ATAX 10-Q 0912

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 and, accordingly, we cannot guarantee their accuracy or completeness.

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. 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and in Item 1A of Part II of this document.



	September 30, 2012			December 31, 2011
Assets
Cash and cash equivalents	$	55,514,460		$	20,176,906
Restricted cash	5,970,155			13,691,088
Interest receivable	9,124,124			6,984,978
Tax-exempt mortgage revenue bonds held in trust, at fair value (Notes 4 & 9)	100,178,554			109,152,787
Tax-exempt mortgage revenue bonds, at fair value (Note 4)	38,623,510			26,542,565
Public housing capital fund trusts, at fair value (Note 5)	66,163,969			—
Real estate assets: (Note 6)
Land	12,895,622			10,394,910
Buildings and improvements	112,488,768			103,911,079
Real estate assets before accumulated depreciation	125,384,390			114,305,989
Accumulated depreciation	(21,813,339		)	(18,264,194		)
Net real estate assets	103,571,051			96,041,795
Other assets (Note 7)	8,289,472			10,069,314
Assets of discontinued operations (Note 8)	8,224,333			15,317,112
Total Assets	$	395,659,628		$	297,976,545

Liabilities
Accounts payable, accrued expenses and other liabilities	$	3,660,766		$	3,231,360
Distribution payable	5,705,283			3,911,340
Debt financing (Note 9)	153,184,000			112,673,000
Mortgages payable (Note 10)	39,178,128			35,464,455
Liabilities of discontinued operations (Note 8)	4,870,902			11,107,345
Total Liabilities	206,599,079			166,387,500

Commitments and Contingencies (Note 15)

Partners' Capital
General Partner (Note 2)	(367,578		)	(354,006		)
Beneficial Unit Certificate holders	213,005,840			154,911,228
Unallocated deficit of Consolidated VIEs	(24,525,004		)	(23,512,962		)
Total Partners' Capital	188,113,258			131,044,260
Noncontrolling interest (Note 6)	947,291			544,785
Total Capital	189,060,549			131,589,045
Total Liabilities and Partners' Capital	$	395,659,628		$	297,976,545



	For the Three Months Ended,						For Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Revenues:
Property revenues	$	4,003,744		$	3,598,955		$	11,441,606		$	10,289,790
Investment income	3,110,717			2,465,876			7,770,767			7,094,549
Gain on sale of bonds	—			—			667,821			—
Other income	15,224			359,167			97,996			759,478
Total revenues	7,129,685			6,423,998			19,978,190			18,143,817
Expenses:
Real estate operating (exclusive of items shown below)	2,572,957			2,088,085			6,811,950			6,102,356
Provision for (recovery of) loss on receivables	(261,825		)	14,525			214,525			725,215
Depreciation and amortization	1,469,476			1,311,600			4,168,441			3,509,964
Interest	1,551,543			2,036,470			4,317,329			4,421,608
General and administrative	834,301			725,115			2,533,246			2,044,132
Total expenses	6,166,452			6,175,795			18,045,491			16,803,275
Income from continuing operations	963,233			248,203			1,932,699			1,340,542
Income from discontinued operations (including gain on sale of MF Property of $1,277,976 in 2012)	1,385,433			29,218			1,613,817			187,302
Net income	2,348,666			277,421			3,546,516			1,527,844
Net income attributable to noncontrolling interest	137,099			145,369			398,469			449,866
Net income - America First Tax Exempt Investors, L.P.	$	2,211,567		$	132,052		$	3,148,047		$	1,077,978

Net income (loss) allocated to:
General Partner	$	333,962		$	3,750		508,592			75,212
Limited Partners - Unitholders	2,390,779			371,285			3,651,497			1,942,800
Unallocated loss of Consolidated Property VIEs	(513,174		)	(242,983		)	(1,012,042		)	(940,034		)
Noncontrolling interest	137,099			145,369			398,469			449,866
	$	2,348,666		$	277,421		$	3,546,516		$	1,527,844
Unitholders' interest in net income per unit (basic and diluted):
Income from continuing operations	$	0.03		$	0.01		$	0.05		$	0.05
Income from discontinued operations	0.03			—			0.05			0.01
Net income, basic and diluted, per unit	$	0.06		$	0.01		$	0.10		$	0.06
Weighted average number of units outstanding, basic and diluted	42,772,928			30,122,928			35,572,562			30,122,928



	General Partner			# of Units	Beneficial Unit Certificate Holders			Unallocated Deficit of Consolidated VIEs			Non- controlling Interest			Total			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2012	$	(354,006	)	30,122,928	$	154,911,228		$	(23,512,962	)	$	544,785		$	131,589,045		$	95,894
Sale of Beneficial Unit Certificates	—			12,650,000	59,948,265									59,948,265
Noncontrolling interest contribution	—				—			—			4,037			4,037
Distributions paid or accrued	(612,603		)	—	(14,458,598		)	—			—			(15,071,201		)	—
Net income (loss)	508,592			—	3,651,497			(1,012,042		)	398,469			3,546,516			—
Unrealized gain on securities	90,439			—	8,953,448			—			—			9,043,887			9,043,887
Balance at September 30, 2012	$	(367,578	)	42,772,928	$	213,005,840		$	(24,525,004	)	$	947,291		$	189,060,549		$	9,139,781

	General Partner			# of Units	Beneficial Unit Certificate Holders			Unallocated Deficit of Consolidated VIEs			Non- controlling Interest			Total			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2011	$	(280,629	)	30,122,928	$	161,389,189		$	(32,945,669	)	$	(141,326	)	$	128,021,565		$	(9,692,233	)
Deconsolidation of VIEs (Note 3)	(7,262		)	—	(718,981		)	10,722,246						9,996,003			(726,243		)
Distributions paid or accrued	(177,643		)		(11,296,098		)	—			—			(11,473,741		)
Net income (loss)	75,212			—	1,942,800			(940,034		)	449,866			1,527,844			—
Unrealized gain on securities	91,628			—	9,071,182			—			—			9,162,810			9,162,810
Balance at September 30, 2011	$	(298,694	)	30,122,928	$	160,388,092		$	(23,163,457	)	$	308,540		$	137,234,481		$	(1,255,666	)



	For Nine Months Ended,
	September 30, 2012			September 30, 2011
Cash flows from operating activities:
Net income	$	3,546,516		$	1,527,844
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	4,618,505			4,171,142
Provision for loss from receivables	214,525			725,215
Non-cash loss on derivatives	1,055,311			1,962,016
Gain on sale of MF Property	(1,277,976		)	—
Bond discount and premium amortization and accretion	(315,580		)	(366,013		)
Gain on sale of bonds	(667,821		)	—
Gain on asset sold	—			(21,103		)
Gain on early extinguishment of debt	—			(104,988		)
Changes in operating assets and liabilities, net of effect of acquisitions
Increase in interest receivable	(2,834,210		)	(2,590,871		)
(Increase) decrease in other assets	(842,388		)	1,466,137
Increase (decrease) in accounts payable and accrued expenses	(115,371		)	302,403
Net cash provided operating activities	3,381,511			7,071,782
Cash flows from investing activities:
Capital expenditures	(4,750,312		)	(7,220,528		)
Acquisition of tax-exempt mortgage revenue bonds	(10,165,287		)	(20,117,500		)
Acquisition of public housing capital fund trust certificates	(65,985,913		)	—
Acquisition of partnerships, net of cash acquired	(5,500,000		)	(24,779,613		)
Proceeds from sale of discontinued operation	8,325,000			—
Proceeds from assets sold	—			36,500
Proceeds from the sale of bonds	16,829,960			—
Decrease (increase) in restricted cash	160,820			(154,371		)
Restricted cash - debt collateral released	7,895,236			230,046
Change in restricted cash - Ohio sale	—			2,684,876
Cash released upon foreclosure	—			2,235,335
Proceeds from bond retirement	—			6,119,573
Transfer of cash to unconsolidated VIE upon deconsolidation	—			(5,135		)
Principal payments received on taxable bonds	95,000			4,528,137
Principal payments received on tax-exempt mortgage revenue bonds	571,458			370,688
Net cash used by investing activities	(52,524,038		)	(36,071,992		)
Cash flows from financing activities:
Distributions paid	(13,277,258		)	(11,473,741		)
Net proceeds from sale of beneficial unit certificates	59,948,265			—
Proceeds from debt financing	52,764,044			48,233,354
Sale of LP Interests - Ohio Properties	4,037			—
Decrease in liabilities related to restricted cash	(160,820		)	154,371
Debt financing costs	(116,542		)	(222,307		)
Principal payments on debt financing	(8,484,000		)	(10,557,444		)
Principal payments on mortgages payable	(6,206,798		)	—
Net cash provided by financing activities	84,470,928			26,134,233
Net increase (decrease) in cash and cash equivalents	35,328,401			(2,865,977		)
Cash and cash equivalents at beginning of period, including cash and cash equivalents of discontinued operations of $36,507 and $28,365, respectively	20,213,413			13,277,048
Cash and cash equivalents at end of period, including cash and cash equivalents of discontinued operations of $27,354 and $57,994, respectively	$	55,541,814		$	10,411,071

Supplemental cash flow information:
Cash paid during the period for interest	3,086,659			2,607,888
Distributions declared but not paid	5,705,283			3,803,399
Capital expenditures financed through payables	58,304			9,000,099

America First Tax Exempt Investors, L.P. (the “Partnership”) was formed on April 2, 1998, under the Delaware Revised Uniform Limited Partnership Act for the primary purpose of acquiring, holding, selling and otherwise dealing with a portfolio of federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential properties. Interest on these bonds is excludable from gross income for federal income tax purposes. As a result, most of the income earned by the Partnership is exempt from federal income taxes. The Partnership may also invest in other types of tax-exempt securities that may or may not be secured by real estate and may make taxable mortgage loans secured by multifamily properties which are financed by tax-exempt mortgage revenue bonds held by 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 expects to sell its interest in these MF Properties in connection with the future syndication of low income housing tax credits under Section 42 of the Internal Revenue Code ("LIHTCs") or to a tax-exempt organization and to acquire tax-exempt mortgage revenue bonds on these properties to provide debt financing to the new owners.

The condensed consolidated financial statements of the “Company” reported in this Form 10-Q include the assets, liabilities and results of operations of the Partnership, ATAX Capital Fund I LLC, an entity owned and controlled by the Partnership which owns the residual interest in three Public Housing Capital Fund Tender Option Bond Trusts (Note 5), its other 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”). The Consolidated Subsidiaries of the Partnership consist of:

Stand alone financial information of the Partnership reported in this Form 10-Q includes only the assets, liabilities, and results of operations of the Partnership and its Consolidated Subsidiaries (hereafter the “Partnership”) without the Consolidated VIEs. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership, the Consolidated Subsidiaries and the Consolidated VIEs have been eliminated in consolidation. The Partnership does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) affects the Partnership’s status as a partnership for federal income tax purposes or the status of unitholders as partners of the Partnership, the treatment of the tax-exempt mortgage revenue bonds on the properties owned by Consolidated VIEs as debt, the tax-exempt nature of the interest payments received on bonds secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to unitholders on IRS Form K-1.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying interim unaudited condensed consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. These condensed consolidated financial statements and notes have been prepared consistently with the 2011 Form 10-K. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the financial position as of September 30, 2012, and the results of operations for the interim periods presented have been made. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.

The Agreement of Limited Partnership of the Partnership contains provisions for the distribution of Net Interest Income, Net Residual Proceeds and Liquidation Proceeds, for the allocation of income or loss from operations and for the allocation of income and loss arising from a repayment, sale, or liquidation of investments. Income and losses will be allocated to each unitholder on a periodic basis, as determined by the General Partner, based on the number of BUCs held by each unitholder as of the last day of the period for which such allocation is to be made. Distributions of Net Interest Income and Net Residual Proceeds will be made to each unitholder of record on the last day of each distribution period based on the number of BUCs held by each unitholder as of such date. For purposes of the Agreement of Limited Partnership, cash distributions, if any, received by the Partnership from its indirect interest in MF Properties (Note 6) will be included in the Partnership’s Interest Income and cash distributions received by the Partnership from the sale of such properties will be included in the Partnership Residual Proceeds.

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

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 revenue 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 acquisition, 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 September 30, 2012, 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 Property 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 revenue 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 rehabilitation, property rent stabilization, the delivery of LIHTCs, tax credit recapture and foreclosure. Even if a repurchase event should occur after the $7.8 million of equity has been contributed, 25% of the BC contributed capital would remain as equity 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.

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 revenue 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.

The Partnership determined it is the primary beneficiary of the following properties at September 30, 2012: Bent Tree, EAT (Maples on 97th), Fairmont Oaks, and Lake Forest. The capital structure of Bent Tree, Fairmont Oaks, and Lake Forest consists of senior debt, subordinated debt, and equity capital. The senior debt is in the form of a tax-exempt mortgage revenue bonds and accounts for the majority of each VIE's total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The equity ownership of the consolidated VIEs is ultimately held by corporations which are owned by four individuals, two of which are related parties. Additionally, each of these properties is managed by an affiliate of the Partnership, America First Properties Management Company, LLC (“Properties Management”) which is an affiliate of Burlington.

In August 2012, the Partnership sold the Commons at Churchland property for approximately $8.1 million resulting in a gain of approximately $1.3 million. In a separate August 2012 transaction, the Partnership closed on the purchase of the Maples on 97^th property (“replacement property”), located in Omaha, Nebraska, for a purchase price of approximately $5.5 million through the execution of a Qualified Exchange Accommodation Agreement that assigned the right to acquire and own the replacement property to a wholly-owned subsidiary of a Title Company (EAT (Maples on 97th)) for a period not to exceed six months. During this six month holding period, the Partnership will rehabilitate the replacement property. The Partnership lent the EAT (Maples on 97th) the necessary funds to purchase the replacement property; there is no other capital within that entity.

The EAT (Maples on 97th) then executed a Master Lease Agreement and Construction Management Agreement with the Partnership. These two agreements give the Partnership the rights and obligations to manage the replacement property as well as the rehabilitation during the six month hold period. In addition, the Qualified Exchange Accommodation Agreement stipulates that title to the Property is to revert back to a subsidiary of the Partnership no later than the end of the six month holding period. The Partnership has determined that it is the primary beneficiary of the EAT (Maples on 97th). Based on the terms of the Master Lease Agreement, the Partnership has determined that it will report the rental income and related real estate operating expenses for the Maples on 97^th property during the six month holding period as an MF Property since it has all the rights and obligations of landlord for the property.

In determining the primary beneficiary of these VIEs, the Partnership considered the activities of the VIE which most significantly impact the VIEs' economic performance, who has the power to control such activities, the risks which the entities were designed to create, the variability associated with those risks and the interests which absorb such variability. The Partnership also considered the related party relationship of the entities involved in the VIEs. It was determined that the Partnership, as part of the related party group, 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.

The Company does not consolidate two VIE entities, Ashley Square and Cross Creek. In determining the primary beneficiary of these VIEs, the Partnership considered the activities of each VIE which most significantly impact the VIEs' economic performance, who has the power to control such activities, the risks which the entities were designed to create, the variability associated with those risks and the interests which absorb such variability. The significant activities of the VIE that impact the economic performance of the entity include leasing and maintaining apartments, determining if the property is to be sold, decisions relating to debt refinancing, the selection of or replacement of the property manager and the approval of the operating and capital budgets. As discussed below, while the capital structures of these VIEs resulted in the Partnership holding a majority of the variable interests in these VIEs, the Partnership determined it does not have the power to direct the activities of these VIEs that most significantly impact the VIEs’ economic performance and, as a result, is not the primary beneficiary of these VIEs.

Ashley Square – Ashley Square Housing Cooperative acquired the ownership of the Ashley Square Apartments in December 2008 from Ashley Square LLC through a warranty deed of transfer and an assumption of debt. This transfer of ownership constituted a reconsideration event as outlined in the consolidation guidance which triggered a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans and equity capital. The senior debt is in the form of tax-exempt mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE’s total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The VIE is organized as a housing cooperative and the 99% equity owner of this VIE is The Foundation for Affordable Housing (“FAH”), an unaffiliated Nebraska not-for-profit organization. Additionally, this property is managed by Properties Management.

Cross Creek – Cross Creek Apartments Holdings LLC is the owner of the Cross Creek Apartments. On January 1, 2010, Cross Creek Apartment Holdings LLC entered into a new operating agreement and admitted three new members. These new members committed approximately $2.2 million of capital payable in three installments including $563,000 on January 1, 2010. The new operating agreement and admission of new owner members constituted a reconsideration event as outlined in the consolidation guidance which triggered a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans, and equity capital at risk. The senior debt is in the form of tax-exempt mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE’s total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The three newly admitted members of this VIE are each unaffiliated with the Partnership and have contributed significant equity capital to the VIE. These members collectively control a 99% interest in the VIE. The other 1% member of this VIE is FAH, which is also unaffiliated with the Partnership. Additionally, this property is managed by Properties Management.

The tax-exempt mortgage revenue bonds are classified on the balance sheet as available for sale investments and are carried at fair value while property loans are presented on the balance sheet as Other assets and are carried at the unpaid principal and interest less any loan loss reserves. See Note 4 for additional information regarding the bonds and Note 7 for additional information regarding the property loans. The maximum exposure to loss for the bonds is equal to the unpaid principal balance as of September 30, 2012. The difference between the carrying value and the maximum exposure to loss is a function of the fair value of the bond. The difference between the carrying value and the maximum exposure is the value of loan loss reserves that have been previously recorded against the outstanding loan balances.



	Partnership as of September 30, 2012			Consolidated VIEs as of September 30, 2012			Consolidation -Elimination as of September 30, 2012			Total as of September 30, 2012
Assets
Cash and cash equivalents	$	55,484,126		$	30,334		$	—		$	55,514,460
Restricted cash	4,693,511			1,276,644			—			5,970,155
Interest receivable	14,460,415			—			(5,336,291		)	9,124,124
Tax-exempt mortgage revenue bonds held in trust, at fair value	125,004,792			—			(24,826,238		)	100,178,554
Tax-exempt mortgage revenue bonds, at fair value	38,623,510			—			—			38,623,510
Public housing capital fund trusts, at fair value	66,163,969			—			—			66,163,969
Real estate assets:
Land	8,523,403			4,372,219			—			12,895,622
Buildings and improvements	76,696,662			35,792,106			—			112,488,768
Real estate assets before accumulated depreciation	85,220,065			40,164,325			—			125,384,390
Accumulated depreciation	(8,404,483		)	(13,408,856		)	—			(21,813,339		)
Net real estate assets	76,815,582			26,755,469			—			103,571,051
Other assets	23,349,351			672,562			(15,732,441		)	8,289,472
Assets of discontinued operations	8,224,333			—			—			8,224,333
Total Assets	$	412,819,589		$	28,735,009		$	(45,894,970	)	$	395,659,628

Liabilities
Accounts payable, accrued expenses and other liabilities	$	2,875,306		$	26,088,519		$	(25,303,059	)	$	3,660,766
Distribution payable	5,705,283			—			—			5,705,283
Debt financing	153,184,000			—			—			153,184,000
Mortgages payable	39,178,128			24,221,000			(24,221,000		)	39,178,128
Liabilities of discontinued operations	4,870,902			—			—			4,870,902
Total Liabilities	205,813,619			50,309,519			(49,524,059		)	206,599,079
Partners' Capital
General Partner	(367,578		)	—			—			(367,578		)
Beneficial Unit Certificate holders	206,426,257			—			6,579,583			213,005,840
Unallocated deficit of Consolidated VIEs	—			(21,574,510		)	(2,950,494		)	(24,525,004		)
Total Partners' Capital	206,058,679			(21,574,510		)	3,629,089			188,113,258
Noncontrolling interest	947,291			—			—			947,291
Total Capital	207,005,970			(21,574,510		)	3,629,089			189,060,549
Total Liabilities and Partners' Capital	$	412,819,589		$	28,735,009		$	(45,894,970	)	$	395,659,628



	Partnership as of December 31, 2011			Consolidated VIEs as of December 31, 2011			Consolidation -Elimination as of December 31, 2011			Total as of December 31, 2011
Assets
Cash and cash equivalents	$	20,164,188		$	12,718		$	—		$	20,176,906
Restricted cash	12,754,035			937,053			—			13,691,088
Interest receivable	11,395,266			—			(4,410,288		)	6,984,978
Tax-exempt mortgage revenue bonds held in trust, at fair value	132,920,723			—			(23,767,936		)	109,152,787
Tax-exempt mortgage revenue bonds, at fair value	26,542,565			—			—			26,542,565
Real estate assets:
Land	7,144,866			3,250,044			—			10,394,910
Buildings and improvements	72,303,086			31,607,993			—			103,911,079
Real estate assets before accumulated depreciation	79,447,952			34,858,037			—			114,305,989
Accumulated depreciation	(5,931,860		)	(12,332,334		)	—			(18,264,194		)
Net real estate assets	73,516,092			22,525,703			—			96,041,795
Other assets	20,080,854			839,879			(10,851,419		)	10,069,314
Assets of discontinued operations	15,317,112			—			—			15,317,112
Total Assets	$	312,690,835		$	24,315,353		$	(39,029,643	)	$	297,976,545

Liabilities
Accounts payable, accrued expenses and other liabilities	$	2,256,569		$	24,780,781		$	(23,805,990	)	$	3,231,360
Distribution payable	3,911,340			—			—			3,911,340
Debt financing	112,673,000			—			—			112,673,000
Mortgages payable	35,464,455			24,407,000			(24,407,000		)	35,464,455
Liabilities of discontinued operations	11,107,345			—			—			11,107,345
Total Liabilities	165,412,709			49,187,781			(48,212,990		)	166,387,500
Partners' Capital
General Partner	(354,006		)	—			—			(354,006		)
Beneficial Unit Certificate holders	147,087,347			—			7,823,881			154,911,228
Unallocated deficit of Consolidated VIEs	—			(24,872,428		)	1,359,466			(23,512,962		)
Total Partners' Capital	146,733,341			(24,872,428		)	9,183,347			131,044,260
Noncontrolling interest	544,785			—			—			544,785
Total Capital	147,278,126			(24,872,428		)	9,183,347			131,589,045
Total Liabilities and Partners' Capital	$	312,690,835		$	24,315,353		$	(39,029,643	)	$	297,976,545



	Partnership For the Three Months Ended September 30, 2012			Consolidated VIEs For the Three Months Ended September 30, 2012			Consolidation -Elimination For the Three Months Ended September 30, 2012			Total For the Three Months Ended September 30, 2012
Revenues:
Property revenues	$	2,799,857		$	1,203,887		$	—		$	4,003,744
Investment income	3,490,431			—			(379,714		)	3,110,717
Other income	15,224			—			—			15,224
Total revenues	6,305,512			1,203,887			(379,714		)	7,129,685
Expenses:
Real estate operating (exclusive of items shown below)	1,613,087			959,870			—			2,572,957
Recovery of loss on receivables	(261,825		)	—			—			(261,825		)
Depreciation and amortization	1,091,999			388,353			(10,876		)	1,469,476
Interest	1,551,543			808,841			(808,841		)	1,551,543
General and administrative	834,301			—			—			834,301
Total expenses	4,829,105			2,157,064			(819,717		)	6,166,452
Income (loss) from operations	1,476,407			(953,177		)	440,003			963,233
Income from discontinued operations (including gain on sale of MF Property of $1,277,976)	1,385,433			—			—			1,385,433
Net income (loss)	2,861,840			(953,177		)	440,003			2,348,666
Net income attributable to noncontrolling interest	137,099			—			—			137,099
Net income (loss) - America First Tax Exempt Investors, L. P.	$	2,724,741		$	(953,177	)	$	440,003		$	2,211,567



	Partnership For the Three Months Ended September 30, 2011		Consolidated VIEs For the Three Months Ended September 30, 2011			Consolidation -Elimination For the Three Months Ended September 30, 2011			Total For the Three Months Ended September 30 , 2011
Revenues:
Property revenues	$	2,390,421	$	1,208,534		$	—		$	3,598,955
Investment income	2,849,396		—			(383,520		)	2,465,876
Other income	359,167		—			—			359,167
Total revenues	5,598,984		1,208,534			(383,520		)	6,423,998
Expenses:
Real estate operating (exclusive of items shown below)	1,358,372		729,713			—			2,088,085
Provision for loss on receivables	14,525		—			—			14,525
Depreciation and amortization	973,316		347,518			(9,234		)	1,311,600
Interest	2,036,470		789,331			(789,331		)	2,036,470
General and administrative	725,115		—			—			725,115
Total expenses	5,107,798		1,866,562			(798,565		)	6,175,795
Income (loss) from operations	491,186		(658,028		)	415,045			248,203
Income from discontinued operations	29,218		—			—			29,218
Net income (loss)	520,404		(658,028		)	415,045			277,421
Net income attributable to noncontrolling interest	145,369		—			—			145,369
Net income (loss) - America First Tax Exempt Investors, L. P.	$	375,035	$	(658,028	)	$	415,045		$	132,052



	Partnership For the Nine Months Ended September 30, 2012		Consolidated VIEs For the Nine Months Ended September 30, 2012			Consolidation -Elimination For the Nine Months Ended September 30, 2012			Total For the Nine Months Ended September 30, 2012
Revenues:
Property revenues	$	7,843,065	$	3,598,541		$	—		$	11,441,606
Investment income	8,912,856		—			(1,142,089		)	7,770,767
Gain on sale of bonds	667,821		—			—			667,821
Other income	97,996		—			—			97,996
Total revenues	17,521,738		3,598,541			(1,142,089		)	19,978,190
Expenses:
Real estate operating (exclusive of items shown below)	4,412,744		2,399,206			—			6,811,950
Provision for loss on receivables	214,525		—			—			214,525
Depreciation and amortization	3,099,153		1,102,000			(32,712		)	4,168,441
Interest	4,317,329		2,411,676			(2,411,676		)	4,317,329
General and administrative	2,533,246		—			—			2,533,246
Total expenses	14,576,997		5,912,882			(2,444,388		)	18,045,491
Income (loss) from continuing operations	2,944,741		(2,314,341		)	1,302,299			1,932,699
Income from discontinued operations (including gain on sale of MF Property of $1,277,976)	1,613,817		—			—			1,613,817
Net income (loss)	4,558,558		(2,314,341		)	1,302,299			3,546,516
Net income attributable to noncontrolling interest	398,469		—			—			398,469
Net income (loss) - America First Tax Exempt Investors, L. P.	$	4,160,089	$	(2,314,341	)	$	1,302,299		$	3,148,047



	Partnership For the Nine Months Ended September 30, 2011		Consolidated VIEs For the Nine Months Ended September 30, 2011		Consolidation -Elimination For the Nine Months Ended September 30, 2011			Total For the Nine Months Ended September 30, 2011
Revenues:
Property revenues	$	5,534,453	$	4,755,337	$	—		$	10,289,790
Investment income	8,729,857		—		(1,635,308		)	7,094,549
Other income	654,490		4,133,477		(4,028,489		)	759,478
Total revenues	14,918,800		8,888,814		(5,663,797		)	18,143,817
Expenses:
Real estate operating (exclusive of items shown below)	3,276,179		2,826,177		—			6,102,356
Provision for loss on receivables	725,215		—		—			725,215
Depreciation and amortization	2,171,090		1,366,577		(27,703		)	3,509,964
Interest	4,421,608		3,243,737		(3,243,737		)	4,421,608
General and administrative	2,044,132		—		—			2,044,132
Total expenses	12,638,224		7,436,491		(3,271,440		)	16,803,275
Income (loss) from continuing operations	2,280,576		1,452,323		(2,392,357		)	1,340,542
Income from discontinued operations	187,302		—		—			187,302
Net income (loss)	2,467,878		1,452,323		(2,392,357		)	1,527,844
Net income attributable to noncontrolling interest	449,866		—		—			449,866
Net income (loss) - America First Tax Exempt Investors, L. P.	$	2,018,012	$	1,452,323	$	(2,392,357	)	$	1,077,978



	September 30, 2012
Description of Tax-Exempt Mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Ashley Square ⁽¹⁾	$	5,272,000	$	260,076	$	—		$	5,532,076
Autumn Pines ⁽²⁾	12,311,758		1,013,109		—			13,324,867
Bella Vista ⁽¹⁾	6,600,000		118,140		—			6,718,140
Bridle Ridge ⁽¹⁾	7,765,000		135,732		—			7,900,732
Brookstone ⁽¹⁾	7,449,870		1,499,825		—			8,949,695
Cross Creek ⁽¹⁾	5,994,150		2,036,975		—			8,031,125
Lost Creek ⁽¹⁾	15,957,472		3,567,600		—			19,525,072
Runnymede ⁽¹⁾	10,645,000		535,444		—			11,180,444
Southpark ⁽¹⁾	11,985,096		2,540,044		—			14,525,140
Woodlynn Village ⁽¹⁾	4,476,000		15,263		—			4,491,263
Tax-exempt mortgage revenue bonds held in trust	$	88,456,346	$	11,722,208	$	—		$	100,178,554

	September 30, 2012
Description of Tax-Exempt Mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Arbors at Hickory Ridge	$	10,165,287	568,513		—			$	10,733,800
Iona Lakes	15,630,000		858,087		—			16,488,087
Woodland Park	15,662,000		—		(4,260,377		)	11,401,623
Tax-exempt mortgage revenue bonds	$	41,457,287	$	1,426,600	$	(4,260,377	)	$	38,623,510



	December 31, 2011
Description of Tax-Exempt Mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Ashley Square ⁽¹⁾	$	5,308,000	$	—	$	—		$	5,308,000
Autumn Pines ⁽¹⁾	12,280,776		—		(152,094		)	12,128,682
Bella Vista ⁽¹⁾	6,650,000		—		(405,184		)	6,244,816
Bridle Ridge ⁽¹⁾	7,815,000		—		(469,056		)	7,345,944
Brookstone ⁽¹⁾	7,437,947		1,116,538		—			8,554,485
Cross Creek ⁽¹⁾	5,961,478		1,824,167		—			7,785,645
GMF-Madison Tower⁽²⁾	3,810,000		51,130		—			3,861,130
GMF-Warren/Tulane ⁽²⁾	11,815,000		321,722		—			12,136,722
Lost Creek ⁽¹⁾	16,051,048		1,962,587		—			18,013,635
Runnymede ⁽¹⁾	10,685,000		—		(434,452		)	10,250,548
Southpark ⁽¹⁾	11,925,483		1,431,637		—			13,357,120
Woodlynn Village ⁽¹⁾	4,492,000		—		(325,940		)	4,166,060
Tax-exempt mortgage revenue bonds held in trust	$	104,231,732	$	6,707,781	$	(1,786,726	)	$	109,152,787

	December 31, 2011
Description of Tax-Exempt Mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Iona Lakes	$	15,720,000	$	160,658	$	—		$	15,880,658
Woodland Park	15,662,000		—		(5,000,093		)	10,661,907
Tax-exempt mortgage revenue bonds	$	31,382,000	$	160,658	$	(5,000,093	)	$	26,542,565

Valuation - As all of the Company’s investments in tax-exempt mortgage revenue bonds are classified as available-for-sale securities, they are carried on the balance sheet at their estimated fair values. Due to the limited market for the tax-exempt mortgage revenue bonds, these estimates of fair value do not necessarily represent what the Company would actually receive in a sale of the bonds. There is no active trading market for the bonds and price quotes for the bonds are not generally available. As of September 30, 2012, 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. The effective yield analysis for each bond considers the current market yield on similar bonds as well as the debt service coverage ratio of each underlying property serving as collateral for the bond. At September 30, 2012, the range of effective yields on the individual bonds was 5.7% to 8.4%. 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 a 10% adverse change in the key assumption, the effective yields on the individual bonds would increase to a range of 6.2% to 9.3% and would result in additional unrealized losses on the bond portfolio of approximately $10.1 million. This sensitivity analysis is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. If available, the general partner may also consider price quotes on similar bonds or other information from external sources, such as pricing services. Pricing services, broker quotes and management’s analyses provide indicative pricing only.

Unrealized gains or losses on these tax-exempt mortgage revenue bonds are recorded in accumulated other comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the underlying properties. As of September 30, 2012, the Woodland Park bond investment has been in an unrealized loss position for greater than twelve months. The Company reviewed this mortgage revenue bond for impairment. The Company's ability to recover the tax-exempt mortgage revenue bond's entire amortized cost basis is dependent upon the issuer being able to recover the collateral. Based upon this evaluation, the current unrealized loss on this bond is considered to be temporary. Valuation of the bond in an unrealized loss position has improved during the first nine months of 2012. If the credit and capital markets would deteriorate, the Company experiences deterioration in the values of its investment portfolio, or if the Company’s intent and ability to hold certain bonds changes, the Company may incur impairments to its investment portfolio which could negatively impact the Company’s financial condition, cash flows, and reported earnings.

The Partnership previously identified the Woodland Park tax-exempt mortgage revenue bond for which certain actions may be necessary to protect the Partnership’s position as a secured bondholder and lender. The Company evaluated the Woodland Park bond holding for an other-than-temporary decline in value as of December 31, 2011 (see Form 10-K, Footnote 5 for discussion of our impairment testing method which remains the same). Based on this evaluation, the Company has concluded that no other-than-temporary impairment of the Woodland Park bond existed at December 31, 2011. However, the evaluation determined that the interest receivable accrued on the Woodland Park bond was impaired and an approximate $953,000 allowance for loss on receivables was recorded during fiscal year 2011. The Partnership received one interest payment in 2012 but has recorded an additional allowance of approximately $215,000 against the remaining interest receivable in the first nine months of 2012. The Partnership continues to monitor these investments for changes in circumstances that might warrant an impairment charge. As of December 31, 2011, the property had 215 units leased out of total available units of 236, or 91% physical occupancy. As of September 30, 2012, occupancy had decreased to 202 units leased, or 86% physical occupancy which we believe is a temporary decline. America First Properties Management Company, LLC, an affiliate of AFCA 2, provides management for this property. Measures have been implemented that we believe will increase the physical occupancy of this property to at or above 90% as of January 1, 2013, which will increase the property's net operating income and ensure that net operating income is in line with what had been projected for 2013 in the most recent evaluation for other than temporary impairment. Based on this evaluation, the current unrealized loss on this bond is considered to be temporary.

In July 2012, the Company purchased 100% of the residual participation receipts (“LIFERs”) in tender option bond trusts (“PHC TOB Trusts”) which acquired approximately $65.3 million of Public Housing Capital Fund Certificates (“PHC Certificates”) issued by three trusts ("PHC Trusts") sponsored by Deutsche Bank ("DB"). The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to a number of local public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by the United States Department of Housing and Urban Development (“HUD”) under HUD's Capital Fund Program established under Quality Housing and Work Responsibility Act of 1998 (the “Capital Fund Program”). The PHC Trusts have a first lien on these annual Capital Fund Program payments to secure the public housing authorities' respective obligations to pay principal and interest on their loans. The loans payable by the public housing authorities are not debts, nor guaranteed by the United States of America or HUD. Interest payable on the public housing authority debt held by the PHC Trusts is exempt from federal income taxes. The PHC Certificates issued by each of the PHC Trusts have been rated investment grade by Standard & Poor's.

The Company purchased the LIFERS issued by the PHC TOB Trusts for approximately $16.0 million and pledged the LIFERS to the trustee to secure certain reimbursement obligations of the Company as the holder of LIFERS. The PHC TOB Trusts also issued senior floating-rate participation interest (“SPEARS”) of approximately $49.0 million to unaffiliated investors. The SPEARS represent senior interests in the PHC TOB Trusts and have been credit enhanced by DB. The LIFERS entitle the Company to all principal and interest payments received by the PHC TOB Trusts on the $65.3 million of PHC Certificates held by it after preferred return payments due to the holders of the SPEARS and trust costs. The SPEARS bear interest at a variable rate based on SIFMA.

The Company determined that the three PHC TOB trusts are variable interest entities and that the Company was the primary beneficiary of each of the three PHC TOB trusts. As a result, the Company reports the PHC TOB Trusts on a consolidated basis and the SPEARS as debt financing. In determining the primary beneficiary of these specific VIEs, the Company considered who has the power to control the activities of the VIEs which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE. The indenture for the PHC TOB trusts stipulates that the Company has the sole right to cause the PHC TOB trusts to sell the PHC Certificates. If they were sold, the extent to which the VIEs will be exposed to gains or losses associated with variability in the PHC Certificates' fair value arising from changes in municipal bond market rates therefore would result from decisions made by the Company.

Valuation - As all of the Company’s investments in PHC Certificates are classified as available-for-sale securities, they are carried on the balance sheet at their estimated fair values. Due to the limited market for the PHC Certificates, these estimates of fair value do not necessarily represent what the Company would actually receive in a sale of the certificates. The estimates of the fair values of these PHC certificates is based on a yield to maturity analysis which begins with the current market yield rate for a “AAA” rated tax-free municipal bond for a term consistent with the weighted-average life of each of the Public Housing Capital Fund trusts adjusted largely for unobservable inputs the General Partner believes would be used by market participants. Management’s valuation encompasses judgment in its application and pricing as determined by pricing services, when available, is compared to Management's estimates. The PHC Certificates are AA and BBB rated. At September 30, 2012, the range of effective yields on the individual bonds was 4.5% to 5.8%. Additionally, the Company calculated the sensitivity of the key assumption used in calculating the fair values of these bonds. Assuming a 10% adverse change in the key assumption, the effective yields on the individual bonds would increase to a range of 4.9% to 6.4% and would result in additional unrealized losses on the bond portfolio of approximately $2.9 million. This sensitivity analysis is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. If available, the general partner may also consider other information from external sources, such as pricing services. Pricing services and management’s analysis provide indicative pricing only.

To facilitate its investment strategy of acquiring additional tax-exempt mortgage revenue bonds secured by MF Properties, the Company has acquired through its various subsidiaries 99% limited partner positions in five limited partnerships and 100% member positions in four limited liability companies that own the MF Properties. Three of the five limited partnerships are reported as discontinued operations in all periods presented. The financial statements of these properties are consolidated with those of the Company. The general partners of these partnerships are unaffiliated parties and their 1% ownership interest in these limited partnerships is reflected in the Company’s consolidated financial statements as noncontrolling interests. The Company expects each of these MF Properties to eventually be sold either to a not-for-profit entity or in connection with a syndication of LIHTCs. The Company expects to purchase tax-exempt mortgage revenue bonds issued by the new property owners as part of the restructuring.

In October 2012, the limited partnership that owns the Greens of Pine Glen Property admitted two entities that are affiliates of Boston Capital (“BC Partners”) as new limited partners as part of a syndication of LIHTCs on the Greens of Pine Glen Property. Prior to the execution of the admittance of the new limited partners, the Company had entered into an agreement to sell the Greens of Pine Glen Property for approximately $7.3 million to the third party not-for-profit which is the general partner of the limited partnership that now owns the Greens of Pine Glen property. That sale was conditional on securing the tax-exempt bond and LIHTCs from the North Carolina Housing Finance Agency. These new limited partners are obligated to invest approximately $3.2 million of capital into the property, the majority of which is expected to be received prior to October 1, 2013. In September 2012, a purchase and sale agreement was executed for the Eagle Ridge property and the sale is expected to occur before the end of 2012. In August 2012, the Partnership sold the Commons at Churchland property for approximately $8.1 million resulting in a gain of approximately $1.3 million. These transactions resulted in the properties being reported as a discontinued operation for all periods reported (Note 8).

In August 2012, the Company closed on the purchase of the Maples on 97^th property, a 258 unit facility located in Omaha, Nebraska, for a purchase price of approximately $5.5 million through the execution of a Qualified Exchange Accommodation Agreement that assigned the right to acquire and own the Maples on 97^th property to a wholly-owned subsidiary of a Title Company, (EAT (Maples on 97th)), for a period not to exceed six months. During this six month hold period, the Company will rehabilitate the property. The Company lent the EAT (Maples on 97th) the necessary funds to purchase the replacement property; there is no other capital within that entity. The EAT (Maples on 97th) then executed a Master Lease Agreement and Construction Management Agreement with the Company. These two agreements give the Company the rights and obligations to manage the replacement property as well as the rehabilitation during the six month hold period.



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)



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Item 1	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Partners’ Capital	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4	Controls and Procedures	62



	Balance Sheet Classification	Carrying Value		Maximum Exposure to Loss
Ashley Square Apartments
Tax Exempt Mortgage Revenue Bond	Bond Investment	$	5,532,076	$	5,272,000
Property Loan	Other Asset	4,852,342		1,256,000
		$	10,384,418	$	6,528,000
Cross Creek Apartments
Tax Exempt Mortgage Revenue Bond	Bond Investment	$	8,031,125	$	5,994,150
Property Loans	Other Asset	3,383,615		3,383,615
		$	11,414,740	$	9,377,765



Description of Public Housing Capital Fund Trust Certificates	Cost adjusted for amortization of premium and discounts		Unrealized Gain		Unrealized Loss			Estimated Fair Value

Public Housing Capital Fund Trust Certificate I	$	28,154,088	$	400,908	$	—		$	28,554,996
Public Housing Capital Fund Trust Certificate II	17,431,891		—		(27,313		)	17,404,578
Public Housing Capital Fund Trust Certificate III	20,385,784		—		(181,389		)	20,204,395
	$	65,971,763	$	400,908	$	(208,702	)	$	66,163,969


•	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 government regulations affecting our business; and


•	changes in the appropriation amounts received by the Public Housing Authorities from the United States Department of Housing and Development Capital Fund Program which are used by the Public Housing Authorities to make interest and principal payments for the Public Housing Capital Fund Trusts' Certificates.



	For Three Months Ended September 30,				For Nine Months Ended September 30,
	2012		2011		2012		2011
Net income	$	2,348,666	$	277,421	$	3,546,516	$	1,527,844
Deconsolidation of VIE	—		—		—		(726,243		)
Unrealized gain on securities	2,121,836		1,765,185		9,043,887		9,162,810
Comprehensive income	4,470,502		2,042,606		12,590,403		9,964,411
Comprehensive income attributable to noncontrolling interest	137,099		145,369		398,469		449,866
Comprehensive income - America First Tax Exempt Investors, L.P.	$	4,333,403	$	1,897,237	$	12,191,934	$	9,514,545


•	ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold tax-exempt mortgage revenue bonds in order to facilitate the Tax Exempt Bond Securitization (“TEBS”) Financing with Freddie Mac (Note 9).


•	Nine multifamily apartments ("MF Properties") of which three are reported as discontinued operations for all periods presented (Note 8). The MF Properties are owned by five limited partnerships in which a subsidiary of the Partnership holds a 99% limited partner interestfive and four limited liability companies of which a subsidiary of the Partnership owns a 100% member interest.


•	Three apartment properties (the "Ohio Properties") which are subject to a sales agreement continue to be reported by the Partnership as MF Properties for the reasons described in Note 2.



	Weighted Average Lives (Years)	Investment Rating	Weighted Average Interest Rate over Life		Principal Outstanding September 30, 2012
Public Housing Capital Fund Trust Certificate I	12.75	AA-	5.330	%	$	26,406,558
Public Housing Capital Fund Trust Certificate II	12.3	AA-	4.240	%	17,959,713
Public Housing Capital Fund Trust Certificate III	13.3	BBB	5.410	%	20,898,432
Total Public Housing Capital Fund Trust Certificates					$	65,264,703



	Maples on 97th 8/29/2012 (Date of Acquisition)
Other current assets	$	44,534
In-place lease assets	428,865
Real estate assets	5,071,135
Total Assets	$	5,544,534
Accounts payable, accrued expenses and other	$	69,120
Stockholders' equity	5,475,414
Total liabilities and stockholders' equity	$	5,544,534