America First Apartment Investors, Inc. Announces Results for Second Quarter 2006.

OMAHA, Neb. -- America First Apartment Investors, Inc. (NASDAQ: APRO), a multifamily real estate investment trust, today announced its financial results for the second quarter ended June 30, 2006.

Net income for the three months ended June 30, 2006, was $17.3 million, or $1.57 per share, compared to a net loss of $507,000, or $0.05 per share in the 2005 second quarter. Net income for the six month period was $17.5 million, or $1.58 per share compared to a net loss of $1.5 million, or $0.14 per share for the 2005 comparable period. APRO's results of operations for the three and six months ended June 30, 2006 were positively impacted by the $14.9 million gain recognized in connection with the second quarter sale of the Belvedere Apartments and the $2.3 million gain recognized in connection with the second quarter sale of The Park at 58 Apartments. The Company's loss from continuing operations for the 2006 second quarter was $89,000, an improvement of $698,000 from a loss of $787,000 in the 2005 second quarter. For the first six months of 2006, the Company's loss from continuing operations improved to $3,000 compared to $2.1 million in the same period a year ago.

The Company's improved results continue the positive momentum that APRO generated during fiscal 2005. For the 2006 second quarter, rental revenues increased $2.3 million, or 23% to $12.3 million from $10.0 million in the second quarter last year. Rental revenues for the 2006 six month period increased $4.1 million, or 21%, to $23.8 million from $19.7 million in the 2005 six month period. Property acquisitions subsequent to June 30, 2005 accounted for $2.0 million and $3.4 million of the respective rental revenue increases. The remainder of the increase is attributable to increased rental rates and economic occupancy on APRO's apartment assets. Over the last twelve months, the Company's economic occupancy has increased to 87% from 82%.

APRO has also benefited from reduced amortization expense from in-place lease intangibles. These expenses have decreased as the in-place leases obtained in the 2004 merger with America First Real Estate Investment Partners became fully amortized in May 2005.

Propelled by strong revenue growth, Funds from Operations (FFO) for the 2006 second quarter increased 13% to $3.1 million, or $0.28 per share, and 19% for the six months ended June 30, 2006 to, $6.3 million, or $0.57 per share.

Strategic Overview

APRO's strategic plan is to enhance the long term value of the Company's real estate assets through a selective acquisition and disposition program that increases APRO's presence in markets with positive growth potential. As part of that plan, APRO seeks to divest older underperforming assets in single asset locations. On April 26, 2006, the Company completed the sale of The Park at 58 Apartments, a 196 unit apartment community in Chattanooga, Tennessee, for $5 million. The Company also sold the Belvedere Apartments, a 162 unit apartment complex in Naples, Florida, for $23.2 million on June 1, 2006. While this property had performed well, the attractive Florida real estate market and the historically high pricing levels that were offered by condominium converters enabled APRO to realize a significant gain, which the Company expects to reinvest during the second half of 2006.

Notwithstanding these property sales, APRO's multifamily asset base continued to grow during the first six months of 2006 with the acquisitions of The Greenhouse in Omaha, Nebraska and Arbors of Dublin in Columbus, Ohio. These property purchases were financed primarily by the proceeds from the 2005 sale of St. Andrews in Orlando, Florida to a condominium converter. On July 27, 2006, the Company completed the acquisition of the second phase of Jackson Park Place, an 80 unit apartment community. Located in a very desirable and prosperous section of Fresno, California, adjacent to the first phase of Jackson Park Place which APRO already owns and operates, the Company will operate the two assets as one property to produce a more efficient operation and improved economic results. The second phase of Jackson Park Place includes 44 three bedroom apartments averaging over 1,200 square feet. These three bedroom apartments complement the first phase, which includes only one and two bedroom apartments. Phase one of Jackson Park Place has generated increasing revenues and income for APRO over the past four years and APRO anticipates strong future growth from this expanded property.

Since initiating its strategic plan in the third quarter of 2005, APRO has divested a total of five properties. Three of the divestitures represented properties that did not provide acceptable growth potential; the remaining two properties divested represented an opportunity for APRO to leverage the significant price appreciation experienced in Florida into $50 million of proceeds that the Company intends to invest in newer apartment assets. The proceeds from the five divested properties, which collectively had a net asset value (defined as net book value of the property less any property-specific debt) of approximately $33 million, have been reinvested in five new properties with a net asset value of approximately $54 million, with an additional $24 million of proceeds available for reinvestment.

Apartment Markets

The overall performance of APRO's apartment portfolio has benefited from several factors over the last year. Job growth and the resulting increase in household formations positively impacts the demand for rental and for sale housing. Economy.com estimates that 1.41 million new households will be created in the U.S. during 2006, an increase of 1.3% over the 2005 level. In addition, a decline in the national homeownership rate over the last 12 months has increased the number of potential renters. With mortgage rates currently higher than rates in 2005 and the unprecedented levels of housing appreciation now abating, the decade-long trend toward increasing levels of home ownership in this country has reversed. The national home ownership rate dropped to 68.5% in the first quarter of 2006 from a peak of 69.2% in 2004.

These factors have contributed to strong revenue growth for APRO's portfolio of apartments, with its Florida, Arizona, Tennessee and Omaha properties leading the portfolio in rental revenue increases.

Looking Forward

"We are pleased that the Company's second quarter results continue to build upon the positive results we experienced in the first quarter of 2006," stated Jack Cassidy, APRO's President and Chief Executive Officer. "We expect our ongoing improvements in property operations and the benefits of recent acquisitions to continue driving higher rental revenues. With an additional $24 million in sales proceeds remaining, we anticipate a very positive impact on future operating cash flow as we redeploy these sale proceeds to acquire apartments.

Overall, the favorable economy and job growth provide positive indicators for the U.S. apartment rental market for the remainder of 2006. Combining these favorable industry factors with our cash currently available to acquire more apartment assets, we foresee continued positive momentum for the Company.

On a cautionary note, the consequences of the devastation and losses resulting from Hurricane Katrina are causing significant increases in the cost of casualty insurance for properties located in Florida, the Gulf coast and the Atlantic coast. Though our current insurance policies do not renew until November 1, 2006, we anticipate insurance premiums will rise significantly upon renewal. We are working with our insurance broker to mitigate the expected increase."

In transitioning from an externally advised real estate investment trust to a self- advised and self-administered company, APRO did sustain certain nonrecurring expenses during the past year. As the transition process concludes and the Company's asset base grows, APRO anticipates lower level of administrative expenses relative to revenues."

Funds From Operations

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

For the three      For the six
                                    months ended      months ended
                                  June 30, June 30, June 30, June 30,
                                    2006     2005     2006     2005
                                  -------- -------- -------- ---------
Net income (loss)                $ 17,304 $   (507)$ 17,475 $  (1,488)
Depreciation expense                2,557    1,884    4,889     3,773
In-place lease amortization           388      907      657     2,166
Depreciation and amortization
  of discontinued operations            -      433      123       867
Loss on sale of agency securities      53        -       53         -
Impairment of agency securities
 and preferred stock                   23        -      367         -
Less: Gain on sales of property   (17,246)       -  (17,246)        -
                                  -------- -------- -------- ---------

FFO                              $  3,079 $  2,717 $  6,318 $   5,318
                                  ======== ======== ======== =========

Shares outstanding                 11,036   10,511   11,036    10,511
                                  ======== ======== ======== =========

FFO per share                    $   0.28 $   0.26 $   0.57 $    0.51
                                  ======== ======== ======== =========

The Company generally calculates FFO in accordance with the definition of FFO that is recommended by the National Association of Real Investment Trust ("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 has added back the impairment loss recognized on the Company's agency securities and preferred stock and believes that this treatment is appropriate since NAREIT allows for the exclusion of gains and losses recognized in connection with the sale of a security in the determination of FFO. NAREIT does not specifically discuss how an impairment of a security should be handled.

The Company believes that FFO is an important non-GAAP measurement 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.

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 which is calculated in accordance with GAAP.

America First Apartment Investors, Inc. is an equity real estate investment trust focused on multifamily apartment properties located primarily in the Southeast and Midwest regions of 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.