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.