Item 2. Acquisition or Disposition of Assets.



(a) On May 26, 2004, the shareholders of America First Apartment Investors, Inc.
(the Registrant) approved a merger with America First Real Estate Investment
Partners, L.P., a Delaware limited partnership (the Partnership), pursuant to
the Agreement and Plan of Merger entered into by the Registrant and the
Partnership on November 25, 2003 (the Merger Agreement). The merger will become
effective at 12:01 a.m. Eastern Time on June 3, 2004. As a result of the merger,
the Partnership will be merged with and into the Registrant. The Registrant will
be the surviving company and will acquire all of the assets of the Partnership,
including 14 multifamily apartment properties containing 2,783 rental units
located in Florida, North Carolina, Michigan, Tennessee, Ohio, Illinois, Arizona
and Virginia and GNMA certificates backed by pools of first mortgage loans on
residential properties. The Registrant will also assume all liabilities of the
Partnership, including taxable mortgages and tax-exempt mortgage loans totaling
approximately $69.3 million, all of which are secured by first mortgages on its
apartment complexes. The Partnership has approximately $7.0 million of
borrowings under repurchase agreements which are collateralized by GNMA
certificates secured by first mortgages on multifamily properties. Additionally,
the Partnership's Variable Rate Junior Notes with an outstanding balance of
approximately $2.4 million will be assumed as liabilities of the Registrant. No
shares of the Registrant's common stock will be issued to holders of these
notes. The Registrant will continue to operate as a real estate investment trust
for federal tax purposes after the merger.


The Registrant will issue shares of its common stock and cash to the holders of
the limited partner and general partner interests in the Partnership upon
consummation of the merger. Each Unit representing an assigned limited
partnership interest in the Partnership as of the date of the merger will be
converted into the right to receive 0.7910 shares of the common stock of the
Registrant and a cash payment of $0.39 per Unit. Fractional shares will be
rounded up or down to the nearest whole number. Approximately 5,376,470 shares
of the common stock of the Registrant will be issued to Unit holders in
connection with the merger. The general partner's 1% interest in the Partnership
will be converted into the right to receive 54,308 shares of the common stock of
the Registrant plus a cash payment of $26,776.


The exchange ratio negotiated between the Registrant and the Partnership to
determine the number of share of the Registrant's common stock issued for each
Unit in the merger approximated the relative prices of the Units and the
Registrant's common stock on the Nasdaq stock market over the 30 trading days
prior to the date of the Merger Agreement. The cash payment of $0.39 is intended
to provide cash to Unit holders to pay state and federal income taxes arising
from the merger.


The Registrant is externally managed by its Advisor, America First Apartment
Advisory Corporation. The Advisor is controlled by America First Companies
L.L.C. The Advisor will continue to manage the newly combined properties of the
Registrant. The general partner of the Partnership is America First Capital
Source I, L.L.C. The general partner is also controlled by America First
Companies L.L.C. All the executive officers of the Advisor are also executive
officers of the Registrant. The Registrant has also retained America First
Properties Management Company L.L.C. to manage each of its multifamily apartment
properties. This property manager is wholly owned by America First Companies
L.L.C. Additionally, some of the directors and executive officers of the
Registrant are also managers and executive officers of the America First
Companies L.L.C. These individuals include Michael Yanney, the Chairman of
America First Companies L.L.C. and of the Registrant, Lisa Roskens, the
President and Chief Executive Officer and a manager of America First Companies
L.L.C. and a director of the Registrant, John H. Cassidy, the President and
Chief Executive Officer of the Registrant, Mark A. Hiatt, the Chief Financial
Officer of America First Companies L.L.C. and the Registrant, Joseph Grego, the
Executive Vice President-Real Estate of the Registrant, Maurice Cox, Jr., the
Executive Vice President-Investor Relations of the Registrant, George Krauss, a
manager of America First Companies L.L.C. and a director of the Registrant, and
Gail Yanney, a manager of America First Companies L.L.C.


(b) The Partnership's investment strategy focused on acquiring multifamily
apartment complexes as long-term investments in addition to the investment in
equity securities of real estate investment trusts and securities issued by GNMA
with cash not invested in apartment complexes. The Registrant intends to
continue to operate such newly-acquired properties as multifamily residences and
to primarily focus its acquisition efforts on established multifamily properties
in stable markets. The Registrant does not currently have any binding
commitments for the sale of its multifamily apartment complexes.