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

Critical Accounting Policies

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

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Executive Summary

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

Although the consequences of these conditions and their impact on our ability to pursue our plan to grow through investments in additional tax-exempt bonds secured by first mortgages on affordable multifamily housing projects are not fully known, we do not anticipate that our existing assets will be adversely affected in the long-term. If uncertainties in these markets continue, the markets deteriorate further or the Company experiences further deterioration in the values of its investment portfolio, the Company may incur impairments to its investment portfolio which could negatively impact the Company's financial statements.

The Company believes that current economic and credit market conditions have created investment opportunities for the Company that it intends to aggressively pursue. Many participants in the multifamily housing debt sector are either reducing their participation in the market or are being forced to divest their existing portfolio of investments. This has resulted in fewer investors competing for new issuances of tax-exempt housing bonds and has created opportunities to acquire existing tax-exempt bonds from distressed entities at attractive yields. We believe that we are well-positioned as a result of our ability to acquire assets on the secondary market while maintaining the ability and willingness to also participate in primary market transactions. Additionally, the current credit crisis is providing the potential for investments in quality real estate assets to be acquired from distressed owners and lenders. Our ability to restructure existing debt together with the ability to improve the operations of the underlying apartment properties through our affiliated property management company results in a valuable tax-exempt bond investment which is supported by the collateral and operations of the underlying real property. The Company is currently evaluating a number of attractive potential investments and continues to be presented with investment opportunities on a regular basis. While we believe the Company is well-positioned to aggressively pursue new investment opportunities thereby creating value to shareholders in the form of a strong tax-exempt bond investment, there is no guarantee that we will be able to consummate any such transaction.

Additionally, the current negative economic conditions, unemployment, lack of jobs growth, low home mortgage interest rates and tax incentives provided to first time homebuyers have begun to have a negative impact on the properties which collateralize our tax-exempt bond investments, the VIEs and our MF Properties in the form of declining occupancy. Economic occupancy at the MF Properties was 85% during the first nine months of 2009 as compared to 87% in the first nine months of 2008. Economic occupancy of the VIEs was 74% in 2009 and 84% in 2008. These issues will have a negative impact on the overall property operations and profitability in the short-term, however, we expect that long-term property operations will not be impacted significantly.

Approximately $19.9 million in outstanding mortgage financing related to the MF Properties located in Ohio and Kentucky was due in July 2009. This mortgage loan contains three one-year renewal options held by the borrower. In July 2009, the borrower entered into a Maturity Date Extension Agreement for the mortgage loan which extended the maturity on the mortgage one year to July 2010. In conjunction with the extension, the borrower paid down the mortgage balance related to two of the financed properties, Eagle Ridge and Meadowview. The outstanding principal was reduced by approximately $7.1 million resulting in a new outstanding mortgage balance of approximately $12.8 million and the Eagle Ridge and Meadowview properties were released as collateral for the loan. If the current illiquidity in the financial markets continues or further deteriorates, our ability to renew or refinance our outstanding credit facility, as well as the mortgage debt financing MF Properties, may be negatively affected.

The Partnership has an effective Registration Statement on Form S-3 with the SEC relating to the sale of up to $100.0 million of its BUCs. Pursuant to this Registration Statement, in October 2009, the Partnership issued, through an underwritten public offering, a total of 4,830,000 BUCs at a public offering price of $5.05 per BUC. Additionally, pursuant to this Registration Statement, in May 2009, the Partnership issued, through an underwritten public offering, a total of 3,500,000 BUCs at a public offering price of $5.00 per BUC. Net proceeds realized by the Partnership from the issuance of the additional BUCs were approximately $22.9 million and $16.1 million, respectively, after payment of an underwriter's discount and other offering costs. The proceeds will be used to acquire additional tax-exempt revenue bonds and other investments meeting the Partnership's investment criteria and for general working capital needs. To date, the Partnership has issued approximately $71.5 million of BUCs under this Registration Statement which will expire in January 2010. The Partnership intends to issue additional BUCs from time to time. In that regard, the Partnership expects to file a new Registration Statement on Form S-3 for the sale of additional BUCs beyond the amount registered under its existing Registration Statement.

The Company's regular annual distributions were paid at a rate of $0.54 per BUC, or $0.135 per quarter per BUC, through the first quarter of 2009. Given the changes to the Company's credit facilities, the General Partner completed financial models in order to estimate the impact of the change on the Company's assets, debt and cash available for distribution ("CAD"). In order to ensure that cash provided by the Company's tax-exempt mortgage revenue bonds and other investments will be adequate to meet its projected liquidity requirements, including the payment of expenses, interest and distributions to BUC holders, beginning with the second quarter 2009 distribution, the General Partner changed the Company's regular annual distribution to $0.50 per BUC, or $0.125 per quarter per BUC. The General Partner believes that distributions at this level are sustainable; however, if actual results vary from current projections and the actual CAD generated is less than the new regular distribution, such distribution amount may need to be reduced.

Discussion of the Partnership Bond Holdings and the Related Apartment Properties as of September 30, 2009

The Partnership's purpose is to acquire and hold as long-term investments a portfolio of federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential apartments. At September 30, 2009, the Partnership held 16 tax-exempt mortgage bonds (secured by 15 properties), six of which are secured by properties held by VIEs and, therefore, eliminated in consolidation on the Company's financial statements. The nine properties underlying the ten non-consolidated tax-exempt mortgage bonds contain a total of 1,329 rental units. At September 30, 2008, the Partnership held 19 tax-exempt mortgage bonds (secured by 17 properties), eight of which were secured by properties held by VIEs and, therefore, eliminated in consolidation on the Company's financial statements. At September 30, 2008, the nine properties underlying the eleven non-consolidated tax-exempt mortgage bonds secured by apartment properties contained a total of 1,137 rental units. The VIEs' primary operating strategy focuses on multifamily apartment properties as long-term investments. Each VIE owns one multifamily apartment property that has been financed by a tax-exempt mortgage revenue bond held by the Partnership. As of September 30, 2009, the Company consolidated six VIE multifamily apartment properties containing a total of 1,288 rental units. As of September 30, 2008, the Company consolidated eight VIE multifamily apartment properties containing a total of 1,764 rental units.

To facilitate its investment strategy of acquiring additional tax-exempt mortgage bonds secured by multifamily apartment properties, the Partnership may acquire ownership positions in apartment properties ("MF Properties"). The Partnership expects to ultimately restructure the property ownership through a sale of the MF Properties and a syndication of low income housing tax credits ("LIHTCs"). The Partnership expects to provide the tax-exempt mortgage revenue bonds to the new property owners as part of the restructuring. Such restructurings will generally be expected to be initiated within 36 months of the initial investment in an MF Property and will often coincide with the expiration of the compliance period relating to LIHTCs previously issued with respect to the MF Property. The Partnership will not acquire LIHTCs in connection with these transactions. As of September 30, 2009, the Partnership's subsidiaries held an interest in nine MF Properties containing 964 rental units, of which four are located in Ohio, two are located in Kentucky, one is located in Virginia, one is located in Georgia, and one in North Carolina. As of September 30, 2008, a wholly-owned subsidiary of the Partnership held limited partnership interests in seven entities that own MF Properties containing a total of 668 rental units.
The following table outlines certain information regarding the apartment properties on which the Partnership holds tax-exempt mortgage bonds (separately identifying those treated as VIEs) and the MF Properties owned by the Partnership. The narrative discussion that follows provides a brief operating analysis of each property during the first nine months of 2009.

                                                                                                                 Economic
                                                                                     Percentage of           Occupancy (1) for
                                                                 Number of         Occupied Units as         the period ended
                                               Number              Units           of September 30,            September 30,
Property Name       Location                  of Units           Occupied           2009       2008           2009       2008

Non-Consolidated
Properties
Bella Vista
Apartments          Gainesville, TX                  144               129             90 %       97 %           89 %       93 %
Bridle Ridge
Apartments          Greer, SC                        152               135             89 %       97 %           77 %       80 %
Clarkson College    Omaha, NE                        142               125             88 %       85 %           69 %       67 %
Gardens of
DeCordova (4)       Granbury, TX                      76               n/a            n/a        n/a            n/a        n/a
Gardens of
Weatherford (2)     Weatherford, TX                   76               n/a            n/a        n/a            n/a        n/a
Runnymede
Apartments          Austin, TX                       252               242             96 %       65 %           95 %       69 %
Southpark
Apartments (4)      Austin, TX                       192               182             95 %      n/a             89 %      n/a
Woodland Park (4)   Topeka, KS                       236               n/a            n/a        n/a            n/a        n/a
Woodlynn Village    Maplewood, MN                     59                57             97 %       88 %          100 %       92 %
                                                   1,329               870             92 %       83 %           88 %       79 %

VIEs
Ashley Square       Des Moines, IA                   144               133             92 %       93 %           92 %       86 %
Bent Tree
Apartments          Columbia, SC                     232               201             87 %       94 %           78 %       85 %
Cross Creek (4)     Beaufort, SC                     144               n/a            n/a        n/a            n/a        n/a
Fairmont Oaks
Apartments          Gainsville, FL                   178               169             95 %       96 %           82 %       91 %
Iona Lakes
Apartments          Ft. Myers, FL                    350               276             79 %       83 %           62 %       66 %
Lake Forest
Apartments          Daytona Beach, FL                240               219             91 %       95 %           74 %       91 %
                                                   1,288               998             87 %       92 %           74 %       84 %

MF Properties
Churchland (3)      Chesapeake, VA                   124               120             97 %       85 %           89 %       85 %
Crescent Village    Cincinnati, OH                    90                85             94 %       89 %           83 %       86 %
Eagle Ridge         Erlanger, KY                      64                53             83 %       86 %           73 %       79 %
Glynn Place (3)     Brunswick, GA                    128                85             66 %      n/a             70 %      n/a
Greens of Pine Glen
(3)                 Durham, NC                       168               160             95 %      n/a             90 %      n/a
                    Highland Heights,
Meadowview          KY                               118                96             81 %       92 %           84 %       95 %
Postwoods I         Reynoldsburg, OH                  92                82             89 %       97 %           86 %       89 %
Postwoods II        Reynoldsburg, OH                  88                82             93 %       94 %           90 %       92 %
                    Columbus
Willow Bend         (Hilliard), OH                    92                89             97 %       89 %           93 %       85 %
                                                     964               852             88 %       90 %           85 %       87 %

(1) Economic occupancy is presented for the nine months ended September 30, 2009 and 2008, and is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Actual occupancy is a point in time measure while economic occupancy is a measurement over the period presented, therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.
(2)This property is still under construction as of September 30, 2009, and therefore has no occupancy data.
(3) Previous period occupancy numbers are not available, as this is a new investment.
(4) Construction on these properties has been completed and the properties are in a lease up and stabilization period. As of September 30, 2009, Cross Creek as leased 61 of a total of 144 units, Gardens of Decordova has leased 28 of a total of 76 units and Woodland Park has leased 107 of a total of 236 units.

Bella Vista - Bella Vista Apartments is located in Gainesville, Texas. In the first nine months of 2009, Bella Vista's operations resulted in Net Operating Income (calculated as property revenue less salaries, advertising, administration, utilities, repair and maintenance, insurance, taxes, and management fee expenses) of $404,000 as compared to $416,000 in 2008. The decrease was a result of a decrease in economic occupancy.

Bridle Ridge Apartments - Bridle Ridge Apartments is located in Greer, South Carolina. In the first nine months of 2009, Bridle Ridge Apartments' operations resulted in Net Operating Income of $335,000 as compared to $566,000 in 2008. This decrease is a direct result of decreased economic occupancy combined with an increase in renting, administration and maintenance expenses.

Clarkson College - Clarkson College is a 142 bed student housing facility located in Omaha, Nebraska. In the first nine months of 2009, Net Operating Income was $275,000 as compared to $300,000 in 2008. The decrease is attributable to an increase in utilities, market ready, and repair expenses.

Gardens of DeCordova - The Gardens of DeCordova Apartments is located in Granbury, Texas and began leasing its 76 units in November 2008. As of September 30, 2009, 76 units have been completed and are available for rent and 28 units are currently occupied. The developer and principals have guaranteed completion and stabilization of the project. During the first nine months of 2009, the property owners made additional capital contributions and in July 2009 the Company made a taxable loan of approximately $315,000 to the project to fund debt service on the bonds through property stabilization. Additionally, Properties Management was engaged to replace the prior property manager and is currently managing the property. In September 2009, the Partnership was notified by the limited partner of the limited partnership that owns the Gardens of DeCordova of its intent to withdraw from the limited partnership and assign its limited partnership interest to another party. Such interest includes the rights to receive the LIHTCs yet to be syndicated on the property. The change in ownership may have a negative impact on the tax-exempt bonds owned by the Partnership on this property unless a successor limited partner is located and agrees to fund any capital contributions necessary to allow the project to reach stabilized occupancy. The Partnership is working with the general partner of this limited partnership to resolve this issue and will use its senior secured position as bondholder to help seek a positive outcome and protect Partnership interests. Until such time as a new limited partner is admitted to this limited partnership, the full impact of this change in ownership will not be known. At this time the Gardens of DeCordova owes the Partnership approximately $4.9 million under tax-exempt bonds and $315,000 under taxable loans.

Gardens of Weatherford - The Gardens of Weatherford Apartments is currently under construction in Weatherford, Texas and will contain 76 units upon completion. At this time infrastructure construction activities have been substantially completed but no construction has begun on the actual apartment buildings. The developer and principals have guaranteed completion and stabilization of the project. During the first half of 2009, the Company made a taxable loan to the owners of the property of approximately $141,000 to help fund the construction activities and current bond debt service reserves through construction completion and property stabilization. Additionally, Properties Management was engaged to replace the prior property manager and is currently managing the property and monitoring the construction progress. Due to numerous zoning, planning and design issues encountered in the building permit application process; construction on this project is significantly behind schedule. In September 2009, the Partnership was notified by the limited partner of the limited partnership that owns the Gardens of Weatherford of its intent to withdraw from the limited partnership and assign its limited partnership interest to another party. Such interest includes the rights to receive the LIHTCs yet to be syndicated on the property. The change in ownership may have a negative impact on the tax-exempt bonds owned by the Partnership on this property unless a successor limited partner is located and agrees to fund any capital contributions necessary to complete and stabilize the project. The Partnership is working with the general partner of this limited partnership to resolve this issue and will use its senior secured position as bondholder to help seek a positive outcome and protect Partnership interests. Until such time as a new limited partner is admitted to this limited partnership, the full impact of this change in ownership will not be known. While approximately $2.0 million remains on deposit with the bond trustee for the Gardens of Weatherford, such funds are insufficient to complete construction of the project or to pay the outstanding principal on the bonds should the project not be constructed. At this time the Gardens of Weatherford owes approximately $4.7 million under tax-exempt bonds and $141,000 under taxable loans.

Runnymede Apartments - Runnymede Apartments is located in Austin, Texas. In the first nine months of 2009, Runnymede Apartment's operations resulted in Net Operating Income of $643,000 as compared to $280,000 in 2008. This increase is a direct result of increased occupancy which led to increased revenues.

Southpark Apartments - Southpark Apartments is located in Austin, TX and contains 192 units. In the first nine months of 2009, Southpark's operations resulted in Net Operating Income of $859,000 on revenue of approximately $1.3 million.

Woodland Park - Woodland Park Apartments began leasing its 236 units in Topeka, Kansas in November 2008. As of September 30, 2009, all units have been completed and are available for rent and 107 units are currently occupied. The developer has guaranteed completion and stabilization of the project.

Woodlynn Village - Woodlynn Village is located in Maplewood, Minnesota. In the first nine months of 2009, Net Operating Income was $292,000 as compared to $244,000 in 2008. This increase is a direct result of increased economic occupancy.

Ashley Square - Ashley Square Apartments is located in Des Moines, Iowa. In the first nine months of 2009, Net Operating Income was $286,000 as compared to $207,000 in 2008. This increase was the result of improved economic occupancy and a decrease in administration and repair and maintenance expenses.

Bent Tree - Bent Tree Apartments is located in Columbia, South Carolina. In the first nine months of 2009, Net Operating Income was $387,000 as compared to $552,000 in 2008. This decrease was the result of lower property revenue based on decreased occupancy.

Cross Creek - Cross Creek Apartments is located in Beaufort, South Carolina. The Cross Creek bonds were acquired in April 2009. At that time the project was not completed and was vacant. The Company has made a $1.7 million taxable loan to the property owner to allow for the completion of construction, lease up and stabilization of the property and the payment of bond debt service. Cross Creek Apartments began leasing its 144 units in June 2009. As of September 30, 2009, 120 units have been completed and are available for rent and 61 units are currently occupied.

Fairmont Oaks - Fairmont Oaks Apartments is located in Gainesville, Florida. In the first nine months of 2009, Net Operating Income was $479,000 as compared to $627,000 in 2008. This decrease was a direct result of lower property revenues from decreased economic occupancy.

Iona Lakes - Iona Lakes Apartments is located in Fort Myers, Florida. In the first nine months of 2009, Net Operating Income was $607,000 as compared to $675,000 in 2008. This decrease was related to lower property revenues from decreased economic occupancy.

Lake Forest - Lake Forest Apartments is located in Daytona Beach, Florida. In the first nine months of 2009, Net Operating Income was $452,000 as compared to $813,000 in 2008. This decrease was a direct result of lower property revenues due to decreased economic occupancy along with an increase in salary and utility expenses.

MF Properties

Churchland - Churchland is located in Chesapeake, Virginia and was acquired in August 2008. During the first nine months of 2009, the property recognized approximately $413,000 in Net Operating Income on revenue of $751,000.

Crescent Village - Crescent Village Townhomes is located in Cincinnati, Ohio. In the first nine months of 2009, Crescent Village's operations resulted in Net . . .