UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





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





For the
quarterly period ended March 31, 2009





OR





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)





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 Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files).


YES  o  NO  o





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 filero
            Accelerated
      filer  x
            Non-
      accelerated filer  o
            Smaller
      reporting company  o(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





INDEX
 
 
 PART I –
FINANCIAL INFORMATION
 
 Item 1
              Financial
      Statements (Unaudited)Condensed
      Consolidated Balance Sheets as of March 31, 2009 and December 31,
      2008
              1Condensed
      Consolidated Statements of Operations for the three months ended March 31,
      2009 and 2008
              2Condensed
      Consolidated Statements of Partners’ Capital and Comprehensive Income
      (Loss) for the three months ended March 31, 2009 and 2008
              3Condensed
      Statement of Cash Flows for the three months ended March 31, 2009 and
      2008
              4Notes
      to Condensed Consolidated Financial Statements
              5Item 2
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              20Item 3
              Quantitative
      and Qualitative Disclosures About Market Risk
              29Item 4
              Controls
      and Procedures
              29
 
 PART II –
OTHER INFORMATION
 
 Item 1A
              Risk
      Factors
              30Item 6
              Exhibits
              30
 
 
 SIGNATURES
              
              31


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 that reflect management's
current beliefs and estimates of future economic circumstances, industry
conditions, the Company's performance and financial results. All statements,
trend analysis and other information concerning possible or assumed future
results of operations of the Company and the investments it has made constitute
forward-looking statements. Beneficial Unit Certificate (“BUC”) holders and
others should understand that these forward-looking statements are subject to
numerous risks and uncertainties and a number of factors could affect the future
results of the Company and could cause those results to differ materially from
those expressed in the forward-looking statements contained herein. These
factors include general economic and business conditions such as the
availability and credit worthiness of prospective tenants, lease rents,
operating expenses, the terms and availability of financing for properties
financed by the tax-exempt mortgage revenue bonds owned by the Partnership,
adverse changes in the real estate markets from governmental or legislative
forces, lack of availability and credit worthiness of counterparties to finance
future acquisitions and interest rate fluctuations and other items discussed
under “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008 and in Item 1A of Part II of this
report.











PART
I - FINANCIAL INFORMATION





Item 1.  Financial Statements.





AMERICA
FIRST TAX EXEMPT INVESTORS, L.P.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)








March
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008AssetsCash
      and cash equivalents
                              
                              $
                              11,457,659
                              
                              
                              $
                              7,196,274Restricted
      cash
                              
                              
                              36,533,465
                              
                              
                              
                              12,848,614Interest
      receivable
                              
                              
                              1,141,623
                              
                              
                              
                              769,201Tax-exempt
      mortgage revenue bonds, at fair value
                              
                              
                              48,308,320
                              
                              
                              
                              44,492,526Real
      estate assets:Land
                              
                              
                              12,519,551
                              
                              
                              
                              10,774,790Buildings
      and improvements
                              
                              
                              92,172,466
                              
                              
                              
                              86,903,743Real
      estate assets before accumulated depreciation
                              
                              
                              104,692,017
                              
                              
                              
                              97,678,533Accumulated
      depreciation
                              
                              
                              (18,478,464
                              )
                              
                              
                              (17,499,670
                              )Net
      real estate assets
                              
                              
                              86,213,553
                              
                              
                              
                              80,178,863Other
      assets
                              
                              
                              4,195,104
                              
                              
                              
                              4,263,937Assets
      of discontinued operations
                              
                              
                              -
                              
                              
                              
                              8,113,861Total
      Assets
                              
                              $
                              187,849,724
                              
                              
                              $
                              157,863,276LiabilitiesAccounts
      payable, accrued expenses and other liabilities
                              
                              $
                              3,415,697
                              
                              
                              $
                              3,380,666Distribution
      payable
                              
                              
                              2,432,327
                              
                              
                              
                              2,432,327Debt
      financing
                              
                              
                              76,565,237
                              
                              
                              
                              56,981,577Mortgages
      payable
                              
                              
                              37,372,130
                              
                              
                              
                              30,908,790Liabilities
      of discontinued operations
                              
                              
                              -
                              
                              
                              
                              23,264,589Total
      Liabilities
                              
                              
                              119,785,391
                              
                              
                              
                              116,967,949Commitments
      and Contingencies (Note 12)Partners'
      CapitalGeneral
      partner
                              
                              
                              873,352
                              
                              
                              
                              261,785Beneficial
      Unit Certificate holders
                              
                              
                              96,288,920
                              
                              
                              
                              93,277,480Unallocated
      deficit of variable interest entities
                              
                              
                              (29,168,124
                              )
                              
                              
                              (52,711,654
                              )Total
      Partners' Capital
                              
                              
                              67,994,148
                              
                              
                              
                              40,827,611Noncontrolling
      interest (Note 13)
                              
                              
                              70,185
                              
                              
                              
                              67,716Total
      Capital
                              
                              
                              68,064,333
                              
                              
                              
                              40,895,327Total
      Liabilities and Capital
                              
                              $
                              187,849,724
                              
                              
                              $
                              157,863,276The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.


1


AMERICA
FIRST TAX EXEMPT INVESTORS, L.P.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





For
      the Three Months Ended,March
      31, 2009
                                                          
                                                          
                                                          March
      31, 2008Revenues:Property
      revenues
                                                          
                                                          $
                                                          3,751,243
                                                          
                                                          
                                                          $
                                                          3,313,395Mortgage
      revenue bond investment income
                                                          
                                                          
                                                          948,344
                                                          
                                                          
                                                          
                                                          1,208,564Other
      interest income
                                                          
                                                          
                                                          34,015
                                                          
                                                          
                                                          
                                                          24,430Gain
      on sale of securities
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          3,704Total
      Revenues
                                                          
                                                          
                                                          4,733,602
                                                          
                                                          
                                                          
                                                          4,550,093Expenses:Real
      estate operating (exclusive of items shown below)
                                                          
                                                          
                                                          2,360,643
                                                          
                                                          
                                                          
                                                          1,959,162Depreciation
      and amortization
                                                          
                                                          
                                                          1,580,872
                                                          
                                                          
                                                          
                                                          1,184,524Interest
                                                          
                                                          
                                                          1,190,869
                                                          
                                                          
                                                          
                                                          1,158,441General
      and administrative
                                                          
                                                          
                                                          576,762
                                                          
                                                          
                                                          
                                                          431,066Total
      Expenses
                                                          
                                                          
                                                          5,709,146
                                                          
                                                          
                                                          
                                                          4,733,193Loss
      from continuing operations
                                                          
                                                          
                                                          (975,544
                                                          )
                                                          
                                                          
                                                          (183,100
                                                          )Income
      from discontinued operations (including gain on bond redemption of
      $26,514,809 in 2009)
                                                          
                                                          
                                                          26,734,754
                                                          
                                                          
                                                          
                                                          193,757Net
      income
                                                          
                                                          
                                                          25,759,210
                                                          
                                                          
                                                          
                                                          10,657Less:
      net loss attributable to noncontrolling interest
                                                          
                                                          
                                                          3,860
                                                          
                                                          
                                                          
                                                          2,745Net
      income - America First Tax Exempt Investors, L. P.
                                                          
                                                          $
                                                          25,763,070
                                                          
                                                          
                                                          $
                                                          13,402Net
      income allocated to:General
      Partner
                                                          
                                                          
                                                          574,090
                                                          
                                                          
                                                          
                                                          6,662BUC
      holders
                                                          
                                                          
                                                          1,645,450
                                                          
                                                          
                                                          
                                                          659,523Unallocated
      gain (loss) of variable interest entities
                                                          
                                                          
                                                          23,543,530
                                                          
                                                          
                                                          
                                                          (652,783
                                                          )Noncontrolling
      interest
                                                          
                                                          
                                                          (3,860
                                                          )
                                                          
                                                          
                                                          (2,745
                                                          )$
                                                          25,759,210
                                                          
                                                          
                                                          $
                                                          10,657Limited
      partners' interest in net income per unit (basic and
    diluted):Income
      from continuing operations
                                                          
                                                          $
                                                          0.12
                                                          
                                                          
                                                          $
                                                          0.05Income
      from discontinued operations
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Net
      income, basic and diluted, per unit
                                                          
                                                          $
                                                          0.12
                                                          
                                                          
                                                          $
                                                          0.05Weighted
      average number of units outstanding,basic
      and diluted
                                                          
                                                          
                                                          13,512,928
                                                          
                                                          
                                                          
                                                          13,512,928The
      accompanying notes are an integral part of the consolidated financial
      statements.





2


AMERICA
FIRST TAX EXEMPT INVESTORS, L.P.


CONDENSED
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL AND COMPREHENSIVE INCOME
(LOSS)


FOR THE
THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(UNAUDITED)








Beneficial
      Unit Certificate
      holders
                                                                                            
                                                                                            
                                                                                            Unallocated
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            Accumulated
      Other
      Comprehensivedeficit
      ofGeneral
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            variable
      interest
                                                                                            
                                                                                            
                                                                                            NoncontrollingPartner
                                                                                            
                                                                                            
                                                                                            #
      of Units
                                                                                            
                                                                                            
                                                                                            Amount
                                                                                            
                                                                                            
                                                                                            entities
                                                                                            
                                                                                            
                                                                                            Interest
                                                                                            
                                                                                            
                                                                                            Total
                                                                                            
                                                                                            
                                                                                            Income
      (Loss)Balance
      at January 1, 2009
                                                                                            
                                                                                            $
                                                                                            261,785
                                                                                            
                                                                                            
                                                                                            
                                                                                            13,512,928
                                                                                            
                                                                                            
                                                                                            $
                                                                                            93,277,480
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (52,711,654
                                                                                            )
                                                                                            
                                                                                            $
                                                                                            67,716
                                                                                            
                                                                                            
                                                                                            $
                                                                                            40,895,327
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (16,857,807
                                                                                            )Comprehensive
      income (loss):Noncontrolling
      interest contribution
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            6,329
                                                                                            
                                                                                            
                                                                                            
                                                                                            6,329Net
      income (loss)
                                                                                            
                                                                                            
                                                                                            574,090
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,645,450
                                                                                            
                                                                                            
                                                                                            
                                                                                            23,543,530
                                                                                            
                                                                                            
                                                                                            
                                                                                            (3,860
                                                                                            )
                                                                                            
                                                                                            
                                                                                            25,759,210
                                                                                            
                                                                                            
                                                                                            
                                                                                            -Unrealized
      gain on securities
                                                                                            
                                                                                            
                                                                                            38,358
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            3,797,436
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            3,835,794
                                                                                            
                                                                                            
                                                                                            
                                                                                            3,835,794Total
      comprehensive income (loss)
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            29,601,333Distributions
      paid or accrued
                                                                                            
                                                                                            
                                                                                            (608,082
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            (1,824,245
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            (2,432,327
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -Reclassification
      of Tier II income
                                                                                            
                                                                                            
                                                                                            607,201
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            (607,201
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -Balance
      at March 31, 2009
                                                                                            
                                                                                            $
                                                                                            873,352
                                                                                            
                                                                                            
                                                                                            
                                                                                            13,512,928
                                                                                            
                                                                                            
                                                                                            $
                                                                                            96,288,920
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (29,168,124
                                                                                            )
                                                                                            
                                                                                            $
                                                                                            70,185
                                                                                            
                                                                                            
                                                                                            $
                                                                                            68,064,333
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (13,022,013
                                                                                            )Beneficial
      Unit Certificate
      holders
                                                                                            
                                                                                            
                                                                                            Unallocated
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            Accumulated
      Other
      Comprehensivedeficit
      ofGeneral
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            variable
      interest
                                                                                            
                                                                                            
                                                                                            NoncontrollingPartner
                                                                                            
                                                                                            
                                                                                            #
      of Units
                                                                                            
                                                                                            
                                                                                            Amount
                                                                                            
                                                                                            
                                                                                            entities
                                                                                            
                                                                                            
                                                                                            Interest
                                                                                            
                                                                                            
                                                                                            Total
                                                                                            
                                                                                            
                                                                                            Income
      (Loss)Balance
      at January 1, 2008
                                                                                            
                                                                                            $
                                                                                            348,913
                                                                                            
                                                                                            
                                                                                            
                                                                                            13,512,928
                                                                                            
                                                                                            
                                                                                            $
                                                                                            112,880,314
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (48,954,760
                                                                                            )
                                                                                            
                                                                                            $
                                                                                            48,756
                                                                                            
                                                                                            
                                                                                            $
                                                                                            64,323,223
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (3,581,844
                                                                                            )Comprehensive
      income (loss):Net
      income (loss)
                                                                                            
                                                                                            
                                                                                            6,662
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            659,523
                                                                                            
                                                                                            
                                                                                            
                                                                                            (652,783
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (2,745
                                                                                            )
                                                                                            
                                                                                            
                                                                                            10,657
                                                                                            
                                                                                            
                                                                                            
                                                                                            -Unrealized
      loss on securities
                                                                                            
                                                                                            
                                                                                            (52,131
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            (5,160,934
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            (5,213,065
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (5,213,065
                                                                                            )Total
      comprehensive income (loss)
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            (5,202,408
                                                                                            )Distributions
      paid or accrued
                                                                                            
                                                                                            
                                                                                            (18,427
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            (1,824,245
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            (1,842,672
                                                                                            )
                                                                                            
                                                                                            
                                                                                            -Balance
      at March 31, 2008
                                                                                            
                                                                                            $
                                                                                            285,017
                                                                                            
                                                                                            
                                                                                            
                                                                                            13,512,928
                                                                                            
                                                                                            
                                                                                            $
                                                                                            106,554,658
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (49,607,543
                                                                                            )
                                                                                            
                                                                                            $
                                                                                            46,011
                                                                                            
                                                                                            
                                                                                            $
                                                                                            57,278,143
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (8,794,909
                                                                                            )











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





3





AMERICA
FIRST TAX EXEMPT INVESTORS, L.P.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)








For
      the three months endedMarch
      31, 2009
                                            
                                            
                                            March
      31, 2008Cash
      flows from operating activities:Net
      income
                                            
                                            $
                                            25,759,210
                                            
                                            
                                            $
                                            10,657Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization expense
                                            
                                            
                                            1,580,872
                                            
                                            
                                            
                                            1,351,431Non-cash
      loss on derivatives
                                            
                                            
                                            453,366
                                            
                                            
                                            
                                            183,191Gain
      on sale of securities
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (3,704
                                            )Gain
      on sale of discontinued operations
                                            
                                            
                                            (26,514,809
                                            )
                                            
                                            
                                            -Changes
      in operating assets and liabilities, net of effect of
      acquisitionsIncrease
      in interest receivable
                                            
                                            
                                            (372,422
                                            )
                                            
                                            
                                            (242,145
                                            )Increase
      in other assets
                                            
                                            
                                            (527,907
                                            )
                                            
                                            
                                            (474,407
                                            )Decrease
      in accounts payable, accrued expenses and other
liabilities
                                            
                                            
                                            (1,287,916
                                            )
                                            
                                            
                                            (481,818
                                            )Net
      cash (used) provided by operating activities
                                            
                                            
                                            (909,606
                                            )
                                            
                                            
                                            343,205Cash
      flows from investing activities:Proceeds
      from the sale of tax-exempt mortgage revenue bonds
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3,433,635Proceeds
      from sale of discontinued operations
                                            
                                            
                                            32,000,000
                                            
                                            
                                            
                                            -Acquisition
      of tax-exempt mortgage revenue bonds
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (12,435,000
                                            )Increase
      in restricted cash
                                            
                                            
                                            (189,709
                                            )
                                            
                                            
                                            (908,867
                                            )Restricted
      cash - debt collateral
                                            
                                            
                                            (23,552,000
                                            )
                                            
                                            
                                            -Capital
      expenditures
                                            
                                            
                                            (178,536
                                            )
                                            
                                            
                                            (150,782
                                            )Acquisition
      of partnerships, net of cash acquired
                                            
                                            
                                            (729,964
                                            )
                                            
                                            
                                            -Principal
      payments received on tax-exempt mortgage revenue bonds
                                            
                                            
                                            20,000
                                            
                                            
                                            
                                            15,000Principal
      payments received on taxable loans
                                            
                                            
                                            -
                                            
                                            
                                            
                                            100,000Net
      cash provided (used) by investing activities
                                            
                                            
                                            7,369,791
                                            
                                            
                                            
                                            (9,946,014
                                            )Cash
      flows from financing activities:Distributions
      paid
                                            
                                            
                                            (2,432,327
                                            )
                                            
                                            
                                            (2,432,327
                                            )Derivative
      settlements
                                            
                                            
                                            (84,388
                                            )
                                            
                                            
                                            (12,194
                                            )Increase
      in liabilities related to restricted cash
                                            
                                            
                                            189,709
                                            
                                            
                                            
                                            908,867Principal
      payments on debt financing and mortgage payable
                                            
                                            
                                            (36,660
                                            )
                                            
                                            
                                            -Net
      cash used by financing activities
                                            
                                            
                                            (2,363,666
                                            )
                                            
                                            
                                            (1,535,654
                                            )Net
      increase (decrease) in cash and cash equivalents
                                            
                                            
                                            4,096,519
                                            
                                            
                                            
                                            (11,138,463
                                            )Cash
      and cash equivalents at beginning of period, including cash and cash
      equivalents of discontinued operations of $164,866 and $145,278,
      respectively
                                            
                                            
                                            7,361,140
                                            
                                            
                                            
                                            14,821,946Cash
      and cash equivalents at end of period, including cash and cash equivalents
      of discontinued operations of $0 and $244,434,
respectively
                                            
                                            $
                                            11,457,659
                                            
                                            
                                            $
                                            3,683,483Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
                                            
                                            $
                                            1,048,282
                                            
                                            
                                            $
                                            457,281Capital
      expenditures financed through accounts payable
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            64,066Liabilites
      assumed in the acquisition of partnerships
                                            
                                            $
                                            6,506,329
                                            
                                            
                                            $
                                            -Distributions
      declared but not paid
                                            
                                            $
                                            2,432,327
                                            
                                            
                                            $
                                            1,842,672The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.


4


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31,
2009


(UNAUDITED)





1.  Basis
of Presentation





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




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





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





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





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





2.  Partnership
Income, Expenses and Cash Distributions





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


5




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





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





The
unallocated deficit of the VIEs is primarily comprised of the accumulated
historical net losses of the VIEs as of the implementation of Consolidation of Variable Interest
Entities, (“FIN 46R”).  The unallocated deficit of the VIEs and
the VIE’s net losses subsequent to that date are not allocated to the General
Partner and BUC holders as such activity is not contemplated by, or addressed
in, the Agreement of Limited Partnership.


3.  Variable
Interest Entities





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





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





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





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





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





The
following tables present the effects of the consolidation of the VIEs on the
Company’s Condensed Consolidated Balance Sheets and Condensed Statements of
Operations.


6





Condensed
Consolidating Balance Sheets as of March 31, 2009 and December 31,
2008:










Partnership
      as of March 31, 2009
                                
                                
                                VIEs
      as of March 31, 2009
                                
                                
                                Consolidation-Elimination
      as of March 31, 2009
                                
                                
                                Total
      as of March 31, 2009AssetsCash
      and cash equivalents
                                
                                $
                                11,359,277
                                
                                
                                $
                                98,382
                                
                                
                                $
                                -
                                
                                
                                $
                                11,457,659Restricted
      cash
                                
                                
                                33,839,650
                                
                                
                                
                                2,693,815
                                
                                
                                
                                -
                                
                                
                                
                                36,533,465Interest
      receivable
                                
                                
                                5,275,484
                                
                                
                                
                                -
                                
                                
                                
                                (4,133,861
                                )
                                
                                
                                1,141,623Tax-exempt
      mortgage revenue bonds
                                
                                
                                94,561,074
                                
                                
                                
                                -
                                
                                
                                
                                (46,252,754
                                )
                                
                                
                                48,308,320Real
      estate assets:Land
                                
                                
                                6,736,351
                                
                                
                                
                                5,783,200
                                
                                
                                
                                -
                                
                                
                                
                                12,519,551Buildings
      and improvements
                                
                                
                                37,059,526
                                
                                
                                
                                55,112,940
                                
                                
                                
                                -
                                
                                
                                
                                92,172,466Real
      estate assets before accumulated depreciation
                                
                                
                                43,795,877
                                
                                
                                
                                60,896,140
                                
                                
                                
                                -
                                
                                
                                
                                104,692,017Accumulated
      depreciation
                                
                                
                                (1,920,273
                                )
                                
                                
                                (16,558,191
                                )
                                
                                
                                -
                                
                                
                                
                                (18,478,464
                                )Net
      real estate assets
                                
                                
                                41,875,604
                                
                                
                                
                                44,337,949
                                
                                
                                
                                -
                                
                                
                                
                                86,213,553Other
      assets
                                
                                
                                15,842,182
                                
                                
                                
                                1,307,025
                                
                                
                                
                                (12,954,103
                                )
                                
                                
                                4,195,104Assets
      of discontinued operations
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Total
      Assets
                                
                                $
                                202,753,271
                                
                                
                                $
                                48,437,171
                                
                                
                                $
                                (63,340,718
                                )
                                
                                $
                                187,849,724LiabilitiesAccounts
      payable, accrued expenses and other
                                
                                $
                                1,753,190
                                
                                
                                $
                                32,954,990
                                
                                
                                $
                                (31,292,483
                                )
                                
                                $
                                3,415,697Distribution
      payable
                                
                                
                                2,432,327
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                2,432,327Debt
      financing
                                
                                
                                76,565,237
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                76,565,237Mortgage
      payable
                                
                                
                                37,372,130
                                
                                
                                
                                51,670,000
                                
                                
                                
                                (51,670,000
                                )
                                
                                
                                37,372,130Liabilities
      of discontinued operations
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Total
      Liabilities
                                
                                
                                118,122,884
                                
                                
                                
                                84,624,990
                                
                                
                                
                                (82,962,483
                                )
                                
                                
                                119,785,391Partners'
      CapitalGeneral
      Partner
                                
                                
                                873,352
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                873,352Beneficial
      Unit Certificate holders
                                
                                
                                83,686,850
                                
                                
                                
                                -
                                
                                
                                
                                12,602,070
                                
                                
                                
                                96,288,920Unallocated
      deficit of variable interest entities
                                
                                
                                -
                                
                                
                                
                                (36,187,819
                                )
                                
                                
                                7,019,695
                                
                                
                                
                                (29,168,124
                                )Total
      Partners' Capital
                                
                                
                                84,560,202
                                
                                
                                
                                (36,187,819
                                )
                                
                                
                                19,621,765
                                
                                
                                
                                67,994,148Noncontrolling
      interest
                                
                                
                                70,185
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                70,185Total
      Capital
                                
                                
                                84,630,387
                                
                                
                                
                                (36,187,819
                                )
                                
                                
                                19,621,765
                                
                                
                                
                                68,064,333Total
      Liabilities and Partners' Capital
                                
                                $
                                202,753,271
                                
                                
                                $
                                48,437,171
                                
                                
                                $
                                (63,340,718
                                )
                                
                                $
                                187,849,724







7







Partnership
      as of December 31, 2008
                                
                                
                                VIEs
      as of December 31, 2008
                                
                                
                                Consolidation-Elimination
      as of December 31, 2008
                                
                                
                                Total
      as of December 31, 2008AssetsCash
      and cash equivalents
                                
                                $
                                7,068,297
                                
                                
                                $
                                127,977
                                
                                
                                $
                                -
                                
                                
                                $
                                7,196,274Restricted
      cash
                                
                                
                                10,836,084
                                
                                
                                
                                2,012,530
                                
                                
                                
                                -
                                
                                
                                
                                12,848,614Interest
      receivable
                                
                                
                                4,249,760
                                
                                
                                
                                -
                                
                                
                                
                                (3,480,559
                                )
                                
                                
                                769,201Tax-exempt
      mortgage revenue bonds
                                
                                
                                112,991,268
                                
                                
                                
                                -
                                
                                
                                
                                (68,498,742
                                )
                                
                                
                                44,492,526Real
      estate assets:Land
                                
                                
                                4,991,590
                                
                                
                                
                                5,783,200
                                
                                
                                
                                -
                                
                                
                                
                                10,774,790Buildings
      and improvements
                                
                                
                                31,877,661
                                
                                
                                
                                55,026,082
                                
                                
                                
                                -
                                
                                
                                
                                86,903,743Real
      estate assets before accumulated depreciation
                                
                                
                                36,869,251
                                
                                
                                
                                60,809,282
                                
                                
                                
                                -
                                
                                
                                
                                97,678,533Accumulated
      depreciation
                                
                                
                                (1,519,845
                                )
                                
                                
                                (15,979,825
                                )
                                
                                
                                -
                                
                                
                                
                                (17,499,670
                                )Net
      real estate assets
                                
                                
                                35,349,406
                                
                                
                                
                                44,829,457
                                
                                
                                
                                -
                                
                                
                                
                                80,178,863Other
      assets
                                
                                
                                16,332,459
                                
                                
                                
                                1,383,674
                                
                                
                                
                                (13,452,196
                                )
                                
                                
                                4,263,937Assets
      of discontinued operations
                                
                                
                                -
                                
                                
                                
                                8,113,861
                                
                                
                                
                                -
                                
                                
                                
                                8,113,861Total
      Assets
                                
                                $
                                186,827,274
                                
                                
                                $
                                56,467,499
                                
                                
                                $
                                (85,431,497
                                )
                                
                                $
                                157,863,276Liabilities
      and Owners' EquityAccounts
      payable, accrued expenses and other
                                
                                $
                                1,571,177
                                
                                
                                $
                                31,565,556
                                
                                
                                $
                                (29,756,067
                                )
                                
                                $
                                3,380,666Distribution
      Payable
                                
                                
                                2,432,327
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                2,432,327Debt
      financing
                                
                                
                                76,565,237
                                
                                
                                
                                -
                                
                                
                                
                                (19,583,660
                                )
                                
                                
                                56,981,577Mortgage
      payable
                                
                                
                                30,908,790
                                
                                
                                
                                51,670,000
                                
                                
                                
                                (51,670,000
                                )
                                
                                
                                30,908,790Liabilities
      of discontinued operations
                                
                                
                                -
                                
                                
                                
                                42,900,305
                                
                                
                                
                                (19,635,716
                                )
                                
                                
                                23,264,589Total
      Liabilities
                                
                                
                                111,477,531
                                
                                
                                
                                126,135,861
                                
                                
                                
                                (120,645,443
                                )
                                
                                
                                116,967,949Partners'
      CapitalGeneral
      Partner
                                
                                
                                261,785
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                261,785Beneficial
      Unit Certificate holders
                                
                                
                                75,020,242
                                
                                
                                
                                -
                                
                                
                                
                                18,257,238
                                
                                
                                
                                93,277,480Unallocated
      deficit of variable interest entities
                                
                                
                                -
                                
                                
                                
                                (69,668,362
                                )
                                
                                
                                16,956,708
                                
                                
                                
                                (52,711,654
                                )Total
      Partners' Capital
                                
                                
                                75,282,027
                                
                                
                                
                                (69,668,362
                                )
                                
                                
                                35,213,946
                                
                                
                                
                                40,827,611Noncontrolling
      interest
                                
                                
                                67,716
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                67,716Total
      Capital
                                
                                
                                75,349,743
                                
                                
                                
                                (69,668,362
                                )
                                
                                
                                35,213,946
                                
                                
                                
                                40,895,327Total
      Liabilities and Partners' Capital
                                
                                $
                                186,827,274
                                
                                
                                $
                                56,467,499
                                
                                
                                $
                                (85,431,497
                                )
                                
                                $
                                157,863,276
































8


CondensedConsolidating
Statements of Operations for the three months ended March 31, 2009 and
2008:





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










9





4.  Investments
in Tax-Exempt Bonds





The
tax-exempt mortgage revenue bonds owned by the Company have been issued to
provide construction and/or permanent financing of multifamily residential
properties. The Company had the following investments in tax-exempt mortgage
revenue bonds as of dates shown:








March
      31, 2009Description
      of Tax-Exempt
                    
                    
                    
                    
                    Unrealized
                    
                    
                    Unrealized
                    
                    
                    EstimatedMortgage
      Revenue Bonds
                    
                    Cost
                    
                    
                    Gain
                    
                    
                    Loss
                    
                    
                    Fair
      ValueClarkson
      College
                    
                    $
                    5,998,333
                    
                    
                    $
                    -
                    
                    
                    $
                    (925,674
                    )
                    
                    $
                    5,072,659Bella
      Vista
                    
                    
                    6,785,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,384,276
                    )
                    
                    
                    5,400,724Woodland
      Park
                    
                    
                    15,715,000
                    
                    
                    
                    -
                    
                    
                    
                    (3,438,442
                    )
                    
                    
                    12,276,558Gardens
      of DeCordova
                    
                    
                    4,870,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,179,173
                    )
                    
                    
                    3,690,827Gardens
      of Weatherford
                    
                    
                    4,702,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,138,495
                    )
                    
                    
                    3,563,505Runnymede
      Apartments
                    
                    
                    10,825,000
                    
                    
                    
                    -
                    
                    
                    
                    (2,199,748
                    )
                    
                    
                    8,625,252Bridle
      Ridge Apartments
                    
                    
                    7,885,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,721,217
                    )
                    
                    
                    6,163,783Woodlynn
      Village
                    
                    
                    4,550,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,034,988
                    )
                    
                    
                    3,515,012$
                    61,330,333
                    
                    
                    $
                    -
                    
                    
                    $
                    (13,022,013
                    )
                    
                    $
                    48,308,320December
      31, 2008Description
      of Tax-Exempt
                    
                    
                    
                    
                    
                    Unrealized
                    
                    
                    Unrealized
                    
                    
                    EstimatedMortgage
      Revenue Bonds
                    
                    Cost
                    
                    
                    Gain
                    
                    
                    Loss
                    
                    
                    Fair
      ValueClarkson
      College
                    
                    $
                    6,018,333
                    
                    
                    $
                    -
                    
                    
                    $
                    (1,241,441
                    )
                    
                    $
                    4,776,892Bella
      Vista
                    
                    
                    6,785,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,821,433
                    )
                    
                    
                    4,963,567Woodland
      Park
                    
                    
                    15,715,000
                    
                    
                    
                    -
                    
                    
                    
                    (4,507,533
                    )
                    
                    
                    11,207,467Gardens
      of DeCordova
                    
                    
                    4,870,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,493,142
                    )
                    
                    
                    3,376,858Gardens
      of Weatherford
                    
                    
                    4,702,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,566,989
                    )
                    
                    
                    3,135,011Runnymede
      Apartments
                    
                    
                    10,825,000
                    
                    
                    
                    -
                    
                    
                    
                    (2,902,074
                    )
                    
                    
                    7,922,926Bridle
      Ridge Apartments
                    
                    
                    7,885,000
                    
                    
                    
                    -
                    
                    
                    
                    (2,047,419
                    )
                    
                    
                    5,837,581Woodlynn
      Village
                    
                    
                    4,550,000
                    
                    
                    
                    -
                    
                    
                    
                    (1,277,776
                    )
                    
                    
                    3,272,224$
                    61,350,333
                    
                    
                    $
                    -
                    
                    
                    $
                    (16,857,807
                    )
                    
                    $
                    44,492,526





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





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




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





10


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





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





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





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





5.  Real
Estate Assets





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





At March
31, 2009, the Partnership held an interest in nine MF Properties containing 964
rental units, of which four are located in Ohio, two are located in Kentucky,
one is located in Virginia, one is located in Georgia, and one in North
Carolina.





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




11
 In
addition to the MF Properties, the Partnership consolidates the assets,
liabilities and results of operation of the VIEs in accordance with FIN
46R.  Although the assets of the VIEs are consolidated, the
Partnership has no ownership interest in the VIEs other than to the extent they
serve as collateral for the tax-exempt mortgage revenue bonds owned by the
Partnership.  The results of operations of those properties are recorded by
the Company in consolidation but any net income or loss from these properties
does not accrue to the BUC holders or the general partner, but is instead
included in "Unallocated deficit of variable interest
entities.”





6.  Discontinued
Operations and Assets Held for Sale





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





As of
December 31, 2008, $19.6 million of the total outstanding debt related to the
Company’s bond portfolio was allocated to discontinued operations.
  Interest expense was allocated to discontinued operations based on
the historical effective rate of the Company’s debt financing applied to the
debt financing allocated to discontinued operations.  The Company allocated
to discontinued operations interest expense of $81,500 and $365,000 for the
three months ended March 31, 2009 and 2008, respectively.





The
following presents the components of the assets and liabilities of discontinued
operations as of March 31, 2009 and December 31, 2008 and the revenues, expenses
and income from discontinued operations, excluding the gain on sale of $26.5
million, for the three months ended March 31, 2009 and 2008.


Mar.
      31, 2009
                                      
                                      
                                      Dec.
      31, 2008Cash
      and cash equivalents
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      164,861Restricted
      cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      322,560Land
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,497,355Buildings
      and improvements
                                      
                                      
                                      -
                                      
                                      
                                      
                                      23,696,355Real
      estate assets before accumulated depreciation
                                      
                                      
                                      -
                                      
                                      
                                      
                                      25,193,710Accumulated
      depreciation
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (17,927,345
                                      )Net
      real estate assets
                                      
                                      
                                      -
                                      
                                      
                                      
                                      7,266,365Other
      assets
                                      
                                      
                                      -
                                      
                                      
                                      
                                      360,075Total
      assets from discontinued operations
                                      
                                      
                                      -
                                      
                                      
                                      
                                      8,113,861Total
      liabilities of discontinued operations
                                      
                                      
                                      -
                                      
                                      
                                      
                                      23,264,589Net
      deficits of discontinued operations
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      (15,150,728
                                      )Quarter
      Ended March 31,2009
                                      
                                      
                                      2008Rental
      Revenues
                                      
                                      $
                                      849,366
                                      
                                      
                                      $
                                      1,321,945Expenses
                                      
                                      
                                      501,926
                                      
                                      
                                      
                                      1,128,188Income
      from discontinued operations
                                      
                                      $
                                      347,440
                                      
                                      
                                      $
                                      193,757








7.  Debt
Financing and Mortgage Payable





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





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


12




Prior to
June 26, 2008, credit rating downgrades at Merrill Lynch resulted in an increase
in the Company’s cost of borrowing under the P-Float program.  For the
three months ended March 31, 2009 and 2008, the Company’s average effective
interest rate on the TOB facility and P-Float program was approximately 2.8% and
6.0%, respectively.





As of
March 31, 2009, Mortgages Payables related to the MF Properties totaled
approximately $37.4 million.  The acquisition of the Greens in
February 2009 was financed with an assumed mortgage loan of $6.5 million. The
unpaid balance of the note bears a 7% annual interest rate payable
monthly.  The initial maturity date of the loan is September 2010 at
which time the borrower has an option to extend the note for 18
months.





The
Company’s aggregate borrowings as of March 31, 2009 contractually mature over
the next five years and thereafter as follows:








2009
                                  
                                  $
                                  96,555,3712010
                                  
                                  
                                  150,9442011
                                  
                                  
                                  270,6462012
                                  
                                  
                                  10,727,6822013
                                  
                                  
                                  6,232,724Thereafter
                                  
                                  
                                  -Total
                                  
                                  $
                                  113,937,367








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





8.  Transactions
with Related Parties





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





AFCA 2
earned mortgage placement fees in connection with the acquisition of certain
tax-exempt mortgage revenue bonds.  These mortgage placement fees were
paid by the owners of the respective properties and, accordingly, have not been
reflected in the accompanying condensed consolidated financial statements
because these properties are not considered VIEs. During the three months ended
March 31, 2009 and 2008, AFCA 2 earned mortgage placement fees of approximately
$91,700 and $61,250, respectively.





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





The
shareholders of the limited-purpose corporations which own five of the apartment
properties financed with tax-exempt bonds and taxable loans held by the Company
are employees of The Burlington Capital Group LLC, the general partner of AFCA 2
(“Burlington”) who are not involved in the operation or management of the
Company and who are not executive officers or managers of Burlington.


13




9.  Interest
Rate Derivative Agreements





As of
March 31, 2009, the Company has four derivative agreements in order to mitigate
its exposure to increases in interest rates on its variable-rate debt financing
and mortgage payable. The terms of the derivative agreements are as
follows:








Effective
      Capped
      Rate
                                                      
                                                      
                                                      Maturity
      Date
                                                      
                                                      Purchase
      PriceDate
      Purchased
                                                      
                                                      Notional
      Amount
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      CounterpartyFebruary
      1, 2003
                                                      
                                                      $
                                                      15,000,000
                                                      
                                                      
                                                      2.95
                                                      %
                                                      (1)
                                                      January
      1, 2010
                                                      
                                                      $
                                                      608,000
                                                      
                                                      Bank
      of AmericaJune
      29, 2007
                                                      
                                                      $
                                                      19,920,000
                                                      
                                                      
                                                      8.30
                                                      %
                                                      
                                                      July
      1, 2009
                                                      
                                                      $
                                                      17,500
                                                      
                                                      JP
      MorganJuly
      7, 2008
                                                      
                                                      $
                                                      60,000,000
                                                      
                                                      
                                                      2.50
                                                      %
                                                      
                                                      August
      1, 2011
                                                      
                                                      $
                                                      985,000
                                                      
                                                      US
      BankOctober
      29, 2008
                                                      
                                                      $
                                                      4,480,000
                                                      
                                                      
                                                      6.00
                                                      %
                                                      
                                                      November
      1, 2011
                                                      
                                                      $
                                                      26,512
                                                      
                                                      Bank
      of America(1) The counterparty
      exercised the right to convert the cap into a fixed rate swap effective
      February
      1, 2008. Under the terms of the swap arrangement, the Partnership pays a
      fixed rate of 2.95%.


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 change in the fair value of these
derivative contracts resulted in an increase in interest expense of
approximately $453,000 and $183,000 for the three months ended March 31, 2009
and March 31, 2008, respectively.





10.  Segment
Reporting





The
Company consists of three reportable segments, Tax-Exempt Bond Investments, MF
Properties, and VIEs.  In addition to the three reportable segments,
the Company also separately reports its consolidation and elimination
information because it does not allocate certain items to the
segments.





Tax-Exempt
Bond Investments Segment





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





14


MF
Properties Segment





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





The
VIE Segment





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





Management
closely monitors and evaluates the financial reporting associated with and the
operations of the VIEs and the MF Properties and performs such evaluation
separately from the other operations of the Partnership through interaction with
the affiliated property management company which manages the multifamily
apartment properties held by the VIEs and the MF Properties.





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





15


The
following table details certain key financial information for the Company’s
reportable segments for the three month periods ended March 31, 2009 and
2008:





For
      the Three Months EndedMarch
      31, 2009
                                                                        
                                                                        
                                                                        March
      31, 2008Total
      revenueTax-Exempt
      Bond Financing
                                                                        
                                                                        $
                                                                        4,549,533
                                                                        
                                                                        
                                                                        $
                                                                        2,664,272MF
      Properties
                                                                        
                                                                        
                                                                        1,631,698
                                                                        
                                                                        
                                                                        
                                                                        1,093,036VIEs
                                                                        
                                                                        
                                                                        2,119,545
                                                                        
                                                                        
                                                                        
                                                                        2,220,359Consolidation/eliminations
                                                                        
                                                                        
                                                                        (3,567,174
                                                                        )
                                                                        
                                                                        
                                                                        (1,427,574
                                                                        )Total
      revenue
                                                                        
                                                                        $
                                                                        4,733,602
                                                                        
                                                                        
                                                                        $
                                                                        4,550,093Interest
      expenseTax-Exempt
      Bond Financing
                                                                        
                                                                        $
                                                                        1,022,620
                                                                        
                                                                        
                                                                        $
                                                                        1,273,145MF
      Properties
                                                                        
                                                                        
                                                                        249,802
                                                                        
                                                                        
                                                                        
                                                                        250,410VIEs
                                                                        
                                                                        
                                                                        1,510,844
                                                                        
                                                                        
                                                                        
                                                                        1,467,861Consolidation/eliminations
                                                                        
                                                                        
                                                                        (1,592,397
                                                                        )
                                                                        
                                                                        
                                                                        (1,832,975
                                                                        )Total
      interest expense
                                                                        
                                                                        $
                                                                        1,190,869
                                                                        
                                                                        
                                                                        $
                                                                        1,158,441Depreciation
      expenseTax-Exempt
      Bond Financing
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -MF
      Properties
                                                                        
                                                                        
                                                                        400,428
                                                                        
                                                                        
                                                                        
                                                                        229,598VIEs
                                                                        
                                                                        
                                                                        578,366
                                                                        
                                                                        
                                                                        
                                                                        557,041Consolidation/eliminations
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Total
      depreciation expense
                                                                        
                                                                        $
                                                                        978,794
                                                                        
                                                                        
                                                                        $
                                                                        786,639Income
      (loss) from continuing operationsTax-Exempt
      Bond Financing
                                                                        
                                                                        $
                                                                        2,601,522
                                                                        
                                                                        
                                                                        $
                                                                        937,890MF
      Properties
                                                                        
                                                                        
                                                                        (385,842
                                                                        )
                                                                        
                                                                        
                                                                        (274,450
                                                                        )VIEs
                                                                        
                                                                        
                                                                        (1,305,900
                                                                        )
                                                                        
                                                                        
                                                                        (1,268,701
                                                                        )Consolidation/eliminations
                                                                        
                                                                        
                                                                        (1,885,324
                                                                        )
                                                                        
                                                                        
                                                                        422,161Income
      (loss) from continuing operations
                                                                        
                                                                        $
                                                                        (975,544
                                                                        )
                                                                        
                                                                        $
                                                                        (183,100
                                                                        )Net
      income (loss)Tax-Exempt
      Bond Financing
                                                                        
                                                                        $
                                                                        2,601,522
                                                                        
                                                                        
                                                                        $
                                                                        937,890MF
      Properties
                                                                        
                                                                        
                                                                        (385,842
                                                                        )
                                                                        
                                                                        
                                                                        (274,450
                                                                        )VIEs
                                                                        
                                                                        
                                                                        33,480,544
                                                                        
                                                                        
                                                                        
                                                                        (1,495,310
                                                                        )Consolidation/eliminations
                                                                        
                                                                        
                                                                        (9,937,014
                                                                        )
                                                                        
                                                                        
                                                                        842,527Net
      income
                                                                        
                                                                        $
                                                                        25,759,210
                                                                        
                                                                        
                                                                        $
                                                                        10,657March
      31, 2009
                                                                        
                                                                        
                                                                        December
      31, 2008Total
      assetsTax-Exempt
      Bond Financing
                                                                        
                                                                        $
                                                                        147,828,540
                                                                        
                                                                        
                                                                        $
                                                                        158,156,573MF
      Properties
                                                                        
                                                                        
                                                                        54,924,731
                                                                        
                                                                        
                                                                        
                                                                        47,561,345VIEs
                                                                        
                                                                        
                                                                        48,437,171
                                                                        
                                                                        
                                                                        
                                                                        56,467,499Consolidation/eliminations
                                                                        
                                                                        
                                                                        (63,340,718
                                                                        )
                                                                        
                                                                        
                                                                        (104,322,141
                                                                        )Total
      assets
                                                                        
                                                                        $
                                                                        187,849,724
                                                                        
                                                                        
                                                                        $
                                                                        157,863,276Total
      partners' capitalTax-Exempt
      Bond Financing
                                                                        
                                                                        $
                                                                        77,541,671
                                                                        
                                                                        
                                                                        $
                                                                        77,498,951MF
      Properties
                                                                        
                                                                        
                                                                        7,018,531
                                                                        
                                                                        
                                                                        
                                                                        6,771,635VIEs
                                                                        
                                                                        
                                                                        (36,187,819
                                                                        )
                                                                        
                                                                        
                                                                        (69,668,362
                                                                        )Consolidation/eliminations
                                                                        
                                                                        
                                                                        19,621,765
                                                                        
                                                                        
                                                                        
                                                                        26,225,387Total
      partners' capital
                                                                        
                                                                        $
                                                                        67,994,148
                                                                        
                                                                        
                                                                        $
                                                                        40,827,611





16





12.
Commitments and Contingencies





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





13.  Recently
Issued Accounting Pronouncements





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





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





In April
2009, the Financial Accounting Standards Board (“FASB”) issued the following
FASB Staff Positions (“FSP”):





FSP FAS
157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly, FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments, and FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments.





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





FSP FAS
107-1 and APB 28-1 relate to fair value disclosures for any financial
instruments that are not currently reflected on the balance sheet of companies
at fair value. Prior to issuing this FSP, fair values for these assets and
liabilities were only disclosed once a year. The FSP now requires these
disclosures on a quarterly basis, providing qualitative and quantitative
information about fair value estimates for all financial instruments not
measured on the balance sheet at fair value.





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





The FSPs
are effective for the Company for interim and annual periods ending after June
15, 2009.  The FSPs are not expected to have a material impact on the
Company’s financial statements.




17


14.   Fair
Value Measurements




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




·
            Defines
      fair value as the exchange price that would be received for an asset or
      paid to transfer a liability (an exit price) in the principal or most
      advantageous market for the asset or liability in an orderly transaction
      between market participants at the measurement date;
  and




·
            Establishes
      a three-level hierarchy for fair value measurements based upon the
      transparency of inputs to the valuation of an asset or liability as of the
      measurement date.




Inputs
refer broadly to the assumptions that market participants would use in pricing
the asset or liability, including assumptions about risk.  To increase
consistency and comparability in fair value measurements and related
disclosures, the fair value hierarchy prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels.  The
three-levels of the hierarchy are defined as follows:




·
            Level
      1 inputs are quoted prices (unadjusted) in active markets for identical
      assets or liabilities.




·
            Level
      2 inputs are inputs other than quoted prices included within Level 1 that
      are observable for the asset or liability, either directly or indirectly,
      for substantially the full term of the financial
    instrument.




·
            Level
      3 inputs are unobservable inputs for asset or
  liabilities.




The
categorization within the valuation hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.




Following
is a description of the valuation methodologies used for assets and liabilities
measured at fair value.





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





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







18


Fair
      Value Measurements at March 31, 2009Quoted
      Prices
                                                                                                          
                                                                                                          
                                                                                                          Significant
      Other Observable Inputs   (Level 2)in
      Active Markets
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          SignificantAssets/Liabilities
                                                                                                          
                                                                                                          
                                                                                                          for
      Identical Assets
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          Unobservable
      InputsDescription
                                                                                                          
                                                                                                          at Fair Value
                                                                                                          
                                                                                                          
                                                                                                          (Level 1)
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (Level 3)AssetsTax-exempt
      Mortgage Revenue Bonds
                                                                                                          
                                                                                                          $
                                                                                                          48,308,320
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          48,308,320Interest
      Rate Derivatives
                                                                                                          
                                                                                                          
                                                                                                          (150,516
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (150,516
                                                                                                          )Total
      Assets at Fair Value
                                                                                                          
                                                                                                          $
                                                                                                          48,157,804
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          48,157,804For
      three months ended March 31, 2009Fair
      Value Measurements Using SignificantUnobservable
      Inputs (Level 3)Tax-exempt
      Mortgage
                                                                                                          
                                                                                                          
                                                                                                          Interest
      Rate DerivativesRevenue Bonds
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          TotalBeginning
      Balance January 1, 2009
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          44,492,526
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          302,849
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          44,795,375Total
      gains or losses (realized/unrealized)Included
      in earnings
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (453,366
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          (453,366
                                                                                                          )Included
      in other comprehensive income
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          3,835,794
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          3,835,794Purchases,
      issuances and settlements
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (20,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (20,000
                                                                                                          )Ending
      Balance March 31, 2009
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          48,308,320
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          (150,517
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          48,157,803Total
      amount of gains or losses for the period included in earnings attributable
      to the change in unrealized gains or losses relating to assets or
      liabilities still held as of March 31, 2009
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          (453,366
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          (453,366
                                                                                                          )Fair
      Value Measurements at December 31, 2008Quoted
      Prices
                                                                                                          
                                                                                                          
                                                                                                          Significant Other Observable Inputs  
      (Level 2)in
      Active Markets
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          SignificantAssets/Liabilities
                                                                                                          
                                                                                                          
                                                                                                          for
      Identical Assets
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          Unobservable
      InputsDescription
                                                                                                          
                                                                                                          at Fair Value
                                                                                                          
                                                                                                          
                                                                                                          (Level 1)
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (Level 3)AssetsTax-exempt
      Mortgage Revenue Bonds
                                                                                                          
                                                                                                          $
                                                                                                          44,492,526
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          44,492,526Interest
      Rate Derivatives
                                                                                                          
                                                                                                          
                                                                                                          302,849
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          302,849Total
      Assets at Fair Value
                                                                                                          
                                                                                                          $
                                                                                                          44,795,375
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          44,795,375For
      three months ended March 31, 2008Fair
      Value Measurements Using SignificantUnobservable
      Inputs (Level 3)Tax-exempt
      Mortgage
                                                                                                          
                                                                                                          
                                                                                                          Interest
      Rate DerivativesRevenue Bonds
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          TotalBeginning
      Balance January 1, 2008
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          66,167,116
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          12,439
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          66,179,555Total
      gains or losses (realized/unrealized)Included
      in earnings
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (183,191
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          (183,191
                                                                                                          )Included
      in other comprehensive income
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (5,213,065
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (5,213,065
                                                                                                          )Purchases,
      issuances and settlements
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          9,030,039
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          9,030,039Ending
      Balance March 31, 2008
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          69,984,090
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          (170,752
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          69,813,338Total
      amount of gains or losses for the period included in earnings attributable
      to the change in unrealized gains or losses relating to assets or
      liabilities still held as of March 31, 2008
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          (183,191
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          (183,191
                                                                                                          )





Losses
included in earnings for the period shown above are included in interest
expense.


19





Item 2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations.





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





Critical
Accounting Policies





The
Company’s critical accounting policies are the same as those described in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("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.





Executive
Summary





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





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





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




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





20


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





Discussion
of the Partnership Bond Holdings and the Related Apartment Properties as of
March 31, 2009





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





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





The VIEs’
primary operating strategy focuses on multifamily apartment properties as
long-term investments.  Each VIE owns one multifamily apartment
property that has been financed by a tax-exempt mortgage revenue bond held by
the Partnership.  As of March 31, 2009, the Company consolidated five
VIE multifamily apartment properties containing a total of 1,144 rental
units.  As of March 31, 2008, the Company consolidated eight VIE
multifamily apartment properties containing a total of 1,764 rental
units.





The
following table outlines certain information regarding the apartment properties
on which the Partnership holds tax-exempt mortgage bonds (separately identifying
those treated as VIEs) and the MF Properties owned by the
Partnership.  The narrative discussion that follows provides a brief
operating analysis of each property during the first three months of
2009.





21


Number
      of
      Units Occupied
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    Percentage
      of Occupied Units
      as of March 31,
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    Economic
      Occupancy (1)
      for the
      period ended March 31,NumberProperty
      Name
                                                                                                                                    Location
                                                                                                                                    
                                                                                                                                    of
      Units
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2009
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2008
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2009
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2008Non-Consolidated PropertiesClarkson
      College
                                                                                                                                    Omaha,
      NE
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    142
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    114
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    80
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    83
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    81
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    83
                                                                                                                                    %Bella
      Vista Apartments
                                                                                                                                    Gainesville,
      TX
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    144
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    137
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    95
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    95
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    94
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    91
                                                                                                                                    %Woodland
      Park (2)
                                                                                                                                    Topeka,
      KS
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    236
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/aRunnymede
      Apartments
                                                                                                                                    Austin,
      TX
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    252
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    245
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    97
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    80
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    100
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    82
                                                                                                                                    %Gardens
      of DeCordova (2)
                                                                                                                                    Granbury,
      TX
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    76
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/aGardens
      of Weatherford (2)
                                                                                                                                    Weatherford,
      TX
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    76
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/aBridle
      Ridge Apartments
                                                                                                                                    Greer,
      SC
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    152
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    127
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    84
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    70
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    85
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    62
                                                                                                                                    %Woodlynn
      Village
                                                                                                                                    Maplewood,
      MN
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    59
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    54
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    92
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    95
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    96
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    99
                                                                                                                                    %1,137
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    677
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    90
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    85
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    93
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    83
                                                                                                                                    %VIEsAshley
      Square
                                                                                                                                    Des
      Moines, IA
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    144
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    139
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    97
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    91
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    92
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    85
                                                                                                                                    %Bent
      Tree Apartments
                                                                                                                                    Columbia,
      SC
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    232
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    206
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    89
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    96
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    79
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    86
                                                                                                                                    %Fairmont
      Oaks Apartments
                                                                                                                                    Gainsville,
      FL
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    178
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    154
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    87
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    94
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    85
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    91
                                                                                                                                    %Iona
      Lakes Apartments
                                                                                                                                    Ft.
      Myers, FL
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    350
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    281
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    80
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    81
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    64
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    66
                                                                                                                                    %Lake
      Forest Apartments
                                                                                                                                    Daytona
      Beach, FL
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    240
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    213
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    89
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    98
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    80
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    104
                                                                                                                                    %1,144
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    993
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    87
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    92
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    77
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    86
                                                                                                                                    %MF PropertiesChurchland
      (3)
                                                                                                                                    Chesapeake,
      VA
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    124
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    115
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    93
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    87
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/aCrescent
      Village
                                                                                                                                    Cincinnati,
      OH
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    90
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    79
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    88
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    94
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    77
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    88
                                                                                                                                    %Eagle
      Ridge
                                                                                                                                    Erlanger,
      KY
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    64
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    51
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    80
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    88
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    70
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    83
                                                                                                                                    %Glynn
      Place (3)
                                                                                                                                    Brunswick,
      GA
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    128
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    108
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    84
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    74
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/aGreens
      of Pine Glen (3)
                                                                                                                                    Durham,
      NC
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    168
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    154
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    92
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/a
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    93
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    n/aMeadowview
                                                                                                                                    Highland
      Heights, KY
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    118
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    105
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    89
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    97
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    87
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    97
                                                                                                                                    %Postwoods
      I
                                                                                                                                    Reynoldsburg,
      OH
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    92
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    88
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    96
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    95
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    86
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    94
                                                                                                                                    %Postwoods
      II
                                                                                                                                    Reynoldsburg,
      OH
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    88
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    86
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    98
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    95
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    92
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    94
                                                                                                                                    %Willow
      Bend
                                                                                                                                    Columbus
      (Hilliard), OH
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    92
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    89
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    97
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    99
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    99
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    100
                                                                                                                                    %964
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    875
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    91
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    95
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    85
                                                                                                                                    %
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    93
                                                                                                                                    %(1)Economic occupancy is presented for the three months ended March
      31, 2009 and 2008, and is defined as the net rental income received divided by the
      maximum amount of rental income to be derived from each
      property. This statistic is reflective of rental concessions,
      delinquent rents and non-revenue units such as model units and employee
      units. Actual occupancy is a point in time measure while economic
      occupancy is a measurement over the period presented, therefore, economic
      occupancy for a period may exceed the actual occupancy at any point in
      time.(2)  These
      properties are still under construction as of March 31, 2009, and
      therefore have no occupancy
      data.(3)Previous period occupancy numbers are not available, as this is a
      new investment.





Non-Consolidated
Properties





Clarkson
College – Clarkson College is a 142 bed student housing facility located in
Omaha, Nebraska.  In the first quarter of 2009, Net Operating Income
(calculated as property revenue less salaries, advertising, administration,
utilities, repair and maintenance, insurance, taxes, and management fee
expenses) was $130,000 as compared to $146,000 in 2008.  The decrease
is attributable to a decline in occupancy along with an increase in utility
expenses.





Bella
Vista – Bella Vista Apartments is located in Gainesville, Texas.  In
the first quarter of 2009, Bella Vista’s operations resulted in Net Operating
Income of $149,000 as compared to $134,000 in 2008.  The increase was
a result of increased economic occupancy and a decrease in salaries
expense.





Woodland
Park – Woodland Park Apartments began leasing its 236 units in Topeka, Kansas in
November 2008.  A final completion date of the project is expected by
May 2009.  As of March 31, 2009, 236 units have been completed and are
available for rent and 57 units are currently occupied.  The developer
and principals have guaranteed completion and stabilization of the
project.





Runnymede
Apartments – Runnymede Apartments is located in Austin, Texas.  In the
first quarter of 2009, Runnymede Apartment’s operations resulted in Net
Operating Income of $245,000 as compared to $86,000 in 2008.  This
increase is a direct result of increased occupancy which led to increased
revenues.


22




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




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





Bridle
Ridge Apartments -–  Bridle Ridge Apartments is located in Greer,
South Carolina.  In the first quarter of 2009, Bridle Ridge
Apartments’ operations resulted in Net Operating Income of $167,000 as compared
to $83,000 in 2008.  This increase is a direct result of increased
occupancy which led to increased revenues.





Woodlynn
Village – Woodlynn Village is located in Maplewood, Minnesota.  In the
first quarter of 2009, Net Operating Income was $69,000 as compared to $79,000
in 2008.  This decrease was the result of lower occupancy and
increased real estate taxes.





VIEs





Ashley
Square – Ashley Square Apartments is located in Des Moines, Iowa.  In
the first quarter of 2009, Net Operating Income was $109,000 as compared to
$42,000 in 2008.  This increase was the result of higher property
revenue from improved occupancy and lower repairs and maintenance
expense.





Bent Tree
– Bent Tree Apartments is located in Columbia, South
Carolina.   In the first quarter of 2009, Net Operating Income
was $164,000 as compared to $194,000 in 2008.  This decrease was the
result of lower property revenue based on decreased occupancy and increased
salary expense.





Fairmont
Oaks – Fairmont Oaks Apartments is located in Gainesville,
Florida.  In the first quarter of 2009, Net Operating Income was
$187,000 as compared to $210,000 in 2008.  This decrease was the
result of lower property revenue from decreased occupancy.





Iona
Lakes – Iona Lakes Apartments is located in Fort Myers, Florida.  In
the first quarter of 2009, Net Operating Income was $254,000 as compared to
$243,000 in 2008.  This increase was directly related to a decrease in
advertising expenditures.





Lake
Forest – Lake Forest Apartments is located in Daytona Beach,
Florida.  In the first quarter of 2009, Net Operating Income was
$216,000 as compared to $317,000 in 2008.  This decrease was a direct
result of lower property revenue due to decreased occupancy along with an
increase in salary expense.


MF
Properties





Commons
at Churchland – Commons at Churchland is located in Chesapeake,
Virginia.  The acquisition of Commons at Churchland in August, 2008,
resulted in the recognition of approximately $130,000 in Net Operating Income on
Revenue of $244,000 during the first quarter of 2009.





Crescent
Village – Crescent Village Townhomes is located in Cincinnati,
Ohio.  In the first quarter of 2009, Crescent Village’s operations
resulted in Net Operating Income of $75,000 as compared to $95,000 in
2008.   This decrease was the result of lower property revenue
from decreased occupancy.





Eagle
Ridge – Eagle Ridge Townhomes is located in Erlanger, Kentucky.  In
the first quarter of 2009, Eagle Ridge’s operations resulted in Net Operating
Income of $19,000 as compared to $47,000 in 2008.  This decrease was
the result of lower property revenue from decreased occupancy.





Glynn
Place – Glynn Place Apartments is located in Brunswick, Georgia.  The
acquisition of Glynn Place Apartments in October 2008, resulted in the
recognition of approximately $71,000 of Net Operating Income on Revenue of
$199,000 during the first quarter of 2009.





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





Meadowview
– Meadowview Apartments is located in Highland Heights, Kentucky.  In
the first quarter of 2009, Meadowview’s operations resulted in Net Operating
Income of $112,000 as compared to $148,000 in 2008.  This decrease was
a result of lower property revenue due to a decrease in
occupancy.


23
 Postwoods
I – Postwoods Townhomes is located in Reynoldsburg, Ohio.  In the
first quarter of 2009, Postwoods I’s operations resulted in Net Operating Income
of $92,000 as compared to $108,000 in 2008. This decrease was a result of lower
property revenue due to more concessions being given to new
tenants.





Postwoods
II – Postwoods Townhomes is located in Reynoldsburg, Ohio.  In the
first quarter of 2009, Postwoods II’s operations resulted in Net Operating
Income of $96,000 as compared to $103,000 in 2008.  This decrease was
a result of lower property revenue due to more concessions being given to new
tenants.





Willow
Bend – Willow Bend Townhomes is located in Columbus (Hilliard),
Ohio.  In the first quarter of 2009, Willow Bend’s operations resulted
in Net Operating Income of $92,000 as compared to $132,000 in
2008.  This decrease was a result of increased real estate taxes,
salaries expense, and utilities expense.


Results
of Operations





Consolidated Results of
Operations





The
following discussion of the Company’s results of operations for the three months
ended March 31, 2009 and 2008 should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 1 of this
report as well as the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.





Three Months Ended March 31,
2009 compared to Three  Months Ended March 31, 2008
(Consolidated)





Change in Results of
Operations




For
      the Three
                                          
                                          
                                          For
      the ThreeMonths
      Ended
                                          
                                          
                                          Months
      EndedMarch
      31, 2009
                                          
                                          
                                          March
      31, 2008
                                          
                                          
                                          Dollar
      ChangeRevenues:Property
      revenues
                                          
                                          $
                                          3,751,243
                                          
                                          
                                          $
                                          3,313,395
                                          
                                          
                                          $
                                          437,848Mortgage
      revenue bond investment income
                                          
                                          
                                          948,344
                                          
                                          
                                          
                                          1,208,564
                                          
                                          
                                          
                                          (260,220
                                          )Other
      interest income
                                          
                                          
                                          34,015
                                          
                                          
                                          
                                          24,430
                                          
                                          
                                          
                                          9,585Gain
      on the sale of securities
                                          
                                          
                                          -
                                          
                                          
                                          
                                          3,704
                                          
                                          
                                          
                                          (3,704
                                          )Total
      Revenues
                                          
                                          $
                                          4,733,602
                                          
                                          
                                          $
                                          4,550,093
                                          
                                          
                                          $
                                          183,509Expenses:Real
      estate operating (exclusive of items shown below)
                                          
                                          
                                          2,360,643
                                          
                                          
                                          
                                          1,959,162
                                          
                                          
                                          
                                          401,481Depreciation
      and amortization
                                          
                                          
                                          1,580,872
                                          
                                          
                                          
                                          1,184,524
                                          
                                          
                                          
                                          396,348Interest
                                          
                                          
                                          1,190,869
                                          
                                          
                                          
                                          1,158,441
                                          
                                          
                                          
                                          32,428General
      and administrative
                                          
                                          
                                          576,762
                                          
                                          
                                          
                                          431,066
                                          
                                          
                                          
                                          145,696Total
      Expenses
                                          
                                          $
                                          5,709,146
                                          
                                          
                                          $
                                          4,733,193
                                          
                                          
                                          $
                                          975,953Income
      from continuing operations
                                          
                                          
                                          (975,544
                                          )
                                          
                                          
                                          (183,100
                                          )
                                          
                                          
                                          (792,444
                                          )Income
      from discontinued operations (including gain on bond redemption of
      $26,514,809 in 2009)
                                          
                                          
                                          26,734,754
                                          
                                          
                                          
                                          193,757
                                          
                                          
                                          
                                          26,540,997Net
      income
                                          
                                          
                                          25,759,210
                                          
                                          
                                          
                                          10,657
                                          
                                          
                                          
                                          25,748,553Less:
      net loss attributable to noncontrolling interest
                                          
                                          
                                          3,860
                                          
                                          
                                          
                                          2,745
                                          
                                          
                                          
                                          1,115Net
      income - America First Tax Exempt Investors, L. P.
                                          
                                          $
                                          25,763,070
                                          
                                          
                                          $
                                          13,402
                                          
                                          
                                          $
                                          25,749,668





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





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





Other interest
income.  The increase in other interest income is attributable
to higher levels of temporary investments in liquid securities representing
amounts presented as cash and cash equivalents and restricted
cash.  Temporary investment levels were higher in 2009 due mainly to
the cash received on the bond redemptions completed in February
2009.


24




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




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





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





General and administrative
expenses.General and administrative expenses increased due to
increased professional fees, increased investment due diligence and related
travel costs and salaries.





Partnership Only Results of
Operations





The
following discussion of the Partnership’s results of operations for the three
months ended March 31, 2009 and 2008 reflects the operations of the Partnership
without the consolidation of the VIEs, which is required under FIN 46R. This
information is used by management to analyze the Partnership’s operations and is
reflective of the segment data discussed in Note 10 to the consolidated
financial statements.




Three Months Ended March 31,
2009 compared to Three Months Ended March 31, 2008 (Partnership
Only)





Changes in Results of
Operations








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




25


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





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





Other interest
income.  The increase in other interest income is attributable
to higher levels of temporary investments in liquid securities representing
amounts presented as cash and cash equivalents and restricted cash. Temporary
investment levels were higher in 2009 due mainly to the cash received on the
bond redemptions completed in February 2009.





Gain (loss) on the sale of
securities.The loss on the sale of securities represents the write-off
of unamortized deferred finance costs related to the three bonds redeemed during
the first quarter of 2009. The gain on sale of securities in the first quarter
of 2008 was related to the sale of the Deerfield bonds.





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





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





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





General and administrative
expenses.General and administrative expenses increased due to
increased professional fees, increased investment due diligence and related
travel costs and salaries.





Liquidity
and Capital Resources





Partnership
Liquidity





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





26
 The
Company intends to issue BUCs from time to time to raise additional equity
capital as needed to fund investment opportunities.  In this regard,
the Company has an effective Registration Statement on Form S-3 with the SEC
relating to the sale of up to $100.0 million of its BUCs.  To date,
the Company has issued approximately $27.5 million of BUCs under this
Registration Statement and intends to issue additional BUCs from time to
time.  In addition, in October 2008, the Company filed a Registration
Statement on Form S-3 with the SEC relating to a Rights
Offering.  Pursuant to this Registration Statement, the Company may
issue Rights Certificates to existing BUC holders.  The Company has
not yet determined when, or if, such a Rights Offering will be
conducted.  Raising additional equity capital for deployment into new
investment opportunities is part of our overall growth
strategy.





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





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





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





VIE
Liquidity





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





The VIEs’
primary uses of cash are: (i) the payment of operating expenses; and (ii) the
payment of debt service on the VIEs’ bonds and mortgage notes payable which are
held by the Partnership.





Consolidated
Liquidity





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





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


27




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





Cash
Available for Distribution





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


The
following tables show the calculation of CAD for the three months ended March
31, 2009 and 2008:








For
      the Three
                        
                        
                        For
      the ThreeMonths
      Ended
                        
                        
                        Months
      EndedMarch
      31, 2009
                        
                        
                        March
      31, 2008Net
      income - America First Tax Exempt Investors, L.P.
                        
                        $
                        25,763,070
                        
                        
                        $
                        13,402Net
      income related to VIEs and eliminations due to
    consolidation
                        
                        
                        (23,543,530
                        )
                        
                        
                        652,783Net
      income before impact of VIE consolidation
                        
                        
                        2,219,540
                        
                        
                        
                        666,185Change
      in fair value of derivatives and interest rate cap
      amortization
                        
                        
                        453,366
                        
                        
                        
                        183,191Loss
      on taxable loans
                        
                        
                        74,999
                        
                        
                        
                        -Loss
      on bond sale
                        
                        
                        127,495
                        
                        
                        
                        -Tier
      2 Income distributable to the General Partner (1)
                        
                        
                        (574,890
                        )
                        
                        
                        -Depreciation
      and amortization expense (Partnership only)
                        
                        
                        1,005,711
                        
                        
                        
                        630,198CAD
                        
                        $
                        3,306,221
                        
                        
                        $
                        1,479,574Net
      income, basic and diluted, per BUC
                        
                        $
                        0.12
                        
                        
                        $
                        0.05Total
      CAD per BUC
                        
                        $
                        0.24
                        
                        
                        $
                        0.11





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





28
 Contractual
Obligations





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





Recently
Issued Accounting Pronouncements





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





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





In April
2009, the Financial Accounting Standards Board (“FASB”) issued the following
FASB Staff Positions (“FSP”):





FSP FAS
157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly, FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments, and FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments.





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





FSP FAS
107-1 and APB 28-1 relate to fair value disclosures for any financial
instruments that are not currently reflected on the balance sheet of companies
at fair value. Prior to issuing this FSP, fair values for these assets and
liabilities were only disclosed once a year. The FSP now requires these
disclosures on a quarterly basis, providing qualitative and quantitative
information about fair value estimates for all those financial instruments not
measured on the balance sheet at fair value.





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





The FSPs
are effective for the Company for interim and annual periods ending after June
15, 2009.  The FSPs are not expected to have a material impact on the
Company’s financial statements.





Item 3.  Quantitative and Qualitative Disclosures About
Market Risk.





There
have been no material changes in market risk from the information provided under
“Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of the
Company’s 2008 Annual Report on Form 10-K.





Item 4.  Controls and Procedures.




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




Changes in internal control over
financial reporting.  The Partnership’s Chief Executive Officer
and Chief Financial Officer have determined that there were no changes in the
Partnership's internal control over financial reporting during the Partnership’s
most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Partnership’s internal control over financial
reporting.


29





PART
II - OTHER INFORMATION





Item 1A. Risk Factors.





The risk
factors affecting the Company are described in Item 1A “Risk Factors” of the
Company’s 2008 Annual Report on Form 10-K.





Item 6.  Exhibits.





The
following exhibits are filed as required by Item 6 of this report. Exhibit
numbers refer to the paragraph numbers under Item 601 of Regulation
S-K:





3.  Articles
of Incorporation and Bylaws of America First Fiduciary Corporation Number Five
(incorporated herein by reference to Registration Statement on Form S-11 (No.
2-99997) filed by America First Tax Exempt Mortgage Fund Limited Partnership on
August 30, 1985).





4(a)  Form
of Certificate of Beneficial Unit Certificate (incorporated herein by reference
to Exhibit 4.1 to Registration Statement on Form S-4 (No. 333-50513) filed by
the Company on April 17, 1998).





4(b)
Agreement of Limited Partnership of the Partnership (incorporated herein by
reference to the Amended Annual Report on Form 10-K (No. 000-24843) filed by the
Company on June 28, 1999).





4(c)  Amended
Agreement of Merger, dated June 12, 1998, between the Partnership and America
First Tax Exempt Mortgage Fund Limited Partnership (incorporated herein by
reference to Exhibit 4.3 to Amendment No. 3 to Registration Statement on Form
S-4 (No. 333-50513) filed by the Company on September 14, 1998).





31.1  Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





31.2  Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32.1  Certification
of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





32.2  Certification
of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.











30


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





AMERICA FIRST TAX EXEMPT INVESTORS,
L.P.





By
America First Capital


Associates
Limited


Partnership
Two, General


Partner
of the Partnership





By  Burlington
Capital Group LLC,


General
Partner of


America
First Capital


Associates
Limited


Partnership
Two








Date:  May
      11, 2009
            /s/ Lisa Y.
      Roskens


Lisa Y.
Roskens


Chief
Executive Officer


Burlington
Capital Group LLC, acting in its capacity as general partner of the General
Partner of America First Tax Exempt Investors, L.P.


31