ATAX 12.31.11 10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2011

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

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-24843

AMERICA FIRST TAX EXEMPT INVESTORS, L.P.

(Exact name of registrant as specified in its charter)



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)

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

Beneficial Unit Certificates representing assignments of limited partnership interests in

America First Tax Exempt Investors, L.P. (the “BUCs")

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES o NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section (15) of the Act.

YES o NO x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period) that the registrant was required to submit and post such files.

YES x NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of the chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO x

The aggregate market value of the registrant's BUCs held by non-affiliates based on the final sales price of the BUCs on the last business day of the registrant's most recently completed second fiscal quarter was $163,465,627.

DOCUMENTS INCORPORATED BY REFERENCE

None

INDEX



	PART I

Item 1	Business	1
Item 1A	Risk Factors	9
Item 1B	Unresolved Staff Comments	16
Item 2	Properties	16
Item 3	Legal Proceedings	17
Item 4	Mine Safety Disclosures	18

	PART II

Item 5	Market for Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities	19
Item 6	Selected Financial Data	20
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	47
Item 8	Financial Statements and Supplementary Data	50
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	97
Item 9A	Controls and Procedures	97
Item 9B	Other Information	99

	PART III

Item 10	Directors, Executive Officers and Corporate Governance	99
Item 11	Executive Compensation	101
Item 12	Security Ownership of Certain Beneficial Owners and Management	102
Item 13	Certain Relationships and Related Transactions, and Director Independence	103
Item 14	Principal Accountant Fee and Services	103

	PART IV

Item 15	Exhibits and Financial Statement Schedules	104

SIGNATURES		106

PART I

Forward-Looking Statements

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. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. When used, statements which are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements. We have based forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. This report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this report. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the headings “Risk Factors” in Item 1A of this report.

These forward-looking statements are subject to various risks and uncertainties, including those relating to:


•	defaults on the mortgage loans securing our tax-exempt mortgage revenue bonds;


•	risks associated with investing in multifamily apartments, including changes in business conditions and the general economy;


•	changes in short-term interest rates;


•	our ability to use borrowings to finance our assets;


•	current negative economic and credit market conditions; and


•	changes in government regulations affecting our business.

Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.

Item 1. Business.

America First Tax Exempt Investors, L.P. was formed for the primary purpose of acquiring a portfolio of federally tax-exempt mortgage revenue bonds that are issued to provide construction and/or permanent financing of multifamily residential properties. Interest paid 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.

The Partnership has been in operation since 1998 and owned 20 federally tax-exempt mortgage revenue bonds with an aggregate outstanding principal amount of $188.6 million as of December 31, 2011. These bonds were issued by various state and local housing authorities in order to provide construction and/or permanent financing of 20 multifamily residential apartments containing a total of 3,959 rental units located in the states of Florida, Illinois, Iowa, Kansas, Kentucky, Minnesota, Ohio, South Carolina, Tennessee, and Texas. In each case the Partnership owns, either directly or indirectly, 100% of the bonds issued for these properties. Each bond is secured by a first mortgage or deed of trust on the financed apartment property. Each of the bonds provides for "base" interest payable at a fixed rate on a periodic basis. Additionally, five of the bonds also provide for the payment of contingent interest determined by the net cash flow and net capital appreciation of the underlying real estate properties. As a result, these mortgage revenue bonds provide the Partnership with the potential to participate in future increases in the cash flow generated by the financed properties, either through operations or from their ultimate sale. Of the 20 bonds owned, four are owned directly by the Partnership, 13 are owned by ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to facilitate a Tax Exempt Bond Securitization (“TEBS”) Financing with Freddie Mac and three are securitized and held by Deutsche Bank ("DB") in two Tender Option Bond ("TOB") facilities (see Notes 2, 9 and 10). Three of the entities that own the apartment properties financed by three of the Partnership's tax-exempt mortgage revenue bonds were deemed to be Consolidated variable interest entities ("VIEs") of the Partnership at December 31, 2011 and, as a result, these bonds are eliminated in consolidation on the Company's consolidated financial statements. Two bonds are secured by three properties, Crescent Village, Post Woods, and Willow Bend apartments in Ohio (the “Ohio Properties”) which are subject to a sales agreement (see Note 3) and are eliminated in consolidation on the Company's financial statements.

The ability of the properties collateralizing our tax-exempt mortgage revenue bonds to make payments of base and contingent interest is a function of the net operating income generated by these properties. Net operating income from a multifamily residential property depends on the rental and occupancy rates of the property and the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market areas 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 interest rates on single-family mortgage loans. In addition, factors such as government regulation, inflation, real estate and other taxes, labor problems and natural disasters can affect the economic operations of a property. Because the return to the Partnership from its investments in tax-exempt mortgage revenue bonds depends upon the economic performance of the multifamily residential properties which collateralize these bonds, the Partnership may be considered to be in competition with other multifamily rental properties located in the same geographic areas as the properties financed with its tax-exempt mortgage revenue bonds.

The Partnership may also invest in other types of tax-exempt securities that may or may not be secured by real estate. These tax-exempt securities must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency and may not represent more than 25% of the Partnership's assets at the time of acquisition. To date, the Partnership has not made any investments of this type.

The Partnership may also make taxable mortgage loans secured by multifamily properties which are financed by tax-exempt mortgage revenue bonds held by the Partnership. The Partnership does this in order to provide financing for capital improvements at these properties or to otherwise support property operations when we determine it is in the best long-term interest of the Partnership.

The Partnership generally does not seek to acquire direct interests in real property as long term or permanent investments. The Partnership may, however, acquire real estate securing its tax-exempt mortgage revenue bonds or taxable mortgage loans through foreclosure in the event of a default. In addition, the Partnership may acquire interests in multifamily apartment properties (“MF Properties”) in order to position itself for future investments in tax-exempt mortgage revenue bonds issued to finance these properties. The Partnership currently holds interests in twelve MF Properties containing 1,772 rental units, of which three are located in Ohio and are currently subject to a sales agreement, one is located in Nebraska, two are located in Kentucky, one is located in Indiana, one is located in Virginia, one is located in Georgia, one is located in North Carolina and two are located in Texas. The Partnership expects the MF Properties to eventually be sold to a not-for-profit entity or in connection with a syndication of Low Income Housing Tax Credits (“LIHTCs”) under Section 42 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Partnership expects to acquire tax-exempt mortgage revenue bonds issued to provide debt financing for these properties at the time the property ownership is restructured. Such restructurings will generally be expected to occur within 36 months of the Partnership's 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. Current credit markets and general economic conditions have resulted in very few 4% LIHTC syndication and tax-exempt bond financing transactions being completed in recent years. These types of transactions represent a long-term market opportunity for the Partnership and will provide us with a pipeline of future bond investment opportunities when the market for LIHTC syndications strengthens.

Properties Management. Ten of the 20 properties which collateralize the bonds owned by the Partnership are managed by America First Properties Management Company (“Properties Management”), an affiliate of AFCA 2, which provides property management services for Ashley Square, Iona Lakes Apartments, Bent Tree Apartments, Lake Forest Apartments, Fairmont Oaks Apartments, Cross Creek, Woodland Park, and each of the MF Properties. Weatherford is currently under construction and not subject to a management agreement. Management believes that this relationship provides greater insight and understanding of the underlying property operations and their ability to meet debt service requirements to the Partnership. The properties not currently managed by Properties Management are Autumn Pines, Bella Vista Apartments, Bridle Ridge, Brookstone Apartments, GMF-Madison Apartments, GMF-Warren/Tulane Apartments, Runnymede Apartments, South Park Ranch Apartments, Villages at Lost Creek and Woodlynn Village.

Business Objectives and Strategy

Our business objectives are to (i) preserve and protect our capital and (ii) provide regular and increasing cash distributions to our unitholders which are substantially exempt from federal income tax. We have sought to meet these objectives by primarily investing in a portfolio of tax-exempt mortgage revenue bonds that were issued to finance, and are secured by first mortgages on, multifamily apartment properties, including student housing. Certain of these bonds may be structured to provide a potential for an enhanced federally tax-exempt yield through the payment of contingent interest which is payable out of net cash flow from operations and net capital appreciation of the financed apartment properties.

We are pursuing a business strategy of acquiring additional tax-exempt mortgage revenue bonds on a leveraged basis in order to (i) increase the amount of tax-exempt interest available for distribution to our unitholders; (ii) reduce risk through asset diversification and interest rate hedging; and (iii) achieve economies of scale. We are pursuing this growth strategy by investing in additional tax-exempt mortgage revenue bonds and related investments, taking advantage of attractive financing structures available in the tax-exempt securities market and entering into interest rate risk management instruments. We may finance the acquisition of additional tax-exempt mortgage revenue bonds through the reinvestment of cash flow, the issuance of additional units, or securitization financing using our existing portfolio of tax-exempt mortgage revenue bonds. Our operating policy is to use securitizations or other forms of leverage to maintain a level of debt financing between 40% and 60% of the total par value of our mortgage bond portfolio.

In connection with our business strategy, we continually assess opportunities to reposition our existing portfolio of tax-exempt mortgage revenue bonds. The principal objective of this assessment is to improve the quality and performance of our revenue bond portfolio and, ultimately, increase the amount of cash available for distribution to our unitholders. In some cases, we may elect to redeem selected tax-exempt mortgage revenue bonds that are secured by multifamily properties that have experienced significant appreciation. Through the selective redemption of the bonds, a sale or refinancing of the underlying property will be required which, if sufficient sale or refinancing proceeds exist, may entitle the Partnership to receive payment of contingent interest on its bond investment. In other cases, we may elect to sell bonds on properties that are in stagnant or declining markets. The proceeds received from these transactions would be redeployed into other tax-exempt investments consistent with our investment objectives. We may also be able to use a higher-quality investment portfolio to obtain higher leverage to be used to acquire additional investments.

In executing our growth strategy, we expect to invest primarily in bonds issued to provide affordable rental housing, but may also consider bonds issued to finance student housing projects and housing for senior citizens. The four basic types of multifamily housing revenue bonds which we may acquire as investments are as follows:


1.	Private activity bonds issued under Section 142(d) of the Internal Revenue Code;


2.	Bonds issued under Section 145 of the Internal Revenue Code by not-for-profit entities qualified under Section 501(c)(3) of the Internal Revenue Code;


3.	Essential function bonds issued by a public instrumentality to finance an apartment property owned by such instrumentality; and


4.	Existing “80/20 bonds” that were issued under Section 103(b)(4)(A) of the Internal Revenue Code of 1954.

Each of these bond structures permits the issuance of tax-exempt mortgage revenue bonds to finance the construction or acquisition and rehabilitation of affordable rental housing. Under applicable Treasury Regulations, any affordable apartment project financed with tax-exempt mortgage revenue bonds must set aside a percentage of its total rental units for occupancy by tenants whose incomes do not exceed stated percentages of the median income in the local area. In each case, the balance of the rental units in the apartment project may be rented at market rates. With respect to private activity bonds issued under Section 142(d) of the Internal Revenue Code, the owner of the apartment project may elect, at the time the bonds are issued, whether to set aside a minimum of 20% of the units for tenants making less than 50% of area median income (as adjusted for household size) or 40% of the units for tenants making less than 60% of the area median income (as adjusted for household size). Multifamily housing bonds that were issued prior to the Tax Reform Act of 1986 (so called “80/20” bonds) require that 20% of the rental units be set aside for tenants whose income does not exceed 80% of the area median income, without adjustment for household size.

We expect that many of the private activity housing bonds that we evaluate for acquisition will be issued in conjunction with the syndication of LIHTCs by the owner of the financed apartment project. Additionally, to facilitate our investment strategy of acquiring additional tax-exempt mortgage bonds secured by MF Properties, we may acquire ownership positions in the MF Properties. We expect to acquire tax-exempt mortgage revenue bonds on these MF Properties in many cases at the time of a restructuring of the MF Property ownership. Such restructuring may involve the syndication of LIHTCs in conjunction with property rehabilitation.

Investment Types

Tax-Exempt Mortgage Revenue Bonds. The Partnership invests in tax-exempt mortgage revenue bonds that are secured by a first mortgage or deed of trust on multifamily apartment projects. Each of these bonds bears interest at a fixed annual base rate. Five of the 20 bonds currently owned by the Partnership also provide for the payment of contingent interest, which is payable out of the net cash flow and net capital appreciation of the underlying apartment properties. As a result, the amount of interest earned by the Partnership from its investment in tax-exempt mortgage revenue bonds is a function of the net operating income generated by the properties collateralizing the tax-exempt mortgage revenue bonds. Net operating income from a multifamily residential property depends on the rental and occupancy rates of the property and the level of operating expenses.

Other Tax-Exempt Securities. The Partnership may invest in other types of tax-exempt securities that may or may not be secured by real estate. These tax-exempt securities must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency and may not represent more than 25% of the Partnership's assets at the time of acquisition.

Taxable Mortgage Loans. The Partnership may also make taxable mortgage loans secured by multifamily properties which are financed by tax-exempt mortgage revenue bonds that are held by the Partnership.

Other Investments. While the Partnership generally does not seek to acquire equity interests in real property as long-term or permanent investments, it may acquire real estate securing its revenue bonds or taxable mortgage loans through foreclosure in the event of a default. In addition, as part of its growth strategy, the Partnership may acquire direct or indirect interests in MF Properties on a temporary basis in order to position itself for a future investment in tax-exempt mortgage revenue bonds issued to finance the acquisition or substantial rehabilitation of such apartment complexes by a new owner. A new owner would typically seek to obtain LIHTCs in connection with the issuance of the new tax-exempt bonds, but if LIHTCs had previously been issued for the property, such a restructuring could not occur until the expiration of a 15-year compliance period for the initial LIHTCs. The Partnership may acquire an interest in MF Properties prior to the end of the LIHTC compliance period. After the LIHTC compliance period, the Partnership would expect to sell its interest in such MF Property to a new owner which could syndicate new LIHTCs and seek tax-exempt bond financing on the MF Property which the Partnership could acquire. Such restructurings will generally be expected to occur within 36 months of the acquisition by the Partnership of an interest in an MF Property. The Partnership will not acquire LIHTCs in connection with these transactions.

Investment Opportunities

There continues to be a significant unmet demand for affordable multifamily housing in the United States. The United States Department of Housing and Urban Development (“HUD”) reports that there are approximately 7.1 million American households in need of quality affordable housing. The types of tax-exempt mortgage revenue bonds in which we invest offer developers of affordable housing a low-cost source of construction and permanent debt financing for these types of properties. Investors purchase these bonds because the income paid on these bonds is exempt from federal income taxation. The National Council of State Housing Agencies Fact Sheet and HUD have captured some key scale metrics and opportunities of this market:


•	HUD has provided over 1.0 million lower-income Americans with affordable rental housing opportunities;


•	Housing Finance Agencies (HFAs) use multifamily tax-exempt housing bonds to finance more than 100,000 apartments each year; and


•	The availability of tax-exempt bond financing for affordable multifamily housing to be owned by private, for-profit developers in each state in each calendar year is limited by the statewide volume cap distributed as described in Section 146 of the Internal Revenue Code; this private activity bond financing is based on state population and indexed to inflation.


•	The supply of rental units is expected to fall short of demand with apartment vacancies continuing to decline.

In addition to tax-exempt mortgage revenue bonds, the federal government promotes affordable housing through the use of LIHTCs for affordable multifamily rental housing. The syndication and sale of LIHTCs along with tax-exempt bond financing is attractive to developers of affordable housing because it helps them raise equity and debt financing for their projects. Under this program, developers that receive an allocation of private activity bonds will also receive an allocation of federal LIHTCs as a method to encourage the development of affordable multifamily housing. The Partnership does not invest in LIHTCs, but is attracted to tax-exempt mortgage revenue bonds that are issued in association with federal LIHTC syndications because in order to be eligible for federal LIHTCs a property must either be newly constructed or substantially rehabilitated and; therefore, may be less likely to become functionally obsolete in the near term than an older property. There are various requirements in order to be eligible for federal LIHTCs, including rent and tenant income restrictions. In general, the property owner must elect to set aside either 40% or more of the property's residential units for occupancy by individuals whose income is 60% or less of the area median gross income or 20% or more of the property's residential units for occupancy by individuals whose income is 50% or less of the area median gross income. These units remain subject to these set aside requirements for a minimum of 30 years.

The 2008 Housing Act simplified and expanded the use of LIHTCs and tax-exempt bond financing for low-income multifamily housing industry. Additionally, it exempted newly issued tax-exempt private activity bonds from Alternative Minimum Tax. Previously, these tax-exempt private activity bonds were Alternative Minimum Tax preference items for individual taxpayers. We believe these changes should enhance the Partnership's opportunities for making investments in accordance with its investment criteria.

Current credit market conditions have shown some improvement over the last year which has offered more opportunities for tax- exempt bond financing and a commensurate improvement in LIHTC syndication which often accompanies these transactions. The Partnership is currently seeing opportunity in new origination as well as secondary market transactions for tax-exempt multifamily housing investment given these improved market conditions.

Effects of Recent Credit Markets and Economic Conditions

The disruptions in domestic and international financial markets, and the resulting restrictions on the availability of debt financing that had prevailed since 2008 began to subside in 2010 and continued to improve in 2011. While economic trends show signs of a stabilization of the economy and debt availability has improved, overall availability remains limited. These conditions, in our view, will continue to create potential investment opportunities for the Partnership. Many participants in the multifamily housing debt sector either reduced their participation in the market or were forced to liquidate some or all of their existing portfolio investments in order to meet their liquidity needs. We believe this continues to create opportunities to acquire existing tax-exempt mortgage revenue bonds from distressed holders at attractive yields. The Partnership continues to evaluate potential investments in bonds which are available on the secondary market. We believe many of these bonds will meet our investment criteria and that we have a unique ability to analyze and close on these opportunities while maintaining our ability and willingness to also participate in primary market transactions.

Current credit and real estate market conditions also create opportunities to acquire quality MF Properties from distressed owners and lenders. Our ability to restructure existing debt, together with the ability to improve the operations of the apartment properties through our affiliated property management company, can position these MF Properties for an eventual financing with tax-exempt mortgage revenue bonds meeting our investment criteria and that will be supported by a valuable and well-run apartment property. We believe we can selectively acquire MF Properties, restructure debt and improve operations in order to create value to our unitholders in the form of a strong tax-exempt bond investment.

On the other hand, continued economic weakness in some markets may limit our ability to access additional debt financing that the Partnership uses to partially finance its investment portfolio or otherwise meet its liquidity requirements. The inability to access debt financing may result in adverse effects on our financial condition and results of operations. There can be no assurance that we will be able to finance additional acquisitions of tax-exempt mortgage revenue bonds through either additional equity or debt financing. Although the consequences of market and economic conditions and their impact on our ability to pursue our plan to grow through investments in additional tax-exempt housing bonds are not fully known, we do not anticipate that our existing assets will be adversely affected in the long-term. In addition, the economic conditions including higher levels of unemployment, lack of job growth and low home mortgage interest rates have had a negative effect on some of the apartment properties which collateralize our tax-exempt bond investments and our MF Properties in the form of lower occupancy. While some properties have been negatively effected, our overall economic occupancy (which is adjusted to reflect rental concessions, delinquent rents and non-revenue units such as model units and employee units) of the apartment properties that the Partnership has financed with tax-exempt mortgage revenue bonds was approximately at 85% during 2011 as compared to 81% during 2010. Overall economic occupancy of the MF Properties has increased to approximately 83% during 2011 from 80% during 2010. Based on the growth statistics in the market, we expect to see continued improvement in property operations and profitability in 2012 and 2013 and that rental rate and occupancy trends will continue to be positive.

Financing Arrangements

The Partnership may finance the acquisition of additional tax-exempt mortgage revenue bonds through the reinvestment of cash flow, the issuance of additional units or with debt financing collateralized by our existing portfolio of mortgage revenue bonds, including the securitization of these bonds.

Debt Financing. At December 31, 2011, the Partnership has outstanding debt financing of $112.7 million secured by 15 tax-exempt mortgage revenue bonds with an approximate par value of $153.6 million, two taxable bonds with an approximate par value of $700,000 plus approximately $8.0 million in restricted cash. Our operating policy is to maintain a level of debt financing between 40% and 60% of the total par value of our mortgage revenue bond portfolio. As of December 31, 2011, the debt outstanding as a percentage of the total par value of the Partnerships' total tax-exempt mortgage revenue and taxable bond portfolio plus the restricted cash of approximately $197.3 million results in a leverage ratio of approximately 57%. The outstanding debt financing facilities consist of two TOB trusts with Deutsche Bank and a TEBS facility with Freddie Mac (see Note 9 to the consolidated financial statements). Additionally, the MF Properties are encumbered by mortgage loans with an aggregate principal balance of approximately $46.2 million. These mortgage loans mature at various times from May 2012 through July 2015 (see Note 10 to the consolidated financial statements). The total debt financing plus mortgage loans of $158.9 million results in a leverage ratio to Total Assets of 53%.

Equity Financing. Beginning in 2007, the Partnership has issued BUCs from time to time to raise additional equity capital to fund investment opportunities. Through December 31, 2011, the Partnership had issued a total of 20,285,000 additional BUCs raising net proceeds of approximately $108.2 million after payment of an underwriter’s discount and other offering costs of approximately $7.8 million. In April 2010, a Registration Statement on Form S-3 was declared effective by SEC under which the Partnership may offer up to $200.0 million of additional BUCs from time to time. The most recent issuance, included above, was completed in April 2010. The Partnership issued an additional 8,280,000 BUCs through an underwritten public offering at a public offering price of $5.37 per BUC pursuant to this new Registration Statement. Net proceeds realized by the Partnership from the issuance of these BUCs were approximately $41.6 million after payment of an underwriter's discount and other offering costs of approximately $2.8 million. There was no equity raise completed in 2011 (see Note 11 to the consolidated financial statements).

Recent Developments

Bond Redemptions. In October 2011, the Briarwood Manor bond was called and retired at Par plus accrued interest for approximately $4.9 million. This transaction resulted in approximately $445,000 gain reported in the fourth quarter of 2011. The net redemption proceeds were used by the Company to retire its $4.0 million term debt with Omaha State Bank. The Briarwood bond was originally purchased in February 2011 for $4.5 million.

In May 2011, the outstanding Clarkson College tax-exempt mortgage revenue bond held by the Company was retired early for an amount equal to the outstanding principal and base interest plus accrued but unpaid contingent interest. As of March 31, 2011, the Company carried the investment in the Clarkson College bond at an estimated fair market value of approximately $5.1 million. The retirement of the bond resulted in a payment to the Partnership of approximately $6.1 million consisting of approximately $5.8 million in principal, approximately $16,000 of base interest and approximately $308,000 of accrued contingent interest.

Bond Acquisitions. In June 2011, the Partnership acquired at par a $3.8 million tax-exempt mortgage revenue bond and a $315,000 taxable revenue bond secured by the GMF-Madison Tower Apartments, a 147 unit multifamily apartment complex located in Memphis, Tennessee, which represented 100% of the bond issuance. These bonds were issued for the acquisition of the GMF-Madison Tower Apartments by an affiliate of the Global Ministries Foundation, an unaffiliated not-for-profit entity. The tax-exempt mortgage revenue bond carries an annual interest rate of 6.75% and matures on December 1, 2046. The taxable bond carries an annual interest rate of 7.75% and matures on December 1, 2019. The bonds do not provide for contingent interest. The Company has determined that the entity which owns GMF-Madison Tower Apartments is an unrelated not -for-profit which under the accounting guidance is not subject to applying the VIE consolidation guidance. As a result, its financial statements are not consolidated into the consolidated financial statements of the Company.

In June 2011, the Partnership acquired at par a $11.8 million tax-exempt mortgage revenue bond and a $485,000 taxable revenue bond secured by the GMF-Warren/Tulane Apartments, a 448 unit multifamily apartment complex located in Memphis, Tennessee, which represented 100% of the bond issuance. These bonds were issued for the acquisition of the GMF-Warren/Tulane Apartments by an affiliate of the Global Ministries Foundation, an unaffiliated not-for-profit entity. The tax-exempt mortgage revenue bond carries an annual interest rate of 6.75% and matures on December 1, 2046. The taxable bond carries an annual interest rate of 6.5% and matures on December 1, 2015. The bonds do not provide for contingent interest. The Company has determined that the entity which owns GMF-Warren/Tulane Apartments is an unrelated not-for-profit which under the accounting guidance is not subject to applying the VIE consolidation guidance. As a result, its financial statements are not consolidated into the consolidated financial statements of the Company.

MF Property Acquisitions. In March 2011, the Partnership purchased The Arboretum on Farnam Drive ("Arboretum"), a 145 unit independent senior living facility located in Omaha, Nebraska, for approximately $20.0 million plus transaction expenses of approximately $449,000. The purchase price was funded through a conventional mortgage of $17.5 million and cash on hand. The mortgage payable is with Omaha State Bank, carries a 5.25% fixed rate and matures on March 31, 2014. The Partnership intends to restructure the property operations by shifting from an entrance fee rental income model utilized by the prior ownership to a current market rent model. Upon lease-up and stabilization of the property, projected to occur in fiscal 2012, the Partnership expects to sell the property to a 501(c)3 not-for-profit entity and acquire tax-exempt mortgage revenue bonds collateralized by the property.

In February 2011, the Partnership foreclosed on the bonds secured by DeCordova and Weatherford properties and one of the Partnership's subsidiaries took 100% ownership interest in these limited liability companies. Both properties are reported as MF Properties. In July 2011, the Company obtained a $6.5 million construction loan secured by the DeCordova and Weatherford properties. This construction loan is being used to fund the completion of Weatherford and the expansion of DeCordova. The construction loan is with an unrelated third party and carries a fixed annual interest rate of 5.9%, maturing on July 28, 2015. The balance of this note at December 31, 2011 is $4.7 million. This agreement requires $500,000 to be held by the Company as restricted cash (see Note 6 to the consolidated financial statements).

In February, 2012, the Partnership obtained a $2.0 million construction loan secured by the DeCordova property to be used to expand the DeCordova campus by constructing a new apartment building adjacent to the existing DeCordova property. This construction loan is with an unrelated third party and carries a fixed annual interest rate of 5.0%, maturing on February 1, 2017.

In the third quarter of 2010, the Company purchased a minority interest equal to 8.7% ownership in 810 Schutte Road LLC ("Eagle Village"), a 511 bed student housing facility located in Evansville, Indiana. The minority interest investment totaled approximately $1.1 million and was presented in other assets. In June 2011, the Partnership acquired the remaining ownership interest in Eagle Village. Approximately $3.1 million of cash on hand plus a conventional mortgage of approximately $8.9 million was used to purchase the remaining ownership. The mortgage loan carries a variable interest rate of one-month LIBOR plus 2.75% but will not be less than 3.5%. At December 31, 2011 the interest rate on the loan was 3.5%. This mortgage matures on June 1, 2013. Eagle Village returned $125,000 to the Company as a preferred return on their investment . The transaction is eliminated upon consolidation. Eagle Village is wholly owned by a subsidiary of the Partnership and was reported as an MF Property. The Partnership plans to operate the property as a student housing facility. Once stabilized as a student housing property, the Company will seek to restructure the ownership and capital structure through the sale of the property to a student housing not-for-profit entity. The Company anticipates it will purchase tax-exempt mortgage revenue bonds issued as part of such a restructuring.

Management and Employees

The Partnership is managed by its general partner, America First Capital Associates Limited Partnership Two (“AFCA 2”) which is an affiliate of The Burlington Capital Group LLC ("Burlington"). The Partnership has no employees, executive officers or directors. Certain services are provided to the Partnership by employees of Burlington, which is the general partner of AFCA 2, and the Partnership reimburses Burlington for its allocated share of these salaries and benefits. The Partnership is not charged, and does not reimburse Burlington, for the services performed by executive officers of Burlington.

Competition

The Partnership competes with private investors, lending institutions, trust funds, investment partnerships and other entities with objectives similar to the Partnership for the acquisition of tax-exempt mortgage revenue bonds and other investments. This competition could reduce the availability of tax-exempt mortgage revenue bonds for acquisition and reduce the interest rate that issuers pay on these bonds.

Because the Partnership holds tax-exempt mortgage revenue bonds secured entirely by multifamily residential properties and holds an interest in the MF Properties, the Partnership may be considered to be in competition with other residential real estate in the same geographic areas. In each city in which the properties financed by the Partnership's tax-exempt mortgage revenue bonds owned by the Partnership or MF Properties are located, such properties compete with a substantial number of other multifamily properties. Multifamily properties also compete with single-family housing that is either owned or leased by potential tenants. To compete effectively, the apartment properties financed or owned by the Partnership must offer quality apartments at competitive rental rates. In order to maintain occupancy rates and attract quality tenants, the Partnership's apartment properties may also offer rental concessions, such as free rent to new tenants for a stated period. These apartment properties also compete by offering quality apartments in attractive locations and that provide tenants with amenities such as recreational facilities, garages and pleasant landscaping.

Environmental Matters

The Partnership believes that each of the MF Properties and the properties collateralizing its tax-exempt mortgage revenue bonds are in compliance, in all material respects, with federal, state and local regulations regarding hazardous waste and other environmental matters and is not aware of any environmental contamination at any of such properties that would require any material capital expenditure by the underlying properties, and therefore the Partnership, for the remediation thereof.

Tax Status

The Partnership is classified as a partnership for federal income tax purposes and accordingly, it makes no provision for income taxes. The distributive share of the Partnership's income, deductions and credits is included in each unitholder's income tax return.

The Partnershipholds its interests in MF Properties through various subsidiaries which are “C” corporations for income tax purposes. These subsidiaries file separate income tax returns. Therefore, the Partnership is only subject to income taxes on these investments to the extent it receives dividends from the subsidiaries.

The VIEs which are reported on a consolidated basis with the Partnership for GAAP reporting purposes as described below under “Effect of Implementation of Guidance Changes on Consolidations on Financial Reporting” are separate legal entities who record and report income taxes based upon their individual legal structure which may include corporations, limited partnerships and limited liability companies. The Partnership does not presently believe that the consolidation of VIEs for reporting under GAAP will impact the Partnership's tax status, amounts reported to unitholders on IRS Form K-1, the Partnership's ability to distribute tax-exempt income to unitholders, the current level of quarterly distributions or the tax-exempt status of the underlying mortgage revenue bonds.

All financial information in this Form 10-K presented on the basis of Accounting Principles Generally Accepted in the United States of America, is that of the Partnership and the VIEs on a consolidated basis. We refer to the Partnership, its wholly owned subsidiaries (each a “Holding Company”), and the consolidated VIEs throughout this Form 10-K as the “Company.” We refer to the Partnership and Holding Company, without consolidation of the VIEs, as the “Partnership.”

General Information

We are a Delaware limited partnership. Our general partner is AFCA 2, whose general partner is Burlington. Since 1984, Burlington has specialized in the management of investment funds, many of which were formed to acquire real estate investments such as tax-exempt mortgage revenue bonds, mortgage securities and multifamily real estate properties. Burlington maintains its principal executive offices at 1004 Farnam Street, Suite 400, Omaha, Nebraska 68102, and its telephone number is (402) 444-1630.

We do not have any employees of our own. Employees of Burlington, acting through our general partner, are responsible for our operations and we reimburse Burlington for the allocated salaries and benefits of these employees and for other expenses incurred in running our business operations. In connection with the operation of the Partnership, our general partner is entitled to an administrative fee in an amount equal to 0.45% per annum of the principal amount of the revenue bonds, other tax-exempt investments and taxable mortgage loans held by the Partnership. Ten of the tax-exempt mortgage revenue bonds held by the Partnership provide for the payment of this administrative fee to the general partner by the owner of the financed property. When the administrative fee is payable by a property owner, it is subordinated to the payment of all base interest to the Partnership on the tax-exempt mortgage revenue bond on that property. Our Agreement of Limited Partnership provides that the administrative fee will be paid directly by the Partnership with respect to any investments for which the administrative fee is not payable by the property owner or a third party. In addition, our Agreement of Limited Partnership provides that the Partnership will pay the administrative fee to the general partner with respect to any foreclosed mortgage bonds.

Our general partner or its affiliates may also earn mortgage placement fees in connection with the identification and evaluation of additional investments that we acquire. Any mortgage placement fees will be paid by the owners of the properties financed by the acquired mortgage revenue bonds out of bond proceeds. The amount of mortgage placement fees, if any, will be subject to negotiation between the general partner or its affiliates and such property owners.

Properties Management is an affiliate of Burlington that is engaged in the management of apartment complexes. Properties Management currently manages the twelve MF Properties and ten of the properties whose tax-exempt mortgage revenue bonds are held by the Partnership and earns a fee paid out of property revenues. Properties Management may also seek to become the manager of apartment complexes financed by additional mortgage bonds acquired by the Partnership, subject to negotiation with the owners of such properties. If the Partnership acquires ownership of any property through foreclosure of a revenue bond, Properties Management may provide property management services for such property and, in such case, earn a fee payable out of property revenues.

Our sole limited partner is America First Fiduciary Corporation Number Five, a Nebraska corporation. BUCs represent assignments by the sole limited partner of its rights and obligations as a limited partner.

Information Available on Website

The Partnership's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and press releases are available free of charge at www.ataxfund.com as soon as reasonably practical after they are filed with the SEC. The information on the website is not incorporated by reference into this Form 10-K.

Item 1A. Risk Factors

The financial condition, results of operations and cash flows of the Partnership are affected by various factors, many of which are beyond the Partnership's control. These include the following:

Cash distributions from the Partnership may change depending on the amount of cash available for distribution.

The Partnership currently distributes cash to unitholders at an annual rate of $0.50 per unit. The amount of the cash per unit distributed by the Partnership may increase or decrease at the determination of the General Partner based on its assessment of the amount of cash available to the Partnership for this purpose. During the year ended December 31, 2011, the Partnership generated cash available for distribution of $0.35 per unit. Although the Partnership may supplement its cash available for distribution with unrestricted cash, unless the Partnership is able to increase its cash receipts through completion of its current investment plans, the Partnership may need to reduce the level of cash distributions per unit from the current level. In addition, there is no assurance that the Partnership will be able to maintain its current level of annual cash distributions per unit even if the Partnership completes its current investment plans.

The receipt of interest and principal payments on our tax-exempt mortgage revenue bonds will be affected by the economic results of the underlying multifamily properties.

Although our tax-exempt mortgage revenue bonds are issued by state or local housing authorities, they are not obligations of these governmental entities and are not backed by any taxing authority. Instead, each of these revenue bonds is backed by a non-recourse loan made to the owner of the underlying apartment complex and is secured by a first mortgage lien on the property. Because of the non-recourse nature of the underlying mortgage loans, the sole source of cash to pay base and contingent interest on the revenue bond, and to ultimately pay the principal amount of the bond, is the net cash flow generated by the operation of the financed property and the net proceeds from the ultimate sale or refinancing of the property, except in limited cases where a property owner has provided a limited guarantee of certain payments. This makes our investments in these mortgage revenue bonds subject to the kinds of risks usually associated with direct investments in multifamily real estate. If a property is unable to sustain net cash flow at a level necessary to pay its debt service obligations on our tax-exempt mortgage revenue bond on the property, a default may occur. Net cash flow and net sale proceeds from a particular property are applied only to debt service payments of the particular mortgage revenue bond secured by that property and are not available to satisfy debt service obligations on other mortgage revenue bonds that we hold. In addition, the value of a property at the time of its sale or refinancing will be a direct function of its perceived future profitability. Therefore, the amount of base and contingent interest that we earn on our mortgage revenue bonds, and whether or not we will receive the entire principal balance of the bonds as and when due, will depend to a large degree on the economic results of the underlying apartment complexes.

The net cash flow from the operation of a property may be affected by many things, such as the number of tenants, the rental rates, operating expenses, the cost of repairs and maintenance, taxes, government regulation, competition from other apartment complexes, mortgage rates for single-family housing and general and local economic conditions. In most of the markets in which the properties financed by our bonds are located, there is significant competition from other apartment complexes and from single-family housing that is either owned or leased by potential tenants. Low mortgage interest rates and federal tax credits make single-family housing more accessible to persons who may otherwise rent apartments.

The value of the properties is the only source of repayment of our tax-exempt mortgage revenue bonds.

The principal of most of our tax-exempt mortgage revenue bonds does not fully amortize over their terms. This means that all or some of the balance of the mortgage loans underlying these bonds will be repaid as a lump-sum “balloon” payment at the end of the term. The ability of the property owners to repay the mortgage loans with balloon payments is dependent upon their ability to sell the properties securing our tax-exempt mortgage revenue bonds or obtain adequate refinancing. The mortgage revenue bonds are not personal obligations of the property owners, and we rely solely on the value of the properties securing these bonds for security. Similarly, if a tax-exempt mortgage revenue bond goes into default, our only recourse is to foreclose on the underlying multifamily property. If the value of the underlying property securing the bond is less than the outstanding principal balance and accrued interest on the bond, we will suffer a loss.

In the event a property securing a tax-exempt mortgage revenue bond is not sold prior to the maturity or remarketing of the bond, any contingent interest payable from the net sale or refinancing proceeds of the underlying property will be determined on the basis of the appraised value of the underlying property. Real estate appraisals represent only an estimate of the value of the property being appraised and are based on subjective determinations, such as the extent to which the properties used for comparison purposes are comparable to the property being evaluated and the rate at which a prospective purchaser would capitalize the cash flow of the property to determine a purchase price. Accordingly, such appraisals may result in us realizing less contingent interest from a tax-exempt mortgage revenue bond than we would have realized had the underlying property been sold.

There is additional credit risk when we make a taxable loan on a property.

The taxable mortgage loans that we make to owners of the apartment properties that secure tax-exempt mortgage revenue bonds held by us are non-recourse obligations of the property owner. As a result, the sole source of principal and interest payments on these taxable loans is the net cash flow generated by these properties or the net proceeds from the sale of these properties. The net cash flow from the operation of a property may be affected by many things as discussed above. In addition, any payment of principal and interest on a taxable loan on a particular property will be subordinate to payment of all principal and interest (including contingent interest) on the tax-exempt mortgage revenue bond secured by the same property. As a result, there may be a higher risk of default on the taxable loans than on the associated tax-exempt mortgage revenue bonds. If a property is unable to sustain net cash flow at a level necessary to pay current debt service obligations on the taxable loan on such property, a default may occur. While these taxable loans are secured by the underlying properties, in general, the Partnership does not expect to pursue foreclosure or other remedies against a property upon default of a taxable mortgage loan if the property is not in default on the tax-exempt mortgage revenue bonds financing the property.

There are risks associated with our strategy of acquiring ownership interests in MF Properties in anticipation of future tax-exempt bond financings of these projects.

To facilitate our investment strategy of acquiring additional tax-exempt mortgage bonds secured by multifamily apartment properties, we may acquire ownership positions in MF Properties.We expect to ultimately sell these MF Properties to unaffiliated parties often as part of a syndication of LIHTCs after the expiration of the compliance period relating to existing LIHTCs issued with respect to the MF Properties. Our plan is to provide tax-exempt mortgage financing to the new property owners at the time of a syndication of new LIHTCs in connection with a rehabilitation of these MF Properties. The market for LIHTC syndications may be negatively affected from time to time by economic and market conditions. For this and other reasons, there is no assurance that the Partnership will be able to sell its interests in the MF Properties after the applicable LIHTC compliance period. In addition, the value of the Partnership's interest in MF Properties will be affected by the economic performance of the MF Properties and other factors generally affecting the value of residential rental properties. As a result, there is no assurance the Partnership will not incur a loss upon the sale of its interest in an MF Property. In addition, there is no assurance that we will be able to acquire tax-exempt mortgage revenue bonds on the MF Properties even if we are able to sell our interests in the MF Properties. During the time the Partnership owns an interest in an MF Property, any net income it receives from these MF Properties will not be exempt from federal or state income taxation.

Any future issuances of additional units could cause their market value to decline.

The Partnership may issue additional units from time to time in order to raise additional equity capital. The issuance of additional units could cause dilution of the existing units and a decrease in the market price of the units. In addition, if additional units are issued but we are unable to invest the additional equity capital in assets that generate tax-exempt income at levels at least equivalent to our existing assets, the amount of cash available for distribution on a per unit basis may decline.

We may suffer adverse consequences from changing interest rates.

We have financed the acquisition of some of our assets using variable-rate debt financing. The interest that we pay on these financings fluctuates with a specific interest rate indices. All of our tax-exempt mortgage revenue bonds bear interest at fixed rates and, notwithstanding the contingent interest feature on some of these bonds, the amount of interest we earn on these bonds will not increase with a general rise in interest rates. Accordingly, an increase in our interest expense due to an increase in the applicable interest rate index used for our variable rate debt financing will reduce the amount of cash we have available for distribution to unitholders and may affect the market value of our units. The use of derivatives is designed to mitigate some but not all of the exposure to the negative impact of a higher cost of borrowing.

An increase in interest rates could also decrease the value of our tax-exempt mortgage revenue bonds. A decrease in the value of our tax-exempt mortgage revenue bonds could also decrease the amount we could realize on the sale of our investments and would thereby decrease the amount of funds available for distribution to our unitholders.During periods of low prevailing interest rates, the interest rates we earn on new tax-exempt mortgage revenue bonds that we acquire may be lower than the interest rates on our existing portfolio of tax-exempt mortgage revenue bonds.

To the extent we finance the acquisition of additional tax-exempt mortgage revenue bonds through the issuance of additional units or from the proceeds from the sale of existing tax-exempt mortgage revenue bonds and we earn a lower interest rate on these additional bonds, the amount of cash available for distribution on a per unit basis may be reduced.

We are subject to various risks associated with our derivative agreements.

We use derivative instruments, such as interest rate caps, to mitigate the risks we are exposed to as a result of changing interest rates. However, there is no assurance that these instruments will fully insulate the Partnership from the interest rate risks to which it is exposed. In addition, there are costs associated with these derivative instruments and there is no assurance these costs will not ultimately turn out to exceed the losses we would have suffered, if any, had these instruments not been in place. There is also a risk that a counterparty to such an instrument will be unable to perform its obligations to the Partnership. If a liquid secondary market does not exist for these instruments, we may be required to maintain a position until exercise or expiration, which could result in losses to the Partnership. In addition, we are required to record the fair value of these derivative instruments on our financial statements by recording changes in their values as interest earnings or expense. This can result in significant period to period volatility in the Partnership's reported net income over the term of these instruments.

There are risks associated with debt financing programs that involve securitization of our tax-exempt mortgage revenue bonds.

We have obtained debt financing through the securitization of our tax-exempt mortgage revenue bonds and may obtain this type of debt financing in the future. The terms of these securitization programs differ, but in general require that we deposit tax-exempt mortgage revenue bonds into a trust or other special purpose entity that issues a senior security to unaffiliated investors and a residual interest to the Partnership. The trust or other entity receives all of the interest payments from its underlying tax-exempt mortgage revenue bonds from which it pays interest on the senior security at a variable rate. As the holder of the residual interest, the Partnership is entitled to any remaining tax-exempt interest received by the trust after it has paid the full amount of interest due on the senior security and all of the expenses of the trust, including various fees to the trustee, remarketing agents and liquidity providers. Specific risks generally associated with these bond securitization programs include the following:

Changes in short-term interest rates can adversely affect the cost of a bond securitization financing.

The interest rate payable on the senior securities resets periodically based on a specified index usually tied to interest rates on short-term instruments. In addition, because the senior securities may typically be tendered back to the trust, causing the trust to remarket the senior securities from time to time, an increase in interest rates may require an increase to the interest rate paid on the senior securities in order to successfully remarket these securities. Any increase in interest rate payable on the senior securities will result in more of the underlying tax-exempt bond interest being used to pay interest on the senior securities leaving less tax-exempt bond interest available to the Partnership. As a result, higher short-term interest rates will reduce, and could even eliminate, the Partnership's return on a residual interest in this type of financing.

Payments on the residual interests in these financing structures are subordinate to payments on the senior securities and to payment of trust expenses and no party guarantees the payment of any amounts under the residual interests.

The residual interests in a trust or other special purpose entity used for these types of financing are subordinate to the senior securities sold to investors. As a result, none of the tax-exempt bond interest received by such a trust will be paid to the Partnership as the holder of a residual interest until all payments currently due on the senior securities have been paid in full and other trust expenses satisfied. The holder of a residual certificate in such a trust can look only to the assets of the trust remaining after payment of these senior obligations for payment on the residual certificates. No third party guarantees the payment of any amount on the residual certificates.

Termination of a bond securitization financing can occur for a number of reasons which could cause the Partnership to lose the tax-exempt mortgage revenue bonds and other collateral it pledged for such financing.

In general, the trust or other special purpose entity formed for a bond securitization financing can terminate for a number of different reasons relating to problems with the bonds or problems with the trust itself. Problems with the bonds that could cause the trust to collapse include payment or other defaults or a determination that the interest on the bonds is taxable. Problems with a trust include a downgrade in the investment rating of the senior securities that it has issued, a ratings downgrade of the liquidity provider for the trust, increases in short term interest rates in excess of the interest paid on the underlying bonds, an inability to remarket the senior securities or an inability to obtain liquidity for the trust. In each of these cases, the trust will be collapsed and the tax-exempt mortgage revenue bonds and other collateral held by the trusts will be sold. If the proceeds from the sale of the trust collateral are not sufficient to pay the principal amount of the senior securities with accrued interest and the other expenses of the trusts then the Partnership will be required, through its guarantee of the trusts, to fund any such shortfall. As a result, the Partnership, as holder of the residual interest in the trust, may not only lose its investment in the residual certificates but could also realize additional losses in order to fully repay trust obligations to the senior securities.

An insolvency or receivership of the program sponsor could impair the Partnership's ability to recover the tax-exempt bonds and other collateral pledged by it in connection with a bond securitization financing.

In the event the sponsor of a bond securitization financing program becomes insolvent, it could be placed in receivership. In that situation, it is possible that the Partnership would not be able to recover the tax-exempt mortgage revenue bonds it pledged in connection with the bond securitization financing or that it would not receive all or any of the payments due from the trust or other special purpose entity on the residual interest held by the Partnership in such trust or other entity.

Conditions in the credit markets may increase our cost of borrowing or may make financing difficult to obtain, each of which may have a material adverse effect on our results of operations and business.

Economic conditions in international and domestic credit markets have been, and remain, challenging. Significantly tighter credit conditions and slower economic growth were experienced in 2011 and continued concerns about the systemic impact of high unemployment, restricted availability of credit, declining residential and commercial real estate markets, volatile energy prices, and overall business and consumer confidence have contributed to the economic downturn and it is unclear when and how quickly conditions and markets will improve. As a result of these economic 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. As a result, our access to debt and equity financing may be adversely affected. If these market and economic conditions continue, they may limit our ability to replace or renew maturing debt financing on a timely basis and may impair our access to capital markets to meet our liquidity and growth requirements which may have an adverse effect on our financial condition and results of operations.

Our tax-exempt mortgage revenue bonds are illiquid assets and their value may decrease.

The majority of our assets consist of our tax-exempt mortgage revenue bonds. These mortgage revenue bonds are relatively illiquid, and there is no existing trading market for them. As a result, there are no market makers, price quotations or other indications of a developed trading market for these mortgage revenue bonds. In addition, no rating has been issued on any of the existing mortgage revenue bonds and we do not expect to obtain ratings on mortgage revenue bonds we may acquire in the future. Accordingly, any buyer of these mortgage revenue bonds would need to perform its own due diligence prior to a purchase. As a result, our ability to sell our tax-exempt mortgage revenue bonds, and the price we may receive upon their sale, will be affected by the number of potential buyers, the number of similar securities on the market at the time and a number of other market conditions. As a result, such a sale could result in a loss to us.

The rent restrictions and occupant income limitations imposed on properties financed by our tax-exempt mortgage revenue bonds and on our MF Properties may limit the revenues of such properties.

All of the apartment properties securing our tax-exempt mortgage revenue bonds and the MF Properties in which our subsidiaries hold indirect interests are subject to certain federal, state and/or local requirements with respect to the permissible income of their tenants. Since federal rent subsidies are not generally available on these properties, rents must be charged on a designated portion of the units at a level to permit these units to be continuously occupied by low or moderate income persons or families. As a result, these rents may not be sufficient to cover all operating costs with respect to these units and debt service on the applicable tax-exempt mortgage revenue bond. This may force the property owner to charge rents on the remaining units that are higher than they would be otherwise and may, therefore, exceed competitive rents. This may adversely affect the occupancy rate of a property securing an investment and the property owner's ability to service its debt.

The properties financed by certain of our tax-exempt mortgage revenue bonds are not completely insured against damages from hurricanes and other major storms.

Five of the multifamily housing properties financed by tax-exempt mortgage revenue bonds held by the Partnership are located in areas that are prone to damage from hurricanes and other major storms. The current insurable value of these five properties is approximately $78.3 million. Due to the significant losses incurred by insurance companies in recent years due to damages from hurricanes, many property and casualty insurers now require property owners to assume the risk of first loss on a larger percentage of their property's value. In general, the current insurance policies on the five properties financed by the Partnership that are located in areas rated for hurricane and storm exposure carry a 5% deductible on the insurable value of the properties. As a result, if any of these properties were damaged in a hurricane or other major storm, the amount of uninsured losses could be significant and the property owner may not have the resources to fully rebuild the property and this could result in a default on the tax-exempt mortgage revenue bonds secured by the property. In addition, the damages to a property may result in all or a portion of the rental units not being rentable for a period of time. Unless a property owner carries rental interruption insurance, this loss of rental income would reduce the cash flow available to pay base or contingent interest on the Partnership's tax-exempt mortgage revenue bonds collateralized by these properties.

The properties securing our revenue bonds or the MF Properties may be subject to liability for environmental contamination which could increase the risk of default on such bonds or loss of our investment.

The owner or operator of real property may become liable for the costs of removal or remediation of hazardous substances released on its property. Various federal, state and local laws often impose such liability without regard to whether the owner or operator of real property knew of, or was responsible for, the release of such hazardous substances. We cannot assure you that the properties that secure our tax-exempt mortgage revenue bonds or the MF Properties in which our subsidiaries hold indirect interests, will not be contaminated. The costs associated with the remediation of any such contamination may be significant and may exceed the value of a property or result in the property owner defaulting on the revenue bond secured by the property or otherwise result in a loss of our investment in a property.

If we acquire ownership of apartment properties we will be subject to all of the risks normally associated with the ownership of commercial real estate.

We may acquire ownership of apartment complexes financed by tax-exempt mortgage revenue bonds held by us in the event of a default on such bonds. We may also acquire indirect ownership of MF Properties on a temporary basis in order to facilitate the eventual acquisition by us of tax-exempt mortgage revenue bonds on these apartment properties. In either case, during the time we own an apartment complex, we will generate taxable income or losses from the operations of such property rather than tax exempt interest. In addition, we will be subject to all of the risks normally associated with the operation of commercial real estate including declines in property value, occupancy and rental rates and increases in operating expenses. We may also be subject to government regulations, natural disasters and environmental issues, any of which could have an adverse effect on the Partnership's financial results and ability to make distributions to unitholders.

There are a number of risks related to the construction of multifamily apartment properties that may affect the tax-exempt mortgage revenue bonds issued to finance these properties.

We may invest in tax-exempt mortgage revenue bonds secured by multifamily housing properties which are still under construction. Construction of such properties generally takes approximately twelve to eighteen months. The principal risk associated with construction lending is that construction of the property will be substantially delayed or never completed. This may occur for a number of reasons including (i) insufficient financing to complete the project due to underestimated construction costs or cost overruns; (ii) failure of contractors or subcontractors to perform under their agreements; (iii) inability to obtain governmental approvals; (iv) labor disputes; and (v) adverse weather and other unpredictable contingencies beyond the control of the developer. While we may be able to protect ourselves from some of these risks by obtaining construction completion guarantees from developers, agreements of construction lenders to purchase our bonds if construction is not completed on time, and/or payment and performance bonds from contractors, we may not be able to do so in all cases or such guarantees or bonds may not fully protect us in the event a property is not completed. In other cases, we may decide to forego certain types of available security if we determine that the security is not necessary or is too expensive to obtain in relation to the risks covered. If a property is not completed, or costs more to complete than anticipated, it may cause us to receive less than the full amount of interest owed to us on the tax-exempt bond financing such property or otherwise result in a default under the mortgage loan that secures our tax-exempt mortgage revenue bond on the property. In such case, we may be forced to foreclose on the incomplete property and sell it in order to recover the principal and accrued interest on our tax-exempt mortgage revenue bond and we may suffer a loss of capital as a result. Alternatively, we may decide to finance the remaining construction of the property, in which event we will need to invest additional funds into the property, either as equity or as a taxable loan. Any return on this additional investment would not be tax-exempt. Also, if we foreclose on a property, we will no longer receive tax-exempt interest on the bond issued to finance the property. The overall return to the Partnership from its investment in such property is likely to be less than if the construction had been completed on time or within budget.

There are a number of risks related to the lease-up of newly constructed or renovated properties that may affect the tax-exempt mortgage revenue bonds issued to finance these properties.

We may acquire tax-exempt mortgage revenue bonds issued to finance properties in various stages of construction or renovation. As construction or renovation is completed, these properties will move into the lease-up phase. The lease-up of these properties may not be completed on schedule or at anticipated rent levels, resulting in a greater risk that these investments may go into default than investments secured by mortgages on properties that are stabilized or fully leased-up. The underlying property may not achieve expected occupancy or debt service coverage levels. While we may require property developers to provide us with a guarantee covering operating deficits of the property during the lease-up phase, we may not be able to do so in all cases or such guarantees may not fully protect us in the event a property is not leased up to an adequate level of economic occupancy as anticipated.

We have assumed certain potential liability relating to recapture of tax credits on MF Properties.

The Partnership has acquired indirect interests in several MF Properties that generated LIHTCs for the previous partners in these partnerships. When the Partnership acquires an interest in an MF Property, it generally must agree to reimburse the prior partners for any liabilities they incur due to a recapture of LIHTCs that result from the failure to operate the MF Property in a manner consistent with the laws and regulations relating to LIHTCs after the Partnership acquired its interest in the MF Property. The amount of this recapture liability can be substantial.

The Partnership is not registered under the Investment Company Act.

The Partnership is not required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”) because it operates under an exemption therefrom. As a result, none of the protections of the Investment Company Act (disinterested directors, custody requirements for securities, and regulation of the relationship between a fund and its advisor) will be applicable to the Partnership.

The Partnership engages in transactions with related parties.

Each of the executive officers of Burlington and four of the managers of Burlington hold equity positions in Burlington. A subsidiary of Burlington acts as the General Partner and manages our investments and performs administrative services for us and earns certain fees that are either paid by the properties financed by our tax-exempt mortgage revenue bonds or by us. Another subsidiary of Burlington provides on-site management for many of the multifamily apartment properties that underlie our tax-exempt mortgage revenue bonds and each of our MF Properties and earns fees from the property owners based on the gross revenues of these properties. The owners of the limited-purpose corporations which own four of the apartment properties financed with tax-exempt mortgage revenue bonds and taxable loans held by the Partnership are employees of Burlington who are not involved in the operation or management of the Partnership and who are not executive officers or managers of Burlington. Because of these relationships, our agreements with Burlington and its subsidiaries are related-party transactions. By their nature, related-party transactions may not be considered to have been negotiated at arm's length. These relationships may also cause a conflict of interest in other situations where we are negotiating with Burlington.

Unitholders may incur tax liability if any of the interest on our tax-exempt mortgage revenue bonds is determined to be taxable.

Certain of our tax-exempt mortgage revenue bonds bear interest at rates which include contingent interest. Payment of the contingent interest depends on the amount of net cash flow generated by, and net proceeds realized from a sale of, the property securing the bond. Due to this contingent interest feature, an issue may arise as to whether the relationship between the property owner and us is that of debtor and creditor or whether we are engaged in a partnership or joint venture with the property owner. If the IRS were to determine that tax-exempt mortgage revenue bonds represented an equity investment in the underlying property, the interest paid to us could be viewed as a taxable return on such investment and would not qualify as tax-exempt interest for federal income tax purposes. We have obtained legal opinions to the effect that the base interest paid on our tax-exempt mortgage revenue bonds is excludable from gross income for federal income tax purposes provided the interest is not paid to a “substantial user” or “related person” as defined in the Internal Revenue Code. However, these legal opinions are not binding on the IRS or the courts, and no assurances can be given that the conclusions reached will not be contested by the IRS or, if contested, will be sustained by a court. In addition, the tax-exempt status of the interest paid on our tax-exempt mortgage revenue bonds is subject to compliance by the underlying properties, and the owners thereof, with the bond documents and covenants required by the bond-issuing authority and the Internal Revenue Code. Among these requirements are tenant income restrictions, regulatory agreement compliance, reporting requirements, use of proceeds restrictions and compliance with rules pertaining to interest arbitrage. Each issuer of the revenue bonds, as well as each of the underlying property owners/borrowers, has agreed to comply with procedures and guidelines designed to ensure satisfaction with the continuing requirements of the Internal Revenue Code. Failure to comply with these continuing requirements of the Internal Revenue Code may cause the interest on our bonds to be includable in gross income for federal income tax purposes retroactively to the date of issuance, regardless of when such noncompliance occurs. In addition, we have, and may in the future, obtain debt financing through bond securitization programs in which we place tax-exempt mortgage revenue bonds into trusts and are entitled to a share of the tax-exempt interest received by the trust on these bonds after the payment of interests on senior securities issued by the trust, it is possible that the characterization of our residual interest in such a securitization trust could be challenged and the income that we receive through these instruments could be treated as ordinary taxable income includable in our gross income for federal tax purposes.

Not all of the income received by the Partnership is exempt from taxation.

We have made, and may make in the future, taxable mortgage loans to the owners of properties which are secured by tax-exempt mortgage revenue bonds that we hold. The interest income earned by the Partnership on these mortgage loans is subject to federal and state income taxes. In addition, if we acquire direct or indirect interests in real estate, either through foreclose of a property securing a tax-exempt mortgage revenue bond or a taxable loan or through the acquisition of an MF Property, any income we receive from the property will be taxable income from the operation of real estate. In that case, the taxable income received by the Partnership will be allocated to our unitholders and will represent taxable income to them regardless of whether an amount of cash equal to such allocable share of this taxable income is actually distributed to unitholders.

If the Partnership was determined to be an association taxable as corporation, it will have adverse economic consequences for the Partnership and its unitholders.

The Partnership has made an election to be treated as a partnership for federal income tax purposes. The purpose of this election is to eliminate federal and state income tax liability for the Partnership and allow us to pass through our tax-exempt interest to our unitholders so that they are not subject to federal tax on this income. If our treatment as a partnership for tax purposes is challenged, we would be classified as an association taxable as a corporation. This would result in the Partnership being taxed on its taxable income, if any, and, in addition, would result in all cash distributions made by the Partnership to unitholders being treated as taxable ordinary dividend income to the extent of the Partnership's earnings and profits, which would include tax-exempt income. The payment of these dividends would not be deductible by the Partnership. The listing of the Partnership's units for trading on the Nasdaq Global Market causes the Partnership to be treated as a “publicly traded partnership” under Section 7704 of the Internal Revenue Code. A publicly traded partnership is generally taxable as a corporation unless 90% or more of its gross income is “qualifying” income. Qualifying income includes interest, dividends, real property rents, gain from the sale or other disposition of real property, gain from the sale or other disposition of capital assets held for the production of interest or dividends and certain other items. Substantially all of the Partnership's gross income will continue to be tax-exempt interest income on mortgage bonds. While we believe that all of this interest income is qualifying income, it is possible that some or all of our income could be determined not to be qualifying income. In such a case, if more than 10% of our annual gross income in any year is not qualifying income, the Partnership will be taxable as a corporation rather than a partnership for federal income tax purposes. We have not received, and do not intend to seek, a ruling from the Internal Revenue Service regarding our status as a partnership for tax purposes.

To the extent the Partnership generates taxable income; unitholders will be subject to income taxes on this income, whether or not they receive cash distributions.

As a partnership, our unitholders will be individually liable for income tax on their proportionate share of any taxable income realized by the Partnership, whether or not we make cash distributions.

There are limits on the ability of our unitholders to deduct Partnership losses and expenses allocated to them.

The ability of unitholders to deduct their proportionate share of the losses and expenses generated by the Partnership will be limited in certain cases, and certain transactions may result in the triggering of the Alternative Minimum Tax for unitholders who are individuals.

Item 1B. Unresolved Staff Comments.

None

Item 2. Properties.

Each of the Partnership's tax-exempt mortgage revenue bonds is collateralized by a multifamily housing property. The Partnership does not hold title or any other interest in these properties, other than the first mortgages securing the bonds.

As a result of the guidance on consolidations, the Company is required to consolidate certain of the multifamily residential properties securing its bonds because the owners of those properties are treated as Consolidated VIEs for which the Company is the primary beneficiary. As of December 31, 2011, the Company consolidated three multifamily housing properties owned by VIEs located in Florida and South Carolina. The Partnership does not hold title to the properties owned by the VIEs.

In addition to the properties owned by Consolidated VIEs, the Company reports the financial results of the MF Properties on a consolidated basis due to the limited partnership interests held by its subsidiary in the partnerships that own the MF Properties. The Company consolidated twelve MF Properties located in Nebraska, Kentucky, Indiana, Virginia, Georgia, and North Carolina, Texas, and Ohio as of December 31, 2011. Three of these properties ("Ohio Properties") are subject to a sales agreement that does not meet the criteria for derecognition and full accrual accounting treatment under the guidance for real estate sales. As a result, the Company continues to consolidate these Ohio Properties as if they were owned (see Note 3 to the consolidated financial statements).

The following table sets forth certain information for each of the consolidated properties as of December 31, 2011:



Consolidated VIEs
Property Name	Location	Number of Units	Land		Buildings and Improvements		Carrying Value at December 31, 2011
Bent Tree Apartments	Columbia, SC	232	$	986,000	$	11,758,519	$	12,744,519
Fairmont Oaks Apartments	Gainsville, FL	178	850,400		8,615,014		9,465,414
Lake Forest Apartments	Daytona Beach, FL	240	1,396,800		11,251,304		12,648,104
							$	34,858,037
Less accumulated depreciation (depreciation expense of approximately $1.7 million in 2011)							(12,332,334		)
							$	22,525,703



MF Properties
Property Name	Location	Number of Units	Land		Buildings and Improvements		Carrying Value at December 31, 2011
Arboretum	Omaha, NE	145	$	1,720,740	$	18,730,388	$	20,451,128
Eagle Ridge	Erlanger, KY	64	290,763		2,485,433		2,776,196
Eagle Village	Evansville, IN	511	564,726		12,230,322		12,795,048
Meadowview	Highland Heights, KY	118	688,539		5,082,090		5,770,629
Churchland	Chesapeake, VA	124	1,171,146		6,389,200		7,560,346
Glynn Place	Brunswick, GA	128	743,996		4,677,793		5,421,789
Greens of Pine Glen	Durham, NC	168	1,744,761		5,256,692		7,001,453
Residences of DeCordova	Granbury, TX	76	679,495		4,960,461		5,639,956
Residences of Weatherford	Weatherford, TX	76	533,000		5,105,278		5,638,278
							73,054,823
Less accumulated depreciation (depreciation expense of approximately $2.3 million in 2011)							(5,549,597		)
Balance at December 31, 2011							$	67,505,226
MF Properties Subject to Sales Agreement
Property Name	Location	Number of Units	Land		Buildings and Improvements		Carrying Value at December 31, 2011
Crescent Village	Cincinnati, OH	90	$	353,117	$	6,238,827	$	6,591,944
Willow Bend	Hilliard, OH	92	580,130		5,008,793		5,588,923
Postwoods	Reynoldsburg, OH	180	1,148,504		10,401,752		11,550,256
							23,731,123
Less accumulated depreciation (depreciation expense of approximately $829,000 in 2011)							(2,958,263		)
Balance at December 31, 2011							20,772,860
Total Net Real Estate Assets at December 31, 2011							$	110,803,789

Item 3. Legal Proceedings.

There are no pending legal proceedings to which the Partnership is a party or to which any of the properties collateralizing the Partnership's tax-exempt mortgage revenue bonds are subject.

Item 4. Mine Safety Disclosures

None

PART II

Item 5. Market for the Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities.

(a)Market Information. BUCs represent assignments by the sole limited partner of its rights and obligations as a limited partner. The rights and obligations of unitholders are set forth in the Partnership's Agreement of Limited Partnership. BUCs of the Partnership trade on the NASDAQ Global Market under the trading symbol "ATAX". The following table sets forth the high and low sale prices for the BUCs for each quarterly period from January 1, 2010 through December 31, 2011.



2011	High		Low
1st Quarter	$	5.90	$	5.22
2nd Quarter	$	5.83	$	5.15
3rd Quarter	$	5.70	$	5.08
4th Quarter	$	5.35	$	4.80

2010	High		Low
1st Quarter	$	6.16	$	5.50
2nd Quarter	$	6.61	$	5.15
3rd Quarter	$	5.68	$	5.22
4th Quarter	$	5.53	$	5.18

(b) Unitholders. The approximate number of unitholders on December 31, 2011 was 7,500.

(c) Distributions. Distributions to unitholders were made on a quarterly basis during 2011, 2010, and 2009. Total distributions for the years ended December 31, 2011, 2010, and 2009 were approximately $15,061,000, $13,574,000, and $10,864,000, respectively.

(d)The distributions paid or accrued per BUC during the fiscal years ended December 31, 2011, 2010, and 2009 were as follows:



	For the Year Ended		For the Year Ended		For the Year Ended
	December 31, 2011		December 31, 2010		December 31, 2009
Cash Distributions	$	0.5000	$	0.5000	$	0.5100
Special Distribution	$	—	$	—	$	0.0350

See Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” for information regarding the sources of funds that will be used for cash distributions and for a discussion of factors which may adversely affect the Partnership's ability to make cash distributions at the same levels in 2011 and thereafter.

(e)Sales of Unregistered Securities. None

(f)Issuer Purchases of Equity Securities. None

Item 6. Selected Financial Data.

Set forth below is selected financial data for the Company as of and for the years ended December 31, 2007 through 2011. The information should be read in conjunction with the Company's consolidated financial statements and notes thereto filed in response to Item 8 of this report. Please refer to the discussions in Item 1 and Item 7 regarding the implementation of guidance on consolidations and it's effects on the presentation of financial data in this report on Form10-K:



	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009			For the Year Ended December 31, 2008			For the Year Ended December 31, 2007


Property revenue	$	16,884,704		$	14,692,537		$	15,667,053		$	13,773,801		$	11,208,209
Real estate operating expenses	(9,859,424		)	(10,016,742		)	(10,127,657		)	(8,872,219		)	(7,299,257		)
Depreciation and amortization expense	(5,691,639		)	(5,062,817		)	(6,067,330		)	(4,987,417		)	(3,611,249		)
Mortgage revenue bond investment income	9,497,281			6,881,314			4,253,164			4,230,205			3,227,254
Other interest income	485,679			455,622			106,082			150,786			751,797
Other income	739,585			—			—			—			—
Gain on early extinguishment of debt	—			435,395			—			—			—
Gain on sale of assets held for sale	—			—			862,865			—			—
Loss on sale of security	—			—			—			(68,218		)	—
Provision for loan loss	(4,242,571		)	(562,385		)	(1,401,731		)	—			—
Provision for loss on receivables	(952,700		)	—			—			—			—
Asset impairment charge - Weatherford	—			(2,528,852		)	—			—			—
Interest expense	(5,769,108		)	(2,514,479		)	(4,202,126		)	(4,106,072		)	(2,595,616		)
General and administrative expenses	(2,764,970		)	(2,383,784		)	(1,997,661		)	(1,808,459		)	(1,577,551		)
(Loss) income from continuing operations	(1,673,163		)	(604,191		)	(2,907,341		)	(1,687,593		)	103,587
Income from discontinued operations, (including gain on sale of $26,514,809 in 2009)	—			—			26,734,754			646,989			824,249
Net (loss) income	(1,673,163		)	(604,191		)	23,827,413			(1,040,604		)	927,836
Less: net income (loss) attributable to noncontrolling interest	570,759			(203,831		)	(11,540		)	(9,364		)	(13,030		)
Net (loss) income - America First Tax Exempt Investors, L. P.	(2,243,922		)	(400,360		)	23,838,953			(1,031,240		)	940,866
Less: general partners' interest in net income	152,359			28,532			804,223			64,059			99,451
Unallocated (loss) income related to variable interest entities	(1,289,539		)	(2,466,260		)	20,495,957			(3,756,894		)	(3,452,591		)
Unitholders' interest in net (loss) income	$	(1,106,742	)	$	2,037,368		$	2,538,773		$	2,661,595		$	4,294,006
Unitholders' Interest in net income per unit (basic and diluted):
(Loss) income from continuing operations	$	(0.04	)	$	0.07		$	0.15		$	0.20		$	0.34
Income from discontinued operations	$	—		$	—		$	—		$	—		$	—
Net (loss) income, basic and diluted, per unit	$	(0.04	)	$	0.07		$	0.15		$	0.20		$	0.34
Distributions paid or accrued per BUC	$	0.5000		$	0.5000		$	0.5450		$	0.5400		$	0.5400
Weighted average number of BUCs outstanding, basic and diluted	$	30,122,928		$	27,493,449		$	16,661,969		$	13,512,928		$	12,491,490
Investments in tax-exempt mortgage revenue bonds, at estimated fair value	$	26,542,565		$	27,115,164		$	69,399,763		$	44,492,526		$	66,167,116
Tax-exempt mortgage revenue bonds held in trust, at fair value	$	109,152,787		$	73,451,479		$	—		$	—		$	—
Real estate assets, net	$	110,803,789		$	81,282,420		$	91,790,893		$	80,178,863		$	70,246,514
Total assets	$	297,976,545		$	241,607,249		$	190,770,720		$	157,863,276		$	164,879,008
Total debt-continuing operations	$	158,916,883		$	106,253,982		$	85,480,187		$	87,890,367		$	72,464,333
Total debt-discontinued operations	$	—		$	—		$	—		$	19,583,660		$	18,850,667
Cash flows provided (used in) operating activities	$	10,229,300		$	2,200,893		$	(339,354	)	$	4,445,215		$	4,227,023
Cash flows (used in) provided by investing activities	$	(31,811,420	)	$	(48,549,857	)	$	11,822,244		$	(16,598,170	)	$	(48,007,185	)
Cash flows provided by (used in) financing activities	$	28,518,485		$	42,345,477		$	(1,563,495	)	$	4,692,149		$	50,125,180
Cash Available for Distribution ("CAD")⁽¹⁾	$	10,608,768		$	9,513,494		$	8,708,527		$	6,248,920		$	6,062,931

⁽¹⁾ 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 income or expense (including adjustments to fair value), provision for loan losses, provision for loss on receivables, impairments on assets, deferred gain and related interest, bond discount amortization net of cash received, losses related to consolidated VIEs, and depreciation and amortization expense on MF Property assets are added back to the Company's net income (loss) as computed in accordance with GAAP. The Company uses CAD as a supplemental measurement of its ability to pay distributions. The Company believes that CAD provides relevant information about its operations and is necessary along with net income (loss) for understanding its operating results.

The following sets forth a reconciliation of the Company's net income (loss) as determined in accordance with GAAP and the Partnership's CAD for the periods set forth.



	2011			2010			2009			2008			2007
Net (loss) income - America First Tax Exempt Investors, L.P.	$	(2,243,922	)	$	(400,360	)	$	23,838,953		$	(1,031,240	)	$	940,866
Net loss (income) related to VIEs and eliminations due to consolidation	1,289,539			2,466,260			(20,495,957		)	3,756,894			3,452,591
Net (loss) income before impact of VIE consolidation	(954,383		)	2,065,900			3,342,996			2,725,654			4,393,457
Change in fair value of derivatives and interest rate derivative amortization	2,083,521			(571,684		)	830,142			721,102			249,026
Depreciation and amortization expense (Partnership only)	3,169,033			2,510,630			3,514,073			2,840,500			1,478,278
Deposit liability gain - Ohio sale agreement	—			1,775,527			—			—			—
Tier 2 Income distributable to the General Partner ⁽¹⁾	(170,410		)	(472,246		)	(802,909		)	(38,336		)	(57,830		)
Asset impairment charge - Weatherford	—			2,716,330			—			—			—
Provision for loss on receivables	952,700			—			—			—			—
Provision for loan loss	4,242,571			1,147,716			1,696,730
Loss on bond sale	—			—			127,495			—			—
Bond purchase discount accretion (net of cash received)	(100,998		)	(403,906		)	—			—			—
Ohio deferred interest	1,390,056			745,227			—			—			—
CAD	$	10,612,090		$	9,513,494		$	8,708,527		$	6,248,920		$	6,062,931
Weighted average number of units outstanding,
basic and diluted	30,122,928			27,493,449			16,661,969			13,512,928			12,491,490
Net (loss) income, basic and diluted, per unit	$	(0.04	)	$	0.07		$	0.15		$	0.20		$	0.34
Total CAD per unit	$	0.35		$	0.35		$	0.52		$	0.46		$	0.49
Distributions per unit	$	0.5000		$	0.5000		$	0.5450		$	0.5400		$	0.5400

⁽¹⁾As described in Note 2 to the consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest (Tier 2 income) will be distributed 75% to the unitholders and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner. For the year ended 2011, the Tier II Income is approximately $445K recognized on the Briarwood bond retirement and approximately $308K of contingent interest recognized upon the Clarkson bond retirement. For the second quarter of 2010, the deferred gain on the sale of the Ohio Properties generated approximately $1.8 million and contingent interest generated approximately $33K of Tier II income. For 2009, the Tier 2 income distributable to the General Partner was generated by the early redemption of Woodbridge - Bloomington and Woodbridge - Louisville bond investments, the sale of Oak Grove, and from Fairmont Oaks and Lake Forest Apartments. For 2008, Lake Forest generated approximately $45,000, Fairmont Oaks generated approximately $54,000, and Iona Lakes generated approximately $54,000 of Tier 2 income. For 2007, Lake Forest generated approximately $231,000 of Tier 2 income.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

In this Management's Discussion and Analysis, the “Partnership” refers to America First Tax Exempt Investors, L.P. and its Consolidated Subsidiaries which consist of:


•	ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to facilitate the Tax Exempt Bond Securitization (“TEBS”) Financing with Freddie Mac - see Notes 2 and 9 to the consolidated financial statements.

•

Nine multifamily apartments ("MF Properties") owned by various Partnership subsidiaries. Such subsidiaries hold a 99% limited partner interest in five limited partnerships and 100% member positions in four limited liability companies. Three apartment properties which are subject to a sales agreement and are also reported as MF Properties (the “MF Properties”) - see Note 6 to the consolidated financial statements.

The “Company” refers to the consolidated financial statements reported in this Form 10-K which include the assets, liabilities and results of operations of the Partnership, its Consolidated Subsidiaries and three other consolidated entities in which the Partnership does not hold an ownership interest but which own multifamily apartment properties financed with tax-exempt mortgage revenue bonds held by the Partnership and which are treated as variable interest entities ("VIEs") of which the Partnership has been determined to be the primary beneficiary (“Consolidated VIEs”). All significant transactions and accounts between the Partnership and the VIEs have been eliminated in consolidation.

Executive Summary

Tax-exempt Mortgage Revenue Bonds. On December 31, 2011, the Partnership owned 20 federally tax-exempt mortgage revenue bonds with an aggregate outstanding principal amount of $188.6 million. These bonds were issued by various state and local housing authorities in order to provide construction and/or permanent financing of 20 multifamily residential apartments containing a total of 3,959 rental units located in the states of Florida, Illinois, Iowa, Kansas, Kentucky, Minnesota, Ohio, South Carolina, Tennessee, and Texas. In each case the Partnership owns, either directly or indirectly, 100% of the bonds issued for these properties. Each bond is secured by a first mortgage or deed of trust on the financed apartment property.

Consolidated VIEs. The three Consolidated VIE multifamily apartment properties as of December 31, 2011, contained a total of 650 rental units. The properties underlying the fifteen non-consolidated tax-exempt mortgage bonds contain a total of 2,947 rental units at December 31, 2011. Two bonds secured by the three Ohio Properties containing 362 rental units are subject to a sales agreement (see Note 3 to the consolidated financial statements) and are eliminated in consolidation on the Company's financial statements. As of December 31, 2010, six of the 21 tax-exempt mortgage revenue bonds owned by the Partnership were secured by properties held as VIEs which contained 1,152 rental units. As of December 31, 2010, the properties underlying the 13 non-consolidated tax-exempt mortgage revenue bonds contain a total of 2,144 rental units. Two bonds secured by the three Ohio Properties containing 362 rental units are subject to a sales agreement (see Note 3 to the consolidated financial statements) and are eliminated in consolidation on the Company's financial statements.

MF Properties. To facilitate its investment strategy of acquiring additional tax-exempt mortgage revenue bonds secured by multifamily apartment properties, the Partnership may acquire ownership positions in MF Properties, in order to ultimately restructure the property ownership through a sale of the MF Properties. The Partnership expects each of these MF Properties to eventually be sold to a not-for-profit entity or in connection with a syndication of Low Income Housing Tax Credits (“LIHTCs”) under Section 42 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Partnership expects to acquire tax-exempt mortgage revenue bonds issued to provide debt financing for these properties at the time the property ownership is restructured. The Partnership expects to provide the tax-exempt mortgage revenue bonds to the new property owners as part of the restructuring.

As of December 31, 2011, the Partnership’s wholly-owned subsidiaries held interests in five entities that own MF Properties containing a total of 602 rental units together with the three Ohio Properties containing 362 rental units which are subject to a sales agreement (see Note 2 and Note 6 to the consolidated financial statements). In addition, the Partnership's subsidiaries own 100% of four MF Properties, Arboretum, DeCordova, Eagle Village and Weatherford. Arboretum, Eagle Village and DeCordova contain a total of 732 rental units and once fully constructed Weatherford will contain 76 rental units. As of December 31, 2010, the Partnership's wholly-owned subsidiaries held limited partnership interests in five entities that own MF Properties containing a total of 602 rental units together with the three Ohio Properties containing 362 rental units which are subject to a sales agreement. The MF Properties' operating goal is similar to that of the properties underlying the Partnership's tax-exempt mortgage revenue bonds.

TOB. In July 2011, the Company closed a $10.0 million financing utilizing a TOB structure with DB. The first TOB was structured as a securitization of the Company's $13.4 million Autumn Pines Apartments tax-exempt mortgage revenue bond. The Company transferred this bond to a custodian and trustee that provide these services on behalf of DB. In December 2011, the Company closed a second TOB financing structure in the amount of $7.8 million with DB. The second TOB was structured as a securitization of the Company's $15.6 million GMF-Warren/Tulane Apartments and GMF-Madison apartments tax-exempt mortgage revenue and taxable mortgage revenue bonds. The Company transferred these bonds to a custodian and trustee that provide these services on behalf of DB.

As of December 31, 2011 the total cost of borrowing for the TOB facilities of 1.97% and 2.28%, respectively. The Company is accounting for these transactions as secured financing arrangements. For financial reporting purposes, the TOB Financings are presented by the Company as a secured financing.

TEBS. As of September 1, 2010, the Partnership and its Consolidated Subsidiary ATAX TEBS I, LLC, entered into a number of agreements relating to a new long-term debt financing facility provided through the securitization of 13 tax-exempt mortgage revenue bonds pursuant to Freddie Mac's TEBS program. The gross proceeds from TEBS Financing were approximately $95.8 million. After the payment of transaction expenses, the Company received net proceeds from the TEBS Financing of approximately $90.4 million. The Company applied approximately $49.5 million of these net proceeds to repay the entire outstanding principal of, and accrued interest on, its secured term loan from Bank of America.

The TEBS Financing essentially provides the Company with a long-term variable-rate debt facility at interest rates reflecting prevailing short-term tax-exempt rates. As of December 31, 2011, the total cost of borrowing was 2.05% for the TEBS facility. As of December 31, 2010, thetotal cost of borrowing was 2.24%.

Economic Conditions. The disruptions in domestic and international financial markets, and the resulting restrictions on the availability of debt financing that had prevailed since 2008 began to subside in 2010 and continued to recover in 2011. While economic trends show signs of a stabilization of the economy and debt availability has increased, overall availability remains limited and the cost of credit may continue to be adversely impacted. These conditions, in our view, will continue to create potential investment opportunities for the Partnership. Many participants in the multifamily housing debt sector either reduced their participation in the market or were forced to liquidate some or all of their existing portfolio investments in order to meet their liquidity needs. We believe this continues to create opportunities to acquire existing tax-exempt bonds from distressed holders at attractive yields. The Partnership continues to evaluate potential investments in bonds which are available on the secondary market. We believe many of these bonds will meet our investment criteria and that we have a unique ability to analyze and close on these opportunities while maintaining our ability and willingness to also participate in primary market transactions.

Current credit and real estate market conditions also create opportunities to acquire quality MF Properties from distressed owners and lenders. Our ability to restructure existing debt together with the ability to improve the operations of the apartment properties through our affiliated property management company can position these MF Properties for an eventual financing with tax-exempt mortgage revenue bonds meeting our investment criteria and that will be supported by a valuable and well-run apartment property. We believe we can selectively acquire MF Properties, restructure debt and improve operations in order to create value to our unitholders in the form of a strong tax-exempt bond investment.

On the other hand, continued economic weakness in some markets may limit our ability to access additional debt financing that the Partnership uses to partially finance its investment portfolio or otherwise meet its liquidity requirements. In addition, the economic conditions including a slow job growth and low home mortgage interest rates have had a negative effect on some of the apartment properties which collateralize our tax-exempt bond investments and our MF Properties in the form of lower occupancy.While some properties have been negatively effected, overall economic occupancy (which is adjusted to reflect rental concessions, delinquent rents and non-revenue units such as model units and employee units) of the apartment properties that the Partnership has financed with tax-exempt mortgage revenue bonds was approximately at 85% during 2011 as compared to 81% during 2010. Overall economic occupancy of the MF Properties has increased to approximately 83% during 2011 from 80% during 2010. Based on the growth statistics in the market, we expect to see continued improvement in property operations and profitability. We expect that property operations will improve in 2012 and 2013 and that rental rate and occupancy trends will be continue to be positive.

Discussion of the Apartment Properties securing the Partnership Bond Holdings and MF Properties as of December 31, 2011

The following discussion describes the operations and financial results of the individual apartment properties financed by the tax-exempt mortgage revenue bonds held by the Partnership and the MF Properties in which it holds an ownership. The discussion also outlines the bond holdings of the Partnership, discusses the significant terms of the bonds and identifies those ownership entities which are Consolidated VIEs of the Company.



			Number	Percentage of Occupied				Economic Occupancy ⁽¹⁾ for
		Number	of Units	Units as of December 31,				the period ended December 31,
Property Name	Location	of Units	Occupied	2011		2010		2011		2010

Non-Consolidated Properties
Ashley Square Apartments	Des Moines, IA	144	140	97	%	97	%	96	%	89	%
Autumn Pines	Humble, TX	250	231	92	%	94	%	92	%	90	%
Bella Vista Apartments	Gainesville, TX	144	138	96	%	90	%	90	%	87	%
Bridle Ridge Apartments	Greer, SC	152	142	93	%	89	%	88	%	80	%
Brookstone Apartments	Waukegan, IL	168	159	95	%	95	%	91	%	96	%
Cross Creek Apartments	Beaufort, SC	144	123	85	%	92	%	83	%	81	%
GMF-Madison Tower Apartments ⁽³⁾	Memphis, TN	147	139	95	%	n/a		94	%	n/a
GMF-Warren/Tulane Apartments ⁽³⁾	Memphis, TN	448	422	94	%	n/a		94	%	n/a
Iona Lakes Apartments	Ft. Myers, FL	350	307	88	%	89	%	69	%	66	%
Runnymede Apartments	Austin, TX	252	236	94	%	87	%	88	%	93	%
South Park Ranch Apartments	Austin, TX	192	188	98	%	94	%	93	%	89	%
Villages at Lost Creek	San Antonio, TX	261	253	97	%	95	%	87	%	82	%
Woodland Park⁽⁴⁾	Topeka, KS	236	215	91	%	81	%	85	%	57	%
Woodlynn Village	Maplewood, MN	59	59	100	%	98	%	97	%	96	%
		2,947	2,752	93	%	92	%	86	%	84	%

Consolidated VIEs
Bent Tree Apartments	Columbia, SC	232	216	93	%	91	%	79	%	81	%
Fairmont Oaks Apartments	Gainesville, FL	178	158	89	%	84	%	78	%	77	%
Lake Forest Apartments	Daytona Beach, FL	240	210	88	%	93	%	78	%	77	%
		650	584	90	%	89	%	78	%	78	%

MF Properties
Arboretum ⁽³⁾	Omaha, NE	145	116	80	%	n/a		72	%	n/a
Churchland	Chesapeake, VA	124	122	98	%	96	%	94	%	91	%
Crescent Village	Cincinnati, OH	90	86	96	%	82	%	82	%	80	%
Eagle Ridge	Erlanger, KY	64	58	91	%	80	%	83	%	84	%
Eagle Village⁽³⁾	Evansville, IN	511	359	70	%	n/a		n/a		n/a
Glynn Place	Brunswick, GA	128	93	73	%	83	%	68	%	69	%
Greens of Pine Glen	Durham, NC	168	156	93	%	91	%	88	%	84	%
Meadowview	Highland Heights, KY	118	112	95	%	95	%	90	%	86	%
Postwoods	Reynoldsburg, OH	180	174	97	%	88	%	91	%	84	%
Residences at DeCordova⁽⁴⁾	Granbury, TX	76	72	95	%	86	%	86	%	56	%
Residences at Weatherford ⁽²⁾	Weatherford, TX	76	n/a	n/a		n/a		n/a		n/a
Willow Bend	Columbus (Hilliard), OH	92	82	89	%	89	%	83	%	86	%
		1,772	1,430	89	%	88	%	83	%	80	%

⁽¹⁾Economic occupancy is presented for the twelve months ended December 31, 2011 and 2010, 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⁾This property is still under construction as of December 31, 2011, and therefore has no occupancy data.

⁽³⁾Previous period occupancy numbers are not available, as this is a new investment.

⁽⁴⁾Construction on these properties has been completed and the properties are in a lease up and stabilization period.

Non-Consolidated Properties

The owners of the following properties do not meet the definition of a VIE and/or the Partnership has evaluated and determined it is not the primary beneficiary of the VIE, as a result, the Company does not report the assets, liabilities and results of operations of these properties on a consolidated basis.

Ashley Square - Ashley Square Apartments is located in Des Moines, Iowa and contains 144 units. The tax-exempt mortgage revenue bond owned by the Partnership is a traditional “80/20” bond issued prior to the Tax Reform Act of 1986. This bond requires that 20% of the rental units be set aside for tenants whose income does not exceed 80% of the area median income, without adjustment for household size. The bond has an outstanding principal amount of $5.3 million and has a base interest rate of 6.25% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 3.0% annually and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the property has not paid any contingent interest and the Partnership has not recognized any contingent interest income related to this bond. Ashley Square's operations resulted in net operating income of $663,000 and $430,000 before payment of bond debt service on net revenue of approximately $1.38 million and $1.21 million in 2011 and 2010, respectively. The improvement in net operating income from 2010 is primarily the result of an increase in economic occupancy. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2011.

Autumn Pines - Autumn Pines is located in Humble, Texas and contains 250 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $13.3 million and has a base interest rate of 5.8% per annum. The bond does not provide for contingent interest. The bond was purchased in November 2010 for approximately $12.3 million providing an approximate effective yield to maturity of 7.0%. Autumn Pines' operations resulted in net operating income of $1.2 million and $1.1 million before payment of bond debt service on net revenue of approximately $2.38 million and $2.32 millionin 2011 and 2010, respectively. The improvement in net operating income from 2010 is primarily the result of an increase in economic occupancy. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Bella Vista - Bella Vista Apartments is located in Gainesville, Texas and contains 144 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $6.7 million and has a base interest rate of 6.15% per annum. The bond does not provide for contingent interest. Bella Vista's operations resulted in net operating income of $583,000 and $521,000 before payment of debt service on net revenue of approximately $1.12 million and $1.06 million in 2011 and 2010, respectively. The increase in net operating income is due to an increase in economic occupancy. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Bridle Ridge - Bridle Ridge Apartments is located in Greer, South Carolina and contains 152 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $7.8 million and a base interest rate of 6.0% per annum. The bond does not provide for contingent interest. Bridle Ridge's operations resulted in net operating income of approximately $702,000 and $560,000 before payment of bond debt service on net revenue of approximately $1.06 million and $972,000 in 2011 and 2010, respectively. The increase in net operating income is due to an increase in economic occupancy. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Brookstone - Brookstone Apartments is located in Waukegan, Illinois and contains 168 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $9.5 million and a base interest rate of 5.45% per annum. The bond does not provide for contingent interest. These bonds were purchased in October 2009 for approximately $7.3 million providing an approximate yield to maturity of 7.5%. Brookstone's operations resulted in net operating income of $905,000 and $888,000 before payment of bond debt service on net revenue of approximately $1.33 million and $1.30 million in 2011 and 2010, respectively. The increase in net operating income is due to a decrease in utilities and advertising expenses. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Cross Creek - Cross Creek Apartments is located in Beaufort, South Carolina and contains 144 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $8.6 million and has a base interest rate of 6.15% per annum. The bond does not provide for contingent interest. These bonds were purchased in April 2009 for approximately $5.9 million providing an approximate yield to maturity of 7.4%. Cross Creek's operations resulted in net operating income of $ 411,000 and $375,000 before payment of bond debt service on net revenue of approximately $1.17 million and $1.13 million in 2011 and 2010, respectively. This increase in net operating income is due to a slight increase in economic occupancy. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2011.

GMF-Madison Tower - Madison Tower Apartments is located in Memphis, Tennessee and contains 147 units. The tax-exempt mortgage revenue bond owned by the Partnership was issued by the 501(c)3 not-for-profit owner of Madison Towers. The bond has an outstanding principal amount of $3.8 million and has a base interest rate of 6.75% per annum. The bond does not provide for contingent interest. The bond was purchased at par in June 2011. Madison Tower's operations resulted in net operating income of $263,000 before payment of bond debt service on net revenue of approximately $511,000 in 2011. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

GMF-Warren/Tulane - Warren/Tulane Apartments is located in Memphis, Tennessee and contains 448 units. The tax-exempt mortgage revenue bond owned by the Partnership was issued by the 501(c)3 not-for-profit owner of Warren/Tulane. The bond has an outstanding principal amount of $11.8 million and has a base interest rate of 6.75% per annum. The bond does not provide for contingent interest. The bond was purchased at par in June 2011. Warren/Tulane's operations resulted in net operating income of $818,000 before payment of bond debt service on net revenue of approximately $1.72 million in 2011. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Iona Lakes - Iona Lakes Apartments is located in Fort Myers, Florida and contains 350 units. The tax-exempt mortgage revenue bond owned by the Partnership is a traditional “80/20” bond issued prior to the Tax Reform Act of 1986. The bond has an outstanding principal amount of $15.7 million and has a base interest rate of 6.9% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 2.6% annually and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the Partnership has realized $8,000 contingent interest income related to this bond. Iona Lake's operations resulted in net operating income of $1.08 million and $931,000 before payment of bond debt service on net revenue of approximately $2.67 million and $2.51 million in 2011 and 2010, respectively. The increase in net operating income was a result of an increase in economic occupancy as well as decreased real estate taxes. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2011.

Runnymede Apartments - Runnymede Apartments is located in Austin, Texas and contains 252 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $10.7 million and has a base interest rate of 6.00%. The bond does not provide for contingent interest. Runnymede's operations resulted in net operating income of $995,000 and $930,000 before payment of bond debt service on net revenue of approximately $2.07 million and $2.05 million in 2011 and 2010 respectively. The increase in net operating income is due to an increase in other revenue along with a decrease in repair and maintenance expenses. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

South Park Ranch Apartments - South Park Ranch Apartments is located in Austin, Texas and contains 192 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $14.0 million and has a base interest rate of 6.13% per annum. The bond does not provide for contingent interest. These bonds were purchased in August 2009 for approximately $11.9 million providing an approximate yield to maturity of 6.8%. South Park's operations resulted in net operating income of $1.2 million and $1.1 million before payment of bond debt service on net revenue of approximately $1.86 million and $1.79 million in 2011 and 2010, respectively. The increase in net operating income is due to an increase in economic occupancy. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Villages at Lost Creek - Villages at Lost Creek is located in San Antonio, Texas and contains 261 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond. The bond has an outstanding principal amount of $18.5 million and has a base interest rate of 6.25% per annum. The bond does not provide for contingent interest. These bonds were purchased in May 2010 for approximately $15.9 million providing an approximate yield to maturity of 7.6%. Lost Creek's operations resulted in net operating income of approximately $1.54 million and $1.47 million before payment of bond debt service on net revenue of approximately $2.42 million and $2.32 million in 2011 and 2010, respectively. There was a slight increase in economic occupancy year over year. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Woodland Park - Woodland Park is located in Topeka, Kansas and contains 236 units. The tax-exempt mortgage revenue bonds owned by the Partnership are private activity housing bonds. The bonds were issued in a Series A and B. The Series A bond has an outstanding principal amount of $15.0 million and a base interest rate of 6.0% per annum. The Series B bond has an outstanding principal amount of $0.7 million and a base interest rate of 8.0% per annum. The bonds do not provide for contingent interest. In May 2010, there were insufficient funds available to the property to meet debt service requirements and the property owner did not provide additional capital to fund the shortfall. As a result, a payment default on the bonds has occurred. In order to protect its investment, the Partnership issued a formal notice of default through the bond trustee and started the foreclosure process. The foreclosure process has been extended and the Partnership cannot estimate when it will be completed. The Partnership continues to enforce its rights as the first lien position. The Partnership believes it will be successful in removing and replacing the general and limited partners of the property owner through foreclosure. This action would allow a new property owner to re-syndicate the LIHTCs associated with this property. If these LIHTCs can be successfully re-syndicated, it will provide additional capital to the project which can be used to support debt service payments on the tax-exempt mortgage revenue bonds until property operations improve to the point that sufficient cash is generated to pay any past due amounts on the bonds as well as ongoing debt service. If the re-syndication of LIHTCs is not successful, the Partnership may pursue other options including making additional taxable loans to the property or completing the foreclosure process and taking direct ownership of the property. As of December 31, 2010, the property had 190 units leased out of total available units of 236, or 81% physical occupancy. As of December 31, 2011 the occupancy had increased to 215 units leased out of a total available units of 236, or 91% physical occupancy. Woodlands operations resulted in net operating income of $754,000 and $70,000 before payment of bond debt service on revenue of $1.55 million and $1.08 million in 2011 and 2010, respectively. The increase in operating income is due to a decrease in utilities and administrative expenses, along with an increase in revenue due to the increase in occupancy. The Partnership has completed an impairment evaluation of the Woodland Park bond and concluded that no other-than-temporary impairment existed at December 31, 2011 and 2010 (see Note 2 for discussion of our impairment testing method). However, the evaluation identified that the interest receivable on the Woodland Park bond was impaired and an approximate $953,000 provision for loss on interest receivables was recorded in 2011. There was no provisions for loss on interest receivable recorded at December 31, 2010. The Partnership will record an allowance and bad debt expense against the bond interest receivable accrued in the future.

Woodlynn Village - Woodlynn Village is located in Maplewood, Minnesota and contains 59 units. The tax-exempt mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $4.5 million and has a base interest rate of 6.0% per annum. The bond does not provide for contingent interest. Woodlynn Village's operations resulted in net operating income of $402,000 and $382,000 before payment of bond debt service on net revenue of approximately $599,000 and $590,000 in 2011 and 2010 respectively. The increase in 2011 as compared to 2010 is due primarily to a decrease in salaries expense. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2011.

Consolidated VIEs - Continuing Operations

The owners of the following properties have been determined to meet the definition of a VIE and the Partnership has been determined to be the Primary Beneficiary. As a result, the Company reports the assets, liabilities and results of operations of these properties on a consolidated basis.

Bent Tree - Bent Tree Apartments is located in Columbia, South Carolina and contains 232 units. The tax-exempt mortgage revenue bond owned by the Partnership is a traditional “80/20” bond issued prior to the Tax Reform Act of 1986. The bond has an outstanding principal amount of $7.7 million and has a base interest rate of 6.25% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 1.9% annually and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the property has not paid any contingent interest and the Partnership has not recognized any contingent interest income related to this bond. Bent Tree's operations resulted in net operating income of $526,000 and $557,000 before payment of bond debt service on net revenue of approximately $1.51 million and $1.54 million in 2011 and 2010, respectively. The decrease in net operating income is due to an increase in utilities expenses along with a decrease in economic occupancy. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2011.

Fairmont Oaks - Fairmont Oaks Apartments is located in Gainesville, Florida and contains 178 units. The tax-exempt mortgage revenue bonds owned by the Partnership are traditional “80/20” bonds issued prior to the Tax Reform Act of 1986. The bond has an outstanding principal amount of $7.5 million and has a base interest rate of 6.3% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 2.2% annually and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the Partnership has realized $57,000 in contingent interest income related to this bond. Fairmont Oak's operations resulted in net operating income of $647,000 and $630,000 before payment of bond debt service on net revenue of approximately $1.38 million and $1.36 million in 2011 and 2010, respectively. The increase in net operating income is the result of a decrease in repair and maintenance expenses. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2011.

Lake Forest - Lake Forest Apartments is located in Daytona Beach, Florida and contains 240 units. The tax-exempt mortgage revenue bonds owned by the Partnership are traditional “80/20” bonds issued prior to the Tax Reform Act of 1986. The bond has an outstanding principal amount of $9.2 million and has a base interest rate of 6.25% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 1.6% annually and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the Partnership has realized approximately $21,000 of contingent interest income related to this bond. Lake Forest's operations resulted in net operating income of $753,000 and $676,000 before payment of bond debt service on net revenue of approximately $1.82 million and $1.77 million in 2011 and 2010, respectively. The increase in net operating income is a result of a decrease in salary expense, real estate taxes and repair and maintenance expenses. The property is current on the payment of principal and base interest on the Partnership's bonds as of December 31, 2011.

In February 2011, the Partnership foreclosed on the bonds secured by DeCordova and Weatherford and one of the Partnership's subsidiaries took 100% ownership interest in these limited liability companies. Both properties were previously reported as Consolidated VIEs and are now are reported as MF Properties (see discussion below).

MF Properties

Nine MF Properties are owned by various Partnership subsidiaries. Such subsidiaries hold a 99% limited partner interest in five limited partnerships and 100% member positions in four limited liability companies. Three apartment properties which are subject to a sales agreement are also reported as MF Properties. The nine properties are encumbered by mortgage loans with an aggregate principal balance of $46.2 million at December 31, 2011. The three MF Properties that are subject to the sales agreement are secured by two tax-exempt mortgage revenue bonds owned by the Company. The Company reports the assets, liabilities and results of operations of these properties on a consolidated basis.

Arboretum - Arboretum is located in Omaha, Nebraska and contains 145 units and was acquired in March 2011 for approximately $20.4 million. This is an independent senior living facility. The Arboretum's operations resulted in recognition by the Company of net operating income of $567,000 on net revenue of approximately $1.83 million in 2011.

Commons at Churchland - Commons at Churchland is located in Chesapeake, Virginia and contains 124 units and was acquired in August 2008. The Commons at Churchland's operations resulted in the recognition by the Company of approximately $588,000 and $571,000 in net operating income on revenue of $1.07 million and $1.02 million during 2011 and 2010 respectively. The increase in net operating income is primarily due to an increase in economic occupancy along with a decrease in repair and maintenance expenses.

Eagle Ridge - Eagle Ridge Townhomes is located in Erlanger, Kentucky and contains 64 units and was acquired in July 2007. Eagle Ridge's operations resulted in recognition by the Company of net operating income of $216,000 and $190,000 on net revenue of approximately $498,000 and $479,000 in 2011 and 2010, respectively. The increase in net operating income is the result of an increase in market rents and a decrease in salaries, advertising and utilities expenses.

Eagle Village - Eagle Village Apartments is located in Evansville, Indiana and contains 511 units and was acquired in June 2011 for approximately $12.0 million. This is a student housing facility. Eagle Village's operations resulted in recognition by the Company of net operating income of $284,000 on net revenue of approximately $945,000 in 2011.

Glynn Place - Glynn Place Apartments is located in Brunswick, Georgia and contains 128 units and was acquired in October 2008. Glynn Place Apartment's operations resulted in the recognition by the Company of approximately $267,000 and $288,000 of net operating income on revenue of $742,000 and $753,000 during 2011 and 2010 respectively. The decrease in net operating income is due primarily to an increase in salary and utility expenses.

Greens of Pine Glen - Greens of Pine Glen Apartments is located in Durham, North Carolina and contains 168 units and was acquired in February 2009. The Greens of Pine Glen Apartment's operations resulted in the recognition by the Company of approximately $588,000 and $460,000 of net operating income on revenue of $1.33 million and $1.22 million during 2011 and 2010, respectively. The increase of net operating income is due primarily to an increase in economic occupancy along with a decrease in salaries and utilities expenses.

Meadowview - Meadowview Apartments is located in Highland Heights, Kentucky and contains 118 units and was acquired in July 2007. Meadowview's operations resulted in recognition by the Company of net operating income of $506,000 and $368,000 on net revenue of approximately $967,000 and $864,000 in 2011 and 2010, respectively. The increase in net operating income is the result of an increase in economic occupancy along with a decrease in salary, advertising and utility expenses.

Residences at DeCordova - This property is a senior (55+) affordable housing project located in Granbury, Texas in the Dallas-Fort Worth area. The Company acquired ownership of the property through foreclosure in February 2011. At this time, the Partnership is operating the property as a market rate rental property. DeCordova's operations resulted in recognition by the Company of net operating income of $345,000 on net revenue of approximately $607,000 in 2011. In addition, given the projected demand in the local market, an additional 34 units will be constructed adjacent to the first phase with a projected completion date of August 2012. In February, 2012, the Partnership obtained a $2.0 million construction loan secured by the DeCordova property to be used to expand the DeCordova campus by constructing a new apartment building adjacent to the existing DeCordova property. In July 2011, the Company obtained a $6.5 million construction loan secured by the DeCordova and Weatherford properties. These construction loans are being used to fund the completion of Weatherford and the expansion of DeCordova. The construction loans are with an unrelated third party. There is pre-construction leasing interest for the additional units and we expect rapid stabilization of the additional units. Upon completion of lease up, the Partnership will consider its options in order to recoup the investment in the overall project.

Residences at Weatherford - Residences at Weatherford are currently under construction and will contain 76 units upon completion. This property is a senior (55+) affordable housing project located in Weatherford, Texas in the Dallas-Fort Worth area. The Company acquired ownership of the property through foreclosure in February 2011. In July 2011, the Company obtained a $6.5 million construction loan secured by the DeCordova and Weatherford properties. This construction loan is being used to fund the completion of Weatherford. The construction loan is with an unrelated third party and this property is expected to be completed in March 2012. The Partnership expects to operate the property as a market rate property and, upon completion of construction and lease stabilization, will evaluate its options in order to recoup its investment.

In June 2010, the Company completed a sales transaction whereby four of the MF Properties, Crescent Village, Post Woods (I and II) and Willow Bend apartments in Ohio (the “Ohio Properties”), were sold to three new ownership entities controlled by an unaffiliated not-for-profit entity. The Company acquired 100% of the $18.3 million tax-exempt mortgage revenue bonds issued by the Ohio Housing Finance Agency as part of a plan of financing for the acquisition and rehabilitation of the Ohio Properties. The tax-exempt mortgage bonds secured by the Ohio Properties were acquired by the Company at par and consisted of two series. The Series A bond has a par value of $14.7 million and bears interest at an annual rate of 7.0%. The Series B bond has a par value of $3.6 million and bears interest at an annual interest rate of 10.0%. Both series of bonds mature in June 2050. The Company had previously acquired a 99% interest in the Ohio Properties as part of its strategy of acquiring existing multifamily apartment properties that it expects will be partially financed with new tax-exempt mortgage bonds at the time the properties become eligible for the issuance of additional LIHTCs. In addition to the new tax-exempt mortgage revenue bonds acquired by the Company, the plan of financing for the acquisition included other subordinated debt issued by the Company. At the time of acquistion, the new owners had not contributed any capital to the transaction and the Company effectively provided 100% of the capital structure to the new owners as part of the sale transaction. Pursuant to accounting guidance for property, plant, and equipment - real estate sales, the sale and restructure does not meet the criteria for derecognition of the properties or full accrual accounting for the gain. The guidance requires sufficient equity at risk as part of a sales transaction to indicate a commitment from the buyer (typically a minimum of 3 to 5% investment by the new owners). Under the sales agreement, the Ohio Properties were sold for a total purchase price of $16.2 million. Cash received by the selling limited partnerships as part of the sale transaction represents a gain on the sale transaction of approximately $1.8 million which has been deferred by the Company.

In October 2011, the three limited partnerships that own the Ohio Properties admitted two entities that are affiliates of Boston Capital (the “BC Partners”) as new limited partners as part of a syndication of LIHTCs on the Ohio Properties. The BC Partners have agreed to contribute approximately $6.7 million to the equity of these limited partnerships, subject to the Ohio Properties meeting certain debt service coverage ratios specified in the applicable limited partnership agreements. As of December 31, 2011, the Ohio Properties had not yet achieved these debt service coverage ratios and the BC Partners had not contributed a sufficient amount of additional capital to these limited partnerships to allow the Company to deconsolidate the Ohio Properties. Accordingly, the Company will continue to report each Ohio Property as an MF Property, and no gain from the 2010 sale of such Ohio Property will be recognized by the Company, until the Ohio Property achieves specified debt service coverage ratios and the BC Partners have contributed their additional capital to the limited partnership owning the Ohio Property. The Company expects that each of the Ohio Properties will achieve the debt service coverage ratios so that the BC Partners will fully fund their capital commitments during 2012. As that occurs, each Ohio Properties will cease to be reported as an MF Property and the Company will recognize the gain for the 2010 sale of the Ohio Property. After that time, the Company will report the tax-exempt mortgage bonds on such Ohio Property as an asset and will report the related interest income on the bond.

In connection with the BC Partners transaction, the Company entered into guarantee agreements with the BC Partners under which the Company has guaranteed certain obligations of the general partner of these limited partnerships, including an obligation to repurchase the interests of the BC Partners if certain “repurchase events” occur. A repurchase event is defined as any one of a number of events mainly focused on the completion of the property rehab, property rent stabilization, the delivery of LIHTCs, tax credit recapture and foreclosure. Even if a repurchase event should occur, 25% of the BC equity would remain in the Ohio Properties and thus BC, a third party, would have sufficient equity in the Ohio Properties for the Company to recognize the sale discussed above. No amount has been accrued for this contingent liability because the likelihood of a repurchase event is remote (see Notes 3 and 15 to the consolidated financial statements).

Crescent Village - Crescent Village Townhomes is located in Cincinnati, Ohio and contains 90 units and was acquired in July 2007. The consolidation of Crescent Village's operations resulted in recognition by the Company of net operating income of $324,000 and $146,000 on net revenue of approximately $731,000 and $726,000 in 2011 and 2010, respectively. The increase in net operating income is the result of a decrease in utility, administration and repair and maintenance expenses. Crescent Village also paid a one-time administration fee to AFCA2 in 2010 that was not repeated in 2011.

Post Woods - Post Woods Townhomes is located in Reynoldsburg, Ohio and contains 180 units and was acquired in July 2007. The consolidation of Post Woods' operations resulted in the recognition by the Company of net operating income of $747,000 and $344,000 on net revenue of approximately $1.49 million and $1.36 million in 2011 and 2010 respectively. The increase in net operating income is a result of an increase in economic occupancy along with a decrease in property insurance, real estate taxes and repair and maintenance expenses. Post Woods also paid a one-time administration fee to AFCA2 in 2010 that was not repeated in 2011.

Willow Bend - Willow Bend Townhomes is located in Columbus (Hilliard), Ohio and contains 92 units and was acquired in July 2007. The consolidation of Willow Bend's operations resulted in recognition by the Company of net operating income of $351,000 and $157,000 on net revenue of approximately $788,000 and $776,000 in 2011 and 2010, respectively. The increase in net operating income is the result of a decrease in property insurance , real estate taxes and utility expenses. Willow Bend also paid a one-time administration fee to AFCA2 in 2010 that was not repeated in 2011.

Results of Operations

The Consolidated Company

The tables below compare the results of operations for the Company for 2011, 2010, and 2009:



	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009


Revenues:
Property revenues	$	16,884,704		$	14,692,537		$	15,667,053
Mortgage revenue bond investment income	9,497,281			6,881,314			4,253,164
Other interest income	485,679			455,622			106,082
Other income	739,585			—			—
Gain on early extinguishment of debt	—			435,395			—
Gain on sale of assets held for sale	—			—			862,865
Total Revenue	27,607,249			22,464,868			20,889,164

Expenses:
Real estate operating (exclusive of items shown below)	9,859,424			10,016,742			10,127,657
Provision for loan loss	4,242,571			562,385			1,401,731
Provision for loss on receivables	952,700			—			—
Asset impairment charge - Weatherford	—			2,528,852			—
Depreciation and amortization	5,691,639			5,062,817			6,067,330
Interest	5,769,108			2,514,479			4,202,126
General and administrative	2,764,970			2,383,784			1,997,661
Total Expenses	29,280,412			23,069,059			23,796,505
Loss from continuing operations	(1,673,163		)	(604,191		)	(2,907,341		)
Income from discontinued operations	—			—			26,734,754
Net (loss) income	(1,673,163		)	(604,191		)	23,827,413
Net income (loss) attributable to noncontrolling interest	$	570,759		$	(203,831	)	$	(11,540	)
Net (loss) income - America First Tax Exempt Investors, L. P.	$	(2,243,922	)	$	(400,360	)	$	23,838,953

Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010

Property revenues. Property revenues increased mainly as a result of additional MF Properties. The Arboretum was acquired on March 31, 2011, and added approximately $1.8 million to property revenues during 2011. Eagle Village was acquired on June 29, 2011 and added approximately $945,000 to property revenues in 2011. Partially offsetting this increase was an approximately $1.4 million decrease in revenue due to the deconsolidation of Iona Lakes. The remaining increase is primarily attributable to the increased economic occupancy at the existing MF Properties year over year. Annual net rental revenues per unit related to the MF Properties, excluding the Eagle Village student housing project which was acquired in 2011, increased to $7,693 per unit in 2011 from $7,295 in 2010. The annual net rental revenues per unit related to the Consolidated VIEs increased to approximately $6,973 in 2011 from approximately $6,888 in 2010.

Mortgage revenue bond investment income. Mortgage revenue bond investment income increased during 2011 due to a higher level of bond investments. Total bond investments at December 31, 2011 were approximately $135.7 million as compared to approximately $100.6 million at December 31, 2010. Interest payments of approximately $1.9 million were received from tax-exempt mortgage revenue bonds that the Company did not hold during 2010. The deconsolidation of Iona Lakes resulted in an approximate $635,000 increase in bond investment income during 2011 as compared to 2010. In addition, the Company realized approximately $308,000 of contingent interest from the Clarkson College bond retirement in second quarter 2011.

Other interest income. Other interest income is comprised mainly of interest income on taxable loans held by the Company. The increase in other interest income is attributable to higher levels of taxable loans outstanding in 2011.

Other income. Other income is comprised of three separate items. Approximately $445,000 is the gain on the Briarwood bond retirement during 2011. Approximately $144,000 is related to the forgiveness of debt from an unrelated third party related to the DeCordova foreclosure which occurred in first quarter 2011 and the payment of a $150,000 prepayment penalty received from the Foundation for Affordable Housing.

Gain on early extinguishment of debt. In June 2010, the Company had the opportunity to acquire at a discount, and thereby retire, the $12.8 million outstanding mortgage debt secured by the Ohio Properties. The early extinguishment of this debt resulted in a gain of approximately $435,000 in 2010 which did not repeat in 2011.

Real estate operating expenses. Real estate operating expenses associated with the MF Properties and the Consolidated VIEs is 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 decreased from $10.0 million in 2010 to $9.9 million in 2011 due to the following offsetting factors. During 2010, approximately $231,000 of administrative fees and approximately $521,000 of acquisition costs paid by the Ohio Properties did not recur in 2011. The deconsolidation of Iona Lakes reduced expenses by approximately $1.0 million 2011 as compared to 2010. In addition, due to the Ohio Property rehabilitation, real estate taxes, insurance, and repairs and maintenance expenses decreased year over year. Offsetting these decreases are increased expenses from the new Arboretum property of approximately $1.2 million in 2011, approximately $286,000 of which were acquisition related expenses. In addition, Eagle Village increased expenses by approximately $667,000 in 2011.

Provision for loss on receivables. During the second quarter of 2011, an impairment of the interest receivable on the Woodland Park bond occurred and an allowance for loss of approximately $953,000 was recorded against the accrued bond interest receivable in 2011.

Provision for loan loss. During 2011 and 2010, the Company determined that a portion of the taxable property loans were potentially impaired and an additional allowance for bad debt should be recorded. An allowance for bad debt and an associated provision for loan loss of approximately $4.2 million was recorded against the Iona Lakes taxable loan in 2011. In 2010, approximately $212,000 was recorded against the Woodland Park taxable loan and $350,000 was recorded against the cross collateralized Ashley Square and Cross Creek taxable loans as an allowance for bad debt and an associated provision for loan loss.

Asset impairment charge - Weatherford. As a result of a decision by the Texas Department of Housing and Community Affairs to terminate the anticipated Tax Credit Assistance Program funding for the Residences at Weatherford in October 2010, the Company determined that the property fixed assets and the associated tax-exempt mortgage revenue bond on this project were impaired and recorded an asset impairment charge of approximately $2.7 million in the third quarter of 2010. The resulting charge was attributable to the unitholders. In February 2011, the Company completed foreclosure proceedings on the bond issued on this property and now owns the property directly. No impairment charges were recorded on this project in 2011.

Depreciation and amortization expense. Depreciation and amortization consists primarily of depreciation associated with the apartment properties of the Consolidated VIEs and the MF Properties, 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 closing of the TEBS and TOB Credit Facilities. The increase in depreciation and amortization expense from 2010 to 2011 is related to offsetting factors. Approximately $742,000 of depreciation expense and approximately $205,000 of in-place lease amortization increases are directly related to the new MF Properties acquired in 2011. This was offset by the reduction of approximately $446,000 depreciation expense due to the deconsolidation of Iona Lakes and the $197,000 reduction of amortization expense related to reduced deferred financing costs. The remaining increase is attributable to depreciation on newly capitalized and newly acquired assets.

Interest expense. The increase in interest expense during 2011 compared to 2010 was due to offsetting factors. The Company's borrowing cost decreased from approximately 3.6% per annum in 2010 to approximately 2.7% resulting in an approximate decrease of $791,000 when comparing 2011 to 2010. Offsetting this decrease was an approximate $1.3 million increase resulting from the higher average principal of outstanding debt. The remaining approximate $2.7 million increase was the result of the mark to market adjustment of the Company's derivatives. These interest rate derivatives do not qualify for hedge accounting and, accordingly, they are carried at fair value, with changes in fair value included in current period earnings within interest expense.

General and administrative expenses. General and administrative expenses increased in 2011 as compared to 2010. Approximately $179,000 of this increase is due to administration fees paid to AFCA2 as a result of new investments. The remaining increase is related to increased salary and insurance expenses offset by a reduction in professional fees.

Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009

Property Revenues. Property revenues of the Company consist of those of the MF Properties as well as the six Consolidated VIEs treated as continuing operations during the periods. Property revenues decreased approximately $1.0 million for the year ended December 31, 2010 compared to the year ended December 31, 2009 mainly as a result of Ashley Square and Cross Creek Apartments no longer being reported as Consolidated VIEs in 2010. Accordingly, no revenues from the operation of these properties were included in property revenues reported by the Company in 2010 compared to approximately $1.5 million of property revenues from these properties that were reported in 2009. The decline in property revenue due to the deconsolidation of Ashley Square and Cross Creek was partially offset by an increase of approximately $300,000 in property revenues generated by Residences at DeCordova which became a Consolidated VIE on March 1, 2010 and general improvements in economic occupancy. Annual net rental revenues per unit related to the MF Properties increased to $7,295 per unit in 2010 from $7,119 in 2009. The annual net rental revenues per unit related to the Consolidated VIEs increased to approximately $6,920 in 2010 from approximately $6,216 in 2009.

Mortgage revenue bond investment income. Mortgage revenue bond investment income of the Company consists of the interest income earned only on the mortgage revenue bonds that were not issued to finance properties owned by Consolidated VIEs. The deconsolidation of Ashley Square and Cross Creek Apartments increased investment income by approximately $962,000. These properties are no longer treated as Consolidated VIEs as of January 1, 2010, therefore the interest paid to the Company on the tax-exempt mortgage revenue bonds is no longer eliminated in consolidation. In addition, the Company realized additional tax-exempt interest income of approximately $1.9 million due to the acquisition of four tax-exempt mortgage revenue bonds, South Park Ranch Apartments, Brookstone Apartments, Villages at Lost Creek, and Autumn Pines that were not owned during 2009. These increases were offset by interest income from Residences at DeCordova and Residences at Weatherford which became Consolidated VIEs on March 1, 2010. The interest income related to these bonds is now eliminated in consolidation. The elimination of DeCordova and Weatherford interest in 2010 totaled approximately $478,000.

Other interest income. Other income is comprised mainly of interest income on taxable loans held by the Company. The increase in other interest income is attributable to higher levels of taxable loans outstanding in 2010.

Gain on assets held for sale. In September 2009, the Partnership sold the Oak Grove Commons apartments, an asset held for sale, to an unaffiliated party for $3.75 million. After the deduction of selling expenses, commissions, and cash advances made to the property, the Partnership realized a taxable gain of approximately $863,000 from the sale. There was no similar transaction in 2010.

Real estate operating expenses. When comparing 2010 to 2009, a decrease of approximately $1.3 million in real estate operating expenses is the result of the Ashley Square and Cross Creek Apartments deconsolidation. This decrease was offset by approximately $428,000 of expenses related to the consolidation of Residences at DeCordova and Residences at Weatherford, an increase of approximately $231,000 in administrative fees, and an increase of approximately $376,000 of acquisition related costs incurred by the MF Properties. The acquisition costs incurred in 2010 by the Ohio Property owners represent expenses of non-controlling interests. In addition, there were increases in MF Property related market ready, insurance, and salary expense.

Provision for loan loss. During 2010, it was determined that a portion of the taxable property loans was potentially impaired and that an additional allowance for bad debt should be recorded. An allowance for bad debt and an associated provision for loan loss of approximately $212,000 and $700,000 was recorded against the Woodland Park taxable loan in 2010 and 2009, respectively. In addition, during the fourth quarter of 2010, $350,000 was recorded as an allowance for bad debt and an associated provision for loan loss against the cross collateralized Ashley Square and Cross Creek taxable loans. In 2009 the Company recorded a $700,000 allowance for bad debt against the judgment receivable related to the 2008 foreclosure on the Prairiebrook Village bonds.

Asset impairment charge - Weatherford. Due to the inability of the property owner to secure an alternative plan of financing to complete construction of the project (see Note 5 to the consolidated financial statements and discussion above) the Company has determined that the property fixed assets of Residences at Weatherford and the associated tax-exempt mortgage revenue bond which is eliminated in consolidation were impaired. As of September 30, 2010 the property fixed assets, consisting of land and land improvements, and the associated tax-exempt mortgage revenue bond owned by the Partnership were written down. The resulting asset impairment charge of approximately $2.5 million is attributable to the unitholders. In February 2011, the Company foreclosed on the current ownership and will continue to develop the property.

Depreciation and amortization. Depreciation and amortization consists primarily of depreciation associated with the apartment properties of the Consolidated VIEs and the MF Properties, 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 written off upon retirement of the BOA Credit Facility in addition to new amortization of finance costs related to the closing of the TEBS Credit Facility. The decrease in depreciation and amortization expense from 2009 to 2010 is attributable to a decrease of approximately $96,000 in deferred financing cost amortization, a decrease of approximately $708,000 of in-place lease amortization, and an approximate $581,000 decrease due to deconsolidation of Ashley Square and Cross Creek Apartments. These were offset by a depreciation expense increase of approximately $200,000 due the consolidation of Residences at DeCordova and an increase of approximately $177,000 due to depreciation on assets added to the existing MF Properties and Consolidated VIEs during 2010.

Interest expense. The decrease in interest expense of $1.7 million in 2010 as compared to 2009 was due to offsetting factors. Approximately $1.5 million of the decrease was a result of the mark to market adjustment of the Company's derivatives. These interest rate derivatives do not qualify for hedge accounting and, accordingly, they are carried at fair value, with changes in fair value included in current period earnings within interest expense. The remaining change in interest expense results from changes in the average outstanding debt throughout the year combined with changes in the Company's cost of borrowing. The average outstanding debt decreased slightly while the average cost of borrowing increased slightly from approximately 3.5% per annum in 2009 to approximately 3.6% per annum in 2010.

General and administrative expenses. General and administrative expenses increased mainly due to increased professional fees and administration fees. Professional fees increased approximately $258,000 due mainly to accounting, legal and other professional fees associated with the process the Company utilized to respond to a comment letter received by the Company from the Securities Exchange Commission in the first quarter of 2010. Additional professional fees were also incurred for accounting consultation regarding the implementation of new accounting standards in 2010. Administration fees paid to AFCA 2 increased approximately $335,000 as the Company has a higher level of invested assets and taxable loans in 2010. Offsetting these expenses was a reduction in reimbursable employee related costs paid to AFCA 2.

Discontinued Operations

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. In order to properly reflect the transaction under the guidance on consolidations, 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 in 2009. The redemption of the bonds did not result in a taxable gain to the Company. For the year ended December 31, 2009 net income, excluding the gain on sale, from these VIEs of approximately $347,000 is included in the income from discontinued operations.

The Partnership

The following discussion of the Partnership's results of operations for the years ended December 31, 2011, 2010 and 2009 reflects the operations of the Partnership without the consolidation of the Consolidated VIEs required by the accounting guidance on consolidations. The Ohio properties are reflected as MF Properties and not Tax-Exempt Bond Investments in the following discussion.

This information reflects the information used by management to analyze the Partnership's operations and is reflective of the consolidated operations of the Tax-Exempt Bond Investments segment and the MF Properties segment as presented in Note 18 to the financial statements.



	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009


Revenues:
Property revenues	$	10,974,897		$	7,205,099		$	7,045,578
Mortgage revenue bond investment income	11,515,237			10,223,269			11,087,923
Other interest income	485,679			488,427			106,082
Other income	634,597			—			—
Gain on early extinguishment of debt	—			435,395			—
Gain on sale of assets held for sale	—			—			862,865
Loss on sale of security	—			—			(127,495		)
Total Revenues	23,610,410			18,352,190			18,974,953
Expenses:
Real estate operating (exclusive of items shown below)	6,255,007			4,917,287			4,151,353
Provision for loan loss	4,242,571			1,147,716			1,696,730
Provision for loss on receivables	952,700			—			—
Asset impairment charge - Weatherford	—			2,716,330			—
Depreciation and amortization	4,009,678			2,810,525			3,514,073
Interest	5,769,108			2,514,479			4,283,680
General and administrative	2,764,970			2,383,784			1,997,661
Total Expenses	23,994,034			16,490,121			15,643,497
Net (loss) income	(383,624		)	1,862,069			3,331,456
Net income (loss) attributable to noncontrolling interest	570,759			(203,831		)	(11,540		)
Net (loss) income - America First Tax Exempt Investors, L.P.	$	(954,383	)	$	2,065,900		$	3,342,996

Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010

Property revenues. Property revenues increased mainly as a result of additional MF Properties. The Arboretum was acquired on March 31, 2011, Eagle Village was acquired on June 29, 2011, and DeCordova became an MF Property in the first quarter of 2011. DeCordova was reported by the Partnership as a bond investment in 2010. Arboretum added approximately $1.8 million, Eagle Village added approximately $945,000, and DeCordova added approximately $607,000 to property revenues in 2011. In addition, the MF Properties that have been in the portfolio since the beginning of 2011 reported higher economic occupancy which contributed approximately $388,000 of additional revenue in 2011 as compared to 2010. Annual net rental revenues per unit related to the MF Properties excluding the Eagle Village student housing project increased to $7,693 per unit in 2011 from $7,295 in 2010.

Mortgage revenue bond investment income. Mortgage revenue bond investment income increased during 2011 compared to 2010 due to a higher level of bond investments. Total bond investments at December 31, 2011 were approximately $159.4 million as compared to approximately $143.4 million at December 31, 2010 for the Partnership. Interest payments of approximately $1.9 million were received from tax-exempt mortgage revenue bonds that the Company did not hold during 2010. In addition, the Company realized approximately $308,000 of contingent interest from the Clarkson College bond retirement in second quarter 2011. These increases were offset by less interest earned due to bond restructuring required to execute the TEBS financing facility and the Clarkson bond retirement.

Other income. Other income is comprised of two main items. Approximately $445,000 is the gain on the Briarwood bond retirement during 2011 and the payment of a $150,000 prepayment penalty received from the Foundation for Affordable Housing.

Real estate operating expenses. Real estate operating expenses associated with the MF Properties is 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. The overall increase in real estate operating expenses was related to offsetting factors. DeCordova was reported by the Partnership as a bond investment during the ten months in 2010, but was reported as an MF Property during 2011. This reporting change combined with the addition of Arboretum and Eagle Village contributed to a net increase of approximately $1.9 million in real estate expenses in 2011. Arboretum also added approximately $286,000 of acquisition fees. During 2010, approximately $231,000 of administrative fees and approximately $521,000 of acquisition costs were incurred by the Ohio Properties and were not repeated in 2011 thereby offsetting the increases. In addition, due to the Ohio Property rehabilitation, real estate taxes, insurance, and repairs and maintenance expenses decreased year over year.

Provision for loan loss. During 2011 and 2010, the Company determined that a portion of the taxable property loans were potentially impaired and an additional allowance for bad debt should be recorded. An allowance for bad debt and an associated provision for loan loss of approximately $4.2 million was recorded against the Iona Lakes taxable loan in 2011. In 2010 an allowance for loan loss of approximately $1.1 million was recorded against taxable loans.

Depreciation and amortization expense. Depreciation and amortization consists primarily of depreciation associated with the MF Properties, 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 closing of the TEBS and TOB Credit Facilities. The increase in depreciation and amortization expense from 2010 to 2011 is related to offsetting factors. Approximately $934,000 of depreciation expense and approximately $205,000 of in-place lease amortization increases are directly related to the new MF Properties acquired in 2011. This was offset by the reduction of approximately $197,000 in amortization expense related to reduced deferred financing costs. The remaining increase is attributable to depreciation on newly capitalized and newly acquired assets.

Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009

Property Revenues. Property revenues of the Partnership consists only of those of the MF Properties. The overall increase was the result of the increase related to Greens of Pine Glen which was owned for the entire 2010 year as compared to ten months in 2009. Annual net rental revenues per unit related to the MF Properties increased to $7,295 per unit in 2010 from $7,119 in 2009.

Mortgage revenue bond investment income. Mortgage revenue bond investment income of the Partnership consists of the interest income earned on the mortgage revenue bonds actually held by the Partnership during the respective periods including the bonds secured by properties owned by Consolidated VIEs that are eliminated in consolidation in the Company's financial statements. The decrease in mortgage revenue bond investment income during 2010 compared to 2009 is mainly the result of the redemption of the tax-exempt mortgage revenue bonds secured by Ashley Pointe at Eagle Crest, Woodbridge Apartment of Bloomington III and Woodbridge Apartments of Louisville II in February 2009. These bond redemptions resulted in the recognition of $2.5 million of contingent and deferred interest plus approximately $313,000 of regular bond interest in 2009. In addition, approximately $164,000 of interest income was recorded in 2009 related to the Oak Grove and Prairiebrook bonds which were not held in 2010. These decreases were partially offset by additional tax-exempt interest payments of approximately $2.2 million received by the Partnership during 2010 due mainly to the acquisition of new tax-exempt mortgage revenue bonds on Cross Creek Apartments, South Park Ranch Apartments, Brookstone Apartments, Villages at Lost Creek, and Autumn Pines. Due to the uncertainty in collections of contingent interest, the Partnership recognizes this as income only when it is realized.

Gain on assets held for sale. In September 2009, the Partnership sold the Oak Grove Commons apartments, an asset held for sale, to an unaffiliated party for $3.75 million. After the deduction of selling expenses, commissions and cash advances made to the property, the Partnership realized a taxable gain of approximately $863,000 from the sale. There was no similar transaction in 2010.

Gain on early extinguishment of debt. In June 2010, the Partnership had the opportunity to acquire at a discount, and thereby retire, the $12.8 million outstanding mortgage debt secured by the Ohio Properties. The early extinguishment of this debt resulted in a gain of approximately $435,000.

Other interest income. Other interest income is comprised mainly of interest income on taxable loans held by the Partnership. The increase in other interest income is attributable to higher levels of taxable loans outstanding in 2010.

Loss on sale of securities. The bond redemptions secured by Ashley Pointe at Eagle Crest, Woodbridge Apartments of Bloomington III and Woodbridge Apartments of Louisville II in February 2009 resulted in a loss from the write off of unamortized deferred financing costs related to the bonds.

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. Real estate operating expenses increased as a result of an increase of approximately $231,000 in administrative fees, and an increase of approximately $376,000 of acquisition related costs incurred by the MF Properties. The acquisition costs incurred in 2010 by the Ohio Property owners represent expenses of non-controlling interests. In addition, there were increases in MF Property related market ready, insurance, and salary expense.

Provision for loan loss. During 2010 it was determined that a portion of the taxable property loans were potentially impaired and that an additional allowance for loan loss should be recorded. An allowance for loan loss of approximately $1.1 million and $700,000 was recorded against the property taxable loans during 2010 and 2009, respectively. Additionally, in 2009 a $700,000 allowance for bad debt was recorded against the judgment receivable related to the 2008 foreclosure on the Prairiebrook Village bonds.

Asset impairment charge - Weatherford. Due to the inability of the property owner to secure an alternative plan of financing to complete construction of the project (see Note 5 and discussion above) the Partnership has determined that the property fixed assets of Weatherford and the associated tax-exempt mortgage revenue bond which is eliminated in consolidation were impaired. As of September 30, 2010 the property fixed assets, consisting of land and land improvements, and the associated tax-exempt mortgage revenue bond owned by the Partnership were written down. The resulting impairment charge of approximately $2.7 million is attributable to the unitholders. In February 2011, the Partnership foreclosed on the current ownership and will continue to develop the property.

Depreciation and amortization. Depreciation and amortization consists primarily of depreciation associated with the MF Properties, 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 written off upon retirement of the BOA Credit Facility in addition to new amortization of finance costs related to the closing of the TEBS Credit Facility. The decrease in depreciation and amortization expense from 2009 to 2010 is attributable to a decrease of approximately $96,000 of deferred financing cost amortization and a decrease of approximately $708,000 of in-place lease amortization which are fully amortized. The remaining difference is directly related to an increase in depreciation expense on the existing MF Properties due to newly capitalized assets.

Interest expense. The decrease in interest expense of $1.7 million in 2010 as compared to 2009 was due to offsetting factors. Approximately $1.5 million of the decrease was a result of the mark to market adjustment of the Partnership 's derivatives. These interest rate derivatives do not qualify for hedge accounting and, accordingly, they are carried at fair value, with changes in fair value included in current period earnings within interest expense. The remaining change in interest expense results from changes in the average outstanding debt throughout the year combined with changes in the Partnership 's cost of borrowing. The average outstanding debt decreased slightly while the average cost of borrowing increased slightly from approximately 3.5% per annum in 2009 to approximately 3.6% per annum in 2010.

General and administrative expenses. General and administrative expenses increased mainly due to increased professional fees and administration fees. Professional fees increased approximately $258,000 due mainly to accounting, legal and other professional fees associated with the process the Partnership utilized to respond to a comment letter received by the Partnership from the Securities Exchange Commission in the first quarter of 2010. Additional professional fees were also incurred for accounting consultation regarding the implementation of new accounting standards in 2010. Administration fees paid to AFCA 2 increased approximately $335,000 as the Company has a higher level of invested assets and taxable loans in 2010. Offsetting these expenses was a reduction in reimbursable employee expenses paid to AFCA 2.

Liquidity and Capital Resources

Primary sources and uses of funds. Tax-exempt interest earned on the mortgage revenue bonds, including those financing properties held by Consolidated 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 mortgage revenue bonds. Changes in the economic performance of the properties financed by tax-exempt mortgage revenue bonds with a contingent interest provision will affect the amount of contingent interest, if any, paid to the Partnership.

The Consolidated VIEs' and MF Properties' primary source of cash is net rental revenues generated by their real estate investments. 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 the payment of operating expenses and debt service.

Other sources of cash available to the Partnership include debt financing, mortgages and the sale of additional BUCs. The Company currently has outstanding debt financing of $112.7 million under three separate credit facilities and mortgages of $46.2 million secured by six MF Properties.

The Partnership's principal uses of cash are the payment of distributions to unitholders, interest and principal on debt financing and general and administrative expenses. The Partnership also uses cash to acquire additional investments. Distributions to unitholders may increase or decrease at the determination of the General Partner. The per unit cash available for distribution primarily depends on the amount of interest and other cash received by the Partnership from its portfolio of tax-exempt mortgage revenue bonds and other investments, the amount of the Partnership's outstanding debt and the effective interest rates paid by the Partnership on this debt, the level of operating and other cash expenses incurred by the Partnership and the number of units outstanding. During the year ended December 31, 2011, the Partnership generated cash available for distribution of $0.35 per unit. See “Cash Available for Distribution,” on a following page within item 7. As a result, the Partnership was required to supplement its cash available for distribution during 2011 with unrestricted cash and expects to continue to do so until the Partnership is able to complete its current investment plans. The General Partner believes that upon completion of its current investment plans, the Partnership will be able meet its liquidity requirements, including the payment of expenses, interest on its debt financing, and cash distributions to unitholders at the current level of $0.50 per unit per year without the use of unrestricted cash. 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 Consolidated VIEs' and MF Properties' primary uses of cash are: (i) the payment of operating expenses; and (ii) the payment of debt service.

Leverage. The Partnership's operating policy is to use securitizations or other forms of leverage to maintain a level of debt financing between 40% and 60% of the total par value of the Partnership's tax-exempt mortgage bond portfolio. As of December 31, 2011, the debt outstanding related to the total par value of the Partnerships' total bond portfolio of approximately $197.3 million plus restricted cash results in a leverage ratio of 57%. The outstanding debt financing arrangements are two TOB facilities with Deutsche Bank and the TEBS financing agreement with Freddie Mac, discussed above (see Note 9). Additionally, the MF Properties are encumbered by mortgage loans with an aggregate principal balance of approximately $46.2 million. These mortgage loans mature at various times from May 2012 through November 2013 (see Note 10). The total debt financing plus mortgage loans of $158.9 million results in a leverage ratio to Total Assets of 53%.

TEBS Financing. As of September 1, 2010, the Partnership and its Consolidated Subsidiary ATAX TEBS I, LLC, entered into a number of agreements relating to a long-term debt financing facility provided through the securitization of 13 tax-exempt mortgage revenue bonds pursuant to Freddie Mac's TEBS program. The gross proceeds from TEBS Financing were approximately $95.8 million. After the payment of transaction expenses, the Company received net proceeds from the TEBS Financing of approximately $90.4 million. The Company applied approximately $49.5 million of these net proceeds to repay the entire outstanding principal of, and accrued interest on, its secured term loan from Bank of America.

The TEBS Financing essentially provides the Company with a long-term variable-rate debt facility at interest rates reflecting prevailing short-term tax-exempt rates. Under the TEBS Financing, the Company transferred the 13 bonds, with a total outstanding principal amount of approximately $125.6 million, to ATAX TEBS I, LLC, a special purpose entity controlled by the Company (the “Sponsor”). In order to meet Freddie Mac's underwriting requirements with respect to the multifamily apartment properties financed by certain of the Bonds, the Sponsor was required to first place eight of the Bonds, with a total outstanding principal of approximately $70.5 million, into a separate custodial trust with The Bank of New York Mellon Trust Company, N.A. (the “Custodial Trust”) that issued senior and subordinated custody receipts (“Custody Receipts”) representing beneficial interests in the Bonds held in the Custodial Trust to the Sponsor. The subordinated Custody Receipts with a total principal amount of approximately $9.5 million were retained by the Sponsor. The senior Custody Receipts, with a total principal amount of approximately $61.0 million, along with the remaining five Bonds that were not placed into the Custodial Trust, with a total principal amount of approximately $55.1 million, were then securitized by transferring these assets to Freddie Mac in exchange for the TEBS Certificates issued by Freddie Mac. The TEBS Certificates represent beneficial interests in the securitized assets held by Freddie Mac.

The Class A TEBS Certificates were issued in an initial principal amount of $95.8 million and were sold through a placement agent to unaffiliated investors. The Class B TEBS Certificates were issued in an initial principal amount of $20.3 million and were retained by the Sponsor. The holders of the Class A TEBS Certificates are entitled to receive regular payments of interest from Freddie Mac at a variable rate which resets periodically based on the weekly SIFMA floating index rate plus certain Facility Fees. As of closing, the SIFMA rate was equal to 0.25% and the total Facility Fees were 1.9%, resulting in a total initial cost of borrowing of 2.15%. As of December 31, 2011, the SIFMA rate was equal to .15% resulting in a total cost of borrowing of 2.05%. As of December 31, 2010, the SIFMA rate was equal to 0.34% resulting in a total cost of borrowing of 2.24%.

Payment of interest on the Class A TEBS Certificates are made from the interest payments received by Freddie Mac from the Bonds and Senior Custody Receipts held by Freddie Mac on designated interest payment dates prior to any payments of interest on the Class B TEBS Certificates held by the Sponsor. As the holder of the Class B TEBS Certificates, the Sponsor is not entitled to receive interest payments on the Class B TEBS Certificates at any particular rate, but will be entitled to all payments of principal and interest on the Bonds and Senior Custody Receipts held by Freddie Mac after payment of principal and interest due on the Class A TEBS Certificates and payment of all Facility Fees and associated expenses. Accordingly, the amount of interest paid to the Sponsor on the Class B TEBS Certificates is expected to vary over time, and could be eliminated altogether, due to fluctuations in the interest rate payable on the Class A TEBS Certificates, Facility Fees, expenses and other factors.

Freddie Mac has guaranteed payment of scheduled principal and interest payments on the Class A TEBS Certificates and also guarantees payment of the purchase price of any Class A TEBS Certificates that are tendered to Freddie Mac in accordance with their terms but which cannot be remarketed to new holders within five business days. The Sponsor has pledged the Class B TEBS Certificates to Freddie Mac to secure certain reimbursement obligations of the Sponsor to Freddie Mac. The Company also entered into various subordination and intercreditor agreements with Freddie Mac under which the Company has subordinated its rights and remedies with respect to the taxable mortgage loans made by it to the owners of properties securing certain of the Bonds to the rights of Freddie Mac as the holder of the Bonds.

For financial reporting purposes, the TEBS Financing is presented by the Company as a secured financing.

The TEBS Financing offers several advantages over the Company's previous credit facilities which, over time, are expected to positively impact the generation of CAD. These advantages include:


•	a longer term thereby addressing the previous refinancing risks,


•	better balance sheet leverage thereby providing additional funds for investment, and


•	a lower initial cost of borrowing.

The second and third credit facilities in place at December 31, 2011 are financings which utilize a TOB structure with DB. In July 2011, the Company closed a $10.0 million financing utilizing a TOB structure with the DB. This first TOB was structured as a securitization of the Company's $13.4 million Autumn Pines Apartments tax-exempt mortgage revenue bond. In December 2011, the Company closed a second TOB financing structure in the amount of $7.8 million with DB. This second TOB was structured as a securitization of the Company's $15.6 million GMF-Warren/Tulane Apartments and GMF-Madison apartments tax-exempt mortgage revenue and taxable mortgage revenue bonds. Under the TOB structure, the Company transfers the related bonds to a custodian and trustee that provide these services on behalf of DB. The TOB trustee then issued SPEARS and LIFERS. The SPEARS and LIFERS represent beneficial interests in the securitized asset held by the TOB trustee. The SPEARS were credit-enhanced by DB and sold through a placement agent to unaffiliated investors. The gross proceeds from the sale of the SPEARS were remitted to the Company. The LIFERS were retained by the Company and are pledged to DB to secure certain reimbursement obligations. The effective interest rate for the two TOB facilities was 1.86% as of December 31, 2011.

Equity Capital. The Partnership is authorized to issue additional BUCs to raise additional equity capital to fund investment opportunities. In April 2010, a Registration Statement on Form S-3 was declared effective by the SEC under which the Partnership may offer up to $200.0 million of additional BUCs from time to time. In April 2010, the Partnership issued an additional 8,280,000 BUCs through an underwritten public offering at a public offering price of $5.37 per BUC pursuant to this new Registration Statement. Net proceeds realized by the Partnership from this issuance of these BUCs were approximately $41.7 million after payment of an underwriter's discount and other offering costs of approximately $2.8 million.

Cash distributions made by the Partnership to unitholders may increase or decrease at the determination of the General Partner based on its assessment of the amount of cash available to the Partnership for this purpose. Beginning with the distribution for the second quarter of 2009, the Partnership's annual distribution was reduced from $0.54 per unit to $0.50 per unit due to the General Partner's determination that higher borrowing costs and other factors would reduce the cash available to the Partnership to make distributions.

Cash flow. On a consolidated basis, cash provided by operating activities for the year ended December 31, 2011 increased approximately $8.0 million compared to the same period a year earlier mainly due to improved operations as net income adjusted for non-cash items such as depreciation and amortization, asset impairment charges, provisions and derivative mark-to-market changes improved approximately $4.3 million from approximately $7.0 million in 2010 to approximately $11.3 million in 2011. Changes in working capital components accounted for the remaining improvement in operating cash flow. Cash used for investing activities improved approximately $16.7 million in 2011 as compared to 2010. The change in restricted cash from 2010 to 2011 comprises the majority of the decrease in cash used. The remaining changes in investing activities is the net result of cash used to acquire the Arboretum Apartment and Eagle Village Student Housing properties; the Briarwood Manor, GMF-Madison and GMF-Warren/Tulane tax-exempt and taxable bonds offset by the release of cash upon foreclosure of the DeCordova and Weatherford properties; the retirement of the Clarkson College and Briarwood Manor bonds; and the repayment of a taxable loan by the Foundation for Affordable Housing. Cash provided by financing activities for the year ended December 31, 2011 decreased approximately $13.8 million compared to 2010. Financing cash flows in 2011 consisted mainly of cash inflows from additional borrowings offset by distribution payments. Financing cash flows in 2010 consisted mainly of cash inflows from the sales of BUCs offset by principal payments on debt and distributions.

Cash Available for Distribution

Management utilizes a calculation of CAD as a means to determine the Partnership's ability to make distributions to unitholders. 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, certain income due to the General Partner (defined as Tier 2 income in the Agreement of Limited Partnership), interest rate derivative expense or income (including adjustments to fair value), provision for loan losses, provision for loss on receivables, impairments on bonds, losses related to Consolidated VIEs including the cumulative effect of accounting change, and depreciation and amortization expense are added back to the Company's net income (loss) as computed in accordance with GAAP. There is no generally accepted methodology for computing CAD, and the Partnership's computation of CAD may not be comparable to CAD reported by other companies. Although the Partnership 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.

In October 2011, the Briarwood Manor bond was called and retired at par plus accured interest for approximately $4.9 million. This transaction resulted in approximately $445,000 gain reported in the fourth quarter. This gain meets the definition of Net Residual Proceeds representing Tier 2 income and was therefore distributed 75% to the unitholders and 25% to the General Partner.

Upon redemption of the Clarkson College bond in May 2011, the Company realized approximately $308,000 in contingent interest. Contingent interest is Tier 2 income and was therefore distributed 75% to the unitholders and 25% to the General Partner.

During June 2010, the Company completed a sales transaction whereby four of the MF Properties, the Ohio Properties, were sold to three new ownership entities controlled by an unaffiliated not-for-profit entity (see Note 3). Pursuant to the accounting guidance related to property, plant, and equipment for real estate sales, the sale and restructure does not meet the criteria for decrecognition of the properties and full accrual accounting treatment for the resulting gain. As such, the Company will continue to consolidate the Ohio Properties as if the sale was not completed. Under the sales agreement, the Ohio properties were sold for a total purchase price of $16.2 million. Cash received by the selling limited partnerships as part of the sale transaction represents a deferred gain on the sale transaction of approximately $1.8 million. As the deferred gain on the transaction represents cash paid to the Company and no on-going legal obligations related to the Ohio Properties or potential obligation to repay any amounts exists, the deferred gain is CAD and is shown as an adjustment in the CAD Calculation below. This gain meets the definition of Net Residual Proceeds representing contingent interest (Tier 2 income) and was therefore distributed 75% to the unitholders and 25% to the General Partner.

The Partnership has made annual cash distribution of $0.50 per unit since 2009. Since realized CAD per unit was less than $0.50 per unit, the Partnership used approximately $3.9 million and $3.1 million of unrestricted cash to supplement the deficit in 2011 and 2010. The General Partner believes that upon completion of its current investment plans, the Partnership will be able to generate sufficient CAD to maintain cash distributions to unitholders at the current level of $0.50 per unit per year without the use of other available cash. However, there is no assurance that the Partnership will be unable to generate CAD at levels in excess of the current annual distribution rate. In that case, the annual distribution rate per unit may need to be reduced.

The following tables show the calculation of CAD for the years ended December 31, 2011, 2010 and 2009.



	2011			2010			2009
Net (loss) income - America First Tax Exempt Investors, L.P.	$	(2,243,922	)	$	(400,360	)	$	23,838,953
Net loss (income) related to VIEs and eliminations due to consolidation	1,289,539			2,466,260			(20,495,957		)
Net (loss) income before impact of VIE consolidation	(954,383		)	2,065,900			3,342,996
Change in fair value of derivatives and interest rate derivative amortization	2,083,521			(571,684		)	830,142
Depreciation and amortization expense (Partnership only)	3,169,033			2,510,630			3,514,073
Deposit liability gain - Ohio sale agreement	—			1,775,527			—
Tier 2 Income distributable to the General Partner ⁽¹⁾	(170,410		)	(472,246		)	(802,909		)
Asset impairment charge - Weatherford	—			2,716,330			—
Provision for loss on receivables	952,700			—			—
Provision for loan loss	4,242,571			1,147,716			1,696,730
Loss on bond sale	—			—			127,495
Bond purchase discount accretion (net of cash received)	(100,998		)	(403,906		)	—
Ohio deferred interest	1,390,056			745,227			—
CAD	$	10,612,090		$	9,513,494		$	8,708,527
Weighted average number of units outstanding,
basic and diluted	30,122,928			27,493,449			16,661,969
Net (loss) income, basic and diluted, per unit	$	(0.04	)	$	0.07		$	0.15
Total CAD per unit	$	0.35		$	0.35		$	0.52
Distributions per unit	$	0.5000		$	0.5000		$	0.5450

⁽¹⁾ As described in Note 2 to the consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest (Tier 2 income) will be distributed 75% to the unitholders and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner. For the year ended 2011, the Tier II Income is approximately $445K recognized on the Briarwood bond retirement and approximately $308K of contingent interest recognized upon the Clarkson bond retirement. For the second quarter of 2010, the deferred gain on the sale of the Ohio Properties generated approximately $1.8 million and contingent interest generated approximately $33K of Tier II income. For 2009, the Tier 2 income distributable to the General Partner was generated by the early redemption of Woodbridge - Bloomington and Woodbridge - Louisville bond investments, the sale of Oak Grove, and contingent interest from Fairmont Oaks and Lake Forest Apartments.

Off Balance Sheet Arrangements

As of December 31, 2011 and 2010, the Partnership held tax-exempt mortgage revenue bonds which are collateralized by multifamily housing projects. The multifamily housing projects are owned by entities that are not controlled by the Partnership. The Partnership has no equity interest in these entities and does not guarantee any obligations of these entities. Some of the ownership entities are deemed to be Consolidated VIEs and are consolidated with the Partnership for financial reporting purposes. The VIEs that are consolidated with the Partnership do not have off-balance sheet arrangements.

The Partnership does not engage in trading activities involving non-exchange traded contracts. As such, the Partnership is not materially exposed to any financing, liquidity, market, or credit risk that could arise if it had engaged in such relationships.

The Partnership does not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with the Partnership or its related parties other than what is disclosed in Note 12 to the Company's consolidated financial statements.

Contractual Obligations

The Partnership has the following contractual obligations as of December 31, 2011:



			Less than 1 year			1-2 years			More than 2 years
	Total		Less than 1 year			1-2 years			More than 2 years
Debt financing	$	112,673,000	$	18,685,000		$	2,092,000		$	91,896,000
Mortgages payable	$	46,243,883	$	4,452,398		$	37,060,499		$	4,730,986
Effective interest rate(s) ⁽¹⁾			2.85		%	2.60		%	2.04		%
Interest ⁽²⁾	$	18,187,179	$	4,296,421		$	6,148,621		$	7,742,137

⁽¹⁾Interest rates shown are the average effective rate as of December 31, 2011, and include the impact of our interest rate derivatives.
⁽²⁾ Interest shown is estimated based upon current effective interest rates through maturity.

As discussed in Note 9 to the financial statements, the amounts maturing in 2012 consist of the paydowns on the TEBS credit facility with Freddie Mac, the TOB credit facilities with Deutsche Bank and payments on the MF Property mortgages. The Partnership plans to refinance or retire the current maturing mortgage in the second quarter of 2012.

Inflation

With respect to the financial results of the Partnership's investments in tax-exempt mortgage revenue bonds and MF Properties, substantially all of the resident leases at the multifamily residential properties, which collateralize the Partnership's tax-exempt mortgage revenue bonds, allow, at the time of renewal, for adjustments in the rent payable thereunder, and thus may enable the properties to seek rent increases. The substantial majority of these leases are for one year or less. The short-term nature of these leases generally serves to reduce the risk to the properties of the adverse effects of inflation; however, market conditions may prevent the properties from increasing rental rates in amounts sufficient to offset higher operating expenses. Inflation did not have a significant impact on the Partnership's financial results for the years presented in this report.

Critical Accounting Policies

The preparation of financial statements in accordance with GAAP requires management of the Company to make a number of judgments, assumptions, and estimates. The application of these judgments, assumptions and estimates can affect the amounts of assets, liabilities, revenues and expenses reported by the Company. All of the Company's significant accounting policies are described in Note 2. The Company considers the following to be its critical accounting policies because they involve judgments, assumptions and estimates by management that significantly affect the financial statements. If these estimates differ significantly from actual results, the impact on our consolidated financial statements may be material.

Accounting for the TEBS and TOB Financing Arrangements

The Company evaluated the accounting guidance in regard to the TEBS and TOB Financing arrangements (see Note 9 to the consolidated financial statements) and has determined that the securitization transactions do not meet the accounting criteria for a sale or transfer of financial assets and will, therefore, be accounted for as secured financing transactions. In accordance with the guidance which outlines the conditions that must be met to derecognize a transferred financial asset, in part, the transferor has surrendered control over transferred assets if and only if the transferor does not maintain effective control over the transferred assets through either of the following:


1.	An agreement that both entitles and obligates the transferor to repurchase or redeem them before their maturity,


2.	The ability to unilaterally cause the holder to return specific assets, other than through a cleanup call, or


3.	An agreement that permits the transferee to require the transferor to repurchase the transferred financial assets at a price that is so favorable to the transferee that it is probable that the transferee will require the transferor to repurchase them.

The TEBS Financing agreements contain certain provisions that allow the Company to (1) cause the return of certain individual bonds under defined circumstances, (2) cause the return of all of the bonds by electing an Optional Series Pool Release or (3) cause the return of any defaulted bonds. The Optional Series Pool Release is defined in the agreements as two specific dates, September 15, 2017 or September 15, 2020, on which the Company has the option to repurchase all of the securitized bonds. Given these terms, the Company has concluded that the condition in item 2 above is present in the agreements and, therefore, effective control over the transferred assets has not occurred. As effective control has not been transferred, the transaction does not meet the conditions to derecognize the assets resulting in the TEBS Financing being presented on the Company's consolidated financial statements as a secured financing. The TOB Financing agreements contain certain provisions that allow the Company to call the bonds held in the TOB Trusts through their ownership of the residual participating interests ("LIFERS") so effective control has not been transferred resulting in the TOB Financings being presented on the Company's consolidated financial statements as a secured financing.

In addition to evaluating the TEBS Financing as a sale or transfer of financial assets, we have evaluated the securitization trust associated with the TEBS Financing (the “TEBS Trust”) under the provisions of the consolidation guidance. As part of the TEBS Financing, certain bond assets of the Partnership were securitized into the TEBS Trust with Freddie Mac. The TEBS Trust then issued Class A and B TEBS Certificates. Other bond assets of the Partnership were securitized into the TOB Trust with Deutsche Bank (“DB”). The TOB trustee then issued senior floating-rate participating interests ("SPEARS") and LIFERS.

The Partnership has determined that the TEBS Trust is a VIE and the Class B Certificates owned by the Partnership create a variable interest in the TEBS Trust. It was also determined that the TOB Trusts are a VIE and the LIFERS owned by the Partnership creates a variable interest entity in the TOB Trusts.

In determining the primary beneficiary of the TEBS Trust and the TOB Trusts, the Partnership considered the activities of each of the VIEs which most significantly impact the VIE's economic performance, who has the power to control such activities, the risks which the entity was designed to create, the variability associated with those risks and the interests which absorb such variability. The Partnership has retained the right, pursuant to the TEBS Financing agreements, to either substitute or reacquire some or all of the securitized bonds at various future dates and under various circumstances. As a result, the Partnership determined it had retained a controlling financial interest in the TEBS Trust because such actions effectively provide the Partnership with the ability to control decisions pertaining to the VIE's management of interest rate and credit risk. While in the TEBS Trust, the bond assets may only be used to settle obligations of the trust and the liabilities of the trust do not provide the Class A certificate holders with recourse to the general credit of the Partnership. The Partnership also determined it was the primary beneficiary of the TOB Trusts as it has the right to call the bonds within the trusts. The Partnership considered the related party relationship of the entities involved in the VIEs. It was determined that the Partnership met both of the primary beneficiary criteria and was the most closely associated with the VIEs and, therefore, was determined to be the primary beneficiary under these financing arrangements.

Given these accounting determinations, the TEBS Financing and the associated TEBS Trust are presented as a secured financing within the consolidated financial statements. The TOB Financings and associated TOB trusts are also presented as a secured financing within the consolidated financial statements.

Variable Interest Entities (“VIEs”)

The Partnership invests in federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential apartments. The Partnership owns 100% of these bonds and each bond is secured by a first mortgage on the property. The Partnership has also made taxable loans to the property owners in certain cases which are secured by second mortgages on these properties. Although each multifamily property financed with tax-exempt mortgage bonds held by the Partnership is owned by a separate entity in which the Partnership has no equity ownership interest, the debt financing provided by the Partnership creates a variable interest in these ownership entities that may require the Partnership to report the assets, liabilities and results of operations of these entities on a consolidated basis under GAAP.

Effective January 1, 2010, the Company adopted new provisions of the consolidation guidance that amended the consolidation guidance applicable to VIEs and required enhanced disclosure to provide more information about the Company's involvement in a VIE. The Partnership must make an evaluation of these entities to determine if they meet the definition of a VIE. Generally, a VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack:


i.	the ability to make decisions about an entity's activities through voting or similar rights;


ii.	the obligation to absorb the expected loss of the entity; or


iii.	the right to receive the expected residual returns of the entity;

or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity's activities either involve, or are conducted on behalf of an investor that has disproportionately few voting rights.

The revised accounting standard introduced a more qualitative approach to evaluating VIEs for consolidation and requires the Partnership to perform an analysis to determine whether its variable interests give it controlling financial interest in a VIE. This analysis identifies the primary beneficiary, the entity that must consolidate the VIE, as the entity that has (1) the power to direct the activities of a VIE that most significantly impact the entity's economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. In adopting this revised accounting standard, the Partnership re-evaluated all of its investments to determine if the property owners were VIEs and, if so, whether the Partnership was the primary beneficiary of the VIE. The guidance also requires an ongoing assessment of whether an enterprise is the primary beneficiary of the VIE.

Under consolidation guidance, the Partnership must make an evaluation of entities which are secured by the tax-exempt mortgage revenue bonds owned by the Partnership to determine if they meet the definition of a VIE. On January 1, 2010, the Partnership determined that eight of the entities financed by tax-exempt mortgage revenue bonds owned by the Partnership were held by VIEs. These VIEs were Ashley Square, Bent Tree, Cross Creek, Fairmont Oaks, Iona Lakes, Lake Forest, DeCordova, and Weatherford. The Partnership then determined that it was the primary beneficiary of six of these VIEs; Bent Tree, Fairmont Oaks, Iona Lakes and Lake Forest, DeCordova and Weatherford and reported these six properties as Consolidated VIEs during 2010. As a result of adopting the new guidance on January 1, 2010, the Partnership no longer reports Ashley Square and Cross Creek on a consolidated basis. In February 2011, the Partnership foreclosed on the bonds secured by DeCordova and Weatherford and one of the Partnership's subsidiaries took 100% ownership interest in these limited liability companies. As a result, the properties are reported as MF Properties. In June 2011, the ownership of Iona Lakes became a not-for-profit entity, which created a re-consideration event and resulted in Iona Lakes no longer being reported as a Consolidated VIE beginning June 1, 2011. At December 31, 2011, the Partnership determined it is the primary beneficiary of three of the remaining VIEs; Bent Tree, Fairmont Oaks, and Lake Forest and has continued to consolidate these entities. At December 31, 2011, the Partnership holds four bonds which were purchased after January 1, 2010, Autumn Pines, GMF-Madison Tower, GMF-Warren/Tulane, and Lost Creek. The evaluation of these entities did not result in required consolidation.

The Partnership does not hold an equity interest in these VIEs and, therefore, the assets of the VIEs cannot be used to settle the general commitments of the Partnership and the Partnership is not responsible for the commitments and liabilities of the VIEs. The primary risks to the Partnership associated with these VIEs relate to the entities' ability to meet debt service obligations to the Partnership and the valuation of the underlying multifamily apartment property which serves as bond collateral.

Investments in Tax-Exempt Mortgage Revenue Bonds, Other Tax-Exempt Bonds, and Property Loans

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. The Company owns 100% of each of these bonds. There is no active trading market for the bonds and price quotes for the bonds are not available. As a result, the Company bases its estimate of fair value of the tax-exempt mortgage revenue bonds using discounted cash flow and yield to maturity analysis performed by management. This calculation methodology encompasses judgment in its application. If available, management may also consider price quotes on similar bonds or other information from external sources, such as pricing services or broker quotes. Pricing services, broker quotes and management's analysis provide indicative pricing only.

As of December 31, 2011, 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 December 31, 2011, the range of effective yields on the individual bonds was 6.3% to 9.0%. 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 6.9% to 9.9% and would result in additional unrealized losses on the bond portfolio of approximately $10.7 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.

The estimated future cash flow of each revenue bond depends on the operations of the underlying property and, therefore, is subject to a significant amount of uncertainty in the estimation of future rental receipts, future real estate