10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2005

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: 000-49986

AMERICA FIRST APARTMENT INVESTORS, INC.

(Exact name of registrant as specified in its charter)

Maryland	47-0858301
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1004 Farnam Street, Suite 100 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 þ NO o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

YES þ NO o

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

Yes o No þ

As of November 1, 2005, there were 10,510,558 outstanding shares of the registrant’s common stock.

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AMERICA FIRST APARTMENT INVESTORS, INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004	2
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004	3
	Notes to the Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	23
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 6.	Exhibits	24
SIGNATURES		25
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except shares and per share amounts)

	September 30,			December 31,
	2005			2004
Assets
Cash and cash equivalents	$	3,529		$	10,634
Restricted cash		15,963			8,039
Real estate assets:
Land		35,022			31,607
Buildings		246,297			212,269
Total		281,319			243,876
Less: accumulated depreciation		(40,249	)		(34,139	)
Real estate assets, net		241,070			209,737
Investments in agency securities, at fair value		19,994			26,192
Investments in corporate equity securities, at fair value		4,258			4,321
Investment in mezzanine loan		7,484			—
In-place lease intangibles, net of accumulated amortization of $4,952 and $2,465, respectively		975			2,572
Assets of discontinued operations		19,309			30,764
Other assets		4,776			5,138
Total assets	$	317,358		$	297,397
Liabilities
Accounts payable and accrued expenses	$	9,180		$	7,039
Dividends payable		2,628			2,628
Notes payable		2,413			2,413
Bonds and mortgage notes payable		185,979			167,150
Borrowings under repurchase agreements		32,675			27,875
Total liabilities		232,875			207,105
Commitments and Contingencies
Stockholders’ Equity
Common stock, $0.01 par value; 500,000,000 shares authorized, 10,510,558 issued and outstanding		105			105
Additional paid-in capital		102,794			102,766
Accumulated deficit		(18,375	)		(12,628	)
Accumulated other comprehensive income (loss)		(41	)		49
Total stockholders’ equity		84,483			90,292
Total liabilities and stockholders’ equity	$	317,358		$	297,397

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

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

	For the Three			For the Three			For the Nine			For the Nine
	Months ended			Months ended			Months ended			Months ended
	September 30, 2005			September 30, 2004			September 30, 2005			September 30, 2004
Revenues:
Rental revenues	$	11,248		$	9,453		$	32,090		$	20,284
Interest and dividend income		189			214			563			573
Gain on sales of corporate equity securities		—			69			—			212
Other income		101			—			267			—
Total revenues		11,538			9,736			32,920			21,069
Expenses:
Real estate operating		5,497			5,611			15,325			11,401
Depreciation		2,238			1,756			6,260			3,888
Interest		1,953			1,592			6,082			3,598
General and administrative		1,515			1,009			4,498			2,209
Amortization		368			1,124			2,637			1,620
Total expenses		11,571			11,092			34,802			22,716
Loss from continuing operations		(33	)		(1,356	)		(1,882	)		(1,647	)
Income from discontinued operations		216			8			576			117
Gain on sale of property		3,442			—			3,442			—
Net income (loss)	$	3,625		$	(1,348	)	$	2,136		$	(1,530	)
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities arising during the period		17			390			(149	)		(315	)
Less: Reclassification adjustments for gains realized in net loss		—			(69	)		—			(212	)
Unrealized gains on derivatives		188			—			59			—
		205			321			(90	)		(527	)
Comprehensive income (loss)	$	3,830		$	(1,027	)	$	2,046		$	(2,057	)
Earnings per share- basic and diluted
Loss from continuing operations	$	—		$	(0.13	)	$	(0.18	)	$	(0.22	)
Income from discontinued operations and gain on sale of property		0.35			0.00			0.38			0.01
Net income (loss)	$	0.35		$	(0.13	)	$	0.20		$	(0.21	)
Dividends declared per share	$	0.25		$	0.25		$	0.75		$	0.75
Weighted average number of shares outstanding basic and diluted		10,511			10,506			10,511			7,453

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

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands, except share amounts)

	For the Nine Months Ended September 30,
	2005			2004
Operating activities
Net Income (loss)	$	2,136		$	(1,530	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation		6,260			3,888
Gain on sale of property		(3,442	)		—
Change in fair value on interest rate swap agreements		(18	)		(57	)
Amortization		2,637			1,620
Amortization of premium on agency securities		130			208
Non cash stock option compensation		28			17
Change in other assets		1,186			1,740
Change in accounts payable and accrued expenses		2,274			915
Net cash provided by operating activities		11,191			6,801
Investing activities
Real estate capital improvements and acquisitions		(26,386	)		(563	)
Principal received on agency securities		5,982			8,978
Change in restricted cash		(7,924	)		(1,653	)
Investment in mezzanine loan		(7,444	)		—
Proceeds from sale of real estate		14,090			—
Proceeds from sales of corporate equity securities		—			3,790
Acquisition of America First Real Estate Investment Partners, LP		—			(3,598	)
Cash received in acquisition of America First Real Estate Investment Partners, LP		—			8,400
Acquisition of agency securities		—			(1,565	)
Net cash (used) provided by investing activities		(21,682	)		13,789
Financing activities
Borrowings under repurchase agreements		6,800			—
Proceeds from mortgage notes		12,370			—
Debt financing costs paid		(142	)		—
Dividends paid		(7,883	)		(5,164	)
Repayments of borrowings under repurchase agreements		(2,000	)		(5,844	)
Principal payments on bonds and mortgage notes payable		(5,759	)		(802	)
Net cash provided (used) in financing activities		3,386			(11,810	)
Change in cash and cash equivalents		(7,105	)		8,780
Cash and cash equivalents at beginning of period		10,634			6,918
Cash and cash equivalents at end of period	$	3,529		$	15,698
Supplemental disclosure of cash flow information:
Dividends declared but not paid	$	2,628		$	2,626
Cash paid for interest	$	6,171		$	3,834

Supplemental disclosure of non-cash investing and financing activities (in thousands):
In connection with the acquisition of The Reserve at Wescott Plantation on September 1, 2005, the Company assumed the existing mortgage note of $12,218.

On June 3, 2004, the Company merged with America First Real Estate Investment Partners, L.P. (“AFREZ”). Merger consideration included $3,450 in cash paid, $513 of additional merger costs incurred and 5,430,661 shares of stock with a value of $55,338 issued in exchange for the limited partner and general partner interests of AFREZ.

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

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)

1. Organization and Basis of Presentation

America First Apartment Investors, Inc. (the “Company”) is a Maryland corporation which owns and operates multifamily apartment projects and an office warehouse facility. The Company also invests in agency securities and other real estate assets.

The Company is treated as a Real Estate Investment Trust (“REIT”) for Federal income tax purposes. As a REIT, the Company is generally not subject to Federal income taxes on distributed income. To maintain qualification as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of the REIT’s ordinary taxable income to shareholders.

The accompanying interim unaudited 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 accounting principles generally accepted in the United States of America (“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 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, 2004. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial position as of September 30, 2005, and the results of operations for all periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. 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.

2. Discontinued Operations

As of September 30, 2005, the Company had designated two communities, St. Andrews at Westwood and The Retreat Apartments, as held for sale pursuant to Statement of Financial Accounting Standards No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. The Company has entered into sale and purchase agreements to sell the real estate assets of these properties for $33 million and $8.4 million, respectively. Each transaction is expected to close during the fourth quarter of 2005. As such, the results of operations from these communities have been classified as income from discontinued operations for all periods presented.

On August 9, 2005 and December 15, 2004, the Company completed the divestitures of the Park Trace Apartments and The Glades Apartments for sales prices of $14.5 million and $20 million, respectively. Accordingly, the results of operations from these properties are presented as discontinued operations.

Summary results of operations for the aforementioned properties are as follows (in thousands):

	Three months ended				Nine months ended
	September 30, 2005		September 30, 2004		September 30, 2005		September 30, 2004
Revenues	$	1,116	$	2,063	$	3,863	$	5,015
Expenses		900		2,055		3,287		4,898
Income from discontinued operations	$	216	$	8	$	576	$	117

The net book value of the real estate assets held for sale was $19.3 million and $30.8 million as of September 30, 2005 and December 31, 2004, respectively.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)

3. Acquisition of Properties

In the third quarter of 2005, the Company completed the acquisition of two properties, The Reserve at Wescott Plantation, a 192 unit complex located in Summerville, South Carolina, and Tregaron Oaks, a 300 unit complex located in Bellevue, Nebraska. The purchase of the Reserve at Wescott included 9.2 acres of adjacent land that can be utilized for future development. The aggregate purchase price for these properties was $37.7 million. The following purchase price allocations have been preliminarily calculated as of September 30, 2005 and may change up to one year subsequent to the respective acquisition dates, as additional information about the acquired assets and liabilities is obtained (in thousands):

Land	$	3,415
Buildings		32,692
Total real estate assets		36,107
Other assets		1,618
Total assets acquired		37,725
Mortgage note payable		12,218
Other liabilities		395
		12,613
Net assets acquired	$	25,112

Included in other assets is $890,000 of in-place lease intangible assets which will be amortized over a twelve month period.

The Tregaron Oaks purchase was partially funded through a 10-year, $12.4 million mortgage note that bears interest at 5.1%. The remaining purchase price was funded with cash on hand. In connection with the acquisition of The Reserve at Wescott Plantation, the Company assumed the existing 40-year, 5.75% first mortgage loan of $12.2 million.

4. Borrowings under Repurchase Agreements

Borrowings under repurchase agreements as of September 30, 2005 and December 31, 2004 consisted of the following (in thousands):

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)

	Interest			Maturity		Carrying Amount
Collateral	Rate			Date	Payment Schedule	September 30, 2005		Dec. 31, 2004
Repurchase agreements collateralized by agency securities:
FNMA Pool #759197		3.86	%	12/13/2005	Interest payments and principal due at maturity	$	16,400	$	16,400
FNMA Pool #670676		3.65	%	10/24/2005	Interest payments and principal due at maturity		2,500		4,500
							18,900		20,900
Other repurchase agreements:
Misty Springs GNMA Certificate		3.74	%	10/12/2005	Interest payments and principal due at maturity		2,919	—
Waters Edge GNMA Certificate		3.74	%	10/12/2005	Interest payments and principal due at maturity		3,881	—
The Ponds at Georgetown GNMA Certificate		3.65	%	12/28/2005	Interest payments due quarterly, principal due at maturity		6,975		6,975
						$	32,675	$	27,875

The Company renewed the repurchase agreements due October 10^th with new agreements, which pay interest at 3.91% and are due November 12, 2005. The October 24^th repurchase agreement was renewed at 4.18% and is due January 24, 2006. The Company intends to renew its repurchase agreements as they become due with repurchase agreements having similar terms.

5. Transactions with Related Parties

Advisory Agreement

America First Apartment Advisory Corporation (the “Advisor”) operates under an Advisory Agreement (“the Agreement”) with the Company, which includes the following provisions: (i) the Advisor will administer the day-to-day operations of the Company; (ii) the Advisor will act as the authorized agent on behalf of the Company in connection with the identification, evaluation, purchase, financing, operation and disposition of all real estate assets; (iii) the Advisor will provide the executive and administrative personnel and services required for the operation of the Company; (iv) the Advisor will maintain the financial records and perform the financial reporting of the Company; and (v) the Advisor will monitor and provide information to the Board of Directors on an on-going basis.

In connection with these services, the Company pays the following administrative fees to the Advisor (in thousands):

	Three months ended				Nine months ended
	September 30, 2005		September 30, 2004		September 30, 2005		September 30, 2004
Administrative fees (1)	$	402	$	367	$	1,185	$	803
Administrative fees-agency securities (2)		12		18		49		58
Property management fees (3)		—		457		—		1,016
Property acquisition fees (4)		456		—		456		—
Reimbursement of direct and allocated costs (5)		374		860		1,711		1,987

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)

⁽¹⁾ Administrative Fee — General- This fee is equal to 0.55% per annum of the sum of: (i) the original principal amount of the bonds originally issued to a predecessor to the Company; (ii) the purchase price paid by the Company for new assets that are then held by the Company; (iii) the outstanding principal of mezzanine financing provided by the Company to unaffiliated owners of residential real estate, plus (iv) the value of the AFREZ properties on the date of the merger of AFREZ with and into the Company. Such fees are included in General and administrative expenses in the Consolidated Statements of Operations.

⁽²⁾ Administrative Fee — Agency Securities- This fee is equal to 0.25% per annum of the outstanding principal balance of all agency securities held by the Company plus an incentive equal to 20% of the amount by which the total net interest income realized by the Company from its portfolio of agency securities during each calendar month exceeds the average dollar amount of stockholders’ equity invested in agency securities during the month times the composite dividend yield reported by the National Association of Real Estate Investment Trusts for equity REITs which invest in residential apartment properties (5.1% for the month ended September 30, 2005).

⁽³⁾ Property Management Fees- Until November 8, 2004, an affiliate of the Advisor, America First Properties Management Company L.L.C. (“AFP”), provided property management services for the multifamily properties owned by the Company. The fees for services provided represented the lower of: (i) costs incurred in managing the properties, or (ii) customary fees for such services determined by reference to national statistics. On November 8, 2004, America First PM Group, Inc., (“PM Group”) a wholly-owned subsidiary of the Company, acquired certain property management assets, rights to use certain proprietary systems, certain property management agreements, certain employment agreements and other intangible assets from AFP and its parent, America First Companies, L.L.C. (“America First Companies”). As a result of this transaction, the management of all of the Company’s properties was internalized and therefore no further management fees will be incurred.

⁽⁴⁾ Property Acquisition Fee- In connection with the identification, evaluation, and acquisition of real estate assets, the Advisor receives a fee in the amount of 1.25% of the gross purchase price paid by the Company for such real estate assets.

⁽⁵⁾ Reimbursement of Direct and Allocated Costs- The Company reimburses the Advisor and its affiliate for certain costs and expenses that it incurs in connection with the carrying out of the Company’s business activities.

Included in accounts payable and accrued expenses in the Consolidated Balance Sheets are amounts due to the Advisor and its affiliate for administrative fees and reimbursed costs and expenses of approximately $131,000 and $162,000 as of September 30, 2005 and December 31, 2004, respectively.

Mezzanine loan

On September 15, 2005, the Company provided $7.4 million to America First Communities Offutt Developer, L.L.C. (the “Developer”). The funds were used by the Developer to partially finance the military housing privatization project at Offutt Air Force Base in Bellevue, Nebraska. The loan agreement requires quarterly payment of principal and interest commencing December 1, 2005, with the final installment due on September 1, 2009. Interest is paid at a variable rate based upon the 30 day LIBOR rate plus 9%. At September 30, 2005 the interest rate was 12.8%. During the third quarter, the Company had recognized $42,000 of interest income related to the mezzanine loan. The transaction was reviewed and approved by the independent members of the Board of Directors, in consultation with independent counsel. Due to the related party nature of the transaction, the Company was not obligated to pay an acquisition fee to the Advisor.

The loan is collateralized by the assets of the Developer and provides the right, upon default, to receive all construction management and development fees, as defined in the respective agreements, earned by the Developer on the privatization project.

In connection with making the loan, and in order to strengthen the Company’s collateral for the loan, the Company and the Advisor entered into an addendum to the Advisory Agreement under which the Advisor has agreed that the Company may set off fees owed by it to the Advisor in the event of any default on the loan. Notwithstanding any set off of its fees, the Advisor will remain obligated to provide advisory services to the Company. In addition, the Advisor has agreed not to terminate the Agreement during the term of the loan, unless otherwise agreed to by the Company.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)

6. Stock Option Plan

The Company adopted a Stock Option Plan (the “Plan”) on April 1, 2002 to permit awards of equity based compensation to those providing services to the Company. The Plan is administered by the Compensation Committee of the Board of Directors. The Plan allows for the granting of options to purchase an aggregate of up to 750,000 shares of the Company’s common stock. The Plan authorizes the Board of Directors and its Compensation Committee to grant Incentive Stock Options (“ISOs”), as defined under section 422 of the IRS Code, non-qualified stock options (“NQSOs”), and dividend equivalent rights (“DERs”) to eligible persons. The exercise price for options granted under the Plan shall not be less than the fair market value of the Company’s common stock on the date of the grant. Options granted under the Plan expire 10 years from the respective grant dates of the options.

On August 11, 2005, the Company granted a total of 16,000 NQSOs to acquire common stock at an exercise price of $12.15 per share. The options vest 25% on the grant date and 25% on each of the next three anniversaries of the grant date.

On February 4, 2003, NQSOs to acquire a total of 40,000 shares of common stock were granted to the Company’s four non-employee Directors, at an exercise price of $8.73 per share. The options vest 25% on the grant date and 25% on each of the next three anniversaries of the grant date.

Stock option activity for the nine month period ended September 30, 2005 is summarized as follows:

	Number of		Weighted Average
	Shares		Exercise Price
Balance at December 31, 2004		30,000	$	8.73
Granted		16,000		12.15
Cancelled		—		—
Balance at September 30, 2005		46,000	$	9.92
Options exercisable at September 30, 2005		26,500	$	9.25

As of September 30, 2005, the outstanding options remaining average contractual life is 8.2 years. The Company accounts for its stock options using the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under SFAS No. 123, the Company records compensation expense based upon the estimated fair value of its granted options, over their vesting period. The per share estimated fair value of the options granted on August 11, 2005 and February 4, 2003 was $3.05 and $2.19, respectively. The estimated fair value of the Company’s stock option grant in 2005 was determined using the Black-Scholes option-pricing model with the following assumptions: a risk free interest rate of 4.18%, an expected remaining contractual life of 6 years and an expected volatility rate of 13%. Compensation expense for stock options was $19,400 and $27,600 for the three and nine month periods ended September 30, 2005, and $4,100 and $16,500 for the three and nine month periods ended September 30, 2004. Payments on the dividend equivalent rights for exercisable options are charged to earnings when declared and were $6,600 and $17,900 for the three and nine month periods ended September 30, 2005, respectively, and $5,000 and $15,000 for the three and nine month periods ended September 30, 2004.

7. Net Income (Loss) Per Share

For the three and nine months ended September 30, 2005 and September 30, 2004 all outstanding stock options were excluded from the computation of diluted loss from continuing operations and net income (loss) per share due to the antidilutive impact on loss from continuing operations.

8. Segment Reporting

The Company’s reportable segments consist of: (i) its multifamily apartment properties; (ii) its commercial property; (iii) its investment in agency securities, and (iv) other, which includes Company overhead and consolidating entries.

The Company defines each of its multifamily apartment properties as an individual operating segment. It has determined that all multifamily apartment properties have similar economic characteristics and meet the other criteria which permit the multifamily apartment properties to be aggregated into one reportable segment, that being the acquiring, holding, operating and selling of

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)

multifamily apartment properties. The Company’s chief operating decision-makers assess and measure segment operating results based on net income.

The Company’s commercial property is defined as a separate individual operating segment. The Company’s chief operating decision-makers assess and measure segment operating results based on net income at the commercial property level.

The Company assesses the performance of its investment in agency securities based on its net income earned on these securities. Net income is calculated as agency securities interest income, less premium amortization, interest expense incurred on the financing used to acquire these securities and administrative and incentive fees. All of the Company’s agency securities are combined into one reportable segment for this purpose.

The Company does not derive any of its consolidated revenues from foreign countries and does not have any major tenants that individually account for 10% or more of the Company’s consolidated revenues.

The following table details certain key financial information for the Company’s reportable segments for the three and nine months ending September, 2005 and 2004 (in thousands):

	Three months ended						Nine months ended
	September 30, 2005			September 30, 2004			September 30, 2005			September 30, 2004
Total revenue
Multifamily	$	11,072		$	9,199		$	31,594		$	19,702
Commercial		176			254			496			582
Agency securities		12			73			121			285
Other		278			210			709			500
Total	$	11,538		$	9,736		$	32,920		$	21,069
Income (loss) from continuing operations
Multifamily	$	1,298		$	(620	)	$	2,021		$	3
Commercial		29			116			59			122
Agency securities		12			73			121			285
Other		(1,372	)		(925	)		(4,083	)		(2,057	)
Total	$	(33	)	$	(1,356	)	$	(1,882	)	$	(1,647	)

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)

9. Contingencies

On December 3, 2003, a purported class action lawsuit was filed in the Delaware Court of Chancery against AFREZ, along with its general partner and America First Companies L.L.C. (“America First”). The plaintiffs sought to have the lawsuit certified as a class action on behalf of all Unit holders of AFREZ. The lawsuit alleged, among other things, that the defendants acted in violation of their fiduciary duties to the Unit holders in connection with the merger of AFREZ with and into the Company. The merger of AFREZ with and into the Company was completed on June 3, 2004 and, as a result, the Company assumed all liabilities of AFREZ, including any liability that may have been imposed as a result of this lawsuit. On August 18, 2005 the lawsuit was dismissed with prejudice as to the named plaintiffs.

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 expensed in the 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 financial statements.

10. Subsequent Event

On November 4, 2005 the Company completed the sale of The Retreat Apartments for $8.4 million. The Company recognized a gain on the sale of $1.2 million.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

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

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 real estate investments it has made constitute forward-looking statements. Shareholders 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 local and national economic conditions, the amount of new construction, affordability of home ownership, interest rates on single-family home mortgages and on the Company’s variable-rate borrowings, government regulation, price inflation, the level of real estate and other taxes imposed on the properties, labor problems and natural disasters and other items discussed under “Risk Factors” in Item 1 of the Company’s Annual Report on Form 10-K as of December 31, 2004.

General

America First Apartment Investors, Inc. (the “Company”) was formed on March 29, 2002 under the Maryland General Corporation Law and is taxed as a real estate investment trust (“REIT”) for Federal income tax purposes. The Company is the successor to America First Apartment Investors, L.P. which merged with the Company as of January 1, 2003.

On June 3, 2004, America First Real Estate Investment Partners, L.P. (“AFREZ”) was merged with and into the Company. The Company was the surviving entity and assumed all of the assets, liabilities and business operations of AFREZ, including 14 multifamily apartment properties containing 2,783 rental units located in Arizona, Florida, Illinois, Michigan, North Carolina, Ohio, Tennessee and Virginia.

The following table sets forth certain information regarding the Company’s real estate properties as of September 30, 2005 and for the three months then ended:

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

					Average		Number		Percentage
		Number			Square Feet		of Units		of Units			Economic
Property Name	Location	of Units			Per Unit		Occupied		Occupied			Occupancy (2)
Arbor Hills	Antioch, TN		548			827		517		94	%		84	%
Belvedere Apartments	Naples, FL		162			829		160		99	%		94	%
Bluff Ridge Apartments	Jacksonville, NC		108			873		106		98	%		94	%
Brentwood Oaks Apartments	Nashville, TN		262			852		260		99	%		93	%
Coral Point Apartments	Mesa, AZ		337			780		322		95	%		82	%
Covey at Fox Valley	Aurora, IL		216			948		202		94	%		81	%
Delta Crossing	Charlotte, NC		178			880		170		96	%		70	%
Elliot’s Crossing Apartments	Tempe, AZ		247			717		239		97	%		81	%
Fox Hollow Apartments	High Point, NC		184			877		159		86	%		78	%
Greenbriar Apartments	Tulsa, OK		120			666		110		92	%		85	%
Highland Park Apartments	Columbus, OH		252			891		237		94	%		86	%
The Hunt Apartments	Oklahoma City, OK		216			693		197		91	%		91	%
Huntsview Apartments	Greensboro, NC		240			875		216		90	%		83	%
Jackson Park Place Apartments	Fresno, CA		296			822		278		94	%		91	%
Lakes of Northdale Apartments	Tampa, FL		216			873		213		99	%		94	%
Littlestone of Village Green	Gallatin, TN		200			987		192		96	%		81	%
Misty Springs Apartments	Daytona Beach, FL		128			786		128		100	%		96	%
Monticello Apartments	Southfield, MI		106			1,027		99		93	%		90	%
Oakhurst Apartments	Ocala, FL		214			790		210		98	%		93	%
Oakwell Farms Apartments	Nashville, TN		414			800		402		97	%		84	%
Park at Countryside	Port Orange, FL		120			720		117		98	%		91	%
The Park at 58 Apartments	Chattanooga, TN		196			876		147		75	%		73	%
The Ponds at Georgetown	Ann Arbor, MI		134			1,002		115		86	%		76	%
The Retreat	Atlanta, GA		226			855		205		91	%		69	%
The Reserve at Wescott Plantation	Summerville, SC		192			1,083		188		98	%		96	%
Tregaron Oaks Apartments	Bellevue, NE		300			875		284		95	%		92	%
St. Andrews at Westwood Apts	Orlando, FL		259			836		255		98	%		92	%
Shelby Heights	Bristol, TN		100			980		98		98	%		98	%
Waterman’s Crossing	Newport News, VA		260			944		245		94	%		91	%
Waters Edge Apartments	Lake Villa, IL		108			814		99		92	%		81	%
			6,539			859		6,170		94	%		86	%
The Exchange at Palm Bay	Palm Bay, FL		72,007	(1)		n/a		63,393		88	%		n/a

(1)	This is an office/warehouse facility. The figure represents square feet available for lease to tenants and percentage of square feet occupied.
(2)	Economic occupancy is presented for the quarter ended September 30, 2005. Economic occupancy is defined as the net rental income divided by the maximum amount of rental income which could be derived from each property. The statistic is reflective of vacancy, rental concessions, delinquent rents, bad debt and non-revenue units such as model units and employee units.

Executive Summary

For the past several years, the Company’s financial results have been negatively impacted by soft market conditions attributable to weak economic conditions, overbuilding of multifamily housing properties and record low interest rates available to purchasers of single family housing. During the first nine months of 2005, market conditions have improved for multifamily housing in many of the markets in which our properties are located. Demand for apartments in some markets has improved due to continued job growth, which has assisted in the creation of new households. Even though home mortgage rates continue to remain relatively low, the creation of new households has strengthened demand for rental housing, especially among newly formed households. While demand has strengthened in many markets, other factors have reduced the supply of available apartments. In particular, the trend toward condominium conversion in Florida has taken a number of rental units out of the market. The Company is capitalizing on this trend by entering into an agreement to sell St. Andrews at Westwood for $33 million. Upon the expected fourth quarter close of the St. Andrews transaction, the Company will recognize a gain of approximately $20 million. Additionally, the Company is evaluating the divestiture of another Florida property in its portfolio, subject to its ability to amend or remove the land use restrictions relating to the tax exempt bond financing on the property.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

As property performance drives the overall financial results for the Company, it is important to examine a few key property performance measures. The following are high level performance measures management uses to gauge the overall performance of our property portfolio.

Physical occupancy, economic occupancy, average annual rent per unit are performance measures that provide management an indication as to the quality of rental revenues. Physical occupancy is calculated simply as the percentage of units occupied out of the total units owned. Economic occupancy is calculated as the net rental revenue divided by the gross potential rental revenue which could be derived from the property portfolio. Economic occupancy is reflective of vacancy, rental concessions, delinquent rents, bad debts and non-revenue units such as model units. The average annual rent per unit is calculated as the total annualized net rental revenue divided by the total number of units owned. Real estate operating contribution is calculated as the excess of rental revenues over real estate operating expenses as a percentage of rental revenues, and provides management an indication as to the ability of the properties to manage expenses in the current occupancy environment.

The following table presents these measures as of the dates indicated.

	Three months ended						Nine months ended
	September 30,			September 30,			September 30,			September 30,
	2005			2004			2005			2004
Physical Occupancy		94	%		93	%		94	%		93	%
Economic Occupancy		86	%		80	%		83	%		80	%
Average Annual Rent Per Unit	$	7,639		$	7,353		$	7,514		$	7,259
Real Estate Operating Contribution		51	%		41	%		52	%		44	%

As reflected in the above figures, the strengthening demand for apartments, along with a tightening of the supply of available rental units, has allowed us to improve physical occupancy at our properties while at the same time significantly improving economic occupancy rates and average annual rent per unit through higher rental rates and a reduced need to offer rental concessions. Real estate operating contribution has increased primarily due to the elimination of property management fees.

Results of Operations

The following discussion of the Company’s results of operations for the three and nine months ended September 30, 2005 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, 2004.

Three Months Ended September 30, 2005 Compared to the Three Months Ended September 30, 2004 (in thousands)

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

	For the Three			For the Three
	Months Ended			Months Ended			Dollar			Percentage
	September 30, 2005			September 30, 2004			Change			Change
Revenues
Rental revenues	$	11,248		$	9,453		$	1,795			19	%
Other		290			283			7			2	%
Total Revenues		11,538			9,736			1,802			19	%
Expenses
Real estate operating		5,497			5,611			(114	)		(2	)%
Depreciation		2,238			1,756			482			27	%
Interest		1,953			1,592			361			23	%
General and administrative		1,515			1,009			506			50	%
Amortization		368			1,124			(756	)		(67	)%
Total Expenses		11,571			11,092			479			4	%
Loss from continuing operations	$	(33	)	$	(1,356	)	$	1,323			N/A

     Rental revenues. The acquisitions of Arbor Hills, Tregaron Oaks (“Tregaron”), and The Reserve at Wescott Plantation (“Wescott”), collectively, the “recently acquired properties,” increased rental revenues by approximately $1.5 million. The remaining increase in rental revenue is attributable to improved economic occupancy at our other properties.

     Other revenues. Other revenues in 2005 include interest and dividend income and revenues earned from property management fees from unaffiliated parties. In 2004, other revenues included a gain of $69,000 on the sale of corporate equity securities, as well as interest and dividend income.

     Real estate operating expenses. Operating expenses decreased by $114,000 from the three months ended September 30, 2004. Operating expenses associated with newly acquired properties increased operating expenses by $730,000. This increase was partially offset by the elimination of property management fees, which amounted to $457,000 during the period ended September 30, 2004. Management fees were eliminated with the internalization of the property management operations in November 2004. The prior year results were also impacted by hurricane related expenses of $270,000. No such expenses were incurred during the third quarter of 2005.

     Depreciation expense. The increase is attributable to the acquisition of Arbor Hills, Tregaron Oaks, and Wescott. Depreciation expense incurred by the properties owned by the Company during the three months ended September 30, 2005 and 2004 was consistent.

     Interest expense. Interest expense represents interest paid and other expenses associated with the taxable and tax-exempt mortgage debt incurred to finance the Company’s investments in multifamily apartment properties. The increase in interest expense for the period is partially attributable to the debt assumed and incurred in the acquisitions of Arbor Hills, Tregaron and Wescott. These increases are partially offset by the benefit recognized from the change in fair market value of the Company’s interest rate swaps.

     General and administrative expenses. General and administrative expenses increased by $506,000 from the three months ended September 30, 2004. Salaries and benefit related costs accounted for $240,000 of the increase, the majority of which was due to the internalization of the property management operations. Administrative fees paid to the Advisor increased by $35,000 as a result of properties acquired subsequent to September 30, 2004. The remainder of the increase is attributable to increases in consulting fees, directors and officer’s insurance and audit fees, largely attributable to increased costs to comply with the provisions of the Sarbanes-Oxley Act.

     Amortization expense. Amortization expense includes the amortization of in-place lease intangibles and debt financing costs. The amounts recorded during the three months ended September 30, 2005 relate primarily to the amortization of in-place leases at Arbor Hills, Wescott and Tregaron. The 2004 amounts relate to the amortization of such intangibles acquired in the AFREZ merger.

Nine Months Ended September 30, 2005 Compared to the Nine Months Ended September 30, 2004 (in thousands)

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

	For the Nine			For the Nine
	Months Ended			Months Ended			Dollar			Percentage
	September 30, 2005			September 30, 2004			Change			Change
Revenues
Rental revenues	$	32,090		$	20,284		$	11,806			58	%
Other		830			785			45			6	%
Total Revenues		32,920			21,069			11,851			56	%
Expenses
Real estate operating		15,325			11,401			3,924			34	%
Depreciation		6,260			3,888			2,372			61	%
Interest		6,082			3,598			2,484			69	%
General and administrative		4,498			2,209			2,289			104	%
Amortization		2,637			1,620			1,017			63	%
Total Expenses		34,802			22,716			12,086			53	%
Loss from continuing operations	$	(1,882	)	$	(1,647	)	$	(235	)		14	%

     Rental revenues. The June 3, 2004 merger with AFREZ increased rental revenues for the nine months ended September 30, 2005 by $7.8 million. The recently acquired properties increased revenues by $3.3 million. Increases in economic occupancy accounted for the remaining increase in revenues.

     Other revenues. Other revenues in 2005 include interest and dividend income, and revenues earned from property management fees from unaffiliated parties. In 2004, other revenues included a gain of $212,000 on the sale of equity securities, as well as interest and dividend income.

     Real estate operating expenses. Operating expenses increased by $5.3 million due to the properties acquired in the merger with AFREZ and the purchase of the recently acquired properties. This increase is partially offset by the elimination of property management fees, which approximated $1.0 million during the period ended September 30, 2004. The prior year results were also impacted by hurricane related expenses of $270,000. No such expenses were incurred during the first nine months of 2005.

     Depreciation expense. The increase is attributable to the acquisition of properties in the merger with AFREZ and the purchase of the recently acquired properties. Depreciation expense incurred by the properties held by the Company prior to the merger with AFREZ was consistent with the depreciation expense incurred during the same period in 2004.

     Interest expense. Interest expense represents interest paid and other expenses associated with the taxable and tax-exempt mortgage debt incurred to finance the Company’s investments in multifamily apartment properties. The increase in interest expense for the period is attributable to the debt assumed and incurred in the merger with AFREZ and the acquisition of the recently acquired properties.

     General and administrative expenses. General and administrative expenses have increased by $2.3 million from the nine months ended September 30, 2004. Salaries and benefit related costs accounted for $1.2 million of the increase. This increase is primarily due to increased costs due to the internalization of the property management operations and severance payments of $600,000 and $370,000 respectively. General and administrative expenses are also impacted by increased Administrative fees paid to the Advisor of $380,000. Such fees increased due to the merger with AFREZ. The remainder of the increase is primarily attributable to increases in consulting fees, directors and officers insurance, and professional fees.

     Amortization expense. Amortization expense includes the amortization of in-place lease intangibles and debt financing costs. During 2005, there were five months of amortization of in-place lease intangibles related to the AFREZ merger and nine months of amortization related to the Arbor Hills acquisition. There was four months of AFREZ related amortization in 2004.

Discontinued Operations.

As of September 30, 2005, the St. Andrews at Westwood Apartments and The Retreat Apartments have been designated as held for sale. Accordingly, the results of operations for the periods presented have been reclassified to discontinued operations and disclosed as a single line item on the Statements of Operations. The Glades Apartments, acquired in the AFREZ merger and divested in

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

December 2004, and the Park Trace Apartments, divested in August of 2005, are also classified as discontinued operations. The closing of the Park Trace transaction resulted in a gain of $3.4 million being recognized during the third quarter of 2005.

Funds from Operations (“FFO”)

The following sets forth a reconciliation of the Company’s net income (loss) as determined in accordance with GAAP and its FFO for the periods set forth (in thousands):

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2005			2004			2005			2004
Net income (loss)	$	3,625		$	(1,348	)	$	2,136		$	(1,530	)
Depreciation expense		2,238			1,756			6,260			3,888
In-place lease amortization		321			1,056			2,488			1,408
Depreciation and amortization of discontinued operations		87			568			704			1,270
Less: Gain on sale of property		(3,442	)		—			(3,442	)		—
Funds from Operations	$	2,829		$	2,032		$	8,146		$	5,036
Shares outstanding		10,511			10,506			10,511			7,453
Funds from Operations per share	$	0.27		$	0.19		$	0.78		$	0.68

Funds from Operations increased $797,000, or 39%, and $3.1 million, or 62%, for the three and nine months ended September 30, 2005, respectively. The increase during the three month period is partially attributable to the acquisition of Arbor Hills, Tregaron and Wescott; whereas, the increase during the nine month period is partially due to the recent acquisitions as well as the inclusion of the results of operations of the properties acquired in the merger with AFREZ. FFO for both periods was positively impacted by improved results of operations from “same store” properties. This improvement was the result of increased economic occupancy and the internalization of the property management operations. These increases are partially offset by the increased general and administrative expenses. In addition, FFO in 2004 reflected a gain on the sale of equity securities held by the Company.

FFO is calculated in accordance with the definition of FFO that is recommended by the National Association of Real Estate Investment Trusts (“NAREIT”). To calculate FFO under the NAREIT definition, depreciation and amortization expenses related to the Company’s real estate, gains or losses realized from the disposition of depreciable real estate assets, and certain extraordinary items are adjustments to the Company’s net income. The Company believes that FFO is an important non-GAAP measurement because FFO excludes the depreciation expense on real estate assets and real estate generally appreciates over time or maintains residual value to a much greater extent than other depreciable assets such as machinery or equipment. Additionally, other real estate companies, analysts and investors utilize FFO in analyzing the results of real estate companies.

While the Company uses the NAREIT definition of FFO, the Company’s FFO may not be comparable to other REITs or real estate companies with similar assets. This is due in part to the differences in capitalization policies used by different companies and the significant effect these capitalization policies have on FFO. Real estate costs incurred in connection with real estate operations which are accounted for as capital improvements are added to the carrying value of the property and depreciated over time whereas real estate costs that are expensed are accounted for as a current period expense. This affects FFO because costs that are accounted for as expenses reduce FFO. Conversely, real estate costs that are capitalized and depreciated are added back to net income to calculate FFO. Prior to 2005, the Company’s capitalization policy was to treat most recurring capital improvements, such as appliances, vinyl flooring and carpet as expenses, and this may cause the Company’s historically reported FFO to be lower than peer companies that capitalize recurring improvements of these types.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

Although the Company considers FFO to be a useful measure of its operating performance, FFO should not be considered as an alternative to net income which is calculated in accordance with GAAP.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

Supplemental Operating Performance Statistics

The following tables are presented to provide additional information regarding property performance.

	For the three months ended September 30,												For the nine months ended September 30,
	2005						2004						2005						2004
	Physical			Economic			Physical			Economic			Physical			Economic			Physical			Economic
Property Name	Occupancy			Occupancy			Occupancy			Occupancy			Occupancy			Occupancy			Occupancy			Occupancy
Properties historically owned by the Company
Belvedere Apartments		99	%		94	%		96	%		91	%		99	%		94	%		97	%		91	%
Coral Point Apartments		95	%		82	%		89	%		68	%		95	%		80	%		87	%		67	%
Covey at Fox Valley		94	%		81	%		89	%		75	%		88	%		74	%		89	%		74	%
Greenbriar Apartments		92	%		85	%		97	%		85	%		93	%		85	%		94	%		82	%
The Hunt Apartments		91	%		91	%		93	%		90	%		94	%		92	%		92	%		90	%
Jackson Park Place Apartments		94	%		91	%		96	%		91	%		95	%		91	%		97	%		93	%
Littlestone of Village Green		96	%		81	%		90	%		77	%		95	%		80	%		92	%		80	%
Oakhurst Apartments		98	%		93	%		96	%		91	%		98	%		94	%		95	%		91	%
Oakwell Farms Apartments		97	%		84	%		95	%		76	%		96	%		80	%		94	%		74	%
Park at Countryside		98	%		91	%		94	%		85	%		98	%		92	%		93	%		87	%
The Park at 58 Apartments		75	%		73	%		83	%		75	%		77	%		73	%		82	%		75	%
The Retreat		91	%		69	%		92	%		65	%		90	%		67	%		94	%		67	%
St. Andrews at Westwood Apts		98	%		92	%		98	%		82	%		99	%		89	%		97	%		82	%
Shelby Heights		98	%		98	%		94	%		93	%		96	%		94	%		95	%		94	%
Properties acquired in the merger with AFREZ (1)
Bluff Ridge Apartments		98	%		94	%		99	%		94	%		98	%		95	%		99	%		96	%
Brentwood Oaks Apartments		99	%		93	%		98	%		86	%		98	%		90	%		98	%		87	%
Delta Crossing		96	%		70	%		91	%		65	%		97	%		69	%		92	%		66	%
Elliot’s Crossing Apartments		97	%		81	%		91	%		73	%		95	%		77	%		93	%		75	%
Fox Hollow Apartments		86	%		78	%		85	%		73	%		84	%		74	%		90	%		80	%
Highland Park Apartments		94	%		86	%		96	%		83	%		96	%		84	%		92	%		81	%
Huntsview Apartments		90	%		83	%		88	%		74	%		91	%		79	%		88	%		74	%
Lakes of Northdale Apartments		99	%		94	%		94	%		84	%		95	%		89	%		94	%		83	%
Misty Springs Apartments		100	%		96	%		100	%		92	%		100	%		95	%		99	%		92	%
Monticello Apartments		93	%		90	%		88	%		78	%		92	%		86	%		93	%		85	%
The Ponds at Georgetown		86	%		76	%		92	%		74	%		88	%		76	%		90	%		78	%
Waterman’s Crossing		94	%		91	%		98	%		93	%		96	%		92	%		98	%		93	%
Waters Edge Apartments		92	%		81	%		94	%		76	%		90	%		77	%		91	%		77	%
Recently acquired properties
Arbor Hills (2)		94	%		84	%		n/a			n/a			90	%		80	%		n/a			n/a
The Reserve at Wescott Plantation (2)		98	%		96	%		n/a			n/a			98	%		96	%		n/a			n/a
Tregaron Oaks (2)		95	%		92	%		n/a			n/a			95	%		92	%		n/a			n/a
		94	%		86	%		93	%		80	%		94	%		83	%		93	%		80	%

(1)	Properties were acquired by the Company on June 3, 2004. The above percentages include physical economic occupancy information for the two and five months prior to the Company’s ownership.
(2)	Arbor Hills, The Reserve at Wescott Plantation, and Tregaron Oaks were acquired by the Company in December 2004, September 2005, and August 2005, respectively.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

	Annualized Revenue per unit
	Three months ended September 30,							Nine months ended September 30,
Property Name	2005		2004		Change			2005		2004		Change
Properties historically owned by the Company
Belvedere Apartments	$	9,702	$	8,818	$	884		$	9,713	$	9,180	$	533
Coral Point		6,611		5,400		1,211			6,360		5,292		1,068
Covey at Fox Valley		10,062		9,451		611			9,247		9,248		(1	)
Greenbriar Apartments		5,652		5,982		(330	)		5,798		5,633		165
The Hunt Apartments		5,677		5,798		(121	)		5,844		5,704		140
Jackson Park Place		8,341		8,274		67			8,310		8,180		130
Littlestone of Village Green		7,214		7,294		(80	)		7,139		7,457		(318	)
Oakhurst Apartments		8,118		7,594		524			7,944		7,575		369
Oakwell Farms Apartments		7,000		6,594		406			6,673		6,452		221
Park at Countryside		8,060		7,488		572			8,019		7,281		738
The Park at Fifty Eight		4,818		5,192		(374	)		4,961		5,211		(250	)
The Retreat		6,269		6,672		(403	)		6,259		6,492		(233	)
St. Andrews at Westwood Apts		8,838		8,233		605			8,673		8,189		484
Shelby Heights		6,951		6,595		356			6,637		6,937		(300	)
Properties acquired in the merger with AFREZ (1)
Bluff Ridge Apartments		7,652		8,061		(409	)		7,852		7,770		82
Brentwood Oaks Apartments		8,395		8,146		249			8,070		7,915		155
Delta Crossing		6,561		6,271		290			6,685		6,453		232
Elliot’s Crossing Apartments		7,057		6,159		898			6,598		6,210		388
Fox Hollow Apartments		6,196		6,273		(77	)		6,003		6,472		(469	)
Highland Park Apartments		6,310		6,650		(340	)		6,414		6,378		36
Huntsview Apartments		6,547		6,279		268			6,479		6,146		333
Lakes of Northdale Apartments		8,982		8,085		897			8,407		7,811		596
Misty Springs Apartments		8,084		7,619		465			7,924		7,550		374
Monticello Apartments		10,012		9,668		344			9,914		10,025		(111	)
The Ponds at Georgetown		9,729		10,664		(935	)		10,424		10,782		(358	)
Waterman’s Crossing		9,742		9,633		109			9,755		9,589		166
Waters Edge Apartments		9,537		9,673		(136	)		9,167		9,180		(13	)
Recently acquired properties
Arbor Hills (2)		6,884		n/a		n/a			6,736		n/a		n/a
The Reserve at Wescott Plantation (2)		10,426		n/a		n/a			10,426		n/a		n/a
Tregaron Oaks (2)		7,709		n/a		n/a			7,709		n/a		n/a
	$	7,639	$	7,353		286		$	7,514	$	7,259		255

(1)	Properties were acquired by the Company on June 3, 2004. The above amounts include operating revenues for the two and five months prior to the Company’s ownership.
(2)	Arbor Hills, The Reserve at Wescott Plantation, and Tregaron Oaks were acquired by the Company in December 2004, September 2005, and August 2005, respectively.

Liquidity and Capital Resources

The Company’s primary source of cash is net rental revenues generated by its 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 areas in which a property is located. This, in turn, is affected by several factors, such as local or national economic conditions, the amount of new apartment construction and the affordability of home ownership. 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 a property.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

The Company uses cash primarily to (i) pay the operating expenses of its multifamily apartment properties, including the cost of capital improvements; (ii) to pay the operating expenses of the Company’s administration, including the fees paid to its Advisor; (iii) the payment of debt service on its bonds and mortgages payable; (iv) the acquisition of additional multifamily apartment properties, agency securities and other investments; and (v) the payment of dividends. Currently, the Company’s cash provided by operations is insufficient to maintain the necessary level of capital improvements and to fully fund the current level of dividends. While the Company has the ability to fund the current level of dividends through other means, including proceeds from the sale of properties, continued weakness in operating cash flows could negatively impact dividend rates.

The Company’s principal business strategy is to acquire and operate multifamily apartment properties as long-term investments. In order to achieve its acquisition strategy, the Company has the authority to finance the acquisition of additional real estate in a variety of manners, including raising additional equity capital. In June 2004, the Company filed a registration statement for $200 million of capital stock which may be sold from time to time in order to raise additional equity capital in order to support the Company’s business strategy. To date, no securities have been sold under this registration statement.

In addition to the funds that the Company may raise through the issuance of additional equity capital, it may also be able to borrow money to finance the acquisition of additional real estate assets. Borrowing to acquire additional multifamily apartment properties is generally in the form of long-term taxable or tax exempt mortgage loans secured by the acquired properties. The amount of debt the Company can incur is not limited by its charter or otherwise. In general, however, the amount of borrowing used to finance the overall multifamily apartment property portfolio is approximately 55% to 70% of the purchase price of these assets, although higher or lower levels of borrowings may be used on any single property.

The multifamily apartment properties which the Company currently owns are financed under twenty-one mortgage financings with an aggregate principal balance outstanding of approximately $186 million as of September 30, 2005. These mortgages consist of thirteen tax-exempt bonds with an aggregate principal balance outstanding of approximately $111.1 million and eight taxable mortgage notes payable with a combined principal balance of approximately $74.9 million. Eleven of these mortgage obligations, totaling approximately $83.2 million, require periodic payments of principal and interest while the remaining ten mortgage obligations require only periodic payments of interest. Approximately 67% of these mortgage obligations bear interest at a fixed rate with a weighted average interest rate of 5.3% for the three months ended September 30, 2005. The remaining 33% of these mortgage obligations bear interest at variable rates, via interest rate swap agreements, that had a weighted average interest rate of 2.8% for the three months ended September 30, 2005. The interest rate on $26.2 million of the $64.3 million of variable rate debt is capped at 4.5%. Maturity dates on these mortgage obligations range from December 2007 to July 2031. Each of these mortgage loans has been made on a non-recourse basis, which means the lender’s source of payment in the event of default is limited to foreclosure of the underlying property securing the mortgage loan.

In order to mitigate interest rate risk associated with the Company’s variable rate debt, the Company has entered into the following derivative financial instruments.

20

AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

	Interest Rate Swaps and Caps
		Counterparty						Company
		Notional			Receive/			Notional			Pay
	Maturity	Amount			Cap Rate			Amount			Rate
Fixed to Variable	December 6, 2006	$	4,800	(5)		7.00	%	$	4,800	(5)		3.05	% (3)
Fixed to Variable	December 6, 2006	$	5,300	(5)		7.13	%	$	5,300	(5)		3.05	% (3)
Fixed to Variable	December 6, 2006	$	5,077	(1) (5)		7.75	%	$	5,104	(1) (5)		3.05	% (3)
Fixed to Variable	January 22, 2009	$	8,300	(5)		5.38	%	$	8,300	(5)		3.05	% (3)
Variable to Fixed	February 3, 2009	$	8,100			2.40	% (2)	$	8,100			2.82	%
Variable to Fixed	June 25, 2009	$	10,910			2.40	% (2)	$	10,910			3.30	%
Fixed to Variable	July 13, 2009	$	6,930	(5)		7.25	%	$	6,930	(5)		3.05	% (3)
Fixed to Variable	July 13, 2009	$	3,980	(5)		7.50	%	$	3,980	(5)		3.05	% (3)
Interest Rate Cap	December 22, 2009	$	13,400			4.50	% (4)		N/A			N/A
Interest Rate Cap	December 22, 2009	$	12,750			4.50	% (4)		N/A			N/A
Variable to Fixed	January 15, 2012	$	11,320			3.44	%	$	11,320			2.40	% (2)

(1)	Notional amount is tied to the The Exchange at Palm Bay bond payable and adjusts downward as principal payments are made on the bond payable.
(2)	Weighted average Bond Market Association rate for the three months ended September 30, 2005.
(3)	Weighted average Bond Market Association rate for the three months ended September 30, 2005 plus 0.65%.
(4)	Capped rate is tied to the weighted average Bond Market Association rate for the month.
(5)	These are total return swaps.

The $8.1 million variable to fixed swap was entered into on top of and to mitigate the variable rate risk of the fixed to variable swap maturing January 22, 2009. It effectively fixes the interest rate on $8.1 million of bonds payable at 2.82% through February 3, 2009. Other than the $11.3 million variable to fixed rate swap, the Company’s interest rate swaps and caps do not qualify for hedge accounting and thus are accounted for as free standing financial instruments which are marked to market each period through the statement of operations.

The Company also has borrowings in the form of notes payable and borrowings under repurchase agreements. The notes, which were assumed as part of the merger with AFREZ, bear interest at a variable rate with a weighted average interest rate for the three month period of 4.0%. These Notes payable are due January 15, 2008. The borrowings under repurchase agreements bear interest at fixed rates with a weighted average interest rate of 3.75% for the three months ended September 30, 2005 and mature within one year.

Acquisitions of agency securities are principally financed with repurchase agreements. Repurchase agreements take the form of a sale of a security (in this case, an agency security owned by the Company) to a counterparty at an agreed upon price in return for the counterparty’s simultaneous agreement to resell the same securities back to the Company at a future date at a higher price. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a borrowing under which the Company pledges agency securities that it already owns as collateral to secure a short-term loan with a counterparty. The borrowings are then used to acquire additional agency securities, which themselves may be used as collateral for additional borrowings under repurchase agreements. The difference between the sale and repurchase price is the cost, or interest expense, of borrowing under the repurchase agreements. The repurchase agreements may require the Company to pledge additional assets to the lender in the event the market value of existing pledged collateral declines below a specified percentage. The pledged collateral may fluctuate in value due to, among other things, principal repayments, market changes in interest rates and credit quality. The Company retains beneficial ownership of the pledged collateral, including the right to distributions, while the counterparty maintains custody of the collateral securities. At the maturity of a repurchase agreement, the Company is required to repay the loan and concurrently receive back its pledged collateral from the lender or, may renew the repurchase agreement at the then prevailing financing rate. As of September 30, 2005, the Company had borrowed approximately $18.9 million under short-term repurchase agreements to finance its investment in agency securities. These repurchase agreements have a weighted average interest rate of 3.8% and a weighted average maturity of less than 90 days. Total borrowings to acquire agency securities are currently limited by the Company to not more than eight times the amount of equity capital invested or set aside for investment by the Company in agency securities, although the Company can increase this limitation with the approval of the Board of Directors.

21

AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

Cash Flows from Operating, Investing and Financing Activities

Cash provided by operating activities for the nine months ended September 30, 2005 increased by $4.4 million compared to the same period a year earlier. The increase is due to cash generated by the properties acquired subsequent to September 30, 2004 and improved economic occupancy.

For the nine months ended September 30, 2005 cash used in investing activities was $21.8 million. The Company utilized approximately $25 million to acquire Tregaron and Wescott. The Company also used $7.4 million to invest in a mezzanine loan to America First Communities Offutt Developer, LLC (the “Developer”). The funds from the investment were used by the Developer to partially finance the military housing privatization project at Offutt Air Force Base in Bellevue, Nebraska. The loan agreement requires quarterly payment of principal and interest commencing December 1, 2005, with the final installment due on September 1, 2009. Interest is paid at a variable rate based upon the 30 day LIBOR rate plus 9%. Restricted cash has increased by $7.9 million, primarily as a result of the sale of Park Trace. Prior to its sale, Park Trace collateralized the bonds held by Covey at Fox Valley. When Park Trace was divested, the Company utilized $6 million of cash from the sale as replacement collateral for those bonds. Partially offsetting the above transactions was the receipt of $14 million from the divestiture of Park Trace and the receipt of $6 million in principal payments from the Company’s agency securities.

For the nine months ended September 30, 2005, cash provided by financing activities was $3.5 million. The Company received $12.4 million in proceeds from a mortgage note that it used to partially finance the acquisition of Tregaron. This note bears interest at a fixed rate of 5.1%. The Company also received $6.8 million from new repurchase agreements. These funds were utilized to finance the mezzanine loan to the Developer. Offsetting these cash receipts was the third quarter payment of $4.9 million, upon maturity, of the Littlestone note and dividend payments of $7.9 million. Declared dividends during 2005 have exceeded the Company’s earnings by $5.6 million, thereby increasing the Company’s accumulated deficit to $18.4 million.

In addition to the mortgage note utilized by the Company to acquired Tregaron, the Company also assumed the existing 5.75% fixed rate mortgage note at Wescott of $12.2 million.

Contractual Obligations

The Company had the following contractual obligations as of September 30, 2005 (in thousands):

	Payments due by period
			Less than		1-3		3-5		More than
	Total		1 year		years		years		5 years
Notes payable	$	2,413	$	—	$	—	$	2,413	$	—
Bonds and mortgage notes payable	$	185,979	$	1,168	$	38,145	$	2,896	$	143,770
Borrowings under
repurchase agreements	$	32,675	$	32,675	$	—	$	—	$	—

The Company is also contractually obligated to pay interest on its long-term debt obligations. The weighted average interest rate of the long-term debt obligations outstanding as of September 30, 2005 was approximately 5.3% for fixed-rate debt and 2.8% for variable-rate debt.

Repurchase agreements will either be renewed with new agreements having similar terms or be repaid.

The table above does not include the Company’s contingent obligation due to the Advisor under the terms of the Advisory Agreement. If the Agreement is terminated by the Company without cause, the Company is required to pay the Advisor a termination fee equal to the appraised present value of the amount of administrative fees that would have been earned under the Agreement through December 31, 2016. Such fees for the nine months ended September 30, 2005 were $1.2 million.

22

AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company’s primary market risk exposure is interest rate risk. The Company’s exposure to market risk for changes in interest rates relates primarily to its long-term borrowings. Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond the Company’s control.

The Company’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objective, the Company borrows primarily at fixed rates and enters into derivative financial instruments, such as interest rate swaps, in order to manage and mitigate its interest rate risk. The Company has not entered into derivative instrument transactions for speculative purposes.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2004 for detailed disclosure about quantitative and qualitative disclosures concerning market risk. Quantitative and qualitative disclosures about market risk have not materially changed since December 31, 2004.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’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 Company’s current disclosure controls and procedures are effective, providing them with material information relating to the Company as required to be disclosed in the reports the Company files or submits under the Exchange Act on a timely basis.

(b) Changes in internal controls over financial reporting. There were no changes in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

23

AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

On December 3, 2003, a purported class action lawsuit was filed in the Delaware Court of Chancery against America First Real Estate Investment Partners, L.P. ( “AFREZ”), along with its general partner and America First Companies, L.L.C., by Harvey Matcovsky and Gloria Rein, in their capacities as holders of assigned limited partner interests (“Units”) of AFREZ. The plaintiffs sought to have the lawsuit certified as a class action on behalf of all Unit holders. The lawsuit alleged, among other things, that the defendants acted in violation of their fiduciary duties to the Unit holders in connection with the merger of AFREZ with and into the Company. The plaintiffs were seeking to enjoin the proposed merger and also sought unspecified damages and costs. On August 18, 2005 the lawsuit was dismissed with prejudice, as to the named plaintiffs.

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:

2.1 Agreement and Plan of Merger, dated November 25, 2003, between the Company and America First Real Estate Investment Partners, L.P. and Amendment to Agreement and Plan of Merger, dated February 10, 2004 (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-4 (Commission File No. 333-111036) filed by the Company on February 25, 2004).

2.2 Agreement and Plan of Merger, dated June 18, 2002, between the Company and America First Apartment Investors, L.P. (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-4 (Commission File No. 333-90690) filed by the Company on June 18, 2002).

3.1 Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (Commission File No. 333-90690) filed by the Company on June 18, 2002).

3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4 (Commission File No. 333-90690) filed by Company on August 1, 2002).

4.1 Specimen of Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-4 (Commission File No. 333-90690) filed by the Company on June 18, 2002).

10.1 Agreement of Sale and Purchase by and between the Company and TCG Acquisitions, Inc. (incorporated herein by reference to the Current report on Form 8-K filed September 9, 2005).

10.2 Loan and Security Agreement the Company and America First Communities Offutt Developer, LLC (incorporated herein by reference to the Current report on Form 8-K filed September 21, 2005).

10.3 Addendum to the Second Amended and Restated Advisory Agreement by and between the Company and America First Apartment Advisory Corporation (incorporated herein by reference to the Current report on Form 8-K filed September 21, 2005).

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.

24

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 APARTMENT INVESTORS, INC.
Date: November 9, 2005	/s/ John H. Cassidy
	John H. Cassidy President and Chief Executive Officer

25

EX-31.1

EXHIBIT 31.1

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

I, John H. Cassidy, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of America First Apartment Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: November 9, 2005

/s/ John H. Cassidy

John H. Cassidy

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

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

I, Michael J. Draper, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of America First Apartment Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: November 9, 2005

/s/ Michael J. Draper

Michael J. Draper

Vice President, Chief Financial Officer, Treasurer and Secretary

27

EX-32.1

Exhibit 32.1

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

I, John H. Cassidy, Chief Executive Officer of America First Apartment Investors, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

  (1) The Quarterly Report on Form 10-Q of the Company for the three months ended September 30, 2005 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2005
	/s/ John H. Cassidy
	John H. Cassidy
	President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to America First Apartment Investors, Inc. and will be retained by America First Apartment Investors, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

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

I, Michael J. Draper, Chief Financial Officer of America First Apartment Investors, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

  (1) The Quarterly Report on Form 10-Q of the Company for the three months ended September 30, 2005 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2005
	/s/ Michael J. Draper
	Michael J. Draper
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to America First Apartment Investors, Inc. and will be retained by America First Apartment Investors, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.