BROOKFIELD PROPERTY PARTNERS L.P. Q2 2019 Supplemental Information
Three Months Ended June 30, 2019 FORWARD-LOOKING STATEMENTS
This supplemental information package contains “forward-looking information” within the meaning of applicable securities laws and regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding our operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”, “forecasts”, “likely”, or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”.
Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.
Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: risks incidental to the ownership and operation of real estate properties including local real estate conditions; the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the ability to enter into new leases or renew leases on favourable terms; business competition; dependence on tenants’ financial condition; the use of debt to finance our business; the behavior of financial markets, including fluctuations in interest and foreign exchanges rates; uncertainties of real estate development or redevelopment; global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; risks relating to our insurance coverage; the possible impact of international conflicts and other developments including terrorist acts; potential environmental liabilities; changes in tax laws and other tax related risks; dependence on management personnel; illiquidity of investments; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom; operational and reputational risks; catastrophic events, such as earthquakes and hurricanes; and other risks and factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.
CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS ACCOUNTING MEASURES This supplemental information package makes reference to net operating income ("NOI"), same-property NOI, and funds from operations ("FFO") and Company FFO (“Company FFO") on a total and per unit basis. These terms do not have any standardized meaning prescribed by International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") and therefore may not be comparable to similar measures presented by other companies. Brookfield Property Partners L.P. ("BPY" or the "partnership") defines NOI as revenues from commercial and hospitality operations of consolidated properties less direct property expenses. Same- property NOI is a subset of NOI, which excludes NOI that is earned from assets acquired, disposed of or developed during the periods presented, or not of a recurring nature, and from opportunistic assets. Our definition of FFO includes all of the adjustments that are outlined in the National Association of Real Estate Investment Trusts ("NAREIT") definition of funds from operations, including the exclusion of gains (or losses) from the sale of investment property, the add back of any depreciation and amortization related to real estate assets and the adjustment to reflect our interest in unconsolidated partnerships and joint ventures. In addition to the adjustments prescribed by NAREIT, we also make adjustments to exclude any unrealized fair value gains (or losses) that arise as a result of reporting under IFRS, except gains (or losses) associated with properties developed for sale, and income taxes that arise as certain of our subsidiaries are structured as corporations as opposed to real estate investment trusts ("REIT"). These additional adjustments result in an FFO measure that is similar to that which would result if the partnership was organized as a REIT that determined net income in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), which is the type of organization on which the NAREIT definition is premised. Our FFO measure will differ from other organizations applying the NAREIT definition to the extent of certain differences between the IFRS and U.S. GAAP reporting frameworks, principally related to the recognition of lease termination income, which do not have a significant impact on the FFO measure reported. The partnership uses NOI and FFO to assess its operating results. NOI is important in assessing operating performance and FFO is a widely used measure to analyze real estate. The partnership reconciles FFO to net income attributable to Unitholders (see the glossary of terms for definition) as opposed to cashflow from operating activities as it believes net income attributable to Unitholders is the most comparable measure. Company FFO is defined as FFO before the impact of depreciation and amortization of non-real estate assets, transaction costs, gains (losses) associated with non-investment properties, imputed interest on equity accounted investments and the partnership's share of BSREP III Company FFO. Distributions from BSREP III, recorded as dividend income under IFRS, are removed from investment and other income for Company FFO presentation. Refer to the last page of this supplemental package for certain definitions.
In calculating net income attributable to Unitholders per unit, the partnership excludes the impact of mandatorily convertible preferred shares in determining the average number of units outstanding as the holders of mandatorily convertible preferred shares do not participate in current earnings. The partnership reconciles this measure to basic net income attributable to Unitholders per unit determined in accordance with IFRS which includes the effect of mandatorily convertible preferred shares in the basic average number of units outstanding.
1 TABLE OF CONTENTS
Page Page Summary of Results Operating Statistics Financial Overview 3 Core Office Diversified Investment Strategy 4 Net Operating Income 24 Core Office 5 Same-Property Net Operating Income 25 Core Retail 6 Historical Occupancy and Rent Metrics 26 LP Investments 7 Proportionate Leasing Activity 27 Consolidated Overview Proportionate Lease Expiry Analysis 28 Results from Operations 8 Development Sites 29 Proportionate Results from Operations by Segment 9 Core Retail Financial Position 11 Net Operating Income and Key Performance Metrics 30 Proportionate Financial Position by Segment 12 Signed Leases and Lease Expiry Analysis 31 Payout Ratio 13 Development Sites 32 Proportionate Fair Value Continuity 14 LP Investments Proportionate Summary Cash Flow Information and Liquidity 16 Summary of Investments 33 Proportionate Debt Summary 17 BSREP Series 35 Proportionate Capital Securities 18 Corporate Proportionate Preferred Equity 19 Foreign Currency Exposure 36 Per Unit Calculations 20 Management Fee and Incentive Distribution 37 Unit Information 22 Appendix A: Company FFO Reconciliation 38 Appendix B: Acquisition and Disposition Activity 39 Glossary of Terms 40
Note: Core Portfolio Additional Information will be posted on August 9, 2019 and includes our core office and core retail portfolio listings, debt details and top tenants
2 Summary of Results FINANCIAL OVERVIEW
Current Quarter Highlights Company FFO(1) Net income attributable to Unitholders
Invested capital Quarter-to-date Year-to-date Quarter-to-date Year-to-date (US$ Millions) Jun. 30, 2019 Dec. 31, 2018 Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Core Office $ 14,219 $ 14,199 $ 187 $ 149 $ 327 $ 302 $ 343 $ 37 $ 693 $ 295 Core Retail 13,711 14,136 170 119 354 235 (3) 187 102 29 LP Investments 5,068 5,204 79 83 165 179 (136) 422 (121) 569 Corporate (5,146) (5,255) (101) (105) (204) (202) (77) (112) (214) 171 Unitholder equity $ 27,852 $ 28,284 $ 335 $ 246 $ 642 $ 514 $ 127 $ 534 $ 460 $ 1,064
Per Unit Metrics Quarter-to-date Year-to-date (US$) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Company FFO and realized LP Investment gains per unit(2)(3)(4) $ 0.38 $ 0.36 $ 0.76 $ 0.74 Company FFO per unit(2)(4) 0.35 0.35 0.66 0.73 Net income per unit(2)(4) 0.13 0.76 0.48 1.51 Distributions per unit(2) 0.33 0.32 0.66 0.64 Unitholder equity per unit(5) $ 28.89 $ 31.23 (1) A reconciliation of FFO to Company FFO is included on pages 9 and 10 (2) Per unit calculations are based on the basic number of units outstanding and detailed on pages 20 and 21 (3) Realized gains for LP investment properties sold during the quarter represent difference between transaction price and invested capital. These gains have previously been recognized in earnings through fair value gains, net (4) Company FFO and realized LP Investment gains per unit, Company FFO per unit, and Net income per unit are reduced by preferred share dividends paid (5)Assumes conversion of mandatorily convertible preferred shares. Refer to page 20 for further detail
3 Summary of Results DIVERSIFIED INVESTMENT STRATEGY
Core Office and Retail
▪ Our core business represents approximately 85% of our balance sheet and consists of: ◦ 143 premier office properties totaling over 96 million square feet in gateway markets including New York City, London, Toronto, Los Angeles, Washington D.C., Sydney and Berlin ◦ 123 best-in-class retail properties totaling over 120 million square feet throughout the United States including 730 Fifth Avenue in New York City, Ala Moana Center in Honolulu, Fashion Show Mall in Las Vegas, Oakbrook Mall in Chicago, Stonestown Galleria in San Francisco, Willowbrook Mall in New Jersey and Staten Island Mall in New York ◦ Approximately 12 million square feet of development projects underway ▪ Our core business strategy is to invest in high-quality, well-located trophy assets maintaining high occupancy and providing stable earnings; and to periodically recycle capital out of these stable assets to reinvest into development, redevelopment and densification opportunities to create additional value ▪ High quality and global tenant base with limited tenant concentration
LP Investments
▪ Our LP investments represent approximately 15% of our balance sheet and consists of investments in various funds targeting a specific return profile including: ◦ BSREP I: A 31% interest in a $4.4B real estate fund targeting opportunistic returns; the fund is in its 8th year, is fully invested and is executing realizations ◦ BSREP II: A 26% interest in a $9.0B real estate fund targeting opportunistic returns; the fund is in its 5th year and is fully invested ◦ BSREP III: A 7% interest in a $15.0B real estate fund targeting opportunistic returns; the fund is in its 2nd year ◦ A blended 36% interest in two multifamily funds totaling $1.8B targeting value-add returns ◦ A blended 13% interest in a series of U.S. real estate debt funds totaling $5.4B ▪ Our LP investment business strategy is to acquire high quality assets at a discount to replacement cost or intrinsic value, to execute clearly defined strategies for operational improvement and to achieve opportunistic returns through NOI growth and realized gains on exit 4 Summary of Results CORE OFFICE
Key Financial Metrics(1) Highlights Quarter-to-date Year-to-date ▪ Leased 657K square feet on a proportionate basis during the (US$ Millions) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 NOI $ 331 $ 351 $ 644 $ 704 quarter at average net rents of $41.06 per square foot, with Fee revenue 64 20 88 39 occupancy at 92.4%. Year to date we have leased 1.4M square Company FFO 187 149 327 302 feet. Net income attributable to Unitholders 343 37 693 295 ▪ The Core Office business generated Company FFO of $187M in Key Operational Highlights the second quarter of 2019, compared to $149M in the same Quarter-to-date Year-to-date period in 2018. The $38M increase was primarily due to a Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Same property growth 0.4% 6.6% (0.4)% 6.4% performance fee earned at Five Manhattan West and same- Same property growth in natural currency 3.2% 4.7% 2.9 % 3.9% property growth of 3.2%. These increases were partially offset by Occupancy 92.4 % 92.7% dispositions in New York, Australia and Toronto, and the negative Same property occupancy 92.6 % 92.8% impact of foreign currency translation. Proportionate Financial Position(1) ▪ Company FFO increased by $47M as compared to the first quarter (US$ Millions) Jun. 30, 2019 Dec. 31, 2018 of 2019 due to increased fees, incremental lease termination Investment properties $ 32,846 $ 31,654 Total assets 36,469 35,071 income and same-property growth. Debt obligations 16,344 15,518 Total liabilities 19,894 18,487 Total equity 16,575 16,584
(1) The impact of applying IFRS 16 resulted in an immaterial impact to Company FFO on a YTD basis ($14M increase in NOI offset by $15M increase in interest expense) and an initial gross-up of assets and liabilities by $468M to reflect the right of use assets and lease liabilities
5 Summary of Results CORE RETAIL
Key Financial Metrics(1) Highlights Quarter-to-date Year-to-date (US$ Millions) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 ▪ As of June 30 we have executed 9.8M square feet of leases NOI $ 418 $ 195 $ 848 $ 384 commencing over the past 12 months. Core Retail same-property Fee revenue 33 9 69 18 occupancy finished the quarter at 95%. Company FFO 170 119 354 235 Net income attributable to Unitholders (3) 187 102 29 ▪ The Core Retail business generated Company FFO of $170M in the second quarter of 2019, compared to $119M in the same Key Operational Highlights period in the prior year primarily as a result of our increased Quarter-to-date Year-to-date investment from 34% after the acquisition of GGP in August Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 2018, offset by the impact from bankruptcies at several national Same property growth (1.4)% 3.4% 0.1% 1.1% Occupancy 95.0% 95.6% retailers and the adoption of the new leasing standard which Same property occupancy 95.0% 95.7% resulted in the cessation of capitalized leasing overhead costs; these costs are now expensed in general and administrative Proportionate Financial Position(1) (US$ Millions) Jun. 30, 2019 Dec. 31, 2018 expense and accounted for $8M of additional expense in the Investment properties $ 33,126 $ 32,996 current quarter. Total assets 34,808 34,332 Debt obligations 19,744 19,013 ▪ Compared to the prior quarter, Company FFO decreased by $14M Total liabilities 20,760 19,950 primarily due to the downtime associated with tenant bankruptcies Total equity 14,048 14,382 and increased interest expense. (1) The impact of applying IFRS 16 resulted in a $19M decrease in Company FFO on a YTD basis ($3M increase in NOI offset by a $6M increase in interest expense and a $16M increase to general ▪ Total equity decreased by $334M compared to December 31, and administrative expense) and an initial gross-up of assets and liabilities by $66M to reflect the 2018 primarily due to distributions of capital in excess of earnings. right of use assets and lease liabilities
6 Summary of Results LP INVESTMENTS Highlights ▪ The LP Investments business generated Company FFO and (1) Key Financial Metrics realized gains of $106M in the second quarter of 2019, compared Quarter-to-date Year-to-date (US$ Millions) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 to $87M in the prior year. The increase relates to a realized gain NOI $ 189 $ 208 $ 367 $ 407 of $27M in the current quarter associated with the sale of an office Company FFO 79 83 165 179 complex in BSREP I and same-property growth. This was offset Company FFO and realized gains 106 87 252 184 by termination income earned in the prior year, the negative impact Net income attributable to Unitholders (136) 422 (121) 569 of foreign currency translation and the impact of dispositions, including IDI, a North American industrial investment in BSREP Proportionate Financial Position (US$ Millions) Jun. 30, 2019 Dec. 31, 2018 I. Investment properties $ 8,867 $ 11,224 ▪ Company FFO and realized gains decreased by $40M compared Property, plant and equipment 2,346 2,489 Total assets 14,125 17,018 to the first quarter of 2019 as a result of realized gains of $60M Debt obligations 7,596 10,010 and a merchant build sale of $17M earned in the prior quarter, Total liabilities 8,984 11,547 partially offset by the positive impact of seasonality in our Total equity 5,141 5,471 (1) The impact of applying IFRS 16 resulted in an immaterial impact to Company FFO on a YTD hospitality portfolios. basis ($3M increase in NOI offset by a $3M increase in interest expense) and an initial gross-up of assets and liabilities by $94M to reflect the right of use assets and lease liabilities
LP Investment Snapshot (US$ Millions) Fund Fund Invested Projected Fund Size Year Capital Net IRR BSREP I $ 4,400 8 $ 1,304 20% BSREP II 9,000 5 2,492 14% BSREP III 15,000 2 315 16% VAMF Funds 1,800 5 173 20% Debt Funds 5,400 10 330 9% Other n/m n/m 454 n/m
7 Consolidated Overview RESULTS FROM OPERATIONS
Quarter-to-date Year-to-date IFRS Proportionate IFRS Proportionate
(US$ Millions) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Commercial property and hospitality revenue $ 1,889 $ 1,606 $ 1,466 $ 1,247 $ 3,854 $ 3,185 $ 2,934 $ 2,523 Commercial property and hospitality expense (785) (716) (528) (493) (1,627) (1,457) (1,075) (1,028) NOI 1,104 890 938 754 2,227 1,728 1,859 1,495 Share of equity accounted income - FFO 208 204 — — 445 431 — — Investment and other income 79 29 28 20 113 53 72 69 Fee revenue 58 16 97 29 122 33 158 58 Interest expense (710) (537) (537) (405) (1,456) (1,057) (1,066) (808) Depreciation of non-real estate assets (15) (10) (10) (7) (31) (17) (21) (15) General and administrative expense (219) (183) (193) (152) (442) (352) (390) (301) Non-controlling interests (214) (199) (32) (29) (429) (381) (63) (60) FFO 291 210 291 210 549 438 549 438 Depreciation of non-real estate assets 10 6 10 7 21 15 21 15 Transaction costs(1) 18 15 18 14 37 33 37 33 Gains/losses on non-investment properties — 3 — 3 (1) 3 (1) 3 Imputed interest(2) 13 12 13 12 27 25 27 25 BSREP III earnings(3) 3 — 3 — 9 — 9 — Company FFO(4) 335 246 335 246 642 514 642 514 Company FFO and realized LP Investments gains 362 250 362 250 729 519 729 519
FFO 291 210 291 210 549 438 549 438 Depreciation of real estate assets (70) (66) (23) (25) (139) (131) (49) (48) Fair value gains, net (1,092) 770 (176) 479 (722) 1,387 (7) 652 Share of equity accounted income - non-FFO 618 84 — — 645 85 — — Income taxes 62 (146) 75 (106) (26) (86) 17 70 Non-controlling interests 318 (318) (40) (24) 153 (629) (50) (48) Net income attributable to Unitholders $ 127 $ 534 $ 127 $ 534 $ 460 $ 1,064 $ 460 $ 1,064
(1) Transaction costs primarily relate to acquisition costs and also include costs incurred on new financings (2) Represents imputed interest on commercial developments accounted for under the equity method under IFRS (3) BSREP III is accounted for as a financial asset which results in FFO being recognized only when distributions are received. This adjustment reflects our proportionate share of BSREP III's Company FFO (4) The impact of applying IFRS 16 resulted in an immaterial impact to Company FFO with the exception of the new requirement to cease capitalizing certain direct leasing costs which resulted in a $16M reduction in Company FFO
8 Consolidated Overview PROPORTIONATE RESULTS FROM OPERATIONS BY SEGMENT
Quarter-to-date Core Office Core Retail LP Investments Corporate Total Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, (US$ Millions) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Commercial property and hospitality revenue $ 541 $ 598 $ 566 $ 260 $ 359 $ 389 $ — $ — $ 1,466 $ 1,247 Commercial property and hospitality expense (210) (247) (148) (65) (170) (181) — — (528) (493) NOI 331 351 418 195 189 208 — — 938 754 Investment and other income 7 5 4 4 13 11 4 — 28 20 Fee revenue 64 20 33 9 — — — — 97 29 Interest expense (147) (160) (218) (67) (107) (106) (65) (72) (537) (405) Depreciation of non-real estate assets (2) (1) (6) (2) (2) (4) — — (10) (7) General and administrative expense (62) (64) (68) (20) (19) (36) (44) (32) (193) (152) Non-controlling interests (26) (24) (2) (2) (4) (3) — — (32) (29) FFO 165 127 161 117 70 70 (105) (104) 291 210 Depreciation of non-real estate assets 2 1 6 2 2 4 — — 10 7 Transaction costs 8 6 3 — 3 9 4 (1) 18 14 Gains/losses on non-investment properties — 3 — — — — — — — 3 Imputed interest 12 12 — — 1 — — — 13 12 BSREP III earnings(1) — — — — 3 — — — 3 — Company FFO(2) 187 149 170 119 79 83 (101) (105) 335 246 Company FFO and realized LP Investment gains 187 149 170 119 106 87 (101) (105) 362 250 FFO 165 127 161 117 70 70 (105) (104) 291 210 Depreciation of real estate assets — (2) — — (23) (23) — — (23) (25) Fair value gains, net 188 (20) (183) 71 (148) 429 (33) (1) (176) 479 Income taxes (10) (62) 33 — (9) (37) 61 (7) 75 (106) Non-controlling interests — (6) (14) (1) (26) (17) — — (40) (24) Net income attributable to Unitholders $ 343 $ 37 $ (3) $ 187 $ (136) $ 422 $ (77) $ (112) $ 127 $ 534 (1) BSREP III is now accounted for as a financial asset which results in FFO being recognized in line with distributions received. As such, the BSREP III earnings adjustment picks up our proportionate share of the Company FFO (2 The impact of applying IFRS 16 resulted in an immaterial impact to Company FFO with the exception of the new requirement to cease capitalizing certain direct leasing costs which resulted in an $8M reduction in Company FFO
9 Consolidated Overview PROPORTIONATE RESULTS FROM OPERATIONS BY SEGMENT
Year-to-date Core Office Core Retail LP Investments Corporate Total Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, Jun. 30, (US$ Millions) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Commercial property and hospitality revenue $ 1,066 $ 1,215 $ 1,156 $ 517 $ 712 $ 791 $ — $ — $ 2,934 $ 2,523 Commercial property and hospitality expense (422) (511) (308) (133) (345) (384) — — (1,075) (1,028) NOI 644 704 848 384 367 407 — — 1,859 1,495 Investment and other income 21 12 5 11 40 45 6 1 72 69 Fee revenue 88 39 69 18 1 1 — — 158 58 Interest expense (287) (326) (434) (133) (214) (209) (131) (140) (1,066) (808) Depreciation of non-real estate assets (4) (4) (12) (6) (5) (5) — — (21) (15) General and administrative expense (122) (116) (143) (41) (37) (77) (88) (67) (390) (301) Non-controlling interests (51) (49) (5) (4) (7) (7) — — (63) (60) FFO 289 260 328 229 145 155 (213) (206) 549 438 Depreciation of non-real estate assets 4 4 12 6 5 5 — — 21 15 Transaction costs 9 10 14 — 5 19 9 4 37 33 Gains/losses on non-investment properties (1) 3 — — — — — — (1) 3 Imputed interest 26 25 — — 1 — — — 27 25 BSREP III earnings(1) — — — — 9 — — — 9 — Company FFO(2) 327 302 354 235 165 179 (204) (202) 642 514 Company FFO and realized LP Investment gains 327 302 354 235 252 184 (204) (202) 729 519 FFO 289 260 328 229 145 155 (213) (206) 549 438 Depreciation of real estate assets (1) (2) — — (48) (46) — — (49) (48) Fair value gains, net 448 123 (237) (199) (157) 528 (61) 200 (7) 652 Income taxes (43) (61) 25 — (25) (46) 60 177 17 70 Non-controlling interests — (25) (14) (1) (36) (22) — — (50) (48) Net income attributable to Unitholders $ 693 $ 295 $ 102 $ 29 $ (121) $ 569 $ (214) $ 171 $ 460 $ 1,064 (1) BSREP III is now accounted for as a financial asset which results in FFO being recognized in line with distributions received. As such, the BSREP III earnings adjustment picks up our proportionate share of the Company FFO (2) The impact of applying IFRS 16 resulted in an immaterial impact to Company FFO with the exception of the new requirement to cease capitalizing certain direct leasing costs which resulted in a $16M reduction in Company FFO
10 Consolidated Overview FINANCIAL POSITION
IFRS Proportionate Jun. 30, Dec. 31, Jun. 30, Dec. 31, (US$ Millions, except per unit amounts) 2019 2018 2019 2018 Assets Commercial properties(1) $ 65,680 $ 76,014 $ 68,169 $ 69,922 Commercial developments 4,148 4,182 6,670 5,952 Equity accounted investments 21,889 22,698 — — Property, plant and equipment(1) 6,854 7,506 2,632 2,702 Participating loan interests — 268 — — Cash and cash equivalents 1,751 3,288 1,611 2,057 Other assets(2) 6,360 7,560 5,774 5,544 Assets held for sale 1,346 1,004 716 401 Total assets 108,028 122,520 85,572 86,578 Liabilities Corporate borrowings 1,380 2,159 3,039 2,659 Asset-level debt obligations 43,725 50,407 37,960 38,531 Subsidiary borrowings, non-recourse to BPY(3) 6,451 11,245 5,724 6,010 Capital securities 3,012 3,385 1,852 2,261 Deferred tax liabilities 2,492 2,378 1,645 1,522 Other liabilities(1)(4) 6,287 6,043 4,297 4,296 Liabilities associated with assets held for sale 765 163 244 101 Equity Preferred equity - partnership 178 — 178 — Preferred shares - subsidiaries 2,992 2,846 2,642 2,672 Non-controlling interests in subsidiaries and properties 12,894 15,610 139 242 Equity attributable to Unitholders 27,852 28,284 27,852 28,284 Total liabilities and equity 108,028 122,520 85,572 86,578 Unitholder equity per unit(5) $ 28.89 $ 28.73 $ 28.89 $ 28.73 (1) Adopted IFRS 16, the new leasing standard, effective January 1, 2019; the impact of applying IFRS 16 resulted in an initial gross-up of assets and liabilities by $847M to reflect right of use asset and a corresponding lease liability on an IFRS basis and $628M on a proportionate basis (2) Other assets includes goodwill of $1,007M and $1,109M on an IFRS basis and $375M and $413M on a proportionate basis as of June 30, 2019 and December 31, 2018, respectively (3) Subsidiary borrowings includes GGP acquisition debt of $412M (L+225bps) maturing in 2021, $2,000M (L+225bps) maturing in 2023 and $1,985M (L+250bps) maturing in 2025 on an IFRS basis (4) Not included in other liabilities is an accrual of approximately $359M related to carried interest due to the general partner of Brookfield Asset Management-sponsored funds based on hypothetical liquidation of these funds as at June 30, 2019 (5) Assumes conversion of mandatorily convertible preferred shares. Refer to page 20 for further detail
11 Consolidated Overview PROPORTIONATE FINANCIAL POSITION BY SEGMENT
Core Office Core Retail LP Investments Corporate Total Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, (US$ Millions) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Assets Commercial properties(1) $ 27,071 $ 26,665 $ 32,685 $ 32,650 $ 8,413 $ 10,607 $ — $ — $ 68,169 $ 69,922 Commercial developments 5,775 4,989 441 346 454 617 — — 6,670 5,952 Property, plant and equipment(1) 199 162 87 51 2,346 2,489 — — 2,632 2,702 Cash and cash equivalents 768 865 453 457 343 670 47 65 1,611 2,057 Other assets 2,183 2,356 1,142 828 2,326 2,268 123 92 5,774 5,544 Assets held for sale 473 34 — — 243 367 — — 716 401 Total assets 36,469 35,071 34,808 34,332 14,125 17,018 170 157 85,572 86,578 Liabilities Corporate borrowings — — — — — — 3,039 2,659 3,039 2,659 Asset-level debt obligations 16,344 15,350 14,129 14,193 7,487 8,988 — — 37,960 38,531 Subsidiary borrowings, non-recourse to BPY — 168 5,615 4,820 109 1,022 — — 5,724 6,010 Capital securities — — — — 145 149 1,707 2,112 1,852 2,261 Deferred tax liabilities 1,117 1,030 49 20 383 381 96 91 1,645 1,522 Other liabilities(1) 2,408 1,939 967 917 641 906 281 534 4,297 4,296 Liabilities associated with assets held for sale 25 — — — 219 101 — — 244 101 Equity Preferred equity - partnership — — — — — — 178 — 178 — Non-controlling interests 2,356 2,385 337 246 73 267 15 16 2,781 2,914 Equity attributable to Unitholders 14,219 14,199 — 13,711 14,136 5,068 5,204 (5,146) (5,255) 27,852 28,284 Total liabilities and equity $ 36,469 $ 35,071 $ 34,808 $ 34,332 $ 14,125 $ 17,018 $ 170 $ 157 $ 85,572 $ 86,578 (1) Adopted IFRS 16, the new leasing standard, effective January 1, 2019; the impact of applying IFRS 16 resulted in an initial gross up of assets and liabilities by $847M to reflect right of use asset and a corresponding lease liability on an IFRS basis and $628M on a proportionate basis
12 Consolidated Overview PAYOUT RATIO
Last twelve months Year-to-date (US$ Per Unit) Jun. 30, 2019 Dec. 31, 2018 Dec. 31, 2017 Company funds from operations (CFFO) $ 1.41 $ 1.48 $ 1.44 LP Investment realized gains(1) 0.51 0.40 0.54 Annual Earnings 1.92 1.88 1.98 Distributions to Unitholders (1.29) (1.26) (1.18) Retained for property maintenance and growth 0.63 0.62 0.80 Payout Ratio 67% 67% 60% (1) Reflects income earned in our LP Investments segment when investments are realized that is not otherwise included in CFFO but represents a key component of our investment return, net of carried interest
13 Consolidated Overview PROPORTIONATE FAIR VALUE CONTINUITY
Quarter-to-date Balance sheet (US$ Millions) Mar. 31, 2019 Invest.(1) Acquisitions Dispositions Reclass FX Profit & Loss(2) Jun. 30, 2019 Commercial properties Core Office $ 27,483 $ 150 $ 3 $ (169) $ (442) $ (78) $ 124 $ 27,071 Core Retail 32,718 149 — — (3) — (179) 32,685 LP Investments 8,674 (61) 378 (66) (298) (14) (200) 8,413 68,875 238 381 (235) (743) (92) (255) 68,169 Commercial developments Core Office 5,458 338 36 (57) (133) (69) 202 5,775 Core Retail 375 66 — — — — — 441 LP Investments 427 28 3 — (14) (2) 12 454 6,260 432 39 (57) (147) (71) 214 6,670 Total investment properties $ 75,135 $ 670 $ 420 $ (292) $ (890) $ (163) $ (41) $ 74,839 Other fair value gains (losses)(3) (135) Total fair value gains $ (176)
(1) Represents investments in our assets through capital expenditures, tenant improvements and redevelopment initiatives (2) Represents changes in value as a result of amount and timing of cash flows at the property level due to leasing activity, leasing assumptions and investment horizon. In addition, includes the impact of changes in discount and terminal capitalization rates (3) Other fair value losses primarily includes the recognition of carried interest related to our investment in BSREP I and mark-to-market losses on derivatives
Valuation Metrics for Commercial Properties Jun. 30, 2019 Mar. 31, 2019 Implied Implied Implied Implied going-in value per going-in value per Discount Terminal Hold period Capitali- capitali- leasable sq. Discount Terminal Hold period Capitali- capitali- leasable sq. (US$) rate cap rate (years) zation rate zation rate(1) ft./unit(2) rate cap rate (years) zation rate zation rate(1) ft./unit(2) Core Office 6.3% 5.4% 11 4.5% $ 658 6.2% 5.3% 11 4.4% $ 668 Core Retail 6.6% 5.2% 10 5.4% 868 6.8% 5.5% 11 5.6% 871 LP Investments Office 10.4% 7.5% 7 238 10.2% 7.4% 7 246 Retail 8.7% 7.2% 10 142 9.2% 8.1% 10 171 Mixed-use 7.8% 5.5% 10 445 7.8% 5.5% 10 447 Logistics 5.8% 306 5.8% 249 Multifamily 5.0% 251 4.8% 251 Triple Net Lease 6.5% 392 6.3% 312 Self-storage 5.7% 111 5.7% 108 Student Housing 5.5% 122 5.4% 124 Manufactured Housing 5.4% 74 5.4% 73
(1) Annualized in-quarter NOI adjusted for acquisitions and dispositions that took place during the quarter and straight-line rental income as disclosed on pages 24 and 30 (2) For multifamily, student housing and manufactured housing assets, the relevant calculation compares the value of commercial properties to the number of units, beds or sites, respectively, rather than square feet 14 Consolidated Overview PROPORTIONATE FAIR VALUE CONTINUITY (Cont'd)
Year-to-date Balance sheet (US$ Millions) Dec. 31, 2018 Invest.(1) Acquisitions Dispositions Reclass IFRS 16(2) FX Profit & Loss(3) Jun. 30, 2019 Commercial properties Core Office $ 26,665 $ 186 $ 3 $ (169) $ (461) $ 387 $ 136 $ 324 $ 27,071 Core Retail 32,650 249 5 (38) 24 22 — (227) 32,685 LP Investments 10,607 149 381 (2,274) (363) 72 (19) (140) 8,413 69,922 584 389 (2,481) (800) 481 117 (43) 68,169 Commercial developments Core Office 4,989 599 36 (57) (133) — (18) 359 5,775 Core Retail 346 95 — — — — — — 441 LP Investments 617 60 6 (173) (72) — — 16 454 5,952 754 42 (230) (205) — (18) 375 6,670 Total investment properties $ 75,874 $ 1,338 $ 431 $ (2,711) $ (1,005) $ 481 $ 99 $ 332 $ 74,839 Other fair value (losses) gains(4) — — — — — — — (339) — Total fair value gains $ (7)
(1) Represents investments in our assets through capital expenditures, tenant improvements and redevelopment initiatives (2) The impact of applying IFRS 16 resulted in an initial increase of $481M on a proportionate basis to reflect right of use assets included within investment properties (3) Represents changes in value as a result of amount and timing of cash flows at the property level due to leasing activity, leasing assumptions and investment horizon. In addition, includes the impact of changes in discount and terminal capitalization rates (4)Other fair value losses primarily includes the recognition of carried interest related to our investment in BSREP I and mark-to-market losses on derivatives
15 Consolidated Overview PROPORTIONATE SUMMARY CASH FLOW INFORMATION AND LIQUIDITY
Proportionate Summary Cash Flow Information Quarter-to-date Year-to-date (US$ Millions) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Company FFO $ 335 $ 246 $ 642 $ 514 Distributions paid (316) (221) (636) (443) Unit repurchases (56) (12) (445) (12) Investments (836) (1,225) (1,522) (2,500) Disposals 690 328 1,090 1,162 Debt repayments (2,061) (1,464) (2,472) (2,853) Proceeds from financings 3,250 2,169 4,523 4,721 Draws (repayments) on corporate and funds subscription facilities (565) 165 (333) 260 Issuance of limited partner units — — 14 — Proceeds from (purchase of) financial assets, net (294) 35 (351) (98) Change in working capital and other, net (505) (390) (956) (745) Change in proportionate cash (358) (369) (446) 6 Proportionate cash at beginning of period 1,969 1,665 2,057 1,290 Proportionate cash at end of period $ 1,611 $ 1,296 $ 1,611 $ 1,296 Proportionate availability under credit facilities 3,410 1,075 Proportionate availability under construction facilities 1,185 2,048 Group-wide liquidity $ 6,206 $ 4,419
16 Consolidated Overview PROPORTIONATE DEBT SUMMARY
Jun. 30, 2019 Deferred financing (US$ Millions) Avg. term Avg. rate Total 2019 (1) 2020(1) 2021 (1) 2022 2023 Thereafter costs % Floating Core Office 5.6 4.11% 16,344 383 2,393 3,861 637 1,331 7,883 (144) 22.7% Weighted average interest rate 4.11% 3.92% 4.08% 4.27% 4.02% 3.99% 4.07% % floating 22.7% 3.1% 44.4% 13.9% 52.6% 56.7% 13.2% Core Retail 4.3 4.59% 19,744 871 1,504 3,103 2,533 4,076 7,676 (19) 28.4% Weighted average interest rate 4.59% 5.11% 3.95% 4.77% 4.41% 4.70% 4.58% % floating 28.4% 46.8% 1.8% 53.2% 22.4% 52.7% 10.5% LP Investments 5.2 5.26% 7,596 95 237 825 1,029 1,008 4,453 (51) 31.3% Weighted average interest rate 5.26% 4.78% 3.25% 3.22% 4.63% 4.59% 5.67% % floating 31.3% 1.1% 7.2% 7.8% 36.7% 47.3% 32.7% Corporate 4.6 3.90% 3,039 — — 305 — 309 2,443 (18) 64.9% Weighted average interest rate 3.90% —% —% 4.10% —% 4.30% 3.80% % floating 64.9% —% —% —% —% —% 81.2% Total 4.9 4.49% $ 46,723 $ 1,349 $ 4,134 $ 8,094 $ 4,199 $ 6,724 $ 22,455 $ (232) 29.2% Maturity as a % of total 100.0% 2.9% 8.8% 17.2% 8.9% 14.3% 47.9% Weighted average interest rate 4.49% 4.75% 4.07% 4.50% 4.41% 4.54% 4.53% (1) Includes $1.11 billion of forward starting swaps to hedge the impact of changing interest rates on certain planned refinancings during these periods
17 Consolidated Overview PROPORTIONATE CAPITAL SECURITIES
Cumulative (US$ Millions) Entity Authorized Outstanding dividend rate Jun. 30, 2019 Dec. 31, 2018 Class A Preferred Equity Units Series 1 (1) Brookfield Property L.P. 24,000,000 24,000,000 6.25% $ 568 $ 562 Class A Preferred Equity Units Series 2(1) Brookfield Property L.P. 24,000,000 24,000,000 6.50% 541 537 Class A Preferred Equity Units Series 3(1) Brookfield Property L.P. 24,000,000 24,000,000 6.75% 527 523 Class B Junior Preferred Shares Brookfield BPY Holdings Inc. 30,000,000 — 7.64% — 420 Class A Senior Preferred Shares Series 1 Brookfield Property Split Corp. 1,000,000 924,390 5.25% 23 23 Class A Senior Preferred Shares Series 2 Brookfield Property Split Corp. 1,000,000 699,165 5.75% 13 13 Class A Senior Preferred Shares Series 3 Brookfield Property Split Corp. 1,000,000 909,814 5.00% 17 17 Class A Senior Preferred Shares Series 4 Brookfield Property Split Corp. 1,000,000 940,486 5.20% 18 17 Class B Series 1(2) Brookfield Office Properties Inc. 3,600,000 3,600,000 70% of bank prime — — Class B Series 2(2) Brookfield Office Properties Inc. 3,000,000 3,000,000 70% of bank prime — — Series A Preferred Shares Rouse Properties L.P. 5,600,000 5,600,000 5.00% 71 71 Preferred Capital Forest City Enterprises L.P. 1,111,044 1,111,044 2.00% — 4 Preferred Capital BSREP II MH B LLC — — 9.00% 64 64 Preferred Shares BSREP II Vintage Estate Partners LLC 10,000 10,000 5.00% 10 10 Total $ 1,852 $ 2,261 (1) Series 1, 2 and 3 are mandatorily convertible into units after seven, ten and twelve years, respectively (2) Class B capital securities are owned by Brookfield Asset Management. Brookfield Office Properties Inc. has an offsetting loan receivable against these securities
18 Consolidated Overview PROPORTIONATE PREFERRED EQUITY
Cumulative (US$ Millions) Entity Outstanding dividend rate Jun. 30, 2019 Dec. 31, 2018 Class A Series 1 Brookfield Property Partners L.P. 7,360,000 6.50% $ 178 $ — Class A Various BPY holding entities 200,004 5.00% 15 15 Class A redeemable voting(1) Brookfield Office Properties Inc. — 7.50% — — Class AA Series E(2) Brookfield Office Properties Inc. 299 70% of bank prime — — Class AAA Series N Brookfield Office Properties Inc. 11,000,000 3.78% 257 257 Class AAA Series P Brookfield Office Properties Inc. 12,000,000 4.16% 287 287 Class AAA Series R Brookfield Office Properties Inc. 8,883,425 4.16% 227 227 Class AAA Series S Brookfield Office Properties Inc. 1,116,575 3 mo. T-Bill+ 3.48% 14 14 Class AAA Series T Brookfield Office Properties Inc. 10,000,000 5.38% 250 250 Class AAA Series V(3) Brookfield Office Properties Inc. 1,290,789 70% of bank prime 18 18 Class AAA Series W(4) Brookfield Office Properties Inc. 1,884,427 70% of bank prime 27 27 Class AAA Series X(5) Brookfield Office Properties Inc. — 30-day BA+ 0.4% — — Class AAA Series Y(6) Brookfield Office Properties Inc. 1,242,911 70% of bank prime 18 18 Class AAA Series Z(7) Brookfield Office Properties Inc. 600,000 30-day BA+ 0.4% 7 7 Class AAA Series AA Brookfield Office Properties Inc. 12,000,000 4.75% 261 261 Class AAA Series CC Brookfield Office Properties Inc. 8,000,000 6.00% 155 155 Class AAA Series EE Brookfield Office Properties Inc. 11,000,000 5.10% 206 206 Class AAA Series GG Brookfield Office Properties Inc. 11,000,000 4.85% 196 196 Class AAA Series II Brookfield Office Properties Inc. 10,000,000 4.85% 190 190 Series C Brookfield Properties, Inc. 8,000 8.00% 80 80 Series A Brookfield DTLA Fund Office Trust Investor Inc. 9,357,465 7.63% 133 148 Series D Brookfield Property REIT Inc. 532,750 6.50% 27 27 Series E Brookfield Property REIT Inc. 502,658 7.00% 25 25 Series K(8) Brookfield Property REIT Inc. 334,324 — 7 22 Series A Brookfield Property REIT Inc. 10,000,000 6.38% 242 242 Total $ 2,820 $ 2,672
(1) BPY and its subsidiaries own all 13,797,320 of the Class A redeemable voting preferred shares, which has been reflected as a reduction in outstanding shares (2) BPY and its subsidiaries own 1,999,701 of the Class AA Series E preferred shares, which has been reflected as a reduction in outstanding shares (3) BPY and its subsidiaries own 514,700 of the Class AAA Series V preferred shares, which has been reflected as a reduction in outstanding shares (4) BPY and its subsidiaries own 1,932,100 of the Class AAA Series W preferred shares, which has been reflected as a reduction in outstanding shares (5) BPY and its subsidiaries own all 300 of the Class AAA Series X preferred shares, which has been reflected as a reduction in outstanding shares (6) BPY and its subsidiaries own 1,604,800 of the Class AAA Series Y preferred shares, which has been reflected as a reduction in outstanding shares (7) BPY and its subsidiaries own 200,000 of the Class AAA Series Z preferred shares, which has been reflected as a reduction in outstanding shares (8) Series K shares are entitled to distributions identical to those paid on Brookfield Property REIT Inc. Class A Stock
19 Consolidated Overview PER UNIT CALCULATIONS
Book Value per Unit Jun. 30, 2019 Dec. 31, 2018 Number of Number of (US$ Millions, except per unit amounts) Unitholder equity units Per unit Unitholder equity units Per unit Basic book value per unit $ 27,852 950.7 $ 29.30 $ 28,284 971.1 $ 29.13 Dilutive effect of conversion of preferred shares(1) 1,636 70.1 23.34 1,622 70.0 23.17 29,488 1,020.8 28.89 29,906 1,041.1 28.73 Dilutive effect of conversion of capital securities(2) — — — 375 19.6 19.13 Fully diluted book value per unit $ 29,488 1,020.8 $ 28.89 $ 30,281 1,060.7 $ 28.55 (1) Represents preferred shares that are mandatorily convertible into units after seven, ten and twelve years and which were issued in Q4 2014; $265M of the preferred shares was classified in equity at the time of issuance (2) Certain series of capital securities can be settled in cash, at the option of the partnership or its subsidiaries which issued such capital securities, which has been the past practice of the partnership and its subsidiaries to avoid dilution associated with issuing units
Company FFO per Unit Quarter-to-date Jun. 30, 2019 Jun. 30, 2018 Average Average number of number of (US$ Millions, except per unit amounts) Company FFO (1) units(2) Per unit Company FFO units Per unit Basic $ 332 952.1 $ 0.35 $ 246 703.1 $ 0.35 Dilutive effect of conversion of preferred shares(3) 29 70.1 0.41 29 70.0 0.41 361 1,022.2 0.35 275 773.1 0.36 Dilutive effect of conversion of capital securities and options 2 4.5 0.44 5 19.6 0.26 Fully-diluted per Management $ 363 1,026.7 $ 0.35 $ 280 792.7 $ 0.35 (1) Company FFO is reduced by $3M of preferred dividends paid in the current period (2) The increase to the basic average number of units represents the impact of 272.0 million units issued on August 28, 2018 (3) Represents preferred shares that are mandatorily convertible into units at a price of $25.70 and the associated carry
Net Income per Unit Quarter-to-date Jun. 30, 2019 Jun. 30, 2018 Net income Average Net income attributable to number of attributable to Average number (US$ Millions, except per unit amounts) Unitholders (1) units(2) Per unit Unitholders of units Per unit Basic(3) $ 124 952.1 $ 0.13 $ 534 703.1 $ 0.76 Dilutive effect of conversion of preferred shares(4) 29 70.1 0.41 29 70.0 0.41 153 1,022.2 0.15 563 773.1 0.73 Dilutive effect of conversion of capital securities and options 2 4.5 0.44 5 19.6 0.26 Fully-diluted per Management $ 155 1,026.7 $ 0.15 $ 568 792.7 $ 0.72 Fully-diluted per IFRS(5)(6) $ 124 1,022.3 $ 0.12 $ 539 792.7 $ 0.68 (1) Net income attributable to Unitholders is reduced by $3M of preferred dividends paid in the current period (2) The increase to the basic average number of units represents the impact of 272.0 million units issued on August 28, 2018 (3) IFRS requires the inclusion of preferred shares that are mandatorily convertible into units without an add back to earnings of the associated carry on the preferred shares. Consequently, basic net income per unit per IFRS for the three months ended June 30, 2019 was $0.12(2018 – $0.69) (4) Represents preferred shares that are mandatorily convertible into units at a price of $25.70 and the associated carry (5) Excludes the add back to earnings of the carry on the mandatorily convertible preferred shares, as required under IFRS 20 (6) For the three months ended June 30, 2019, the conversion of capital securities would be anti-dilutive and, as such, are excluded from the calculation of fully-diluted earnings per unit under IFRS Consolidated Overview PER UNIT CALCULATIONS
Company FFO per Unit Year-to-date Jun. 30, 2019 Jun. 30, 2018 Average number of Average number (US$ Millions, except per unit amounts) Company FFO (1) units(2) Per unit Company FFO of units Per unit Basic $ 639 961.4 $ 0.66 $ 514 703.3 $ 0.73 Dilutive effect of conversion of preferred shares(3) 59 70.1 0.84 59 70.0 0.84 698 1,031.5 0.68 573 773.3 0.74 Dilutive effect of conversion of capital securities and options 8 13.1 0.61 11 18.2 0.60 Fully-diluted per Management $ 706 1,044.6 $ 0.68 $ 584 791.5 $ 0.74 (1) Company FFO is reduced by $3M of preferred dividends paid in the current period (2) The increase to the basic average number of units represents the impact of 272.0 million units issued on August 28, 2018 (3) Represents preferred shares that are mandatorily convertible into units at a price of $25.70 and the associated carry
Net Income per Unit Year-to-date Jun. 30, 2019 Jun. 30, 2018 Net income Average Net income attributable to number of attributable to Average number (US$ Millions, except per unit amounts) Unitholders (1) units(2) Per unit Unitholders of units Per unit Basic(3) $ 457 961.4 $ 0.48 $ 1,064 703.3 $ 1.51 Dilutive effect of conversion of preferred shares(4) 59 70.1 0.84 59 70.0 0.84 516 1,031.5 0.50 1,123 773.3 1.45 Dilutive effect of conversion of capital securities and options 8 13.1 0.61 11 18.2 0.60 Fully-diluted per Management $ 524 1,044.6 $ 0.50 $ 1,134 791.5 $ 1.43 Fully-diluted per IFRS(5)(6) $ 457 1,031.6 $ 0.44 $ 1,075 791.5 $ 1.36 (1) Net income attributable to Unitholders is reduced by $3M of preferred dividends paid in the current period (2) The increase to the basic average number of units represents the impact of 272.0 million units issued on August 28, 2018 (3) IFRS requires the inclusion of preferred shares that are mandatorily convertible into units without an add back to earnings of the associated carry on the preferred shares. Consequently, basic net income per unit per IFRS for the six months ended June 30, 2019 was $0.44(2018 – $1.38) (4) Represents preferred shares that are mandatorily convertible into units at a price of $25.70 and the associated carry (5) Excludes the add back to earnings of the carry on the mandatorily convertible preferred shares, as required under IFRS (6)For the six months ended June 30, 2019, the conversion of capital securities would be anti-dilutive and, as such, are excluded from the calculation of fully-diluted earnings per unit under IFRS
21 Consolidated Overview UNIT INFORMATION
Unit Distributions Earnings Announcements Current policy: Brookfield Property Partners' financial results are ▪ Distribution of US$0.33 per unit for the June 1, 2019 to August 31, 2019 scheduled to be announced on the following dates: period (US$1.32 per unit annualized) ▪ Third quarter 2019 results on November 6, 2019 ▪ Record date - last business day of February, May, August and November ▪ Fourth quarter 2019 results on February 5, 2020 ▪ Payment date - last business day of March, June, September and ▪ First quarter 2020 results on May 7, 2020 December
Units Outstanding Jun. 30, 2019 Dec. 31, 2018 Brookfield Property Partners L.P. limited partnership units 509,870,178 530,287,793 Brookfield Property Partners L.P. general partnership units 138,875 138,875 Total Brookfield Property Partners L.P. units(1) 510,009,053 530,426,668 Limited partner units of the operating partnership held by Brookfield Asset Management 437,409,102 437,409,102 Limited partner units of Brookfield Office Properties Exchange LP 3,260,049 3,308,662 Total units outstanding 950,678,204 971,144,432 (1) Brookfield Asset Management has economic interests in approximately 81.7M BPY L.P. units and 3.0M BPR units as of June 30, 2019, bringing Brookfield Asset Management's economic interest to approximately 522.3M units, or approximately 54.9%
Unit Trading Statistics Apr. 1, 2019 - Jun. 30, 2019 Jan. 1, 2019 - Mar. 31, 2019 Oct. 1, 2018 - Dec. 31, 2018 Jul. 1, 2018 - Sep. 30, 2018 Apr. 1, 2018 - Jun. 30, 2018 NASDAQ NASDAQ NASDAQ NASDAQ NASDAQ (USD) TSX (CAD) (USD) TSX (CAD) (USD) TSX (CAD) (USD) TSX (CAD) (USD) TSX (CAD) High $ 21.22 C$ 28.49 $ 20.79 C$ 27.93 $ 21.09 C$ 27.11 $ 21.15 C$ 27.67 $ 20.65 C$ 26.86 Low $ 18.12 C$ 24.50 $ 15.89 C$ 21.66 $ 14.96 C$ 20.41 $ 18.86 C$ 24.80 $ 18.46 C$ 23.30 Close $ 18.93 C$ 24.74 $ 20.57 C$ 27.49 $ 16.12 C$ 22.02 $ 20.89 C$ 27.01 $ 19.02 C$ 24.97 Volume 77,183,700 32,837,936 87,399,700 40,030,566 121,103,300 37,691,433 199,737,100 43,715,637 23,369,916 10,156,916
22 Consolidated Overview Core Office NET OPERATING INCOME
Total Net Operating Income Quarter-to-date Year-to-date % of Total (Millions in source currency unless otherwise noted) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 (Current QTD) United States $ 156.2 $ 167.2 $ 306.8 $ 324.2 48.7% Canada in C$ 79.1 78.1 155.9 157.3 in US$ 59.1 60.5 116.9 123.1 18.4% Australia in A$ 65.2 69.7 118.4 135.4 in US$ 45.7 52.8 83.6 104.4 14.2% United Kingdom in £ 40.6 38.5 79.9 81.6 in US$ 52.2 52.3 103.4 112.3 16.3% Germany in € 3.5 3.9 7.2 7.1 in US$ 3.9 4.7 8.1 8.6 1.2% Brazil in R$ 14.9 12.5 28.0 24.7 in US$ 3.8 3.4 7.3 7.2 1.2% Total Cash NOI 320.9 340.9 626.1 679.8 100.0% Straight-line rental income 10.0 10.0 18.0 24.0 Total NOI (US$) $ 330.9 $ 350.9 $ 644.1 $ 703.8
Composition of Net Operating Income by City
25
20 18% 16.2% 16.3%
) 15.3% D
T 15 Q ( l a t o T
f 9.1% 9.4% 9.2% o 10 8.8% 8.7% 8.1% 7.9% % 7.3% 7.6% 6.9% 6.7% 6% 6% 6% 5.5% 5.4% 5.6% 5 3.8% 3.8% 2.4%
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Q2 2019 Q2 2018
24 Core Office SAME-PROPERTY NET OPERATING INCOME
Same-Property Net Operating Income(1) Growth Quarter-to-date Year-to-date % of Total (Millions in source currency unless otherwise noted) (QoQ) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 (Current QTD) United States 3.1 % $ 151.9 $ 147.3 $ 299.0 $ 288.7 49.6% Canada in C$ 1.0 % 77.2 76.4 153.3 149.6 in US$ (2.7)% 57.6 59.2 114.8 117.2 18.8% Australia in A$ 8.8 % 53.0 48.7 106.6 98.8 in US$ 0.8 % 37.2 36.9 75.3 76.2 12.1% United Kingdom in £ 2.8 % 40.9 39.8 80.6 81.6 in US$ (2.8)% 52.6 54.1 104.2 112.3 17.2% Germany in € (8.1)% 3.4 3.7 6.8 6.9 in US$ (13.6)% 3.8 4.4 7.7 8.4 1.2% Brazil in R$ 6.6 % 13.0 12.2 25.7 24.7 in US$ (8.1)% 3.3 3.4 6.7 7.2 1.1% Total same-property NOI (US$) $ 306.4 $ 305.3 $ 607.7 $ 610.0 100.0% Percent of same-property NOI growth 0.4 % (0.4)% Percent of same-property NOI growth excluding the impact of FX 3.2 % 2.9 % (1) Excluded from same-property net operating income is the impact of adoption of IFRS 16 which resulted in $7M and $14M in incremental net operating income on a QTD and YTD basis, respectively.
Composition of Same-Property Net Operating Income by City
20 17.7% 17.2% 16.1%15.9% 16 ) D
T 12 Q (
l 9.6% a 9.2% 9.4% 9.2% t
o 8.7%
T 8% 8.1% 7.9% 7.9% f 7.3% o 8 6.4% 6.5% % 5.8% 6.1% 5.2% 5.4% 3.7% 4 2.8% 2.8% 3.1%
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25 Q2 2019 Q2 2018 Core Office HISTORICAL OCCUPANCY AND RENT METRICS
Historical Occupancy and Rent Metrics (Assets Under Management) Q2 2019 Q1 2019 Q2 2018 Avg. Remaining In-Place Net Market Net Lease Term In-Place Net Market Net In-Place Net Market Net Occupancy Rents Rents (years) Occupancy Rents Rents Occupancy Rents Rents Midtown New York 96.3% $ 46.66 $ 61.68 12.9 96.1% $ 46.20 $ 61.68 96.1% $ 46.98 $ 54.33 Downtown New York 95.3% 34.80 43.49 10.0 96.3% 34.20 43.49 95.2% 33.26 47.51 Washington, D.C. 86.5% 32.14 26.52 6.0 90.5% 31.46 26.27 89.5% 32.44 25.65 Los Angeles 84.9% 26.54 28.00 6.9 86.6% 26.21 28.00 84.3% 25.72 27.50 Houston 83.5% 23.73 25.00 5.6 84.3% 23.72 24.50 84.8% 22.79 23.00 Boston 98.7% 30.10 38.70 5.1 98.4% 29.42 38.70 93.9% 25.25 35.39 Denver 83.6% 24.64 21.00 5.2 83.5% 23.86 21.00 83.3% 23.59 21.00 San Francisco 82.4% 48.41 54.00 5.4 94.2% 46.25 54.00 95.7% 41.72 51.00 United States 89.7% 32.22 36.35 8.2 91.2% 31.74 36.26 90.3% 31.92 36.66 Toronto 99.2% 33.18 37.00 7.3 99.1% 33.05 35.00 98.6% 31.62 35.00 Calgary 92.1% 32.48 21.00 11.4 91.8% 32.67 21.00 91.3% 32.38 21.00 Ottawa 90.4% 22.45 19.00 4.6 90.4% 22.83 19.00 93.0% 20.72 18.00 Canada 95.6% 32.56 29.48 9.0 95.4% 32.58 28.44 95.2% 31.46 28.59 in US$ (1) 24.86 22.51 24.87 21.71 24.02 21.83 Sydney 99.5% 63.80 94.97 5.1 99.5% 63.44 94.22 97.7% 64.15 92.51 Melbourne 99.9% 60.85 54.39 3.4 99.9% 60.28 53.91 100.0% 57.95 53.23 Perth 94.2% 77.77 57.73 7.2 94.7% 76.24 57.73 94.7% 75.63 57.41 Brisbane 86.1% 67.56 56.29 4.7 86.1% 67.67 55.97 79.1% 66.51 55.46 Australia 97.4% 69.43 68.86 5.6 97.5% 68.52 68.29 96.6% 67.18 73.02 in US$ (1) 48.74 48.34 48.10 47.94 47.16 51.26 London 94.8% 46.51 51.17 10.6 96.8% 46.02 51.17 96.2% 45.15 50.67 in US$ (1) 59.04 64.96 58.42 64.96 57.32 64.33 Berlin 91.2% 25.25 39.02 4.6 88.3% 25.85 38.46 91.1% 26.38 35.12 in US$ (1) 28.70 44.36 29.38 43.72 29.99 39.92 São Paulo 100.0% 268.81 268.81 4.4 100.0% 268.81 268.81 100.0% 249.97 249.97 Rio de Janeiro 100.0% 158.60 158.60 8.8 100.0% 158.60 158.60 100.0% 155.48 155.48 Brazil 100.0% 213.51 213.51 6.6 100.0% 213.51 213.51 100.0% 210.99 210.99 in US$ (1) 55.70 55.70 55.70 55.70 55.05 55.05 Total 92.4% $ 34.91 $ 37.42 8.3 93.3% $ 34.54 $ 37.14 92.7% $ 34.24 $ 37.63 Mark-to-market 7.2% 7.5% 9.9% (1) Using the spot rate at June 30, 2019 for all periods presented
26 Core Office PROPORTIONATE LEASING ACTIVITY
Quarter-to-date Mar. 31, 2019 Quarter-to-date leasing activity Jun. 30, 2019 Total Year one Average Acq. (disp.) Leased Avg. in-place expiries Expiring Leasing leasing leasing additions Leased Avg. in-place Avg. mkt. (Sq. ft. in net rent (1) (Sq. ft. in net rent (Sq. ft. in net rent net rent (Sq. ft. in (Sq. ft. in net rent net rent (Local currency) 000's) (per sq. ft.) 000's) (per sq. ft.) 000's) (per sq. ft.) (per sq. ft.) 000's) 000's) (per sq. ft.) (per sq. ft.) Midtown New York 2,511 $ 46.20 (36) $ 64.58 42 $ 76.09 $ 80.22 — 2,517 $ 46.66 $ 61.68 Downtown New York 6,698 34.20 (309) 25.39 212 38.42 40.75 — 6,601 34.80 43.49 Washington, D.C. 3,454 31.46 (63) 25.21 41 28.33 32.41 126 3,558 32.14 26.52 Los Angeles 3,665 26.21 (136) 22.65 61 29.65 32.19 — 3,590 26.54 28.00 Houston 3,663 23.72 (69) 27.82 29 26.08 27.36 — 3,623 23.73 25.00 Boston 248 29.42 (4) 29.53 5 37.95 39.47 — 249 30.10 38.70 Denver 558 23.86 (3) 24.33 4 27.16 27.97 — 559 24.64 21.00 San Francisco 194 46.25 (25) 40.20 7 61.88 66.48 — 176 48.41 54.00 United States 20,991 31.74 (645) 27.84 401 39.40 42.07 126 20,873 32.22 36.35 Toronto 4,795 33.05 (51) 39.10 56 49.37 50.12 — 4,800 33.18 37.00 Calgary 3,891 32.67 (28) 45.20 59 28.21 29.90 — 3,922 32.48 21.00 Ottawa 269 22.83 (23) 23.46 23 18.98 19.04 — 269 22.45 19.00 Canada 8,955 32.58 (102) 37.25 138 35.26 36.30 — 8,991 32.56 29.48 in US$(1) 24.87 28.44 26.92 27.71 24.86 22.51 Sydney 1,101 63.44 (6) 85.81 6 106.84 114.70 — 1,101 63.80 94.97 Melbourne 678 60.28 (1) 111.56 1 116.67 127.56 — 678 60.85 54.39 Perth 1,477 76.24 (32) 65.31 40 53.83 59.59 — 1,485 77.77 57.73 Brisbane 259 67.67 (11) 59.18 11 54.01 55.89 (67) 192 67.56 56.29 Australia 3,515 68.52 (50) 67.35 58 60.43 65.76 (67) 3,456 69.43 68.86 in US$(1) 48.10 47.28 42.42 46.16 48.74 48.34 London 3,949 46.02 (140) 41.49 42 61.42 61.42 — 3,851 46.51 51.17 in US$(1) 58.42 52.65 77.94 77.94 59.04 64.96 Berlin 549 25.85 (1) 99.12 18 16.35 16.35 — 566 25.25 39.02 in US$(1) 29.38 112.64 18.57 18.57 28.70 44.36 São Paulo 141 268.81 — — — — — — 141 268.81 268.81 Rio de Janeiro 142 158.60 — — — — — — 142 158.60 158.60 Brazil 283 213.51 — — — — — — 283 213.51 213.51 in US$(1) 55.70 — — — 55.70 55.70 Total 38,242 $ 34.54 (938) $ 32.73 657 $ 38.94 $ 41.06 59 38,020 $ 34.82 $ 37.33 (1) Using the spot rate at June 30, 2019 for all periods presented
27 Core Office PROPORTIONATE LEASE EXPIRY ANALYSIS
Jun. 30, 2019 Current 2019 2020 2021 2022 2023 2024 Thereafter Total(1) Net rent Net rent Net rent Net rent Net rent Net rent Net rent (Sq. ft. in (Sq. ft. in (per (Sq. ft. in (per (Sq. ft. in (per (Sq. ft. in (per (Sq. ft. in (per (Sq. ft. in (per (Sq. ft. in (per (Sq. ft. in (Local currency) 000's) 000's) sq. ft.)(2) 000's) sq. ft.)(2) 000's) sq. ft.)(2) 000's) sq. ft.)(2) 000's) sq. ft.)(2) 000's) sq. ft.)(2) 000's) sq. ft.)(2) 000's) Midtown New York 71 79 $ 43 26 $ 51 30 $ 42 2 $ 53 18 $ 40 55 $ 67 2,307 $ 54 2,588 Downtown New York 317 7 3 146 52 403 33 82 50 315 40 264 38 5,384 44 6,918 Washington, D.C. 455 66 30 376 31 761 30 114 35 372 33 225 31 1,644 46 4,013 Los Angeles 644 100 17 205 28 230 30 262 29 478 28 302 33 2,013 37 4,234 Houston 853 62 25 507 26 106 26 599 24 506 26 253 27 1,590 27 4,476 Boston 6 5 33 10 63 68 34 32 28 20 32 27 30 87 32 255 Denver 110 11 32 39 25 53 24 5 27 140 27 5 32 306 29 669 San Francisco 30 1 37 15 30 4 68 82 54 11 67 15 68 48 76 206 United States 2,486 331 28 1,324 31 1,655 31 1,178 30 1,860 31 1,146 34 13,379 43 23,359 Toronto 35 60 32 374 36 315 36 557 31 232 34 354 36 2,908 36 4,835 Calgary 385 25 34 139 42 62 37 224 30 53 33 74 42 3,345 37 4,307 Ottawa 29 — — 2 28 144 23 5 13 1 28 24 19 93 23 298 Canada 449 85 33 515 38 521 33 786 31 286 34 452 36 6,346 36 9,440 in US$ 25 29 25 24 26 27 27 Sydney 4 6 105 20 83 87 84 163 79 357 64 131 64 337 86 1,105 Melbourne — 2 126 3 134 281 68 141 63 2 138 245 65 4 192 678 Perth 50 34 88 15 51 19 79 161 85 51 79 69 79 1,136 103 1,535 Brisbane 31 22 60 17 75 31 74 29 110 10 79 — — 83 72 223 Australia 85 64 81 55 75 418 72 494 78 420 67 445 67 1,560 98 3,541 in US$ 57 53 51 55 47 47 69 London 249 34 74 173 44 155 48 138 39 235 56 114 60 3,002 45 4,100 in US$ 94 56 61 49 71 76 57 Berlin 54 18 44 9 48 66 25 29 25 120 27 84 23 240 23 620 in US$ 49 55 28 28 31 26 26 São Paulo — — — — — — — — — 141 269 — — — — 141 Rio de Janeiro — — — — — — — — — — — — — 142 159 142 Brazil — — — — — — — — — 141 269 — — 142 159 283 in US$ — — — — 70 — 41 Total 3,323 532 $ 36 2,076 $ 33 2,815 $ 34 2,625 $ 34 3,062 $ 38 2,241 $ 37 24,669 $ 42 41,343 Total % expiring 8.0% 1.3 % 5.0 % 6.8% 6.3 % 7.4% 5.4 % 59.8% 100.0% End of prior year 7.0% 1.9 % 5.6 % 5.7% 8.0 % 6.4% 6.4 % 59.0% 100.0% Difference 1.0% (0.6)% (0.6)% 1.1% (1.7)% 1.0% (1.0)% 0.7%
(1) Excludes developments (2) Net rent represents cash rent in year of expiry
28 Core Office DEVELOPMENT SITES
Proportionate Area currently under construction Expected date of Jun. 30, 2019 accounting Cost Percent pre- Assets under (Local currency Millions and sq. ft. in 000's) Location stabilization Total To-date Yield on cost leased management Proportionate Office 100 Bishopsgate London Q2 2020 £ 875 £ 810 7% 75% 938 938 One Manhattan West New York City Q4 2020 $ 778 $ 620 6% 86% 2,081 853 Manhattan West Retail New York City Q1 2021 $ 131 $ 99 5% 34% 82 46 Wood Wharf - Office London Q2 2021 £ 125 £ 22 8% 44% 423 211 ICD Brookfield Place Dubai Q2 2021 AED 1,420 AED 1,153 10% 21% 1,156 578 1 Bank Street London Q3 2022 £ 257 £ 212 7% 89% 715 358 Bay Adelaide North Toronto Q4 2022 C$ 498 C$ 102 6% 78% 820 820 Four Manhattan West (2) New York City Q2 2023 $ 145 $ 60 5% n/a 159 89 Two Manhattan West New York City Q4 2023 $ 1,329 $ 230 6% —% 1,955 1,095 Multifamily - Rental Wood Wharf - 8 Water Street & 2 George Street London Q4 2020 £ 151 £ 107 5% n/a 371 186 Greenpoint Landing Building F New York City Q1 2021 $ 347 $ 243 6% n/a 348 331 Newfoundland London Q2 2021 £ 249 £ 216 4% n/a 545 273 Multifamily - Condominium (1) Principal Place Residential (2) London Q4 2019 £ 190 £ 164 17% n/a 303 152 Southbank Place (2) London Q4 2019 £ 232 £ 181 20% n/a 669 167 Wood Wharf - 10 Park Drive (2) London Q2 2020 £ 102 £ 87 31% n/a 269 135 Wood Wharf - One Park Drive (2) London Q2 2021 £ 221 £ 127 30% n/a 430 215 Active developments 11,264 6,447 Office - 10 Bank St London 857 428 Office - Elizabeth Quay Australia 1,150 1,150 Multifamily - Rental Los Angeles 791 374 Multifamily- Rental (various) New York City 1,909 1,872 Multifamily- Rental (various) Houston 771 771 Multifamily (various) London 465 188 Halley Rise - Mixed-use Washington, D.C. 2,889 2,435 Active planning 8,832 7,218 Future developments 11,173 7,569 Total commercial developments 31,269 21,234 (1) Completion date and anticipated return on cost are presented instead of cash stabilization and yield on cost, respectively, for these developments (2) Hotel and multifamily-condominium developments are classified as PP&E on the balance sheet
Commercial Developments Proportionate balance (US $ Millions) Jun. 30, 2019 Dec. 31, 2018 Active developments $ 4,009 $ 3,512 Active planning 1,038 816 Future developments 728 661 Total core office commercial developments $ 5,775 $ 4,989
29 Core Retail NET OPERATING INCOME AND KEY PERFORMANCE METRICS
Commercial Property Net Operating Income Quarter-to-date(1) Year-to-date(1) (US$ Millions unless otherwise noted) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Same-property NOI $ 417.1 $ 423.0 $ 844.8 $ 844.4 Percent of same-property NOI growth(2) -1.4% 0.1% Non same-property NOI 0.8 155.5 3.1 293.2 Total NOI 417.9 578.5 847.9 1,137.6 Less: straight-line rental income(3) (14.1) (1.4) (33.0) (1.4) Total cash NOI $ 403.8 $ 577.1 $ 814.9 $ 1,136.2 (1) Amounts reflected on a consolidated basis for all periods presented (2) Same-property net operating income increased by 0.4% and 1.7%, respectively, for the three and six months ended June 30, 2019 excluding the temporary incremental impact of recent bankruptcies, which reduced NOI by $7.7M for the current quarter and $13.9M on a year-to-date basis (3) The increase in straight-line rent is due to the impact of acquisition accounting applied at the merger date
Key Performance Metrics (US$ and sq. ft. in 000's) Jun. 30, 2019 Jun. 30, 2018 Number of properties 123 125 Leasable sq. ft.: Assets under management 120,903 122,214 Proportionate 49,255 34,424 Same-property: Occupancy 95.0% 95.7% Average in-place rents per square foot 62.27 61.86 Average in-place rents per square foot (<10K square feet) 80.13 78.44 NOI weighted sales per square foot 777 739
30 Core Retail SIGNED LEASES AND LEASE EXPIRY ANALYSIS
Leasing Activity - All Leases Trailing 12 months commencements Trailing 12 months commencements Jun. 30, 2019 Sq. ft. in Term Initial rent Average rent Term Initial rent Average rent (US$) # of leases 000's (in years) per sq. ft. per sq. ft. # of leases Sq. ft. in 000's (in years) per sq. ft. per sq. ft. New and renewal leases 1,829 6,746 7.0 $ 56.89 $ 60.94 1,664 6,612 7.0 $ 51.45 $ 54.13 Percent in lieu/gross 668 2,878 5.1 N/A N/A 614 3,190 5.4 N/A N/A Total leases 2,497 9.624 6.3 $ 56.89 $ 60.94 2,278 9,802 6.5 $ 51.45 $ 54.13
Suite-to-Suite Lease Spreads(1,2) New and renewal leases Jun. 30, 2019 Term Initial rent Expiring rent (3) (US$) # of leases Sq. ft. in 000's (in years) per sq. ft. per sq. ft. Initial rent spread Trailing 12 months commencements 1,151 4,451 6.9 $ 63.36 $ 59.09 $ 4.26 7.2% (1) Represents signed leases that have commenced in the specified period compared to expiring rent for the prior tenant in the same suite. New suites are within 10,000 square feet of the expiring suites (2) Represents leases where downtime between the new and previous tenant was less than 24 months (3) Excluding short-term renewals at Ala Moana Center
Lease Expiration Expiring GLA Number of Jun. 30, 2019 at 100% expiring (sq. ft. in Percent of Expiring rent Expiring rent (US$) leases 000's) total (in thousands) per sq. ft. Specialty leasing 914 1,975 3.7 % $ 35,216 $ 17.83 2019 1,020 2,831 5.3 % 185,461 65.51 2020 1,652 5,428 10.2 % 285,526 52.60 2021 1,560 5,583 10.5 % 317,589 56.88 2022 1,437 5,853 11.0 % 303,571 51.86 2023 1,308 5,148 9.6 % 326,871 63.50 2024 1,127 5,725 10.7 % 359,710 62.84 2025 951 4,446 8.3 % 342,052 76.94 2026 820 3,866 7.2 % 293,539 75.92 2027 685 3,903 7.3 % 270,354 69.27 Subsequent 1,464 8,604 16.2 % 493,128 57.34 Total 12,938 53,362 100.0 % $ 3,213,017 $ 60.22 Vacant space 1,228 2,840 Mall and freestanding GLA 14,166 56,202
31 Core Retail DEVELOPMENT SITES
Jun. 30, 2019 Proportionate cost Expected Stabilized return on (US$ Millions) Location Description Year Total To-date investment Active developments The SoNo Collection Norwalk, CT Ground up development 2022 $ 460 $ 279 6% Active redevelopments Paramus Park Paramus, NJ Sears Redevelopment for Stew Leonard's 2021 21 13 7% Stonestown Galleria San Francisco, CA Anchor Redevelopment for Retail and Entertainment 2022 149 14 7-8% Other Projects Various 2020-2022 90 25 7-9% Active developments/redevelopments $ 720 $ 331 Active planning Ala Moana Honolulu, HI Residential Tower 2025 $ 160 $ — 5-7% North Point Alpharetta, GA Sears Redevelopment - Residential 2022 63 — 5-7% Macy's Redevelopment - Retail expansion and Northbrook Court Northbrook, IL residential 2022 138 2 5-7% Oxmoor Center Louisville, KY Sears Redevelopment for Top Golf + restaurants 2022 29 1 6-7% Streets at Southpoint Durham, NC Mixed Use Densification 2024 107 — 6-8% Macy's Redevelopment for iPic and multi-level small- Tysons Galleria McLean, VA shop expansion 2021 124 2 6-7% Valley Plaza Bakersfield, CA Sears backfill for multi-tenant spec 2021 18 — 7-9% Other Projects Various 2021-2025 216 2 7-9%
Active planning 855 7 Total retail developments $ 1,575 $ 338
32 LP Investments SUMMARY OF INVESTMENTS
Current Quarter Highlights Quarter-to-date Year-to-date NOI Company FFO NOI Company FFO (US$ Millions) Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 Office $ 33 $ 41 $ 5 $ 18 $ 66 $ 75 $ 10 $ 30 Retail 24 23 17 17 48 51 32 34 Logistics 1 8 — 3 1 17 — 6 Multifamily 18 23 5 8 35 46 27 40 Hospitality 61 60 38 30 114 115 65 60 Triple Net Lease 23 22 6 6 47 44 12 12 Alternative Real Estate 19 24 6 11 38 46 13 20 Mixed-use(1) 9 7 4 3 17 13 8 5 Finance Funds 1 — 3 3 1 — 6 6 BSREP III — — 3 — — — 9 — Corporate — — (8) (16) — — (17) (34) Total $ 189 $ 208 $ 79 $ 83 $ 367 $ 407 $ 165 $ 179 (1) Restated prior period office statistics to reflect reclassification of certain properties to mixed-use
Last 12 months Commercial properties Invested capital realized gains(1) (US$ Millions) Jun. 30, 2019 Dec. 31, 2018 Jun. 30, 2019 Dec. 31, 2018 Jun. 30, 2019 Office $ 2,431 $ 2,408 $ 1,020 $ 1,134 $ 51 Retail 1,457 1,700 943 1,167 31 Logistics 26 48 20 39 264 Multifamily 1,214 1,301 601 685 86 Hospitality(2) — — 789 882 (1) Triple Net Lease 1,290 1,451 331 335 (4) Alternative Real Estate 1,388 1,344 556 810 57 Mixed-use 607 2,355 250 747 — Finance Funds — — 185 182 — BSREP III (3) — — 315 — — Corporate — — 58 (777) (9) Total 8,413 10,607 $ 5,068 $ 5,204 $ 475 (1) Net of carried interest (2) Hospitality assets are recorded separately from commercial properties within property, plant and equipment (3) BSREP III is accounted for as a financial asset on the balance sheet
33 LP Investments SUMMARY OF INVESTMENTS (CONT'D)
Key Performance Metrics(1) Jun. 30, 2019 Area Assets under Unit of (Sq. ft. in 000's) No. of properties management Proportionate measurement Occupancy % Office 113 42,939 12,621 Sq. ft. 82.1% Retail 45 28,350 9,498 Sq. ft. 85.7% Logistics 1 357 86 Sq. ft. 100.0% Multifamily 62 19,965 5,510 Units 93.9% Hospitality 123 25,185 6,580 Rooms n/a Triple Net Lease 324 16,831 4,821 Sq. ft. 99.4% Alternative Real Estate Self-storage 98 8,169 2,036 Sq. ft. 82.7% Student Housing 49 17,827 4,512 Beds 94.2% Manufactured Housing 136 32,424 8,289 Sites 86.5% Mixed-use 7 5,634 1,363 Sq. ft. 91.4% (1)Excludes BSREP III investments
Summary of Hospitality Properties Assets under Number of Avg. daily rate per room Revenue per available room management Proportionate (US$ Millions) properties Jun. 30, 2019 Jun. 30, 2018 Jun. 30, 2019 Jun. 30, 2018 # of rooms Own % # of rooms
North America 9 $ 247 $ 254 $ 201 $ 186 7,517 26% 1,955 United Kingdom(1) 5 236 236 252 233 4,312 27% 1,177 Extended Stay (North America) 108 59 47 37 38 12,923 26% 3,312 Australia(1) 1 133 130 89 95 433 31% 136 Total 123 25,185 26% 6,580 (1) Using the average quarter-to-date exchange rate for the three months ended June 30, 2019 for all periods presented
34 LP Investments BSREP Series
BSREP I BSREP II BSREP III • $4.4B Fund • $9.0B Fund • $15.0B Fund • BPY has a 31% interest • BPY has a 26% interest • BPY has a 7% interest • BPY consolidates this fund • BPY consolidates this fund • BPY accounts for its interest in • Fund is in year 8 • Fund is in year 5 this fund as a financial asset • 8 realizations to date representing: • No realizations to date • Fund is in year 2 ◦ 29.3% gross IRR • 58% of capital remains to be ◦ 2.2x multiple of capital invested
Sector Composition Sector Composition Sector Composition
11% 16% 24% 19% 9% 39% 15% 1% 8% 6% 20% 58% 6% 17% 16% 5% 13% 14% 3%
n n n n n Office Retail Multifamily Mixed-use Hospitality n n n Logistics Alternative Uncommitted capital
35 Corporate FOREIGN CURRENCY EXPOSURE
Jun. 30, 2019 (US$ Millions) USD GBP BRL AUD INR CAD KRW RMB EUR AED Other Total Net equity - US$ $ 19,812 $ 4,203 $ 746 $ 1,855 $ 330 $ 96 $ 216 $ 87 $ 357 $ 150 $ — $ 27,852 FX contracts - US$ 3,827 (2,641) — (591) (86) (24) (201) (83) (201) — — — Net unhedged - US$ 23,639 1,562 746 1,264 244 72 15 4 156 150 — 27,852 % of total equity 84.7% 5.6% 2.8% 4.5% 0.9% 0.3% 0.1% —% 0.6% 0.5% —% End of prior year - US$ 22,521 2,890 718 1,364 183 20 96 68 311 123 (10) 28,284 % of total equity 79.7% 10.3% 2.5% 4.8% 0.6% 0.1% 0.3% 0.2% 1.1% 0.4% —%
36 Corporate MANAGEMENT FEE AND INCENTIVE DISTRIBUTION
Management Fee Incentive Distribution (US$ Millions, except per unit amounts) No. of units Price Amount (US$ Millions, except per unit amounts) Rate Per Unit Amount Initial market value of BPY units 466.3 $ 21.91 $ 10,218 Distribution per quarter $ 0.330 $ 314.64 A Corporate capital securities First distribution Class B and Class C preferred shares 1,250 First distribution threshold 0.275 266.12 Class A preferred equity 25 266.12 B Recourse debt, net of cash (25) Second distribution(1) Initial capitalization 11,468 A Distribution above first threshold (A - B) 0.025 24.19 Add: 15% incentive distribution 15.0% 4.27 Current market value of BPY units 704.7 $ 19.12 13,474 28.46 C Corporate capital securities Third distribution(2) Preferred equity units(1) 1,984 Distribution above second threshold 0.030 29.03 Class A preferred equity 15 Add: 25% incentive distribution 25.0% 9.68 Recourse debt, net of cash 3,005 38.71 D Current capitalization 18,478 B Total distributions (B + C + D) 333.29 (2) Minimum fee 13.8 Incentive distributions 13.95 Fee on increased market capitalization ((B - A) x 0.3125%) 21.9 Less: Incentive distribution account credits (13.95) (3) Available creditable operating payments (9.8) Net incentive distribution payable to Brookfield Asset Management $ — Total management fee $ 25.9 (1) The incentive distribution is 15% of BPY's regular distributions (i.e., excluding the EED) (1) Preferred shares of $1,800M were issued in the fourth quarter of 2014 in connection with the between $1.10 and $1.20 per year (or $0.275 and $0.30 per quarter) joint venture in Canary Wharf and are comprised of three series of Class A preferred equity units (2) The incentive distribution is 25% of BPY's regular distributions (i.e., excluding the EED) above that are mandatorily convertible into units after seven, ten and twelve years, respectively, based $1.20 per year (or $0.30 per quarter) on tranche. $184M of Class A Cumulative Redeemable Perpetual Preferred Units, Series 1 were issued in 2019 (2) Minimum fee of $50M annually, adjusted for inflation (3) Represents a reduction to the BPY management fee for fees already paid by BPY on capital that is invested in Brookfield sponsored funds
▪ Our total management fee paid in the second quarter of 2019 was ▪ Performance-based fees paid to Brookfield Asset Management on BPY’s $25.9M compared to $28.5M in the prior quarter, as a result of an interests in Brookfield Asset Management-sponsored funds are offset decrease in current capitalization. against the incentive distribution. The amount available for the offset is calculated as the accumulated performance fees incurred since BPY’s spin-out in April 2013, less any prior gross incentive distribution offsets taken. ▪ In the second quarter of 2019, Brookfield Asset Management earned $13.9M of incentive distributions, which were fully offset by the available credits. As of June 30, 2019, BPY has an additional $132.7M of credits available to offset against future incentive distributions.
37 Appendix A COMPANY FFO RECONCILIATION
Quarter-to-Date Jun. 30, 2019 Core Office Core Retail LP Investments Corporate Total
(US$ Millions) FFO Adjustments CFFO FFO Adjustments CFFO FFO Adjustments CFFO FFO Adjustments CFFO FFO Adjustments CFFO NOI $ 331 $ — $ 331 $ 418 $ — $ 418 $ 189 $ — $ 189 $ — $ — $ — $ 938 $ — $ 938 Investment and other income 7 — 7 4 — 4 13 — 13 4 — 4 28 — 28 Fee revenue 64 — 64 33 — 33 — — — — — — 97 — 97 BSREP III earnings — — — — — — — 3 3 — — — — 3 3 Interest expense (147) 17 (130) (218) — (218) (107) 3 (104) (65) — (65) (537) 20 (517) Depreciation and amortization of non- real estate assets (2) 2 — (6) 6 — (2) 2 — — — — (10) 10 — General and administrative expense (62) 3 (59) (68) 3 (65) (19) 1 (18) (44) 4 (40) (193) 11 (182) Non-controlling interests (26) — (26) (2) — (2) (4) — (4) — — — (32) — (32) FFO/Company FFO $ 165 $ 22 $ 187 $ 161 $ 9 $ 170 $ 70 $ 9 $ 79 $ (105) $ 4 $ (101) $ 291 $ 44 $ 335
38 Appendix B ACQUISITION AND DISPOSITION ACTIVITY
▪ During the second quarter we disposed of 20 assets for net proceeds of $173M and acquired 27 assets for $192M.
Dispositions For the three months ending Jun. 30, 2019 BPY Direct LP Investment BPY Interest in % of BPY Property BPY Share (US$, Millions) Assets Location Interest Sold Interest Fund Interest Fund Interest Sold Sales Price Sales Price Net Proceeds Core Office 2001 M Street 1 Washington, D.C. 100% 43% —% —% 43% $ 238 $ 103 $ 45 240 Queen Street 1 Brisbane, Australia 23% 100% —% —% 23% $ 157 $ 36 $ 36 Land Banks 2 Various (US) 77% 100% —% —% 77% $ 25 $ 19 $ 19 LP Investments BSREP I 5 Various (US) 100% 2% 91% 30% 29% $ 320 $ 94 $ 39 BSREP II 6 Various (Int'l) 86% 3% 97% 27% 24% $ 100 $ 24 $ 12 BSREP III 3 Various (US) 100% 1% 30% 7% 3% $ 310 $ 11 $ 5 VAMF II 2 Various (US) 100% —% 100% 37% 37% $ 105 $ 39 $ 17 Total Dispositions 20 $ 173 Acquisitions For the three months ending Jun. 30, 2019 BPY Direct LP Investment BPY Interest BPY Ownership Gross Purchase BPY Share (US$, Millions) Assets Location Interest Fund Interest in Fund Acquired Price Purchase Price Core Office 3 Various (Australia) 24% —% —% 24% $ 317 $ 76 Core Retail (1) 1 Northbrook, IL 94% —% —% 94% $ 10 $ 9 LP Investments BSREP I 2 Various (US) 12% 45% 30% 26% $ 17 $ 4 BSREP II 8 Various (Int'l) —% 82% 26% 22% $ 184 $ 40 BSREP III 10 Various (Int'l) 1% 73% 7% 6% $ 330 $ 21 VAMF III 3 Various (US) —% 100% 30% 30% $ 141 $ 42 Total Acquisitions 27 $ 192 (1) Acquired a tenant-owned space
39 GLOSSARY OF TERMS
Terms Description
Anchor Department stores whose merchandise appeals to a broad range of shoppers. Anchors either own their stores, the land under them and adjacent parking areas, or enter into long-term leases at rates that are generally lower than the rents charged to mall store tenants. Average leasing net rent Average rent over the lease term on a per square foot basis including tenant expense reimbursements, less operating expenses being incurred for that space, but including the impact of straight-lining rent escalations or amortization of free rent periods. Average rent Represents average rent over the term consisting of base minimum rent and common area costs. Company FFO FFO before the impact of depreciation and amortization of non-real estate assets, transaction costs, gains (losses) associated with non-investment properties, imputed interest on equity accounted investments and the partnership’s share of BSREP III Company FFO. The partnership accounts for the investment in BSREP III as a financial asset and income (loss) of the fund is not presented in the partnership’s results. Distributions from BSREP III, recorded as dividend income under IFRS, are removed from investment and other income for Company FFO presentation. DFC Deferred financing costs. Expiring net rent Escalated cash rent at the end of the lease term on a per square foot basis including tenant expense reimbursements, less operating expenses being incurred for that space. Expiring rent Represents rent at the end of the lease consisting of base minimum rent and common area costs. Funds from Operations ("FFO") Income, including equity accounted income, before realized gains (losses) on investment property, fair value gains (losses) (including equity accounted fair value gains (losses)), unrealized fair value gains (losses) that arise as a result of reporting under IFRS, depreciation and amortization of real estate assets, income tax expense (benefit), and less non-controlling interests. Gross Leasable Area ("GLA") Total gross leasable space at 100%. In-place net rent For our office segment, the annualized amount of cash rent receivable from leases on a per square foot basis including tenant expense reimbursements, less operating expenses being incurred for that space, but excluding the impact of straight-lining rent escalations or amortization of free rent periods. In-place rent For our retail segment, the amount of cash consisting of base minimum rent and common area costs. Mall and freestanding Inline mall shop and outparcel retail locations (locations that are not attached to the primary complex of buildings that comprise a shopping center). Excludes anchor stores. Net Operating Income ("NOI") Revenues from commercial and hospitality operations of consolidated properties less direct property expenses. Office (as defined by Core Retail segment only) Leasable office space, either peripheral to a retail center or a stand-alone office building without a retail component. Operating Entity Subsidiaries of the operating partnership that hold interests, directly or indirectly, in BPY's real estate assets other than entities in which such subsidiaries hold interests for investment purposes only of less than 5% of the equity securities. Operating partnership Brookfield Property L.P. Proportionate Reflects proportionate share of the operating subsidiaries attributable to Unitholders. Realized LP Investment gains Income earned on investing activity when fund investments are realized, inclusive of associated change in carried interest to be due at a future date to the general partner of the relevant Brookfield Asset Management-sponsored funds Specialty leasing Temporary tenants on license agreements (as opposed to leases) with terms in excess of twelve months. License agreements are cancellable by the company with 60 days notice. Strip center An attached row of stores or service outlets managed as a coherent retail entity, with on-site parking usually located in front of the stores. Open canopies may connect the storefronts, but a strip center does not have enclosed walkways linking the stores. Tenant sales Comparative rolling twelve month sales for inline mall tenants that opened at less than 10,000 square feet. Unitholders Refers to holders of general partnership and limited partnership units of BPY, limited partner units of the operating partnership, limited partner units of Brookfield Office Properties Exchange LP and Class A shares of Brookfield Property REIT Inc.
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