million and the Series B bond par value is $1.4 million. The bonds were issued for the construction of the Oak Grove Commons Apartments, a 168 unit multifamily apartment complex located in Conway, Arkansas. At the time of acquisition the bonds were in technical default as the property had not reached stabilization and was not current on debt service. The Company expects to make a taxable loan to the property owner to allow for the continued lease up and stabilization of the property and the payment of bond debt service. Properties Management has been retained to manage the property and will begin marketing and leasing activities for the property in the second quarter of 2009. The Company is currently evaluating whether the underlying entity that owns the Oak Grove Commons Apartments meets the definition of a VIE and accordingly, whether its financial statements are to be consolidated into the Company’s consolidated financial statements under FIN 46R.

During the first quarter of 2009 the Company made a taxable loan to the owners of The Gardens of Weatherford Apartments of approximately $141,000 to help fund final construction activities and current bond debt service reserves through construction completion and property stabilization. The Gardens of Weatherford Apartments is currently under construction in Weatherford, Texas and will contain 76 units upon completion. The estimated final completion date is December 2009 with some units available for rent in July 2009. The developer and principals have guaranteed completion and stabilization of the project. The general contractor has a guaranteed maximum price contract and payment and performance bonds are in place.

In June 2007, the Company acquired bonds with a combined face value of $5.9 million, the proceeds of which were to be used to finance the construction of a 72 unit multifamily apartment complex in Gardner, Kansas known as Prairiebrook Village. These bonds are in default due to the inability of the developer to complete construction of the project. As a result, the bond trustee filed a petition of foreclosure on the mortgage securing the bonds in May 2008. In October 2008, the Company received approximately $4.5 million from the trustee representing unused bond proceeds. Currently the land owned by the project is being held for sale by the bond trustee. Upon the sale of the land the Company intends to pursue its remedies against the project developer on its guarantees. The Company has recorded a receivable of $1.3 million which is included in Other Assets on the Condensed Consolidated Balance Sheet.

To facilitate its investment strategy of acquiring additional tax-exempt mortgage bonds secured by multifamily apartment properties (“MF Properties”), the Partnership has caused its various Holding Companies to acquire 99% limited partner positions in the nine limited partnerships that own the MF Properties. The general partners of these partnerships are unaffiliated parties and their 1% ownership interest in these limited partnerships is reflected in the Company’s consolidated financial statements as non-controlling interests. The Partnership expects to ultimately restructure the property ownership through a sale of the MF Properties and a syndication of the associated low income housing tax credits (“LIHTCs”). The Partnership expects to provide the tax-exempt mortgage revenue bonds to the new property owners as part of the restructuring. Such restructurings will generally be expected to be initiated within 36 months of the initial investment in an MF Property and will often coincide with the expiration of the compliance period relating to LIHTCs previously issued with respect to the MF Property. Current credit markets and general economic issues have had a significant negative impact on these types of transactions. At this time very few LIHTC syndication and tax-exempt bond financing transactions are being completed. Management believes that these types of transactions represent a long-term market opportunity for the Company and provide a significant future bond investment pipeline when the market for LIHTC syndications strengthens. Until such a restructuring occurs the operations of the properties owned by the limited partnerships are consolidated with the Partnership. The Partnership will not acquire LIHTCs in connection with these transactions.

The ninth MF Property, Greens of Pine Glen Limited Partnership (“Greens”), which is located in North Carolina, was acquired in February 2009, for a $7.0 million purchase price. The Company incurred transaction expenses of approximately $165,000 which were expensed based on the Company’s adoption of SFAS No. 141R on January 1, 2009. As a result, the financial statements of this property have been consolidated with those of the Partnership since that time. The Company has preliminarily allocated $6.8 million of the purchase price to real estate assets. The purchase price was funded through an assumed mortgage loan of $6.5 million and cash on hand. The unpaid balance of the note bears a 7% annual interest rate payable monthly. The initial maturity date of the loan is September 2010 at which time the borrower has an option to extend the note for 18 months.

In addition to the MF Properties, the Partnership consolidates the assets, liabilities and results of operation of the VIEs in accordance with FIN 46R. Although the assets of the VIEs are consolidated, the Partnership has no ownership interest in the VIEs other than to the extent they serve as collateral for the tax-exempt mortgage revenue bonds owned by the Partnership. The results of operations of those properties are recorded by the Company in consolidation but any net income or loss from these properties does not accrue to the BUC holders or the general partner, but is instead included in "Unallocated deficit of variable interest entities.”

In February 2009, the tax-exempt mortgage revenue bonds secured by Ashley Pointe at Eagle Crest in Evansville, Indiana, Woodbridge Apartment of Bloomington III in Bloomington, Indiana, and Woodbridge Apartments of Louisville II in Louisville, Kentucky were redeemed. The properties financed by these redeemed mortgage revenue bonds were required to be consolidated into the Company’s financial statements as VIEs under FIN 46R. During the fourth quarter of 2008, these VIEs met the criteria for discontinued operations under SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (“SFAS No. 144”), and they were classified as such in the consolidated financial statements for all periods presented. In order to properly reflect the transaction under FIN 46R, the Company recorded the redemption of the bonds as a sale of the properties as though they were owned by the Company. The transaction was completed for a total purchase price of $32.0 million resulting in a gain on sale for GAAP reporting to the Company of approximately $26.5 million. The redemption of the bonds did not result in a taxable gain to the Partnership. The redeemed bonds were collateral on the Company’s TOB facility. As of the closing date of the redemption, the Company placed on deposit with Bank of America $23.6 million as replacement collateral. Such funds on deposit may be used to reduce the amount of debt outstanding on the TOB facility.


	Mar. 31, 2009		Dec. 31, 2008
Cash and cash equivalents	$	-	$	164,861
Restricted cash		-		322,560
Land		-		1,497,355
Buildings and improvements		-		23,696,355
Real estate assets before accumulated depreciation		-		25,193,710
Accumulated depreciation		-		(17,927,345	)
Net real estate assets		-		7,266,365
Other assets		-		360,075
Total assets from discontinued operations		-		8,113,861
Total liabilities of discontinued operations		-		23,264,589
Net deficits of discontinued operations	$	-	$	(15,150,728	)


	Quarter Ended March 31,
	2009		2008
Rental Revenues	$	849,366	$	1,321,945
Expenses		501,926		1,128,188
Income from discontinued operations	$	347,440	$	193,757

As of March 31, 2009, the Company had debt financing of $76.6 million secured by 14 tax-exempt mortgage revenue bonds with a total par value of $113.0 million plus approximately $27.8 million in restricted cash. At March 31, 2009, all of the Company’s debt financing was attributable to continuing operations. As of December 31, 2008, the Company had debt financing of $76.6 million secured by 17 tax-exempt mortgage revenue bonds with a total par value of $141.3 million plus approximately $5.0 million in restricted cash. At December 31, 2008, three of the tax-exempt mortgage revenue bonds securing the debt financing were those of the consolidated VIEs presented as discontinued operations. Accordingly, $19.6 million of the debt financing was classified in liabilities of discontinued operations. The remaining $57.0 million of debt financing at December 31, 2008, was classified as continuing operations.

Historically, the Company’s long-term debt has been provided by securitization of existing tax-exempt mortgage revenue bonds through the Merrill Lynch P-Float program which was accounted for as secured borrowings. On June 26, 2008, the Company effectively replaced the Merrill Lynch P-Float program by entering into an agreement for a new tender option bond credit facility (“TOB facility”) agreement with Bank of America. In order to secure these obligations, the Company is required to pledge cash or certain highly-rated securities as collateral. The Company may be required to provide additional collateral during the term of the TOB Trusts due to variations in interest rates and in the value of the collateral provided by it and of the tax-exempt mortgage revenue bonds held by the TOB Trusts.

The amounts maturing in 2009 consist of the entire balance of the TOB facility plus approximately $19.9 million of mortgages payables on MF Properties. Subsequent to March 31, 2009, the Company received a firm commitment for a new secured credit facility from Bank of America which will refinance the current TOB facility. The new credit facility will have a one-year term with a six-month renewal option held by the Company, an annual floating interest rate of one-month LIBOR plus 390 basis points and a loan amount of approximately $50.0 million. The proceeds from the new credit facility plus the current cash collateral held by Bank of America for the TOB facility will be used to retire the outstanding balance on the TOB facility. The new credit facility is expected to close before June 30, 2009. In addition, approximately $19.9 million in outstanding mortgage financing related to the MF Properties located in Ohio and Kentucky is due in July, 2009. This mortgage loan contains three one-year renewal options held by the borrower. The borrower has provided the appropriate notification to the lender and intends to renew the mortgage for an additional year from the date of original maturity. The Company also continues to explore refinancing opportunities for this mortgage loan. While the Company expects to be able to renew or refinance current debt maturities, if the current illiquidity in the financial markets continues or further deteriorates, the counterparties on our credit facilities may be unable or unwilling to meet their commitments and our ability to renew or refinance our outstanding debt financing may be negatively affected.

The general partner of the Partnership, AFCA 2, is entitled to receive an administrative fee from the Partnership equal to 0.45% per annum of the outstanding principal balance of any of its tax-exempt mortgage revenue bonds or other tax-exempt investments for which the owner of the financed property or other third party is not obligated to pay such administrative fee directly to AFCA 2. For the three months ended March 31, 2009 and 2008, the Partnership paid administrative fees to AFCA 2 of approximately $70,500 and $92,500, respectively. In addition to the administrative fees paid directly by the Partnership, AFCA 2 receives administrative fees directly from the owners of properties financed by certain of the tax-exempt mortgage revenue bonds held by the Partnership. These administrative fees also equal 0.45% per annum of the outstanding principal balance of these tax-exempt mortgage revenue bonds and totaled approximately $61,600 and $90,000 for the three months ended March 31, 2009 and 2008, respectively.

An affiliate of AFCA 2, America First Property Management Company, LLC (“Properties Management”), was retained to provide property management services for Ashley Square, Ashley Pointe at Eagle Crest, Iona Lakes Apartments, Bent Tree Apartments, Lake Forest Apartments, Fairmont Oaks Apartments, Eagle Ridge, Crescent Village, Meadowview, Willow Bend, Postwoods I, Postwoods II, Churchland, Glynn Place and The Greens. The management fees paid to Properties Management amounted to approximately $226,000 during the first quarter of 2009, and $180,000 during the first quarter of 2008. For the VIEs, these management fees are not Partnership expenses but are recorded by each applicable VIE entity and, accordingly, have been reflected in the accompanying consolidated financial statements. Such fees are paid out of the revenues generated by the properties owned by the VIEs prior to the payment of any interest on the tax-exempt mortgage revenue bonds and taxable loans held by the Partnership on these properties. For the MF Properties, these management fees are considered real estate operating expenses. Additionally, Properties Management was retained to provide property management services for Clarkson College and Chandler in 2008 and Clarkson College in 2009. The management fees paid to Properties Management by these entities amounted to approximately $6,900 and $23,000 during the first quarter of 2009 and 2008, respectively.

			Effective Capped Rate				Maturity Date	Purchase Price
Date Purchased	Notional Amount		Effective Capped Rate				Maturity Date	Purchase Price		Counterparty

February 1, 2003	$	15,000,000		2.95	%	(1)	January 1, 2010	$	608,000	Bank of America

June 29, 2007	$	19,920,000		8.30	%		July 1, 2009	$	17,500	JP Morgan

July 7, 2008	$	60,000,000		2.50	%		August 1, 2011	$	985,000	US Bank

October 29, 2008	$	4,480,000		6.00	%		November 1, 2011	$	26,512	Bank of America

(1) The counterparty exercised the right to convert the cap into a fixed rate swap effective February 1, 2008. Under the terms of the swap arrangement, the Partnership pays a fixed rate of 2.95%.

The Tax-Exempt Bond Investments segment consists of the Company’s portfolio of federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential apartments. Such tax-exempt bonds are held as long-term investments. As of March 31, 2009, the Company held nine tax-exempt bonds (secured by eight properties) not associated with VIEs and five tax-exempt bonds associated with VIEs. The multifamily apartment properties financed by these tax-exempt bonds contain a total of 1,137 rental units.

The MF Properties segment consists of indirect equity interests in multifamily apartment properties which are not currently financed by tax-exempt bonds held by the Partnership but which the Partnership eventually intends to finance by such bonds through a restructuring. In connection with any such restructuring, the Partnership will be required to dispose of any equity interest held in such MF Properties. The Partnership’s interests in its current MF Properties are not currently classified as Assets Held for Sale because the Partnership is not actively marketing them for sale, there is no definitive purchase agreement in existence and, therefore, no sale is expected in the next twelve months. During the time the Partnership holds an interest in a MF Property, any net rental income generated by the MF Properties in excess of debt service will be available for distribution to the Partnership in accordance with its interest in the MF Property. Any such cash distribution will contribute to the Partnership’s Cash Available for Distribution (“CAD”). As of March 31, 2009, the Company held limited partner interests in the owners of nine MF Properties containing a total of 964 rental units.

The VIE segment consists of multifamily apartment properties which are financed with tax-exempt bonds held by the Partnership, the assets, liabilities and operating results of which are consolidated with those of the Partnership as a result of FIN 46R. The tax-exempt bonds on these VIE properties are eliminated from the Company’s financial statements as a result of such consolidation, however, such bonds are held as long-term investments by the Partnership which continues to be entitled to receive principal and interest payments on such bonds. The Company does not actually own an equity position in the VIEs or their underlying properties. As of March 31, 2009, the Company consolidated five VIE multifamily apartment properties containing a total of 1,144 rental units.

Management’s goals with respect to the properties constituting each of the Company’s reportable segments is to generate increasing amounts of net rental income from these properties that will allow them to (i) make all payments of base interest, and possibly pay contingent interest, on the properties included in the Tax-Exempt Bond Investments segment and the VIE segment, and (ii) distribute net rental income to the Partnership from the MF Properties segment until such properties can be refinanced with additional tax-exempt mortgage bonds meeting the Partnership’s investment criteria. In order to achieve these goals, management of these multifamily apartment properties is focused on: (i) maintaining high economic occupancy and increasing rental rates through effective leasing, reduced turnover rates and providing quality maintenance and services to maximize resident satisfaction; (ii) managing operating expenses and achieving cost reductions through operating efficiencies and economies of scale generally inherent in the management of a portfolio of multiple properties; and (iii) emphasizing regular programs of repairs, maintenance and property improvements to enhance the competitive advantage and value of its properties in their respective market areas.

	For the Three Months Ended
	March 31, 2009			March 31, 2008
Total revenue
Tax-Exempt Bond Financing	$	4,549,533		$	2,664,272
MF Properties		1,631,698			1,093,036
VIEs		2,119,545			2,220,359
Consolidation/eliminations		(3,567,174	)		(1,427,574	)
Total revenue	$	4,733,602		$	4,550,093

Interest expense
Tax-Exempt Bond Financing	$	1,022,620		$	1,273,145
MF Properties		249,802			250,410
VIEs		1,510,844			1,467,861
Consolidation/eliminations		(1,592,397	)		(1,832,975	)
Total interest expense	$	1,190,869		$	1,158,441

Depreciation expense
Tax-Exempt Bond Financing	$	-		$	-
MF Properties		400,428			229,598
VIEs		578,366			557,041
Consolidation/eliminations		-			-
Total depreciation expense	$	978,794		$	786,639

Income (loss) from continuing operations
Tax-Exempt Bond Financing	$	2,601,522		$	937,890
MF Properties		(385,842	)		(274,450	)
VIEs		(1,305,900	)		(1,268,701	)
Consolidation/eliminations		(1,885,324	)		422,161
Income (loss) from continuing operations	$	(975,544	)	$	(183,100	)

Net income (loss)
Tax-Exempt Bond Financing	$	2,601,522		$	937,890
MF Properties		(385,842	)		(274,450	)
VIEs		33,480,544			(1,495,310	)
Consolidation/eliminations		(9,937,014	)		842,527
Net income	$	25,759,210		$	10,657

	March 31, 2009			December 31, 2008
Total assets
Tax-Exempt Bond Financing	$	147,828,540		$	158,156,573
MF Properties		54,924,731			47,561,345
VIEs		48,437,171			56,467,499
Consolidation/eliminations		(63,340,718	)		(104,322,141	)
Total assets	$	187,849,724		$	157,863,276

Total partners' capital
Tax-Exempt Bond Financing	$	77,541,671		$	77,498,951
MF Properties		7,018,531			6,771,635
VIEs		(36,187,819	)		(69,668,362	)
Consolidation/eliminations		19,621,765			26,225,387
Total partners' capital	$	67,994,148		$	40,827,611

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are frequently covered by insurance. If it has been determined that a loss is probable to occur, the estimated amount of the loss is accrued in the consolidated financial statements. While the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on the Company’s consolidated financial statements.

On January 1, 2009, the Company adopted SFAS No. 141R, Business Combinations, which changes the way the Company accounts for business acquisitions (SFAS No. 141R). SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of SFAS No. 141R will, among other things, impact the determination of acquisition date fair value of consideration paid in a business combination, exclude transaction costs from acquisition accounting and change some accounting practices.

On January 1, 2009, the Company adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in deconsolidation. The adoption of SFAS No. 160 recharacterized minority interests as noncontrolling interests and reclassified minority interests as a component of equity on the Company’s financial statements. Prior year amounts relating to noncontrolling interests have been reclassified to conform to current year presentation as required by SFAS No. 160.

FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales and reaffirms what SFAS No. 157 states is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.

FSP FAS 115-2 and FAS 124-2 on other-than-temporary impairments is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. The FSP also requires increased and timelier disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses.

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The adoption of SFAS 157 did not significantly change the method in which the Company measures fair value, but it requires certain additional disclosures, as set forth below. The provisions of SFAS 157 apply to other accounting pronouncements that require or permit fair value measurements. SFAS 157:

Investments in Tax-exempt Mortgage Revenue Bonds. The fair values of the Company’s investments in tax-exempt mortgage revenue bonds have each been based a discounted cash flow and yield to maturity analyses performed by the general partner. There is no active trading market for the bonds and price quotes for the bonds are not available. If available, the general partner may also consider price quotes on similar bonds or other information from external sources, such as pricing services. The estimates of the fair values of these bonds, whether estimated by the Company or based on external sources, are based largely on unobservable inputs the general partner believes would be used by market participants. Additionally, the calculation methodology used by the external sources and the Company encompasses the use of judgment in their application. Given these facts the fair value measurement of the Company’s investment in tax-exempt mortgage revenue bonds is categorized as a Level 3 input.

Interest rate derivatives. The effect of the Company’s interest rate caps is to set a cap, or upper limit, on the base rate of interest paid on the Company’s variable rate debt equal to the notional amount of the derivative agreement. The effect of the Company’s interest rate swap is to change a variable rate debt obligation to a fixed rate for that portion of the debt equal to the notional amount of the derivative agreement. The interest rate derivatives are recorded at fair value with changes in fair value included in current period earnings within interest expense. The fair value of the interest rate derivatives is based on a model whose inputs are not observable and therefore are categorized as a Level 3 input.

				Fair Value Measurements at March 31, 2009
				Quoted Prices			Significant Other Observable Inputs (Level 2)
				in Active Markets						Significant
	Assets/Liabilities			for Identical Assets						Unobservable Inputs
Description	at Fair Value			(Level 1)						(Level 3)
Assets
Tax-exempt Mortgage Revenue Bonds	$	48,308,320		$	-		$	-		$	48,308,320
Interest Rate Derivatives		(150,516	)		-			-			(150,516	)
Total Assets at Fair Value	$	48,157,804		$	-		$	-		$	48,157,804

				For three months ended March 31, 2009
				Fair Value Measurements Using Significant
				Unobservable Inputs (Level 3)
				Tax-exempt Mortgage			Interest Rate Derivatives
				Revenue Bonds			Interest Rate Derivatives			Total
Beginning Balance January 1, 2009				$	44,492,526		$	302,849		$	44,795,375
Total gains or losses (realized/unrealized)
Included in earnings					-			(453,366	)		(453,366	)
Included in other comprehensive income					3,835,794			-			3,835,794
Purchases, issuances and settlements					(20,000	)		-			(20,000	)
Ending Balance March 31, 2009				$	48,308,320		$	(150,517	)	$	48,157,803

Total amount of gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of March 31, 2009				$	-		$	(453,366	)	$	(453,366	)

				Fair Value Measurements at December 31, 2008
				Quoted Prices			Significant Other Observable Inputs (Level 2)
				in Active Markets						Significant
	Assets/Liabilities			for Identical Assets						Unobservable Inputs
Description	at Fair Value			(Level 1)						(Level 3)
Assets
Tax-exempt Mortgage Revenue Bonds	$	44,492,526		$	-		$	-		$	44,492,526
Interest Rate Derivatives		302,849			-			-			302,849
Total Assets at Fair Value	$	44,795,375		$	-		$	-		$	44,795,375

				For three months ended March 31, 2008
				Fair Value Measurements Using Significant
				Unobservable Inputs (Level 3)
				Tax-exempt Mortgage			Interest Rate Derivatives
				Revenue Bonds			Interest Rate Derivatives			Total
Beginning Balance January 1, 2008				$	66,167,116		$	12,439		$	66,179,555
Total gains or losses (realized/unrealized)
Included in earnings					-			(183,191	)		(183,191	)
Included in other comprehensive income					(5,213,065	)		-			(5,213,065	)
Purchases, issuances and settlements					9,030,039			-			9,030,039
Ending Balance March 31, 2008				$	69,984,090		$	(170,752	)	$	69,813,338

Total amount of gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of March 31, 2008				$	-		$	(183,191	)	$	(183,191	)

In this Management’s Discussion and Analysis, the “Partnership” refers to America First Tax Exempt Investors, L.P. and its subsidiaries (which own the MF Properties) on a consolidated basis and the “Company” refers to the consolidated financial information of the Partnership and certain entities that own multifamily apartment projects financed with mortgage revenue bonds held by the Partnership that are treated as “variable interest entities” (“VIEs”). The Partnership has been determined to be the primary beneficiary of these VIEs although it does not hold an equity position in them and, therefore, must consolidate these entities. The consolidated financial statements of the Company include the accounts of the Partnership and the VIEs. All significant transactions and accounts between the Partnership and the VIEs have been eliminated in consolidation.

Recent economic conditions have been unprecedented and challenging, with significantly tighter credit conditions and slower growth expected in 2009. As a result of these conditions, the cost and availability of credit has been, and may continue to be, adversely affected in all markets in which we operate. Concern about the stability of the markets generally, and the strength of counterparties specifically, has led many lenders and institutional investors to reduce, and in some cases, cease, to provide funding to borrowers. If these market and economic conditions continue, they may limit our ability to replace or renew maturing liabilities on a timely basis, access the capital markets to meet liquidity and capital expenditure requirements and may result in adverse effects on our financial condition and results of operations.

Although the consequences of these conditions and their impact on our ability to pursue our plan to grow through investments in additional tax-exempt bonds secured by first mortgages on affordable multifamily housing projects are not fully known, we do not anticipate that our existing assets will be adversely affected in the long-term. We believe the current tightening of credit may create opportunities for additional investments consistent with the Partnership's investment strategy because it may result in fewer parties competing to acquire tax-exempt bonds issued to finance affordable housing. There can be no assurance that we will be able to finance additional acquisitions of tax-exempt bonds through either additional equity or debt financing. If uncertainties in these markets continue, the markets deteriorate further or the Company experiences further deterioration in the values of its investment portfolio, the Company may incur impairments to its investment portfolio which could negatively impact the Company’s financial statements.

Additionally, the current negative economic conditions, unemployment, lack of jobs growth, low home mortgage interest rates and tax incentives provided to first time homebuyers have begun to have a negative impact on the properties which collateralize our tax-exempt bond investments, the VIEs and our MF Properties in the form of declining occupancy. Economic occupancy at the MF Properties was 85% during the first quarter 2009 as compared to 93% in the first quarter 2008. Economic occupancy of the VIEs was 77% in 2009 and 86% in 2008. These issues will have a negative impact on the overall property operations and profitability in the short-term, however, we expect that long-term property operations will not be impacted significantly.

Debt maturing in 2009 consists of the entire balance of the TOB facility of approximately $76.6 million plus approximately $19.9 million of mortgages payables on MF Properties. Subsequent to March 31, 2009, the Company received a firm commitment for a new secured credit facility from Bank of America which will refinance the current TOB facility. The new credit facility will have a one-year term with a six-month renewal option held by the Company, an annual floating interest rate of one-month LIBOR plus 390 basis points and a loan amount of approximately $50.0 million. The proceeds from the new credit facility plus the current cash collateral held by Bank of America for the TOB facility will be used to retire the outstanding balance on the TOB facility. The new credit facility is expected to close before June 30, 2009. In addition, approximately $19.9 million in outstanding mortgage financing related to the MF Properties located in Ohio and Kentucky is due in July, 2009. This mortgage loan contains three one-year renewal options held by the borrower. The borrower has provided the appropriate notification to the lender and intends to renew the mortgage for an additional year from the original maturity date. The Company also continues to explore refinancing opportunities for this mortgage loan. While the Company expects to be able to renew or refinance current debt maturities, if the current illiquidity in the financial markets continues or further deteriorates the counterparties on our credit facilities may be unable or unwilling to meet their commitments and our ability to renew or refinance our outstanding debt financing may be negatively affected.

Compared with the terms of the Company’s existing TOB facility, the terms of the new credit facility will increase the effective interest rate payable by the Company and will also reduce the amount of debt financing available for additional investments. Both of these factors will have a negative impact on the amount of CAD generated by the Company. The general partner has completed financial models in order to estimate the impact of the change in credit facilities on CAD. In order to ensure that cash provided by the Company’s tax-exempt mortgage revenue bonds and other investments will be adequate to meet its projected liquidity requirements, including the payment of expenses, interest and distributions to BUC holders, the general partner intends to change the Company’s policy regarding distributions. The Company’s regular annual distributions have recently equaled $0.54 per BUC, or $0.135 per quarter per BUC. Beginning with the second quarter 2009 distribution, the general partner intends to make the Company’s regular annual distribution equal to $0.50 per BUC, or $0.125 per quarter per BUC. The general partner believes that distributions at this level are sustainable, however, if actual results vary from current projections and the actual CAD generated is less than the new regular distribution, such distribution amount may need to be reduced.

The Partnership’s purpose is to acquire and hold as long-term investments a portfolio of federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential apartments. At March 31, 2009, the Partnership held 14 tax-exempt mortgage bonds (secured by 13 properties), five of which are secured by properties held by VIEs and, therefore, eliminated in consolidation on the Company’s financial statements. The eight properties underlying the nine non-consolidated tax-exempt mortgage bonds contain a total of 1,137 rental units. At March 31, 2008, the Partnership held twelve non-consolidated tax-exempt mortgage bonds secured by apartment properties containing a total of 1,497 rental units.

To facilitate its investment strategy of acquiring additional tax-exempt mortgage bonds secured by multifamily apartment properties, the Partnership may acquire ownership positions in apartment properties (“MF Properties”). The Partnership expects to ultimately restructure the property ownership through a sale of the MF Properties and a syndication of low income housing tax credits (“LIHTCs”). The Partnership expects to provide the tax-exempt mortgage revenue bonds to the new property owners as part of the restructuring. Such restructurings will generally be expected to be initiated within 36 months of the initial investment in an MF Property and will often coincide with the expiration of the compliance period relating to LIHTCs previously issued with respect to the MF Property. The Partnership will not acquire LIHTCs in connection with these transactions. As of March 31, 2009, the Partnership’s wholly-owned subsidiaries held limited partnership interests in nine entities that own MF Properties containing a total of 964 rental units. As of March 31, 2008, a wholly-owned subsidiary of the Partnership held limited partnership interests in six entities that own MF Properties containing a total of 544 rental units.


				Number of Units Occupied		Percentage of Occupied Units as of March 31,						Economic Occupancy (1) for the period ended March 31,
		Number				Percentage of Occupied Units as of March 31,						Economic Occupancy (1) for the period ended March 31,
Property Name	Location	of Units				2009			2008			2009			2008

Non-Consolidated Properties
Clarkson College	Omaha, NE		142		114		80	%		83	%		81	%		83	%
Bella Vista Apartments	Gainesville, TX		144		137		95	%		95	%		94	%		91	%
Woodland Park (2)	Topeka, KS		236		n/a		n/a			n/a			n/a			n/a
Runnymede Apartments	Austin, TX		252		245		97	%		80	%		100	%		82	%
Gardens of DeCordova (2)	Granbury, TX		76		n/a		n/a			n/a			n/a			n/a
Gardens of Weatherford (2)	Weatherford, TX		76		n/a		n/a			n/a			n/a			n/a
Bridle Ridge Apartments	Greer, SC		152		127		84	%		70	%		85	%		62	%
Woodlynn Village	Maplewood, MN		59		54		92	%		95	%		96	%		99	%
			1,137		677		90	%		85	%		93	%		83	%

VIEs
Ashley Square	Des Moines, IA		144		139		97	%		91	%		92	%		85	%
Bent Tree Apartments	Columbia, SC		232		206		89	%		96	%		79	%		86	%
Fairmont Oaks Apartments	Gainsville, FL		178		154		87	%		94	%		85	%		91	%
Iona Lakes Apartments	Ft. Myers, FL		350		281		80	%		81	%		64	%		66	%
Lake Forest Apartments	Daytona Beach, FL		240		213		89	%		98	%		80	%		104	%
			1,144		993		87	%		92	%		77	%		86	%

MF Properties
Churchland (3)	Chesapeake, VA		124		115		93	%		n/a			87	%		n/a
Crescent Village	Cincinnati, OH		90		79		88	%		94	%		77	%		88	%
Eagle Ridge	Erlanger, KY		64		51		80	%		88	%		70	%		83	%
Glynn Place (3)	Brunswick, GA		128		108		84	%		n/a			74	%		n/a
Greens of Pine Glen (3)	Durham, NC		168		154		92	%		n/a			93	%		n/a
Meadowview	Highland Heights, KY		118		105		89	%		97	%		87	%		97	%
Postwoods I	Reynoldsburg, OH		92		88		96	%		95	%		86	%		94	%
Postwoods II	Reynoldsburg, OH		88		86		98	%		95	%		92	%		94	%
Willow Bend	Columbus (Hilliard), OH		92		89		97	%		99	%		99	%		100	%
			964		875		91	%		95	%		85	%		93	%
(1) Economic occupancy is presented for the three months ended March 31, 2009 and 2008, and is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Actual occupancy is a point in time measure while economic occupancy is a measurement over the period presented, therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.
(2) These properties are still under construction as of March 31, 2009, and therefore have no occupancy data.
(3) Previous period occupancy numbers are not available, as this is a new investment.

Gardens of DeCordova – The Gardens of DeCordova Apartments is located in Granbury, Texas and began leasing its 76 units in November 2008. Full construction completion is scheduled for April 2009. As of March 31, 2009, 76 units have been completed and are available for rent and 13 units are currently occupied. The developer and principals have guaranteed completion and stabilization of the project. During the first quarter of 2009, the property owners made additional capital contributions to the project to fund debt service on the bonds through property stabilization. Additionally, Properties Management was engaged to replace the prior property manager and is currently managing the property.

Gardens of Weatherford – The Gardens of Weatherford Apartments is currently under construction in Weatherford, Texas and will contain 76 units upon completion. The estimated final completion date is December 2009 with some units available for rent in July 2009. The developer and principals have guaranteed completion and stabilization of the project. The general contractor has a guaranteed maximum price contract and payment and performance bonds are in place. During the first quarter of 2009 the Company made a taxable loan to the owners of the property of approximately $141,000 to help fund the final construction activities and current bond debt service reserves through construction completion and property stabilization. Additionally, Properties Management was engaged to replace the prior property manager and is currently managing the property and monitoring the construction progress.

Greens of Pine Glen – Greens of Pine Glen Apartments is located in Durham, North Carolina and contains 168 units. A wholly-owned subsidiary of the Partnership acquired a 99% limited partner in the partnership that owns this property in February 2009. As a result, the financial statements of this property have been consolidated with those of the Partnership since that time. The consolidation of Greens of Pine Glen Apartment’s operations resulted in the recognition by the Partnership of approximately $79,000 of net operating loss on revenue of $153,000 during the first quarter of 2009. This loss includes approximately $175,000 of acquisition costs.

	For the Three			For the Three
	Months Ended			Months Ended
	March 31, 2009			March 31, 2008			Dollar Change
Revenues:
Property revenues	$	3,751,243		$	3,313,395		$	437,848
Mortgage revenue bond investment income		948,344			1,208,564			(260,220	)
Other interest income		34,015			24,430			9,585
Gain on the sale of securities		-			3,704			(3,704	)
Total Revenues	$	4,733,602		$	4,550,093		$	183,509

Expenses:
Real estate operating (exclusive of items shown below)		2,360,643			1,959,162			401,481
Depreciation and amortization		1,580,872			1,184,524			396,348
Interest		1,190,869			1,158,441			32,428
General and administrative		576,762			431,066			145,696
Total Expenses	$	5,709,146		$	4,733,193		$	975,953

Income from continuing operations		(975,544	)		(183,100	)		(792,444	)
Income from discontinued operations (including gain on bond redemption of $26,514,809 in 2009)		26,734,754			193,757			26,540,997
Net income		25,759,210			10,657			25,748,553
Less: net loss attributable to noncontrolling interest		3,860			2,745			1,115
Net income - America First Tax Exempt Investors, L. P.	$	25,763,070		$	13,402		$	25,749,668

Property revenues. Property revenues increased as a result of revenue generated by the MF Properties acquired in the second half of 2008 and the first quarter of 2009. These new properties added approximately $596,000 in revenue in the first quarter of 2009. This increase was offset by a decrease in revenue at the existing VIE and MF Properties of approximately $158,000 due to lower occupancy levels. The MF Properties averaged $552 per unit in monthly rent in 2009 as compared with $654 per unit in 2008. Economic occupancy at the MF Properties was 85% during the first quarter of 2009 as compared to 93% in the first quarter of 2008. The VIEs averaged $594 per unit in monthly rent in 2009 as compared to $641 per unit in 2008. Economic occupancy of the VIEs was 77% in 2009 and 86% in 2008.

Mortgage revenue bond investment income. The decrease in mortgage revenue bond investment income during the first quarter of 2009 compared to the first quarter of 2008 is primarily related to the 2008 dispositions of the Deerfield, Chandler Creek, and Prairiebrook bonds. The three disposed bonds had a total par value of $20.3 million. This decrease was partially offset by the two bond investments acquired in the first quarter of 2008 with a total par value of $12.4 million. These two bonds realized a full quarter of earnings in 2009 versus only a partial quarter of earnings in 2008.

Gain on the sale of securities. The gain on sale of securities in the first quarter of 2008 was related to the sale of the Deerfield bonds.

Real estate operating expenses. Real estate operating expenses associated with the MF Properties and the consolidated VIEs are comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses are fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues. Real estate operating expenses increased as a direct result of the expenses incurred by the newly acquired MF Properties, which were approximately $302,000 in the first quarter of 2009. Real estate operating expenses related to the six existing MF Properties increased approximately $51,000 compared to 2008 due to increased real estate taxes and other fees. Real estate operating expenses related to the VIEs decreased approximately $125,000 compared to 2008, primarily due to decreased real estate taxes and professional fees.

Depreciation and amortization expense. Depreciation and amortization consists primarily of depreciation associated with the apartment properties of the consolidated VIEs and the MF Properties and amortization associated with in-place lease intangible assets recorded as part of the purchase accounting for the acquisition of MF Properties and deferred finance cost amortization related to the TOB credit facility that was entered into in the second quarter of 2008. Approximately $246,000 of the increase is attributable to deferred financing cost amortization offset by a net decrease of approximately $38,000 of in-place lease amortization. Depreciation expense increased approximately $167,000 due to the acquisition of new MF Properties and by approximately $21,000 due to depreciation of capital assets placed in service at VIE properties.

Interest expense. Interest expense increased approximately $32,000 during the first quarter 2009 compared to the first quarter 2008. The increase was due to a number of offsetting factors. The Company’s borrowing cost decreased from 5.8% per annum in 2008 to 2.8% per annum in 2009 resulting in an approximate decrease of $593,000 compared to first quarter 2008. Offsetting the interest rate decrease was interest expense attributable to marking interest rate derivatives to fair value. The fair value adjustment increased interest expense by approximately $342,000 for 2009 as compared to the first quarter 2008. The remaining increase in interest expense is due to the change in interest expense allocated to discontinued operations. In 2008 a full quarter of interest expense was allocated to discontinued operations while only 2 months was allocated in 2009 whereby approximately $283,000 more interest expense was recorded to continuing operations in 2009 compared to the first quarter of 2008.

	For the Three			For the Three
	Months Ended			Months Ended
	March 31, 2009			March 31, 2008		Dollar Change
Revenues:
Mortgage revenue bond investment income	$	4,643,013		$	2,636,138	$	2,006,875
Property revenues		1,631,698			1,093,036		538,662
Other interest income		34,015			24,430		9,585
Gain on sale of securities		(127,495	)		3,704		(131,199	)
Total Revenues	$	6,181,231		$	3,757,308	$	2,423,923
Expenses:
Real estate operating (exclusive of items shown below)		1,035,657			509,049		526,608
Loan loss expense		74,999			-		74,999
Interest expense		1,272,422			1,523,555		(251,133	)
Depreciation and amortization expense		1,005,711			630,198		375,513
General and administrative		576,762			431,066		145,696
Total Expenses		3,965,551			3,093,868		871,683
Net income		2,215,680			663,440		1,552,240
Less: net loss attributable to noncontrolling interest		3,860			2,745		1,115
Net Income - America First Tax Exempt Investors, L.P.	$	2,219,540		$	666,185	$	1,553,355

Mortgage revenue bond investment income. The increase in mortgage revenue bond investment income during the first quarter of 2009 compared to the first quarter of 2008 is a net effect of the $2.5 million contingent and deferred interest realized from the Woodbridge of Bloomington III and Woodbridge Apartments of Louisville II bond redemptions and a $0.5 million reduction of regular bond interest income due to the bond redemptions and 2008 dispositions of the Deerfield, Chandler Creek, and Prairiebrook bonds. The par value of the entire bond redemptions, including Ashley Pointe of Eagle Crest, equaled $28.2 million and the par value of the bond dispositions totaled $20.3 million.

Property revenues. Property revenues increased as a direct result of revenue generated by the newly acquired MF Properties, two acquired in the second half of 2008 and one acquired in first quarter 2009. These properties added $596,000 of rental income, with the existing MF Properties reporting a $57,000 reduction of rental income. The MF Properties averaged $552 per unit in monthly rent in 2009 as compared with $654 per unit in 2008. Economic occupancy at the MF Properties was 85% during the first quarter 2009 as compared to 93% in the first quarter 2008.

Real estate operating expenses. Real estate operating expenses associated with the MF Properties are comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses are fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues. Real estate operating expenses increased as a direct result of the expenses incurred by the two MF Properties acquired in 2008 and the one acquired in 2009. Additionally, real estate operating expenses related to the six existing MF Properties increased approximately $51,000 compared to 2008 due to increased real estate taxes and other fees.

Depreciation and amortization expense. Depreciation and amortization consists primarily of depreciation associated with the apartment properties of the consolidated VIEs and the MF Properties and amortization associated with in-place lease intangible assets recorded as part of the purchase accounting for the acquisition of MF Properties and deferred finance cost amortization related to the TOB credit facility that was entered into in the second quarter of 2008. Approximately $246,000 of the increase is related to the changes in deferred financing cost amortization offset by a net decrease of approximately $38,000 of in-place lease amortization. In addition, depreciation expense increased approximately $167,000 due to the acquisition of new MF Properties.

Interest expense. Interest expense decreased approximately $251,000 during the first quarter 2009 compared to the first quarter 2008. The Company’s borrowing cost decreased from 5.8% per annum in 2008 to 2.8% per annum in 2009 resulting in an approximate decrease of $593,000 compared to first quarter 2008. Offsetting the interest rate decrease was interest expense attributable to marking interest rate derivatives to fair value. The fair value adjustment increased interest expense by approximately $342,000 for 2009 as compared to the first quarter 2008.

Tax-exempt interest earned on the mortgage revenue bonds, including those financing properties held by VIEs, represents the Partnership's principal source of cash flow. The Partnership may also receive cash distributions from equity interests held in MF Properties. Tax-exempt interest is primarily comprised of base interest payments received on the Partnership’s tax-exempt mortgage revenue bonds. Certain of the tax-exempt mortgage revenue bonds may also generate payments of contingent interest to the Partnership from time to time when the underlying apartment properties generate excess cash flow. Because base interest on each of the Partnership’s mortgage revenue bonds is fixed, the Partnership’s cash receipts tend to be fairly constant period to period unless the Partnership acquires or disposes of its investments in tax-exempt bonds. Changes in the economic performance of the properties financed by tax-exempt bonds with a contingent interest provision will affect the amount of contingent interest, if any, paid to the Partnership. Similarly, the economic performance of MF Properties will affect the amount of cash distributions, if any, received by the Partnership from its ownership of these properties. The economic performance of a multifamily apartment property depends on the rental and occupancy rates of the property and on the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market area in which a property is located. This, in turn, is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (such as zoning laws), inflation, real estate and other taxes, labor problems and natural disasters can affect the economic operations of an apartment property. The primary uses of cash by apartment properties are: (i) the payment of operating expenses; and (ii) the payment of debt service. Other sources of cash include debt financing and the sale of additional BUCs.

The Company intends to issue BUCs from time to time to raise additional equity capital as needed to fund investment opportunities. In this regard, the Company has an effective Registration Statement on Form S-3 with the SEC relating to the sale of up to $100.0 million of its BUCs. To date, the Company has issued approximately $27.5 million of BUCs under this Registration Statement and intends to issue additional BUCs from time to time. In addition, in October 2008, the Company filed a Registration Statement on Form S-3 with the SEC relating to a Rights Offering. Pursuant to this Registration Statement, the Company may issue Rights Certificates to existing BUC holders. The Company has not yet determined when, or if, such a Rights Offering will be conducted. Raising additional equity capital for deployment into new investment opportunities is part of our overall growth strategy.

We believe that current market conditions have created significant investment opportunities and we will seek to aggressively pursue those opportunities. More specifically, the current credit crisis has severely disrupted the financial markets and, in our view, has also created potential investment opportunities for the Company. Non-traditional participants in the multifamily housing debt sector are either reducing their participation in the market or are being forced to downsize their existing portfolio of investments. We believe this is creating opportunities to acquire existing tax-exempt bonds from distressed entities at attractive yields. We believe that we are well-positioned as a result of our ability to acquire assets on the secondary market while maintaining the ability and willingness to also participate in primary market transactions.

The current credit crisis is also providing the potential for investments in quality real estate assets to be acquired from distressed owners and lenders. Our ability to restructure existing debt together with the ability to improve the operations of the underlying apartment properties through our affiliated property management company, America First Property Management Company, L.L.C., results in a valuable tax-exempt bond investment which is supported by the valuable collateral and operations of the underlying real property. We believe the Company is well-positioned to selectively acquire distressed assets, restructure debt and improve operations thereby creating value to shareholders in the form of a strong tax-exempt bond investment.

The Partnership’s principal uses of cash are the payment of distributions to BUC holders, interest and principal on debt financing and general and administrative expenses. The Partnership also uses cash to acquire additional investments. Distributions to BUC holders may increase or decrease at the determination of the General Partner. Distributions to BUC holders depend upon the amount of base and contingent interest received on the Company’s tax-exempt mortgage revenue bonds and cash received from other investments, the amount of borrowings and the effective interest rate of these borrowings, and the amount of the Partnership’s undistributed cash. Given that the terms of the new credit facility are expected to have a negative impact on the amount of CAD generated by the Company, the general partner intends to change the Company’s policy regarding distributions. The Company’s regular annual distributions have recently equaled $0.54 per BUC, or $0.135 per quarter per BUC. Beginning with the second quarter 2009 distribution, the general partner intends to make the Company’s regular annual distribution equal to $0.50 per BUC, or $0.125 per quarter per BUC. The general partner believes that distributions at this level are sustainable, however, if actual results vary from current projections and the actual CAD generated is less than the new regular distribution, such distribution amount may need to be reduced.

The VIEs’ primary source of cash is net rental revenues generated by their real estate investments. Net rental revenues from a multifamily apartment property depend on the rental and occupancy rates of the property and on the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market area in which a property is located. This, in turn, is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (such as zoning laws), inflation, real estate and other taxes, labor problems and natural disasters can affect the economic operations of an apartment property.

On a consolidated basis, cash provided by operating activities for the three months ended March 31, 2009 decreased approximately $1.2 million compared to the same period a year earlier mainly due to changes in working capital components. Cash from investing activities increased approximately $17.3 million, for the three months ended March 31, 2009 compared to the same period in 2008 primarily due to cash inflows from the early redemption of the Ashley Pointe, Woodbridge – Louisville and Woodbridge – Bloomington bonds offset by an increase in restricted cash. The increase in restricted cash was due mainly to the deposit of cash collateral for the Company’s TOB facility as replacement collateral for the redeemed bonds. Additionally, in 2008, bond acquisitions totaling approximately $12.4 million were made while no such cash outflows for new investments occurred in 2009. Cash from financing activities decreased approximately $800,000 for the three months ended March 31, 2009 compared to the same period in 2008. This decrease is mainly the result of changes in the liabilities related to restricted cash.

Historically, the Company’s primary leverage vehicle has been the Merrill Lynch P-Float program. The P-Float program was replaced in June of 2008 by the Company’s current TOB facility with Bank of America. The TOB facility matures in July 2009 and, subsequent to March 31, 2009, the Company received a firm commitment for a new secured credit facility from Bank of America which will refinance the current TOB facility. The new credit facility is expected to have a one-year term with a six-month renewal option held by the Company, an annual floating interest rate of LIBOR plus 390 basis points and a loan amount of approximately $50.0 million. The proceeds from the new credit facility plus the current cash collateral held by Bank of America for the TOB facility will be used to retire the outstanding balance on the TOB facility. The new credit facility is expected to close before June 30, 2009. In addition to the TOB facility maturity, approximately $19.9 million in outstanding mortgage financing related to the MF Properties located in Ohio and Kentucky is due in July, 2009. This mortgage loan contains three one-year renewal options held by the borrower. The borrower has provided the appropriate notification to the lender and intends to renew the mortgage for an additional year from the original maturity date. While the Company expects to be able to renew or refinance current debt maturities, if the current illiquidity in the financial markets continues or further deteriorates the counterparties on our credit facilities may be unable or unwilling to meet their commitments and our ability to renew or refinance our outstanding debt financing may be negatively affected.

Compared with the terms of our existing TOB facility, the terms of the new credit facility will increase the effective interest rate payable by the Company and will also reduce the amount of debt financing available for additional investments. Both of these factors will have a negative impact on the amount of CAD generated by the Company. The general partner has completed financial models in order to estimate the impact of the change in credit facilities on CAD. The actual impact on CAD may vary from current projections. The new distribution rate was determined based upon the current projections. The general partner will evaluate the new distribution rate against actual CAD generated by the Company and may increase or decrease the distribution based on such actual results.

Management utilizes a calculation of Cash Available for Distribution (“CAD”) as a means to determine the Partnership’s ability to make distributions to BUC holders. The general partner believes that CAD provides relevant information about its operations and is necessary along with net income for understanding its operating results. To calculate CAD, amortization expense related to debt financing costs and bond reissuance costs, Tier 2 income due to the general partner as defined in the Agreement of Limited Partnership, interest rate derivative expense or income, provision for loan losses, impairments on bonds and losses related to VIEs including depreciation expense are added back to the Company’s net income (loss) as computed in accordance with accounting principles generally accepted in the United States of America (“GAAP”). There is no generally accepted methodology for computing CAD, and the Company’s computation of CAD may not be comparable to CAD reported by other companies. Although the Company considers CAD to be a useful measure of its operating performance, CAD should not be considered as an alternative to net income or net cash flows from operating activities which are calculated in accordance with GAAP.


	For the Three			For the Three
	Months Ended			Months Ended
	March 31, 2009			March 31, 2008

Net income - America First Tax Exempt Investors, L.P.	$	25,763,070		$	13,402
Net income related to VIEs and eliminations due to consolidation		(23,543,530	)		652,783
Net income before impact of VIE consolidation		2,219,540			666,185
Change in fair value of derivatives and interest rate cap amortization		453,366			183,191
Loss on taxable loans		74,999			-
Loss on bond sale		127,495			-
Tier 2 Income distributable to the General Partner (1)		(574,890	)		-
Depreciation and amortization expense (Partnership only)		1,005,711			630,198
CAD	$	3,306,221		$	1,479,574

Net income, basic and diluted, per BUC	$	0.12		$	0.05

Total CAD per BUC	$	0.24		$	0.11

(1) As described in Note 2 to the consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent (Tier 2 income) will be distributed 75% to the BUC holders and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner. For 2009, the Tier 2 income distributable to the General Partner was generated by the early redemption of the Woodbridge – Louisville and Woodbridge - Bloomington bond investments.

There were no significant changes to the Company’s contractual obligations as of March 31, 2009 from the December 31, 2008 information presented in the Company’s Annual Report on Form 10-K. As discussed in the Annual report on Form 10-K, the Company’s TOB facility matures in July 2009. Subsequent to March 31, 2009, the Company received a firm commitment for a new secured credit facility from Bank of America which will refinance the current TOB facility. In addition to the TOB facility maturity, approximately $19.9 million in outstanding mortgage financing related to the MF Properties located in Ohio and Kentucky is due in July, 2009. This mortgage loan contains three one-year renewal options held by the Company. The Company has provided the appropriate notification to the lender and intends to renew the mortgage for an additional year from the original maturity date.

Evaluation of disclosure controls and procedures. The Partnership's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Partnership's current disclosure controls and procedures are effective, providing them with material information relating to the Partnership as required to be disclosed in the reports the Partnership files or submits under the Exchange Act on a timely basis.

Delaware	47-0810385
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1004 Farnam Street, Suite 400	Omaha, Nebraska 68102
(Address of principal executive offices)	(Zip Code)

(402) 444-1630
(Registrant's telephone number, including area code)

Large accelerated filer o	Accelerated filer x	Non- accelerated filer o	Smaller reporting company o
		(do not check if a smaller reporting company)


2009	$	96,555,371
2010		150,944
2011		270,646
2012		10,727,682
2013		6,232,724
Thereafter		-
Total	$	113,937,367