UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended September 30, 2004

or

For the transition period from            to

Commission File Number: 000-49986

AMERICA FIRST APARTMENT INVESTORS, INC.

(402) 444-1630
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [ X ]   NO [    ]

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

YES [    ]   NO [ X ]

     As of November 9, 2004, there were 10,505,558 outstanding shares of the registrant’s common stock.

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AMERICA FIRST APARTMENT INVESTORS, INC.

TABLE OF CONTENTS

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

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

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

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

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

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

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

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Supplemental disclosure of non-cash investing and financing activities:

On June 3, 2004, the Company merged with America First Real Estate Investment Partners, L.P. (“AFREZ”). Merger consideration included $3,597,948 in cash paid, $513,110 of additional merger costs incurred and paid by AFREZ and 5,430,661 shares of stock with a value of $55,338,436 issued in exchange for the limited partner and general partner interests of AFREZ.

In May 2003, the Company issued 992 shares of its common stock having a value of $10,000 as Director compensation.

On January 1, 2003, the Company merged with America First Apartment Investors, L.P. (the “Partnership”). In connection with such merger, the Company issued 5,073,805 shares of stock in exchange for the limited partner and general partner interests of the Partnership.

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

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES

1. Organization and Basis of Presentation

America First Apartment Investors, Inc. (the “Company”) is a Maryland corporation formed for the purpose of owning and operating multifamily apartment complexes and other real estate investments. The Company commenced its business operations upon the completion of the merger of America First Apartment Investors, L.P. (the “Partnership”) with and into the Company. Upon consummation of the merger, which became effective January 1, 2003, the Company assumed all of the assets, liabilities and business operations of the Partnership. In June 2004, the Company merged with America First Real Estate Investment Partners, L.P., a Delaware limited partnership (“AFREZ”). Refer to footnote 2 for further details. As of September 30, 2004, the Company owns and operates 29 multifamily apartment complexes containing a total of 6,118 rental units and one commercial property.

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, 2003. Certain amounts from prior periods have been reclassified to conform to the current period presentation. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial position as of September 30, 2004, 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.

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.

2. Merger

On May 26, 2004, the shareholders of the Company approved a merger with AFREZ, pursuant to the Agreement and Plan of Merger entered into by the Company and AFREZ on November 25, 2003 (the “Merger Agreement”). The merger became effective on June 3, 2004. As a result of the merger, AFREZ was merged with and into the Company. The Company was the surviving company 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.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(UNAUDITED)

The Company issued shares of its common stock and paid cash to the holders of the limited partner and general partner interests in AFREZ upon consummation of the merger. Each Unit representing an assigned limited partnership interest in AFREZ as of the date of the merger was converted into the right to receive 0.7910 shares of the common stock of the Company and a cash payment of $0.39 per Unit. Fractional shares were rounded up or down to the nearest whole number. A total of 5,376,353 shares of the common stock of the Company were issued to Unit holders in connection with the merger plus a cash payment of $2,650,851. The general partner’s 1% interest in AFREZ was converted into 54,308 shares of the common stock of the Company plus a cash payment of $26,776.

Pursuant to Statement of Financial Accounting Standards No. 141, Business Combinations, the Company allocates a portion of the total acquisition cost of a property acquired to leases in existence as of the date of acquisition. The estimated valuation of in-place leases is calculated by applying a risk-adjusted discount rate to the projected cash flow deficit at each property during the lease-up of these properties. This allocated cost is amortized over the average remaining term of the leases (approximately twelve months). There were no significant leases with above or below market terms and no value was assigned to tenant relationships beyond the in-place lease intangibles discussed previously. This transaction did not result in recording any goodwill.

The following table summarizes the estimated fair value of AFREZ assets acquired and liabilities assumed at the date of the merger and the total value of the merger consideration. The following purchase price allocations have been preliminarily calculated as of June 1, 2004 and may change for up to one year subsequent to the acquisition date pending the Company’s review and valuation procedures of the assets acquired and the liabilities assumed.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(UNAUDITED)

The Company has continued to operate as a real estate investment trust for federal income tax purposes after the merger.

The following unaudited, pro-forma financial information assumes the AFREZ acquisition occurred at the beginning of 2003. The most significant adjustments to the periods presented is the inclusion of AFREZ’s results for the entire periods presented in addition to the amortization expense related to in-place lease intangibles being reflected in 2003 rather than in 2004. These results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of 2003, or the results which may occur in the future.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(UNAUDITED)

3. Investments in Real Estate

As of September 30, 2004 and December 31, 2003, the Company’s investments in real estate consisted of the following:

⁽¹⁾ This is an office/warehouse facility. The figure represents square feet available for lease to tenants.

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AMERICA FIRST APARTMENT INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(UNAUDITED)

4. Notes Payable

Notes payable of the Company consist of Variable Rate Junior Notes assumed in the merger with AFREZ. These unsecured notes bear interest at the rate equal to 120% of the annual applicable federal rate for debt instruments with a term of not over three years as determined by the Internal Revenue Code and applicable regulations thereunder. As of September 30, 2004, such rate was 2.79%. The notes provide for annual installments of accrued interest payable on the 15^th of each January. The unpaid principal balance and accrued but unpaid interest is due January 15, 2008.

5. Bonds and Mor