America First Apartment Investors, Inc. Announces Fourth Quarter and Full Year 2004 Results.

OMAHA, Neb. -- America First Apartment Investors, Inc. (Nasdaq:APRO) (the "Company"), a multifamily real estate investment trust, today announced its results for the fourth quarter and the full year ended December 31, 2004.

Fourth Quarter 2004 Highlights

--Net loss of $1.2 million or $0.12 per share in 2004 compared to a $118,000 net loss or $0.02 per share for the same quarter a year ago. The increased net loss is primarily attributable to $1.1 million of non-cash amortization expense associated with in-place lease intangibles. The in-place lease intangibles represent the value assigned to the existing leases at acquired properties including the 14 additional properties acquired by the Company in June 2004 through its acquisition of America First Real Estate Investment Partners, L.P. Additionally, the fourth quarter results were also affected by two significant transactions: first, the Company's purchase of certain property management assets and, second, the sale of the Glades Apartments in Jacksonville, Florida.

--In November the Company completed the purchase of certain property management assets. Assets purchased included employment agreements, property management contracts and an operating platform thereby providing the Company the capability to internally manage its property portfolio. The Company paid $6.8 million for these assets of which $5.9 million was expensed in the fourth quarter. The Company expects this transaction to be accretive to earnings in the first quarter of 2005.

--In December the Company sold the Glades Apartments for a total sales price of $20.0 million. The total sales price consisted of cash and debt assumed by the purchaser. The sale netted $11.1 million in cash proceeds and the Company realized a gain on sale of $6.0 million.

--In December the Company completed the purchase of Arbor Hills, a 548-unit apartment complex in Antioch, Tennessee. The total purchase price was $29.7 million, $26.2 million through the assumption of existing tax-exempt mortgage debt on the Property and $3.5 million representing cash plus expenses paid at closing.

--Fourth quarter same store results showed positive net operating income growth as compared to the same quarter last year. These results benefited in part from revenue and occupancy increases as well as the elimination of property management fees for almost two full months of the quarter.

--The Florida market has rebounded strongly from the third quarter disruptions caused by the multiple hurricanes. Also, all six of our apartment properties in Florida experienced occupancy and revenue gains in the fourth quarter compared to the fourth quarter of 2003.

Full Year 2004 Highlights

--Net loss of $2.8 million or $0.34 per share for the full year 2004 compared to net income of $4.4 million or $0.86 per share in 2003. The financial results in 2004 are largely driven by the merger in June with America First Real Estate Investment Partners, L.P. ("AFREZ") and the significant fourth quarter transactions noted above. The increased net loss is primarily attributable to $2.5 million of non-cash amortization expense associated with in-place lease intangibles. The in-place lease intangibles represent the value assigned to the existing leases at acquired properties including the 14 additional properties acquired by the Company in June 2004 through its acquisition of America First Real Estate Investment Partners, L.P. In addition, the 2003 results for the Company were improved by a gain of $4.4 million gain recorded on the repayment of a subordinate note resulting from the sale of Jefferson Place Apartments.

--In addition, the Company incurred significant added expense in the second half of 2004 in connection with its documentation and assessment of internal financial controls as required by Section 404 of the Sarbanes-Oxley Act of 2002 produced significant added expenses in the second half of 2004. Specifically, the Company recognized additional consulting and audit fees over the prior year of over $300,000 related to Sarbanes-Oxley Section 404 compliance. This added expense does not include any quantification or allocation of internal costs. Management and staff of the Company also devoted significant time and effort to the compliance project which is difficult to quantify.

--Funds From Operations ("FFO" a non-GAAP financial measure defined below) for the year 2004 equaled $1.2 million or $0.14 per share as compared to $9.4 million or $1.84 per share in 2003. The property management acquisition expense of $5.9 million reduced FFO in 2004 while the $4.4 million gain recorded in 2003 on the repayment of a subordinate note almost doubled FFO in 2003. Beginning in 2005 we believe the internalization of the property management function previously discussed will add between $0.07 to $0.09 per share to the Company's annual FFO.

FFO is a non-GAAP measure that refers to Funds from Operations. FFO is a common measure of operating performance for real estate investment trusts. A reconciliation and further discussion of FFO can be found later in this release.

Management Comments

"Our 2004 financial results reflect the difficult conditions we experienced in many of the markets we currently serve," said Jack Cassidy, CEO. "As we look into 2005, the positive momentum of our operating performance in the fourth quarter has sustained itself nicely into the first quarter of 2005. We believe the steady job growth in the United States over the last year has strengthened many of our markets and improved leasing conditions. Additionally, our renewed focus on improving property operating efficiencies and controlling property expenses contributed positively to our fourth quarter property results and will continue in 2005."

Looking ahead, the Company remains committed to its long term objectives of delivering a secure and growing dividend while maintaining the value and quality of the property portfolio. To meet these objectives, we continue to focus on middle market rental product, but seek to achieve greater balance and stability in the portfolio through a selective disposition and acquisition program. Our portfolio strategy also aims to produce a more efficient and effective property management operation. As such, we are currently evaluating our property portfolio to identify properties with minimal upside potential or isolated locations relative to the rest of our portfolio which may be marketed for sale.

Our current business strategy includes the expansion of our property portfolio through acquisitions of multifamily apartment properties. As part of this strategy, in June 2004, we filed a Form S-3 registration statement with the SEC 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 such acquisitions.

Company financial statements and other required disclosures for 2004 may be found in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission on March 21, 2005.

America First Apartment Investors, Inc. is an equity real estate investment trust focused on multifamily apartment properties located throughout the United States. Its portfolio currently includes 29 multifamily properties and one commercial property. America First Apartment Investors, Inc. press releases are available on the World Wide Web at www.apro-reit.com.

Information contained in this Press Release contains "forward-looking statements" relating to, without limitation, future performance, plans and objectives of management for future operations and projections of revenue and other financial items, which can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. Several factors with respect to such forward-looking statements, including certain risks and uncertainties, could cause actual results to differ materially from those in such forward-looking statements. Reference is hereby made to the filings of America First Apartment Investors, Inc., with the Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and its annual report on Form 10-K.

FFO is calculated in accordance with the definition of FFO that is recommended by the National Association of Real 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 added back to the Company's net income. The Company believes that FFO more appropriately reflects the Company's operating performance 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. During the periods reported above, 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 reported FFO to be lower than peer companies that capitalize recurring improvements of these types.

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 or net cash flows from operating activities which are calculated in accordance with GAAP.

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

For the        For the
                                            Year Ended    Year Ended
                                          Dec. 31, 2004  Dec. 31, 2003
                                          -------------- -------------
Net income (loss)                               $(2,765)       $4,361
Depreciation expense                              7,122         5,001
Amortization of in-place lease
 intangibles                                      2,797             -

Gain on sale of discontinued operations          (5,973)            -
                                          -------------- -------------
Funds From Operations                            $1,181        $9,362
                                          ============== =============

Weighted Average Number of Shares
 Outstanding - basic and diluted                  8,243         5,074
Net Income (Loss)  Per Share - basic and
 diluted                                         $(0.34)        $0.86
 Funds From Operations - basic and
  diluted                                         $0.14         $1.84