UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
      Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 20192020
 
         Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from                    to                     
 
COMMISSION FILE NUMBER 1-34948
1-34948

Brookfield Property REIT Inc.
(Exact name of registrant as specified in its charter)
Delaware27-2963337
(State or other jurisdiction of incorporating or organization)(I.R.S. Employer Identification Number)
250 Vesey Street, 15th FloorNew YorkNY10281-1023
(Address of principal executive offices)(Zip Code)
(212) (212) 417-7000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Stock, par value $.01 per shareBPRBPYUNasdaq Global Select Market
6.375% Series A Cumulative Perpetual Redeemable Preferred Stock, par value $0.01 per shareBPRAPBPYUPNasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes            No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes           No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes           No

The number of shares of Class A Stock, $.01 par value, outstanding on November 6, 20194, 2020 was 65,457,145.
39,129,457.
1



Brookfield Property REIT Inc.
INDEX

PAGE
NUMBER
Part IFINANCIAL INFORMATION
PAGE
NUMBER
Part IFINANCIAL INFORMATION

2


PART I        FINANCIAL INFORMATION

ITEM I        FINANCIAL STATEMENTS

Brookfield Property REIT Inc.

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2019 December 31, 2018September 30, 2020December 31, 2019
(Dollars in thousands, except share and per share amounts) (Dollars in thousands, except share and per share amounts)
Assets:   Assets:  
Investment in real estate: 
  
Investment in real estate:  
Land$3,234,324
 $2,706,701
Land$3,719,749 $3,659,595 
Buildings and equipment11,785,472
 10,774,079
Buildings and equipment14,225,715 14,020,589 
Less accumulated depreciation(2,457,103) (2,214,603)Less accumulated depreciation(2,917,298)(2,569,911)
Construction in progress83,122
 576,695
Construction in progress235,186 160,443 
Net property and equipment12,645,815
 11,842,872
Net property and equipment15,263,352 15,270,716 
Investment in Unconsolidated Real Estate Affiliates4,935,345
 5,385,582
Investment in Unconsolidated Real Estate Affiliates4,461,997 4,634,292 
Net investment in real estate17,581,160
 17,228,454
Net investment in real estate19,725,349 19,905,008 
Cash and cash equivalents189,212
 247,019
Cash and cash equivalents173,341 197,829 
Accounts receivable, net218,922
 222,562
Accounts receivable, net563,612 234,928 
Notes receivable44,550
 256,937
Notes receivable44,572 76,310 
Deferred expenses, net157,321
 145,631
Deferred expenses, net166,956 188,591 
Prepaid expenses and other assets (see Notes 7 and 14)349,832
 313,648
Prepaid expenses and other assets (see Notes 7 and 14)757,832 745,060 
Deferred tax assets, net630,086
 619,275
Deferred tax assets, net620,058 625,660 
Total assets$19,171,083
 $19,033,526
Total assets$22,051,720 $21,973,386 
Liabilities: 
  Liabilities: 
Mortgages, notes and loans payable (including related party debt - see Note 6)$14,307,203
 $12,589,649
Mortgages, notes and loans payable (including related party debt - see Note 6)$16,330,129 $15,902,894 
Investment in Unconsolidated Real Estate Affiliates85,633
 124,627
Investment in Unconsolidated Real Estate Affiliates131,201 125,565 
Accounts payable and accrued expenses (see Notes 7 and 15)843,777
 953,369
Accounts payable and accrued expenses (see Notes 7 and 15)1,025,044 1,027,130 
Dividend payable13,895
 4,668
Dividend payable454 21 
Junior subordinated notes206,200
 206,200
Junior subordinated notes206,200 206,200 
Total liabilities15,456,708
 13,878,513
Total liabilities17,693,028 17,261,810 
Redeemable Class A equity interests1,394,910
 2,305,895
Redeemable Class A equity interests890,464 1,354,234 
Redeemable noncontrolling interests62,264
 73,696
Redeemable noncontrolling interests61,670 62,235 
Total redeemable interests1,457,174
 2,379,591
Total redeemable interests952,134 1,416,469 
Equity: 
  
Equity:  
Class B Stock & Series B Preferred Stock (collectively, "Combined Class B Stock"): 5,907,500,000 shares authorized, $0.01 par value, 478,167,829 and 454,744,938 issued and outstanding as of September 30, 2019 and December 31, 2018, respectively (see Note 9)4,782
 4,547
Class C Stock: 1,000,000,000 shares authorized, $0.01 par value, 640,051,301 issued and outstanding as of September 30, 2019 and December 31, 20186,401
 6,401
Common Stock: 965,000,000 shares authorized, $0.01 par value, no shares issued or outstanding as of September 30, 2019 and December 31, 2018
 
Preferred Stock: 500,000,000 shares authorized, $0.01 par value, 10,000,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018242,042
 242,042
Class B Stock & Series B Preferred Stock (collectively, "Combined Class B Stock"): 5,907,500,000 shares authorized, $0.01 par value, 520,528,095 and 493,665,297 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively (see Note 9)Class B Stock & Series B Preferred Stock (collectively, "Combined Class B Stock"): 5,907,500,000 shares authorized, $0.01 par value, 520,528,095 and 493,665,297 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively (see Note 9)5,206 4,937 
Class C Stock: 1,000,000,000 shares authorized, $0.01 par value, 640,051,301 issued and outstanding as of September 30, 2020 and December 31, 2019Class C Stock: 1,000,000,000 shares authorized, $0.01 par value, 640,051,301 issued and outstanding as of September 30, 2020 and December 31, 20196,401 6,401 
Preferred Stock: 500,000,000 shares authorized, $0.01 par value, 10,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019Preferred Stock: 500,000,000 shares authorized, $0.01 par value, 10,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019242,042 242,042 
Additional paid-in capital6,339,508
 5,772,824
Additional paid-in capital7,245,170 6,670,844 
Retained earnings (accumulated deficit)(5,686,823) (4,721,335)
Accumulated deficitAccumulated deficit(5,426,952)(5,076,455)
Accumulated other comprehensive loss(87,518) (82,653)Accumulated other comprehensive loss(102,599)(85,402)
Total stockholders' equity818,392
 1,221,826
Total stockholders' equity1,969,268 1,762,367 
Noncontrolling interests in Consolidated Real Estate Affiliates17,248
 26,652
Noncontrolling interests in Consolidated Real Estate Affiliates14,062 26,210 
Noncontrolling interests of the Operating Partnership1,421,561
 1,526,944
Noncontrolling interests of the Operating Partnership1,423,228 1,506,530 
Total equity2,257,201
 2,775,422
Total equity3,406,558 3,295,107 
Total liabilities, redeemable interests and equity$19,171,083
 $19,033,526
Total liabilities, redeemable interests and equity$22,051,720 $21,973,386 
 The accompanying notes are an integral part of these consolidated financial statements.

Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
 (Dollars in thousands, except per share amounts)
Revenues: 
  
  
  
Rental revenues, net$317,469
 $447,767
 $954,728
 $1,518,930
Management fees and other corporate revenues44,206
 30,483
 123,444
 82,278
Other13,450
 14,899
 34,368
 49,250
Total revenues375,125
 493,149
 1,112,540
 1,650,458
Expenses:       
Real estate taxes43,726
 55,081
 126,955
 177,417
Property maintenance costs6,297
 8,381
 22,693
 34,070
Marketing965
 1,801
 2,790
 4,961
Other property operating costs45,271
 66,327
 129,768
 209,832
Provision for doubtful accounts
 3,517
 
 9,180
Property management and other costs59,042
 43,763
 174,339
 119,932
General and administrative4,929
 15,947
 15,661
 40,235
Costs related to the BPY Transaction
 204,159
 9,179
 204,159
Provision for impairment38,794
 7,487
 223,142
 45,866
Depreciation and amortization120,249
 156,401
 357,429
 515,437
Total expenses319,273
 562,864
 1,061,956
 1,361,089
Interest and dividend income12,138
 7,240
 23,451
 25,906
Interest expense(180,755) (144,632) (494,306) (423,120)
Loss on extinguishment of debt(27,542) 
 (27,542) 
Gain from changes in control of investment properties and other, net39,712
 2,850,017
 39,712
 2,862,681
(Loss) income before income taxes, equity in income of Unconsolidated Real Estate Affiliates and related gain on investment, and allocation to noncontrolling interests(100,595) 2,642,910
 (408,101) 2,754,836
Benefit from income taxes14,021
 570,716
 6,068
 571,018
Equity in income of Unconsolidated Real Estate Affiliates16,145
 20,336
 434
 59,206
Unconsolidated Real Estate Affiliates - gain on investment, net33,640
 478,293
 137,994
 488,654
Net (loss) income(36,789) 3,712,255
 (263,605) 3,873,714
Allocation to noncontrolling interests3,366
 (28,981) 34,617
 (32,790)
Net (loss) income attributable to Brookfield Property REIT Inc.$(33,423) $3,683,274
 (228,988) 3,840,924
Class A Stock Earnings Per Share (See Note 10):       
Basic & Diluted Earnings Per Share$0.330
 $0.315
 $0.990
 $0.315
Common Stock Earnings Per Share (See Note 10):       
Basic

 $4.70
   $4.16
Diluted

 $4.68
   $4.15
        
        
        
        
        
        
        

Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Continued)
(UNAUDITED)
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
 (Dollars in thousands, except per share amounts)
Comprehensive Income (Loss), Net: 
  
  
  
Net (loss) income$(36,789) $3,712,255
 $(263,605) $3,873,714
Other comprehensive income (loss)       
Foreign currency translation(5,472) (2,347) (4,745) (12,764)
Net unrealized gains (losses) on other financial instruments(72) 8
 (120) 16
Other comprehensive income (loss)(5,544) (2,339) (4,865) (12,748)
Comprehensive income (loss)(42,333) 3,709,916
 (268,470) 3,860,966
Comprehensive loss (income) allocated to noncontrolling interests3,366
 (29,105) 34,617
 (32,829)
Comprehensive income (loss) attributable to Brookfield Property REIT Inc.$(38,967) $3,680,811
 $(233,853) $3,828,137

The accompanying notes are an integral part of these consolidated financial statements.
3



Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in thousands, except per share amounts)
Revenues:    
Rental revenues, net$326,707 $317,469 $1,019,609 $954,728 
Management fees and other corporate revenues28,923 44,206 90,826 123,444 
Other11,353 13,450 34,643 34,368 
Total revenues366,983 375,125 1,145,078 1,112,540 
Operating Expenses:
Real estate taxes51,054 43,726 147,517 126,955 
Property maintenance costs6,640 6,297 22,200 22,693 
Marketing1,197 965 3,602 2,790 
Other property operating costs51,471 45,271 138,554 129,768 
Property management and other costs62,836 59,042 181,335 174,339 
General and administrative5,753 4,929 15,645 15,661 
Costs related to the BPY Transaction9,179 
Provision for impairment38,794 71,455 223,142 
Depreciation and amortization165,200 120,249 485,442 357,429 
Total operating expenses344,151 319,273 1,065,750 1,061,956 
Interest and dividend income1,969 12,138 5,828 23,451 
Interest expense(164,443)(180,755)(507,209)(494,306)
Gain (loss) on extinguishment of debt(27,542)14,320 (27,542)
Gain (loss) from changes in control of investment properties and other, net39,712 (15,433)39,712 
Loss before income taxes, equity in income (loss) of Unconsolidated Real Estate Affiliates and related gain on investment, and allocation to noncontrolling interests(139,642)(100,595)(423,166)(408,101)
Benefit from (provision for) income taxes(5,808)14,021 (4,596)6,068 
Equity in income (loss) of Unconsolidated Real Estate Affiliates(44,155)16,145 (105,424)434 
Unconsolidated Real Estate Affiliates - (loss) gain on investment, net(645)33,640 10,882 137,994 
Net loss(190,250)(36,789)(522,304)(263,605)
Allocation to noncontrolling interests19,630 3,366 60,807 34,617 
Net loss attributable to Brookfield Property REIT Inc.$(170,620)$(33,423)$(461,497)$(228,988)
Class A Stock Earnings Per Share (See Note 10):
Basic & Diluted Earnings Per Share$0.3325 $0.3300 $0.9975 $0.9900 









4


Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
 
Common
Stock
 Combined Class B Stock Class C Stock 
Preferred
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Accumulated 
Other
Comprehensive Loss
 
Common
Stock in
Treasury
 Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
 
Total
Equity
 Redeemable Class A Stock
 (Dollars in thousands, except for per share and share amounts)  
Balance at January 1, 2018$10,130
 $
 $
 $242,042
 $11,845,532
 $(2,107,498) $(71,906) $(1,122,640) $104,748
 $8,900,408
 $
                      
Cumulative effect of accounting change          (16,864)       (16,864)  
Net income

     

 

 3,789,792
 

 

 (1,827) 3,787,965
 51,132
Distributions to noncontrolling interests in consolidated Real Estate Affiliates

     

         (4,213) (4,213)  
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates        3,808
       (9,229) (5,421)  
Long-Term Incentive Plan Common Unit grants, net (238,655 LTIP Units)        
 
     17,859
 17,859
  
Restricted stock grants, net (1,000,143 common shares and 48,773 Class A stock)10
     
 9,241
 

 

 

 

 9,251
 2,910
Employee stock purchase program

     

 1,797
 

 

 

 

 1,797
  
Stock options exercised (288,715 common shares)3
     

 4,972
 

 

 

 

 4,975
  
Cash dividends reinvested (DRIP) in stock
     
 245
 (245) 

 

 

 
  
Other comprehensive loss

     

 

 

 (12,786) 

 

 (12,786)  
Dividends on Common Stock

     

 

 (421,446) 

 

 

 (421,446)  
Cash distributions on Preferred Stock ($1.1952 per share)

     

 

 (11,952) 

 

 

 (11,952)  
Adjust Mezzanine Equity to Fair Value        40,294
         40,294
  
OP Unit Conversion to Common Stock (4,098,105 common shares)41
       87,149
         87,190
  
Special Pre-Closing Dividend          (9,152,446)     (36,436) (9,188,882)  
BPR Equity Recapitalization(10,184) 4,074
     (7,428,698) 2,903,347
   1,122,640
 (661) (3,409,482) 3,408,889
Cash Contribution from BPY    6,401
   193,599
         200,000
  
Class A Conversion to Class B (14,328,654 Class B Shares)  143
     306,347
         306,490
 (306,490)
Adjust Class A stock to Fair Value

       24,501
         24,501
 (24,501)
Acquisition of NCI by Institutional Investor                1,470,857
 1,470,857
  
Class A Dividend                  
 (51,132)
Balance at September 30, 2018$
 $4,217
 $6,401
 $242,042
 $5,088,787
 $(5,017,312) $(84,692) $
 $1,541,098
 $1,780,541
 $3,080,808
Brookfield Property REIT Inc.


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Continued)
Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
 
Common
Stock
 Combined Class B Stock Class C Stock 
Preferred
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Accumulated 
Other
Comprehensive Loss
 
Common
Stock in
Treasury
 Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
 
Total
Equity
 Redeemable Class A Stock
 (Dollars in thousands, except for per share and share amounts)  
Balance at July 1, 2018$10,144
 $
 $
 $242,042
 $11,880,450
 $(2,396,371) $(82,229) $(1,122,640) $102,666
 $8,634,062
 $
                      
Net income          3,632,142
     (2,997) 3,629,145
 51,132
Distributions to noncontrolling interests in consolidated Real Estate Affiliates                (1,325) (1,325)  
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates        3,808
       (4,231) (423)  
Long-Term Incentive Plan issuance and expense                13,225
 13,225
  
Restricted stock grants, net (48,773 Class A stock)        4,244
         4,244
 2,910
Employee stock purchase program(1)       
         (1)  
Stock options exercised (39,207 common shares)1
       856
         857
  
Cash dividends reinvested (DRIP) in stock        
 
       
  
Other comprehensive loss            (2,463)     (2,463)  
Cash distributions on Preferred Stock ($0.3984 per share)          (3,984)       (3,984)  
Fair value adjustment for noncontrolling interest in Operating Partnership        (22,395)         (22,395)  
Adjust Mezzanine Equity to Fair Value        40,294
         40,294
  
OP Unit Conversion to Common Stock (4,031,041 common shares)40
       85,781
         85,821
  
Special Pre-Closing Dividend          (9,152,446)     (36,436) (9,188,882)  
BPR Equity Recapitalization(10,184) 4,074
     (7,428,698) 2,903,347
   1,122,640
 (661) (3,409,482) 3,408,889
Cash Contribution from BPY    6,401
   193,599
         200,000
  
Class A Conversion to Class B (14,328,654 Class B Shares)  143
     306,347
         306,490
 (306,490)
Adjust Class A stock to Fair Value        24,501
         24,501
 (24,501)
Acquisition of NCI by Institutional Investor                1,470,857
 1,470,857
  
Class A Dividend                  
 (51,132)
Balance at September 30, 2018$
 $4,217
 $6,401
 $242,042
 $5,088,787
 $(5,017,312) $(84,692) $
 $1,541,098
 $1,780,541
 $3,080,808
(UNAUDITED)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(Dollars in thousands, except per share amounts)
Comprehensive Loss, Net:
Net loss$(190,250)$(36,789)$(522,304)$(263,605)
Other comprehensive income (loss)
Foreign currency translation(964)(5,472)(18,958)(4,745)
Net unrealized gain (losses) on other financial instruments(15)(72)39 (120)
Other comprehensive loss(979)(5,544)(18,919)(4,865)
Comprehensive loss(191,229)(42,333)(541,223)(268,470)
Comprehensive loss allocated to noncontrolling interests19,726 3,366 62,529 34,617 
Comprehensive loss attributable to Brookfield Property REIT Inc.$(171,503)$(38,967)$(478,694)$(233,853)
Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
 
Common
Stock
 Combined Class B Stock Class C Stock 
Preferred
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Accumulated 
Other
Comprehensive Loss
 
Common
Stock in
Treasury
 
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
 
Total
Equity
 Redeemable Class A Stock
 (Dollars in thousands, except for per share and share amounts)  
Balance at January 1, 2019$
 $4,547
 $6,401
 $242,042
 $5,772,824
 $(4,721,335) $(82,653) $
 $1,553,596
 $2,775,422
 $2,305,895
                      
Net income (loss)

     

 

 (315,935) 

 

 (39,005) (354,940) 86,947
Distributions to noncontrolling interests in consolidated Real Estate Affiliates and Operating Partnership                (76,241) (76,241)  
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates        

 

     1,188
 1,188
  
Buyback of Class A Stock        

 5,283
       5,283
 (120,210)
Buyback of Class B-1 Stock  (105)     (158,517) (65,902)       (224,524)  
Series K Preferred Unit redemption        

 941
     (729) 212
  
Long Term Incentive Plan & Stock Option Expense          653
       653
  
Preferred stock dividend ($1.1952 per share)          (11,952)       (11,952)  
Other comprehensive loss            (4,865)     (4,865)  
Dividends on Class A ($0.99 per share) and Combined Class B Stock (Refer to Note 9)          (651,098)       (651,098) (86,947)
Restricted stock grants, net of forfeitures (607,450 Class A Stock)

       
 

       
 7,288
Class A Conversion to Class B-1 (38,002,949 Class A Shares converted to 33,919,596 Class B-1 Shares)  340
     725,201
 72,522
       798,063
 (798,063)
Balance at September 30, 2019$
 $4,782
 $6,401
 $242,042
 $6,339,508
 $(5,686,823) $(87,518) $
 $1,438,809
 $2,257,201
 $1,394,910
                      

Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
 
Common
Stock
 Combined Class B Stock Class C Stock 
Preferred
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Accumulated 
Other
Comprehensive Loss
 
Common
Stock in
Treasury
 
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
 
Total
Equity
 Redeemable Class A Stock
 (Dollars in thousands, except for per share and share amounts)  
Balance at July 1, 2019$
 $4,664
 $6,401
 $242,042
 $6,087,409
 $(5,652,263) $(81,974) $
 $1,453,857
 $2,060,136
 $1,674,301
                      
Net income (loss)          (56,318)     (4,717) (61,035) 22,900
Distributions to noncontrolling interests in consolidated Real Estate Affiliates and Operating Partnership                (14,538) (14,538)  
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates                4,392
 4,392
  
Buyback of Class A Stock          2,008
       2,008
 (5,668)
Series K Preferred Unit redemption          18
     (185) (167)  
Long Term Incentive Plan & Stock Option Expense          223
       223
  
Preferred stock dividend ($0.3984 per share)          (3,984)       (3,984)  
Other comprehensive loss            (5,544)     (5,544)  
Dividends on Class A ( $0.33 per share) and Combined Class B Stock (Refer to Note 9)          
       
 (22,900)
Restricted stock grants, net of forfeitures (25,562 Class A Stock)                  
 1,990
Class A Conversion to Class B-1 (13,129,125 Class A Shares converted to 11,791,341 Class B-1 Shares)  118
     252,099
 23,493
       275,710
 (275,713)
Balance at September 30, 2019$
 $4,782
 $6,401
 $242,042
 $6,339,508
 $(5,686,823) $(87,518) $
 $1,438,809
 $2,257,201
 $1,394,910

The accompanying notes are an integral part of these consolidated financial statements.
5



Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWSEQUITY
(UNAUDITED)
Combined Class B StockClass C StockPreferred
Stock
Additional
Paid-In
Capital
Accumulated DeficitAccumulated 
Other
Comprehensive Loss
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
Total
Equity
Redeemable Class A Stock
(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2019$4,547 $6,401 $242,042 $5,772,824 $(4,721,335)$(82,653)$1,553,596 $2,775,422 $2,305,895 
Net income (loss)(315,935)(39,005)(354,940)86,947 
Distributions to noncontrolling interests in consolidated Real Estate Affiliates(76,241)(76,241)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates1,188 1,188 
Buyback of Class A Stock5,283 5,283 (120,210)
Buyback of Class B-1 Stock(105)(158,517)(65,902)(224,524)
Series K Preferred Unit redemption941 (729)212 
Long Term Incentive Plan & Stock Option Expense653 653 
Restricted stock grants, net of forfeitures (607,450 shares of Class A Stock)7,288 
Preferred stock dividend ($1.1952 per share)(11,952)(11,952)
Other comprehensive loss(4,865)(4,865)
Class A Conversion to Class B-1 (38,002,949 shares of Class A Stock converted to 33,919,596 shares of Class B-1 Stock)340 725,201 72,522 798,063 (798,063)
Dividends on Class A Stock ($0.99 per share) and Combined Class B Stock (See Note 9)(651,098)(651,098)(86,947)
Balance at September 30, 2019$4,782 $6,401 $242,042 $6,339,508 $(5,686,823)$(87,518)$1,438,809 $2,257,201 $1,394,910 
6


 Nine Months Ended September 30,
 2019 2018
 (Dollars in thousands)
Cash Flows provided by Operating Activities: 
  
Net (loss) income$(263,605) $3,873,714
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Equity in income of Unconsolidated Real Estate Affiliates(434) (59,206)
Distributions received from Unconsolidated Real Estate Affiliates79,267
 85,269
Provision for doubtful accounts8,244
 9,180
Depreciation and amortization357,429
 515,437
Amortization/write-off of deferred finance costs21,644
 10,381
Accretion/write-off of debt market rate adjustments(1,255) (1,643)
Amortization of intangibles other than in-place leases(2,480) 15,338
Amortization of right of use assets3,934
 
Straight-line rent amortization(5,633) 766
Deferred income taxes(10,810) (573,109)
Unconsolidated Real Estate Affiliates - gain on investment, net(137,994) (488,654)
Gain from changes in control of investment properties and other, net(39,712) (2,862,681)
Provision for impairment223,142
 45,866
Loss on extinguishment of debt27,542
 
Net changes: 
  
Accounts and notes receivable, net45,614
 (19,962)
Prepaid expenses and other assets (see Notes 7 and 14)(4,137) (7,791)
Deferred expenses, net(13,012) (28,863)
Accounts payable and accrued expenses (see Notes 7 and 15)(39,910) (66,203)
Other, net4,359
 40,386
Net cash provided by operating activities252,193
 488,225
Cash Flows (used in) provided by Investing Activities: 
  
Acquisition of real estate and property additions(169,596) 
Development of real estate and property improvements(381,811) (587,418)
Loans to affiliates(330,000) 
Loans to joint venture and joint venture partners(97,548) (6,739)
Proceeds from repayment of loans to affiliates330,000
 
Proceeds from repayment of loans to joint venture and joint venture partners18,020
 82,000
Proceeds from sales of investment properties and Unconsolidated Real Estate Affiliates173,774
 2,878,021
Contributions to Unconsolidated Real Estate Affiliates(208,277) (102,118)
Distributions received from Unconsolidated Real Estate Affiliates in excess of income269,465
 343,047
Net cash (used in) provided by investing activities(395,973)
2,606,793
Cash Flows provided by (used in) Financing Activities: 
  
Proceeds from refinancing/issuance of mortgages, notes and loans payable (including related party debt - see Note 6)4,653,639
 6,571,856
Principal payments on mortgages, notes and loans payable - (including related party debt - see Note 6)(3,364,544) (1,186,149)
Payment of deferred finance costs(30,471) (110,584)
Issuances of Class C Stock
 200,000
Buyback of Class A Stock(114,927) 
Buyback of Combined Class B Stock(224,524) 
Series K preferred unit redemptions(14,719) 
Cash contributions from noncontrolling interests in consolidated real estate affiliates
 1,470,857
Cash distributions to noncontrolling interests in consolidated real estate affiliates(67,035) (4,213)
Cash distributions paid to stockholders(738,043) (9,835,798)
Cash distributions reinvested (DRIP) in common stock
 357
Cash distributions paid to preferred stockholders(11,952) (11,952)
Cash distributions and redemptions paid to unit holders(5,248) (106,167)
Other, net
 (9,631)
Net cash provided by (used in) financing activities82,176
 (3,021,424)
Net change in cash, cash equivalents and restricted cash(61,604) 73,594
Cash, cash equivalents and restricted cash at beginning of period298,693
 231,939
Cash, cash equivalents and restricted cash at end of period$237,089

$305,533
    

Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
Combined Class B StockClass C StockPreferred
Stock
Additional
Paid-In
Capital

Accumulated
Deficit
Accumulated 
Other
Comprehensive Loss
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
Total
Equity
Redeemable Class A Stock
(Dollars in thousands, except for per share and share amounts)
Balance at July 1, 2019$4,664 $6,401 $242,042 $6,087,409 $(5,652,263)$(81,974)$1,453,857 $2,060,136 $1,674,301 
Net income (loss)(56,318)(4,717)(61,035)22,900 
Distributions to noncontrolling interests in consolidated Real Estate Affiliates(14,538)(14,538)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates4,392 4,392 
Long-Term Incentive Plan & Stock Option Expense223 223 
Buyback of Class A Stock2,008 2,008 (5,668)
Series K Preferred Unit redemption18 (185)(167)
Preferred stock dividend ($0.3984 per share)(3,984)(3,984)
Other comprehensive loss(5,544)(5,544)
Restricted stock grants, net of forfeitures (25,562 shares of Class A Stock)1,990 
Class A Conversion to Class B-1 (13,129,125 shares of Class A Stock converted to 11,791,341 shares of Class B-1 Stock)118 252,099 23,493 275,710 (275,713)
Dividends on Class A Stock ($0.33 per share) and Combined Class B Stock (See Note 9)— — (22,900)
Balance at September 30, 2019$4,782 $6,401 $242,042 $6,339,508 $(5,686,823)$(87,518)$1,438,809 $2,257,201 $1,394,910 
7


Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)

 Nine Months Ended September 30,
 2019 2018
 (Dollars in thousands)
Supplemental Disclosure of Cash Flow Information: 
  
Interest paid$484,479
 $442,924
Interest capitalized13,412
 15,123
Income taxes paid5,994
 2,522
Accrued capital expenditures included in accounts payable and accrued expenses221,995
 219,022
Cash paid for amounts included in the measurement of lease liabilities6,406
 
Recognition of right-of-use asset73,633
 
Lease liabilities arising from obtaining right-of-use lease asset73,633
 
Straight-line ground rent asset reclassed to right-of-use asset53,779
 
Straight-line ground rent liability reclassed to right-of-use asset3,817
 
Straight-line building rent liability reclassed to right-of-use asset3,599
 
Non-cash transfer of legal rights for Coronado Center Mall (Refer to Note 3)53,100
 
Non-cash satisfaction of notes receivable from joint venture partner (Refer to Note 3)250,000
 
Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
Combined Class B StockClass C StockPreferred
Stock
Additional
Paid-In
Capital
Accumulated DeficitAccumulated 
Other
Comprehensive Loss
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
Total
Equity
Redeemable Class A Stock
(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2020$4,937 $6,401 $242,042 $6,670,844 $(5,076,455)$(85,402)$1,532,740 $3,295,107 $1,354,234 
Net income (loss)(516,388)(63,524)(579,912)54,891 
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates(336)(336)
Buyback of Class A Stock92,822 92,822 (226,431)
Series K Preferred Unit redemption2,149 (29,868)(27,719)
Long Term Incentive Plan & Stock Option Expense54 54 
Preferred stock dividend ($1.19532 per share)(11,953)(11,953)
Other comprehensive loss(17,197)(1,722)(18,919)
Restricted stock grants, net of forfeitures (784,517 shares of Class A Stock)5,808 
Class A Conversion to Class B-1 (11,578,482 shares of Class A Stock converted to 7,495,510 shares of Class B-1 Stock)75 160,253 82,819 243,147 (243,147)
Dividends on Class A Stock ($0.9975 per share)(54,891)
Class B Equity Issuance194414,073 414,267 
Balance at September 30, 2020$5,206 $6,401 $242,042 $7,245,170 $(5,426,952)$(102,599)$1,437,290 $3,406,558 $890,464 
8


Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
Combined Class B StockClass C StockPreferred
Stock
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated 
Other
Comprehensive Loss
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
Total
Equity
Redeemable Class A Stock
(Dollars in thousands, except for per share and share amounts)
Balance at July 1, 2020$4,992 $6,401 $242,042 $6,788,182 $(5,361,146)$(101,715)$1,458,562 $3,037,318 $1,172,745 
Net income (loss)(185,956)(20,531)(206,487)15,336 
Distributions to noncontrolling interests in consolidated Real Estate Affiliates and Operating Partnership
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates(204)(204)
Buyback of Class A Stock90,740 90,740 (208,476)
Series K Preferred Unit redemption270 (441)(171)
Long Term Incentive Plan & Stock Option Expense23 23 
Preferred stock dividend ($0.3984 per share)(3,984)(3,984)
Other comprehensive loss(884)(96)(980)
Restricted stock grants, net of forfeitures (21,758 shares of Class A Stock forfeited)2,231 
Class A Conversion to Class B-1 (3,620,879 shares of Class A Stock converted to 2,007,259 shares of Class B-1 Stock)20 42,915 33,101 76,036 (76,036)
Dividends on Class A Stock ($0.33 per share)(15,336)
Class B Equity Issuance194 414,073 414,267 
Balance at September 30, 2020$5,206 $6,401 $242,042 $7,245,170 $(5,426,952)$(102,599)$1,437,290 $3,406,558 $890,464 

The accompanying notes are an integral part of these consolidated financial statements.
9


Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
20202019
 (Dollars in thousands)
Cash Flows (used in) provided by Operating Activities:  
Net (loss) income$(522,304)$(263,605)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:  
Equity in (income) loss of Unconsolidated Real Estate Affiliates105,424 (434)
Distributions received from Unconsolidated Real Estate Affiliates35,703 79,267 
Provision for doubtful accounts56,475 8,244 
Depreciation and amortization485,442 357,429 
Amortization/write-off of deferred finance costs25,240 21,644 
Accretion/write-off of debt market rate adjustments(1,110)(1,255)
Amortization of intangibles other than in-place leases(3,261)(2,480)
Amortization of right-of-use assets7,681 3,934 
Straight-line rent amortization(5,943)(5,633)
Deferred income taxes5,601 (10,810)
Unconsolidated Real Estate Affiliates - loss on investment, net(10,882)(137,994)
Gain (loss) from changes in control of investment properties and other, net15,433 (39,712)
Provision for impairment71,455 223,142 
(Gain) loss on extinguishment of debt(14,320)27,542 
Net changes:  
Accounts and notes receivable, net(364,587)45,614 
Prepaid expenses and other assets (see Notes 7 and 14)(27,640)(4,137)
Deferred expenses, net(2,055)(13,012)
Accounts payable and accrued expenses (see Notes 7 and 15)53,684 (39,910)
Other, net(3,707)4,359 
Net cash (used in) provided by operating activities(93,671)252,193 
Cash Flows (used in) Investing Activities:  
Acquisition of real estate and property additions(169,596)
Development of real estate and property improvements(219,670)(381,811)
Loans to affiliates(330,000)
Loans to joint venture and joint venture partners(2,168)(97,548)
Proceeds from repayment of loans to affiliates330,000 
Proceeds from repayment of loans to joint venture and joint venture partners18,020 
Proceeds from sales of investment properties and Unconsolidated Real Estate Affiliates84,450 173,774 
Contributions to Unconsolidated Real Estate Affiliates(75,226)(208,277)
Distributions received from Unconsolidated Real Estate Affiliates in excess of income29,684 269,465 
Net cash (used in) investing activities(182,930)(395,973)
Cash Flows provided by Financing Activities:  
Proceeds from refinancing/issuance of mortgages, notes and loans payable (including related party debt - see Note 6)811,053 4,653,639 
Principal payments on mortgages, notes and loans payable - (including related party debt - see Note 6)(751,174)(3,364,544)
Payment of deferred finance costs(6,343)(30,471)
Issuances of Class B Stock414,266 
Buyback of Class A Stock(133,609)(114,927)
Buyback of Combined Class B Stock(224,524)
Series K preferred unit redemptions(28,284)(14,719)
Cash contributions from noncontrolling interests in consolidated real estate affiliates31,688 
Cash distributions to noncontrolling interests in consolidated real estate affiliates(67,035)
Cash distributions paid to stockholders(54,891)(738,043)
Cash distributions paid to preferred stockholders(11,953)(11,952)
Cash distributions and redemptions paid to unit holders(2,881)(5,248)
Net cash provided by financing activities267,872 82,176 
Net change in cash, cash equivalents and restricted cash(8,729)(61,604)
Cash, cash equivalents and restricted cash at beginning of period275,512 298,693 
Cash, cash equivalents and restricted cash at end of period$266,783 $237,089 
10


Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
Nine Months Ended September 30,
20202019
(Dollars in thousands)
Supplemental Disclosure of Cash Flow Information:
Interest paid$475,778 $484,479 
Interest capitalized5,417 13,412 
Income taxes paid7,064 5,994 
Accrued capital expenditures included in accounts payable and accrued expenses265,716 221,995 
Cash paid for amounts included in the measurement of lease liabilities6,947 6,406 
Recognition of right-of-use asset73,633 
Lease liabilities arising from obtaining right-of-use lease asset73,633 
Straight-line ground rent asset reclassed to right-of-use asset53,779 
Straight-line ground rent liability reclassed to right-of-use asset3,817 
Straight-line building rent liability reclassed to right-of-use asset3,599 
Non-cash transfer of legal rights for Coronado Center Mall (see Note 3)53,100 
Non-cash satisfaction of notes receivable from joint venture partner (see Note 3)250,000 
Non-cash transfer of legal rights for Mall in Columbia (see Note 3)45,500 

The accompanying notes are an integral part of these consolidated financial statements.
11

Table of Contents
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)



NOTE 1        ORGANIZATION

Readers of this Quarterly Report on Form 10-Q (this "Quarterly Report") should refer to the Company's (as defined below) audited consolidated financial statements for the year ended December 31, 20182019 which are included in the Company's Annual Report on Form 10-K (our "Annual Report") for the fiscal year ended December 31, 20182019 (Commission File No. 001-34948), as certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this Quarterly Report. Unless context otherwise requires, capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.
 
General

Brookfield Property REIT Inc. (referred to herein as "BPR"BPYU" or the "Company"), formerly known as GGP Inc. ("GGP"), a Delaware corporation, was organized in July 2010 and is an externally managed real estate investment trust referred to as a "REIT"("REIT").

On March 26, 2018, GGP and Brookfield Property Partners L.P. ("BPY") entered into a definitivean agreement (theand plan of merger (as amended by the amendment thereto dated June 25, 2018, the "Merger Agreement") pursuant to which BPY would acquire all of the shares of GGP common stock, par value $0.01 per share, that BPY and its affiliates did not already own through a series of transactions (collectively, the "BPY Transaction"), including, among other things, the exchange of all shares of GGP common stock owned by certain affiliates of BPY and any subsidiary of GGP for a newly authorized series of preferred stock of GGP designated Series B Preferred Stock (the "Class B Exchange") and the payment of a special dividend payable to certain holders of record of GGP common stock pursuant to the terms of the Merger Agreement (the "Pre-Closing Dividend").

BPRBPYU is an indirect subsidiary of BPY, one of the world's largest commercial real estate companies. In these notes, the terms "we","we," "us" and "our" refer to BPRBPYU and its subsidiaries. BPR,BPYU, through its subsidiaries and affiliates, is an owner and operator of retail properties. As of September 30, 2019,2020, we were the owner, either entirely or with joint venture partners, of 123122 retail properties in the United States.

Substantially all of our business is conducted through BPR OP, LP ("BPROP"), which we sometimes refer to herein as the Operating Partnership, and its subsidiaries. As of September 30, 2019, BPR2020, BPYU held approximately 99% of the common equity of BPROP, while the remaining 1% was held by limited partners and certain previous contributors of properties to BPROP.

In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through BPR REIT Services LLC.LLC ("BPRRS"), Brookfield Properties Retail Inc. ("BPRI") and General Growth Management, Inc. ("GGMI"). Each of GGMI and BPRI is a taxable REIT subsidiary ("TRS"), which earn real estate management, leasing, development, and financing fees for other ancillary services for a majority of our Unconsolidated Real Estate Affiliates (defined below) and for substantially all of our Consolidated Properties (defined below). BPRI also serves as a contractor to GGMI for these services. BPRRS generally provides financial, accounting, tax, legal, development, and other services to our Consolidated Properties.

We refer to our ownership interests in properties in which we own a majority or controlling interest and are consolidated under accounting principles generally accepted in the United States of America ("GAAP") as the "Consolidated Properties." We also own interests in certain properties through joint venture entities in which we own a noncontrolling interest ("Unconsolidated Real Estate Affiliates") and we refer to those properties as the "Unconsolidated Properties".

12

Table of Contents
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

NOTE 2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of BPR,BPYU, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated joint ventures, the noncontrolling partner's share of the assets, liabilities and operations of the joint ventures (generally computed as the joint venture partner's ownership percentage) is included in noncontrolling interests in consolidated real estate affiliates as permanent equity of the Company. Intercompany balances and transactions have been eliminated. Noncontrolling interests are included on our Consolidated Balance Sheets related to the Common,
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Preferred, and LTIP Units of BPROP and are presented either as redeemable noncontrolling interests or as noncontrolling interests in our permanent equity. The Operating Partnership and each of our consolidated joint ventures are variable interest entities as the limited partners do not have substantive kick-out rights or substantive participating rights. However, as the Company holds a majority voting interest in the Operating Partnership and our consolidated joint ventures, it qualifies for the exemption from providing certain of the disclosure requirements associated with variable interest entities.

We operate in a single reportable segment, which includes the operation, development and management of retail and other rental properties. Our portfolio is targeted to a range of market sizes and consumer tastes. Each of our operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. The Company's chief operating decision maker is comprised of a team of several members of executive management who use property operations in assessing segment operating performance. We do not distinguish or group our consolidated operations based on geography, size or type for purposes of making property operating decisions. Our operating properties have similar economic characteristics and provide similar products and services to our tenants. There are no individual operating segments that are greater than 10% of combined revenue or combined assets. When assessing segment operating performance, certain non-cash and non-comparable items such as straight-line rent, depreciation expense and intangible asset and liability amortization are excluded from property operations, which are a result of GGP's emergence from bankruptcy, acquisition accounting and other capital contribution or restructuring events. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. As a result, the Company's operating properties are aggregated into a single reportable segment.

Reclassifications

Components of revenue that were previously reported as minimum rents, tenant recoveries, and overage rents have been combined and reported as rental revenues on the Consolidated Statements of Comprehensive Income. This change in presentation was done to improve comparability by conforming prior year presentation to the current year presentation required under Accounting Standards Codification ("ASC") 842. Total revenues of the Company are unchanged by this reclassification. Refer to Note 7 for further information.
 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
 As Originally Reported As Reclassified As Originally Reported As Reclassified
Minimum rents$309,983
 $
 $1,057,817
 $
Tenant recoveries133,103
 
 446,260
 
Overage rent4,681
 
 14,853
 
Total rental revenues$
 $447,767
 $
 $1,518,930

Acquisitions of Operating Properties (Note 3)

The fair values of tangible assets are determined on an "if vacant" basis. The "if vacant" fair value is allocated to land, where applicable, buildings, equipment and tenant improvements based on comparable sales and other relevant information with respect to the property. Specifically, the "if vacant" value of the buildings and equipment was calculated using a cost approach utilizing published guidelines for current replacement cost or actual construction costs for similar, recently developed properties; and an income approach. Assumptions used in the income approach to the value of buildings include: capitalization and discount rates, lease-up time, market rents, make ready costs, land value, and site improvement value.

The estimated fair value of in-place tenant leases includes lease origination costs (costs we would have incurred to lease the property to the current occupancy level of the property) and the lost revenues during the period necessary to lease-up from vacant to current occupancy level. Such estimates include the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, we evaluate the time period over which such occupancy level would be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance, and utilities) incurred during the lease-up period, which generally ranges up to one year. The fair value of the acquired in-place tenant leases is included in the balance of buildings and equipment and amortized over the remaining lease term for each tenant.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where we are the lessor or the lessee. The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably certain. The remaining term of leases with renewal options at terms significantly below market reflect the assumed exercise of such below-market renewal options and assume the amortization period would coincide with the extended lease term.

13

Table of Contents
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

The gross asset balances and accumulated amortization of the in-place value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.
 Gross AssetAccumulated
Amortization
Net Carrying
Amount
As of September 30, 2020   
Tenant leases:   
In-place value$314,921 $(99,142)$215,779 
As of December 31, 2019
Tenant leases:
In-place value$311,838 $(72,658)$239,180 
 Gross Asset 
Accumulated
Amortization
 
Net Carrying
Amount
      
As of September 30, 2019 
  
  
Tenant leases: 
  
  
In-place value$162,548
 $(68,464) $94,084
      
As of December 31, 2018     
Tenant leases:     
In-place value$188,140
 $(86,510) $101,630


The above-market tenant leases are included in prepaid expenses and other assets (Note 14); the below-market tenant leases are included in accounts payable and accrued expenses (Note 15) in our Consolidated Balance Sheets.

Amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, had the following effects on our income from continuing operations:
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Amortization/accretion effect on continuing operations$(8,665) $(11,524) $(18,446) $(42,390)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Amortization/accretion effect on continuing operations$(16,079)$(8,665)$(61,235)$(18,446)


Future amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, is estimated to decrease results from continuing operations as follows:
YearAmount
2020 Remaining$14,771 
202142,449 
202231,641 
202324,163 
202419,974 
Year Amount
2019 Remaining $4,621
2020 14,067
2021 9,499
2022 8,741
2023 8,458


Revenue Recognition and Related Matters

Accounting for real estate sales distinguishes between sales to a customer or non-customer for purposes of revenue recognition. Once we, as the seller, determine that we have a contract, we will identify each distinct non-financial asset promised to the counter-party and whether the counter-party obtains control and transfers risks and rewards of ownership of each non-financial asset to determine if we should derecognize the asset.

Leases
We have entered into lease arrangements for the land and buildings at certain properties, as well as for the use of office space in Chicago, Illinois. We account for leases under Accounting Standards Update ("ASU") 2016-02, Leases ("TopicASC 842", "Topic 842", or "the new leasing standard"). We elected to use the "package of practical expedients", as discussed below, which allowed us not to reassess
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


under the new leasing standard prior conclusions about lease identification, lease classification, and initial direct costs. We elected to recast prior-period comparative information presented in our Consolidated Statements of Comprehensive Income (Loss) related to rental revenues.

The new leasing standard requires lessees to record a right-of-use ("ROU") asset and a related lease liability for the rights and obligations associated with all lessee leases. TopicAccounting Standards Codification ("ASC") 842 also modified the lease classification criteria through the elimination of "bright-line" tests, the removal of historical real estate specific lease provisions, and changes to lessor accounting to align with the new revenue recognition standard (ASC 606)ASC 606, Revenue from Contracts with Customers.

On the adoption date, we recognized lease liabilities
14

Table of $73.4 millionContents
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and ROU assets of $118.9 million for operating leases of Consolidated Properties for which we are the lessee included in accounts payable and accrued expenses and prepaid expenses and other assets, respectively, on the Consolidated Balance Sheet and there was no cumulative effect on retained earnings. In order to determine the lease liabilities recognized upon adoption, we discounted the remaining lease payments using our incremental borrowing rates ("IBR") at January 1, 2019. The weighted average rate applied was 7.36%. The ROU asset balance was initially measured as the lease liability amount adjusted by the amount of prepaid or accrued lease payments, deferred straight-line lease liabilities, and intangible ground lease assets and liabilities relating to leases recognized on our Consolidated Balance Sheet as of December 31, 2018. In transition, an adjustment of $45.4 million was made to the ROU asset balance to derecognize $52.8 million of below-market ground lease intangible assets (within prepaid expenses and other assets) and $7.4 million of accrued straight-line rent (within per share amounts)
(Unaudited)
accounts payable and accrued expenses) which are now part of the total ROU assets previously recorded on our Consolidated Balance Sheet.

In addition to the "package of practical expedients", weWe elected to use the following additional practical expedients permitted by the new leasing standard:
The transition practical expedient that allows us to carry forward our historical accounting treatment for land easements on existing agreements.
The short-term lease election that allows a lessee not to apply the balance sheet recognition requirements to leases with a term of 12 months or less; lease payments associated with these leases are recognized on a straight-line basis as an expense over the lease term and are not material.
The practical expedient which allows a lessee to not separate lease and non-lease components. We have elected to apply this election to all classes of underlying assets.
The Company did not elect to apply the practical expedients related to hindsight or assessing impairment of ROU assets.

Lessee arrangements (policy applicable from January 1, 2019)
To account for leases for which we are the lessee under the new leasing standard, contracts must be analyzed upon inception to determine if the arrangement is, or contains, a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification tests and measurement procedures are performed at the lease commencement date. Differences in lease classification will affect only the pattern and classification of expense recognition in our Consolidated Statements of Operations and Comprehensive Income (Loss).
The lease liability is initially measured as the present value of the lease payments over the lease term, discounted using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the lessee’s incremental borrowing rate is used. The lease liability balance is subsequently amortized using the effective interest method. The incremental borrowing rate is determined using an approach based on the rate of interest that the lessee would pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. We utilized a market-based approach to estimate the IBRIncremental Borrowing Rate ("IBR") for each individual lease. The approach required significant judgment. Therefore, we utilized different data sets to estimate base IBRs via an analysis of (i) yields on outstanding public debt of BPR,BPYU, as well as comparable companies, (ii) observable mortgage rates, and (iii) unlevered property yields and discount rates. We then applied adjustments to account for considerations related to (i) term and (ii) security that may not be fully incorporated by the aforementioned data sets. Based on individual characteristics of each lease, we selected an IBR taking into consideration how each data approach and adjustments thereto incorporate term, currency and security.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


The lease term is the noncancelable period of the lease, and includes any renewal and termination options we are reasonably certain to exercise. The reasonably certain threshold is evaluated at lease commencement and is typically met if substantial economic incentives or termination penalties are identified.
Lease payments measured at the commencement date include fixed payments, in-substance fixed payments, variable lease payments dependent on a rate or index (using the index or rate in effect at lease commencement), any purchase option the lessee is reasonably certain to exercise, and payments of penalties for terminating the lease if the lease term reflects the lessee exercising the termination option. Fully variable lease payments without an in-substance fixed component are not included in the measurement of the lease liability and are recognized in the period in which the underlying contingency is resolved.
The lease liability is remeasured when the contract is modified, upon the resolution of a contingency such that variable payments become fixed or if our assessment of exercising an extension, termination or purchase option changes. Once remeasured, an adjustment is made to the ROU asset. However, if the carrying amount of the right-of-use asset is reduced to zero, any remaining amount of the remeasurement is recognized in earnings.

The ROU asset balance is initially measured as the lease liability amount, adjusted for any lease payments made prior to the commencement date, initial direct costs, estimated costs to dismantle, remove, or restore the underlying asset and incentives received.

Our current lessee lease portfolio is comprised entirelyprimarily of operating leases; however ifleases. If we enter into a finance lease, in the future, the new leasing standard requires us to initially recognize and measure these leases using the same method as described above for operating leases. Subsequent to initial recognition, each lease payment would be allocated between interest expense and a reduction of the lease liability. InterestThis expense would be recognized over the lease term using the interest method to produce a constant periodic rate of interest on the remaining balance of the liability for each period and would be included in interest expense in our Consolidated Statements of Operations and Comprehensive Income (Loss). The ROU asset would be amortized on a straight-line basis over the lease term, with depreciation recorded in depreciation and amortization in our Consolidated Statements of Operations and Comprehensive Income (Loss).
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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


The ROU assets in our operating leases are evaluated for impairment in a manner similar to our operating properties, as described below under "Impairment".

Lessor arrangements (policy applicable from January 1, 2019)
At the inception of a new lease arrangement, including new leases that arise from amendments, we assess the terms and conditions to determine the proper lease classification. When the terms of a lease effectively transfer control of the underlying asset, the lease is classified as a sales-type lease. When a lease does not effectively transfer control of the underlying asset to the lessee, but we obtain a guarantee for the value of the asset from a third party, we classify the lease as a direct financing lease. All other leases are classified as operating leases. Control of the underlying asset is transferred to the lessee if any of the following criteria are met: (i) transfer of ownership to the lessee prior to or shortly after the end of the lease term, (ii) lessee has an option to purchase the underlying property that the lessee is reasonably certain to exercise, (iii) the lease term is for the major part of the underlying property’s remaining economic life, (iv) the present value of the sum of lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments is equal to or exceeds substantially all of the fair value of the leased property or (v) the underlying property is of such a specialized nature that it is expected to have no alternative use at the end of the lease term. As of September 30, 2019,2020, we do not have any material sales-type or direct financing leases.
For operating leases with minimum scheduled rent increases, we recognize rental income on a straight‑linestraight-line basis, including the effect of any free rent periods, over the lease term when collectability of lease payments (and, if applicable, any amounts necessary to satisfy a residual value guarantee) is probable. Variable lease payments are recognized as rental income in the period when the changes in facts and circumstances on which the variable lease payments are based occur. Variable lease payments include overage rent, which is paid by a tenant when the tenant's sales exceed an agreed upon minimum amount, is recognized once tenant sales exceed contractual tenant lease thresholds and is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Our leases also contain provisions for tenants to reimburse us for real estate taxes and insurance, as well as for other property operating expenses, marketing costs, and utilities, which are considered to be non-lease components. These tenant reimbursements are most often established in the leases or in less frequent cases computed based upon a formula. We have elected the practical expedient to not separate non-lease components from the lease component for all classes of underlying assets and determined that the lease component is the predominant component in the contract; therefore, these recoveries are recognized in a manner similar to minimum rents and variable rents within rental revenues on our Consolidated Statements of Operations and Comprehensive Income (Loss).

Recognizing rental and related income on a straight-line basis results in a difference in the timing of revenue recognition from what is contractually due from tenants. Straight-line rents are recorded in accounts receivable, net in our Consolidated Balance Sheet.Sheets. For leases where collectability of substantially all the lease payments is probable, we establish a generalan allowance for doubtful accounts against the portion of accounts receivable, net, including straight-line rents, which is estimated to be uncollectibleuncollectible. Such estimates are based on our previous recovery experience.experience and expectations of future lease concessions. Lease concessions are generally considered a lease modification and thus are recognized prospectively over the remaining lease term. However, the Company does include its estimate of potential lease concessions when establishing its general reserve, based on its best estimates of total lease concessions expected, recognizing the portion of the total concession that is deemed attributable to the current period through consideration of weighted average remaining lease terms. Changes in the general allowance are recognized in rental income on our Consolidated Statements of Operations and Comprehensive Income (Loss). If we determine that collectability of substantially all the lease payments is not probable, we record a current-period adjustment to rental income to reduce cumulative income recognized since lease commencement to the amount of cash collected from the lessee. FutureThis adjustment effectively reduces cumulative income recognized since lease commencement from an accrual basis to cash basis. In addition, future revenue recognition is limited to amounts paid by the lessee. Generally, a lease is returnedlessee. We will generally return to an accrual statusbasis of accounting, if and when, all delinquent payments become current under the terms of the lease agreement and collectability of substantially all the remaining contractual lease payments is reasonably probable.

With respect to our consolidated properties, for the three and nine months ended September 30, 2020, we have recorded $36.9 million and $59.8 million, respectively, associated with potentially uncollectible revenues, which includes $2.4 million
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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

and $7.4 million, respectively, for straight-line rent receivables. With respect to our Unconsolidated Real Estate Affiliates, for the three and nine months ended September 30, 2020, our Unconsolidated Real Estate Affiliates have recorded $47.4 million and $81.0 million, respectively, associated with potentially uncollectible revenues, which includes $3.0 million and $10.1 million, respectively, for straight-line rent receivables. Of these amounts for the three and nine months ended September 30, 2020, our share totaled $24.9 million and $40.1 million, respectively, which includes $1.5 million and $4.8 million, respectively, for straight-line rent receivables.

As of September 30, 2020, the Company, including consideration of our share of Unconsolidated Real Estate Affiliates, has collected approximately 65% of third quarter rents, and collections continue to increase subsequent to quarter end. While working to preserve our profitability and cash flow, we are also working with our tenants regarding requests for lease concessions and other forms of assistance, although we have not executed a significant number of agreements. While we anticipate that we may grant further rent concessions, such as the deferral or abatement of lease payments, such rent concession requests are evaluated on a case-by-case basis. Not all requests for rent relief will be granted as the Company does not intend to forgo its legally enforceable contractual rights that exist under its lease agreements.

Rental revenues also includes lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination dates, as well as accretion related to above-market and below-market tenant leases on acquired properties and properties that were recorded at fair value at the emergence from bankruptcy.

In leasing tenant space, we may provide funding to the lessee through a tenant allowance. To account for a tenant allowance, we determine whether the allowance represents funding for the construction of leasehold improvements and evaluate the control and ownership of such improvements. If we are considered the owner of the leasehold improvements, we capitalize the amount of the tenant allowance and depreciate it over the shorter of the useful life of the leasehold improvements or the related lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event we are not considered the owner of the leasehold improvements, the allowance is capitalized to deferred expenses and considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue on a straight-line basis.

Deferred expenses (policy applicable from January 1, 2019)

The new leasing standard defines initial direct costs as incremental costs of a lease that would not have been incurred if the lease had not been obtained. These initial direct costs (consisting primarily of leasing commissions paid to third parties) are recognized as deferred expenses on our Consolidated Balance Sheet and are amortized using the straight-line method over the life of the leases. Other leasing costs which do not meet the definition of initial direct costs (consisting primarily of internal legal and leasing overhead costs) are expensed as incurred and included in property management and other costs in our Consolidated Statements of Operations and Comprehensive Income (Loss).

Policy applicable to periods prior to January 1, 2019

Our accounting policy for leases in which we are the lessor or lessee prior to the adoption of the new leasing standard can be found in our audited consolidated financial statements for the year ended December 31, 2018, which are included in our Annual Report.
Management Fees and Other Corporate Revenues

Management fees and other corporate revenues primarily represent real estate management and leasing fees, development fees, financing fees and fees for other ancillary services performed for the benefit of certain of the Unconsolidated Real Estate Affiliates. Management fees are reported at 100% of the revenue earned from the joint venture in management fees and other corporate revenues on our Consolidated Statements of Operations and Comprehensive Income (Loss). Our share of the management fee expense incurred by the Unconsolidated Real Estate Affiliates is reported within equity in income (loss) of Unconsolidated Real Estate Affiliates on our Consolidated Statements of Operations and Comprehensive Income (Loss) and in property management and other costs in the Condensed Combined
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Statements of Income in Note 5. The following table summarizes the management fees from affiliates and our share of the management fee expense:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Management fees from affiliates$28,923 $44,206 $90,826 $123,444 
Management fee expense(9,007)(11,956)(25,911)(36,485)
Net management fees from affiliates$19,916 $32,250 $64,915 $86,959 
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Management fees from affiliates$44,206
 $30,483
 $123,444
 $82,278
Management fee expense(11,956) (11,630) (36,485) (32,409)
Net management fees from affiliates$32,250
 $18,853
 $86,959
 $49,869


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

Management Fee Expense

Following the BPY Transaction, certain Brookfield Asset Management Inc. ("BAM")-owned entities provide certain management and administration services to BPR. BPR willBPYU. BPYU and its affiliates pay an annual basea management fee to BAM equal to 1.25% of the totalbased on market capitalization of BPR, subject to certain adjustments.and metrics defined by management. For the first twelve months following closing of the BPY Transaction, BAM has agreed to waive management fees payable by BPR. For the period August 29, 2019 through September 30, 2019, the Company accrued base management fees of $986 thousand due to BAM which is included in accountsBPYU. Amounts payable and accrued expenses on the Consolidated Balance Sheets and in property management and other costs on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019.2020 were $4.6 million and $12.4 million, respectively.

Following the BPY Transaction, an affiliate of BAM is entitled to receive incentive distributions based on an amount by which quarterly distributions exceed specified target levels. There were no such amounts payable for the three and nine months ended September 30, 2020 and 2019.

Impairment

Operating Properties
 
We regularly review our Consolidated Properties for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income, significant decreases in occupancy, debt maturities, changes in management's intent with respect to the properties and prevailing market conditions.
 
If an indicator of potential impairment exists, the property is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows. Although the carrying amount may exceed the estimated fair value of certain properties, a real estate asset is only considered to be impaired when its carrying amount cannot be recovered through estimated future undiscounted cash flows. To the extent an impairment provision is determined to be necessary, the excess of the carrying amount of the property over its estimated fair value is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of the asset group. The adjusted carrying amount, which represents the new cost basis of the property, is depreciated over the remaining useful life of the property.

Although we may market a property for sale, there can be no assurance that the transaction will be complete until the sale is finalized. However, GAAP requires us to utilize the Company's expected holding period of our properties when assessing recoverability. If we cannot recover the carrying value of these properties within the planned holding period, we will estimate the fair values of the assets and record impairment charges for properties when the estimated fair value is less than their carrying value.

Impairment indicators for pre-development costs, which are typically costs incurred during the beginning stages of a potential development and construction in progress, are assessed by project and include, but are not limited to, significant changes in the Company's plans with respect to the project, significant changes in projected completion dates, tenant demand, anticipated revenues or cash flows, development costs, market factors and sustainability of development projects.

Impairment charges are recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss) when the carrying value of a property is not recoverable and it exceeds the estimated fair value of the property, which can occur in accounting periods preceding disposition and/or in the period of disposition.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


During the three months ended September 30, 2020, we recorded no impairment charges. During the nine months ended September 30, 2020, we recorded an impairment charge of $71.5 millionon our Consolidated Statements of Operations and Comprehensive Income (Loss) related to a reduction in the probability-weighted holding period at one of the operating properties, where the Company is currently engaging in negotiations with the creditor to obtain potential lender concessions or other relief (see Note 5).

During the three months ended September 30, 2019, we recorded an impairment charge of $38.8 million on our Consolidated Statements of Operations and Comprehensive Income (Loss) related to one operating property where the carrying value exceeded the transfer price to our affiliate (Note 3). During the nine months ended September 30, 2019, we recorded a $223.1
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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

$223.1 million impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss), $184.3 million of which related to one operating property as a result of a significant decrease in market leasing assumptions and $38.8 million of which related to the impairment charge on the operating property discussed above.

During the nine months ended A significant judgment is made as to if and when impairment should be taken. The Company’s assessment of impairment as of September 30, 2018, we recorded a $45.9 million impairment charge2020 was based on our Consolidated Statements of Comprehensive Income (Loss) relatedthe most current information available to one operating property that had non-recourse debt maturing during 2019 that exceeded the fair valueCompany. Based upon current market conditions, certain of the operating property.

Changes in economicCompany’s properties may have fair values less than their carrying amounts. However, based on the Company’s plans with respect to those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, no impairment charges were recognized. If the operating conditions that occurmentioned above deteriorate or if the Company’s expected holding period for assets change, subsequent to our review of recoverability of our properties could impact the assumptions used in that assessment andtests for impairment could result in future impairment if assumptions regarding those properties differ from actual results.charges in the future.

Investment in Unconsolidated Real Estate Affiliates

A series of operating losses of an investee or other factors may indicate that an other-than-temporary decline in value of our investment in an Unconsolidated Real Estate Affiliate has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated for valuation declines below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we performed for such joint ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary declines with respect to the carrying values of our Unconsolidated Real Estate Affiliates. Refer to Note 5 for more information.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions and access to our credit facility. Our credit risk exposure with regard to our cash and the $1.5 billion available under our credit facility is spread among a diversified group of investment grade financial institutions. We had $315.0$920.0 million and $387.0$715.0 million outstanding under our credit facility as of September 30, 20192020 and December 31, 2018,2019, respectively.

Severance and Other Employee Related Costs

In accordance with ASC 712, Nonretirement Postemployment Benefits, we recognize severance costs when it becomes probable that a payment will be made and the amount is estimable. During the three and nine months ended September 30, 2020, the Company recorded $12.0 million of severance costs included in accounts payable on our Consolidated Balances Sheets and property management costs on our Consolidated Statements of Operations and Comprehensive Income (Loss), related to a workforce reduction.

Recently Issued Accounting Pronouncements

Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic ("COVID-19" or "the global economic shutdown" or "the shutdown"), lessors may provide rent deferrals and other lease concessions to lessees. In February 2016,April 2020, the Financial Accounting Standards Board ("FASB") staff issued ASU 2016-02,a question and answer document (the "Lease Modification Q&A") focused on the application of lease accounting guidance to lease concessions provided as a result of the global economic shutdown. Under existing lease guidance, economic relief that is agreed to or negotiated outside of the original lease agreement is typically considered a lease modification, in which case both the lessee and lessor would be required to apply the respective modification frameworks. However, if the lessee was entitled to the economic relief because of either contractual or legal rights, the relief would be accounted for outside of the modification framework. Although the original lease modification guidance in ASC 842, Leases. This new guidance, including related ASUs that remain appropriate to address routine lease modifications, the Lease Modification Q&A established a different framework to account for certain lease concessions granted in response to the global economic shutdown. The Lease Modification Q&A allows the Company, if certain criteria have been subsequently issued, was effective January 1, 2019, and required lessees to recognize a liability to make lease payments and a right-of-use asset, initially measured at the present value of lease payments, for both operating and finance leases. For leases with a term of 12 months or less, lessees were permittedmet, to make an accounting policy election by class of underlying asset to not recognizeaccount for COVID-19 related lease liabilities andconcessions as either a lease assets. The guidance allowed lessors and lessees to make an accounting policy election, by class of underlying asset, to not separate non-lease components from lease components. The guidance also provided an optional transition method which allowed entities to initially apply the new guidance in the period of adoption, recognizingmodification or a cumulative-effectnegative variable adjustment to the opening balancerental revenue. Such election is required to be applied consistently to leases with similar characteristics and similar circumstances.

19

Table of retained earnings, if necessary. The Company elected to apply the alternative transition method and no cumulative-effect adjustment to the opening balance of retained earnings was deemed necessary to record.Contents

The Company adopted the new standard on January 1, 2019 and applied the new guidance as of that date. In addition, the Company has presented all income as a single line item within "rental revenues" in the accompanying Consolidated Statements of Comprehensive Income (Loss) for the current and comparative period. Refer to the Reclassifications section of Note 2 for additional detail. The Company elected to use the "package of practical expedients", which allowed the Company to not reassess under the new standard prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not make any adjustments to the opening balance of retained earnings upon adoption of the new standard given the nature of the impacts and other transition practical expedients elected by the Company. The leases section above and Note 7 includes a discussion of the effect of the adoption of the new standard.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

The Company has elected to apply such relief and will avail itself of the election to treat leases as lease modifications, thereby avoiding performing a lease by lease analysis for the lease concessions that were (1) granted as relief due to the shutdown and (2) result in the cash flows remaining substantially the same or less than the original contract. The adoption of this standard did not materially impact the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326: Measurement of Credit Losses on Financial Instruments), which changes the model for the measurement of credit losses on financial instruments. Specifically, the amendments in the ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of this new guidance. The amendments inCompany adopted this ASU will be effective for the Companystandard on January 1, 2020. The Company is evaluating the potential2020 which did not materially impact of this pronouncement and does not expect that it will have a material effect on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement. This new guidance is effective January 1, 2020, with early adoption permitted, and provides new, and in some cases eliminates or modifies the existing disclosure requirements on fair value measurements. Public entities will be required to disclose the following: (i) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (ii) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. In addition, public entities will no longer be required to disclose the following: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The new pronouncement also clarifies and modifies certain existing provisions, including eliminating "at a minimum" from the phrase "an entity shall disclose at a minimum" to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and clarifying that materiality is an appropriate consideration when evaluating disclosure requirements. The Company is evaluating the potentialadopted this standard on January 1, 2020 which did not materially impact of this pronouncement and does not expect that it will have a material effect on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. This temporary guidance is effective as of March 12, 2020 through December 31, 2022 to ease potential burdens related to the accounting for, or recognizing the effects of, reference rate reform on financial reporting. The guidance provides optional expedients for applying existing GAAP to contract modifications and hedging relationships affected by the move of global capital markets away from interbank offered rates, most notably the London Interbank Offered Rate (LIBOR). The Company has not adopted any of the optional expedients or exceptions as of September 30, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, estimates and assumptions have been made with respect to allocating the purchase price of real estate acquisitions, the useful lives of assets, capitalization of development and leasing costs, provision for income taxes, recoverable amounts of receivables and deferred taxes, provision for loan loss, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to acquisitions, impairment of long-lived assets, litigation related accruals and disclosures and fair value of debt. Actual results could differ from these and other estimates.

NOTE 3        ACQUISITIONS, SALES AND JOINT VENTURE ACTIVITY

On September 3, 2020, the Company transferred its right in the Sears Anchor Parcel at The Mall in Columbia to TMIC FS Anchor Parcel LLC, a subsidiary of Mall in Columbia JV LLC. In connection with the formation of the Mall in Columbia JV LLC joint venture, the Company agreed to use reasonable efforts to transfer its legal rights at an agreed upon value of $45.5 million.

On May 27, 2020, the Company completed a restructuring with respect to Water Tower Place with its joint venture partner for nominal consideration and assumption of the partner’s share of the debt, resulting in the Company obtaining control of the entity with a total ownership percentage for the Company of 93.93%. Accordingly, the Company recognized a loss of
20

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

$15.4 million included in loss from changes in control of investment properties on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2020.

On March 11, 2020, BPR Nimbus LLC (an indirect subsidiary of the Company) purchased 690,427 shares of Series B Convertible Preferred Stock in Camp NYC, Inc. (par value $0.01 per share) at a price of approximately of $7.24 per share, for a $5.0 million total investment, resulting in a 5.5% ownership interest in Camp NYC, Inc. The investment is accounted for using the cost method (adjusted for impairment and observable price changes) as the Company has neither control nor significant influence over Camp NYC, Inc. and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

On February 21, 2020, the Company completed the sale of eight outparcels for a gross sales price of $12.1 million, which resulted in a gain of $7.8 million included in Other Revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2020. All of the eight outparcels were located at consolidated entities.

On February 7, 2020, our joint venture partner at the SoNo Collection contributed $70.8 million in additional capital to the joint venture, resulting in a dilution of the Company’s ownership interest from 17.0% to 12.9%.

On January 14, 2020, BPR Cumulus LLC (an indirect subsidiary of the Company) purchased 758,725 shares of Common Stock in Allied Esports Entertainment, Inc. (par value $0.01 per share) at a price of $6.59 per share, for a $5.0 million total investment. The investment was marked to fair value as of September 30, 2020, which resulted in a loss of $0.6 million and a loss of $4.0 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2020, respectively. This investment resulted in a 3.2% ownership interest in Allied Esports Entertainment, Inc. The investment is accounted for at fair value as the Company has neither control nor significant influence over Allied Esports Entertainment, Inc. and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

On January 9, 2020, the Company completed the sale of its 27.0% interest in Aero OpCo LLC ("Aeropostale") for a gross sales price of $36.0 million, which resulted in a gain on the sale of $15.1 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2020.

On January 9, 2020, the Company completed the sale of its 1.2% interest in Authentic Brands Group LLC ("ABG") for a gross sales price of $33.5 million, which resulted in a gain on the sale of $1.4 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2020.

On September 13, 2019, BPR Cumulus LLC (an indirect subsidiary of the Company) purchased 10,000,000 shares of Class A Units in PFC Associates LLC (P.F. Chang's)("P.F. Chang's") (par value $0.01 per share) at a price of $1.00 per share, for a $10.0 million total investment, resulting in a 3.2% ownership interest in PFP.F. Chang's. P.F. Chang's is a tenant at certain properties for which we receive rental income included in rental revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss). for the nine months ended September 30, 2019. The investment is accounted for using the cost method as the Company has neither control nor significant influence over PFP.F. Chang's and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

On August 26, 2019, the Company purchased an additional ownership interest of 49.677% in 730 Fifth Owners, LLC from its joint venture partner resulting in the Company obtaining control of the entity with a total ownership percentage for the Company of 99.677%. The transaction was accounted for as an asset acquisition. The transaction consideration consisted of cash consideration of $153.0 million and satisfaction of notes receivable of $249.5 million from the joint venture partner. Because of the presence of non-cash consideration, the Company determined that the fair value of the net assets acquired was more readily determinable than the fair value of the consideration given, and determined that the aggregate fair value of the joint venture's equity was $808.0 million on the acquisition date, which was allocated to the Company's 99.677% ownership interest for $805.4 million and the joint venture partner's remaining 0.323% non-controlling interest for $2.6 million. Concurrent with this transaction, the joint venture partner repaid $54.7 million of interest on the notes receivable (including amounts that had been annually capitalized onto the outstanding principal balance). The Company recorded a gain on change in
21

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

control of investment properties of $39.7 million related to the Company's previously held 50% ownership interest. Immediately following this transaction, the Company sold a condominium interest in one unit of the property to an affiliate of the joint venture partner for a gross sales price of $12.6 million
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


to an affiliate of the joint venture partner, and incurred fees of $0.4 million, which resulted in no gain or loss, as the fair value of the condominium interest in the consolidation transaction had been determined to be $12.2 million.

The table below summarizes the gain from changes in control of investment properties ($ in millions):

Fair value of Investment in Unconsolidated Real Estate Affiliates as of change in control$404.0
Less: carrying value of Investment in Unconsolidated Real Estate Affiliates364.3
Gain from changes in control of investment properties and other, net$39.7
Fair value of Investment in Unconsolidated Real Estate Affiliates as of change in control$404.0 
Less: carrying value of Investment in Unconsolidated Real Estate Affiliates364.3
Gain from changes in control of investment properties and other, net$39.7 


The following table summarizes the allocation of the purchase price to net assets acquired at the date of acquisition. The allocation were based on the relative fair value of the assets acquired and liabilities assumed ($ in millions):

Investment in real estate, including intangible assets and liabilities$1,560.5
Debt held by the joint venture(720.0)
Net working capital(32.5)
Net assets acquired$808.0
Investment in real estate, including intangible assets and liabilities$1,560.5 
Debt held by the joint venture(720.0)
Net working capital(32.5)
Net assets acquired$808.0 

On August 19, 2019, the Company sold the SoNo Collection to a newly formed joint venture owned 80.5% by an affiliated fund (which is a related party of the Company) and 19.5% by the Company. The property was contributed to the joint venture at a value of $419.3 million based on project-specific cash costs. This excludes additional costs to complete the project by the joint venture. Prior to obtaining project-specific financing on August 9, 2019, the Company was required under GAAP to capitalize interest on general corporate financings into the cost basis of the project, which resulted in a $38.8 million impairment due to the difference between the project’s GAAP basis and the sale price based upon total project-specific cash costs. Following the transaction, the Company accounts for its non-controlling investment in the SoNo Collection under the equity method of accounting as the Company can exercise significant influence but not control over the joint venture.

On August 12, 2019, the Company completed the sale of the land in the former Sears anchor parcelAnchor Parcel at Columbia Mall for a gross sales price of $5.0 million, which resulted in a gain on the sale of $3.6 million included in other revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months and nine months ended September 30, 2019.

On August 9, 2019, the Company completed the sale of 49.3% of its interest in Authentic Brands Group LLC ("ABG") for a gross sales price of $32.1 million, which resulted in a gain on the sale of $16.8 million included in Unconsolidated Real Estate Affiliates - Gain on Investment on the Consolidated Statements ofOperations and Comprehensive Income (Loss) for the three months and nine months ended September 30, 2019. The basis of the remaining 50.7% investment was marked to fair value of $32.1 million in conjunction with the sale transaction noted above, which resulted in an additional gain on sale of $16.8 million directly related to the step up basis in fair value. This gain is recorded in Unconsolidated Real Estate Affiliates - Gain on Investment on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months and nine months ended September 30, 2019. The investment will continue to be accounted for using the cost method as the Company has neither control nor significant influence over ABG and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

On July 26, 2019, the Company purchased 2,255,503 shares of Series D Preferred Units in Industrious National Management Company LLC at a price of $2.22 per share, for a $5.0 million total investment, resulting in a less than 2.0% ownership interest in Industrious National Management Company LLC. The investment is accounted for using the cost method as the Company has neither control nor significant influence over Industrious National Management Company LLC and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

On April 19, 2019, BPR Cumulus LLC (an indirect subsidiary of the Company) purchased 1,250,000 shares of Series F Convertible Preferred Stock in Pinstripes, Inc. (par value $0.01 per share) at a price of $8.00 per share, for a $10.0 million total investment, resulting in a 7.6% ownership interest in Pinstripes, Inc. The investment is accounted for using the cost method as the Company has neither control nor significant influence over Pinstripes, Inc. and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


In connection with the formation of the BPR-FF JV LLC joint venture, described below, the Company agreed to use reasonable efforts to cause a transfer to BPR-FFBPRFF JV LLC of the legal rights it held in the Seritage Venture at Coronado Center Mall at an agreed upon value of $53.1 million. On April 9, 2019, the Company transferred its rights in the Sears Anchor Parcel at Coronado Center Mall to Coronado Center LLC. No gain or loss was recognized on the transaction.

On January 7, 2019, the Company completed the sale of ourits 12.0% interest in Bayside Marketplace for a sales price of $42.0 million. Due to cumulative distributions received in excess of its investment, the Company had a liability balance associated with its investment in Bayside Marketplace. Accordingly, the Company recognized a gain of $104.4 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2019.

The Company entered into a series of separate transactions on August 27, 2018 as a result of the BPY Transaction as follows:

The BPR-FF JV LLC joint venture was formed with Brookfield Real Estate Partners F LP. The Company contributed properties and recognized a gain of $1.4 billion included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018. In addition, the Company recognized a gain in Unconsolidated Real Estate Affiliates - Gain on Investment of $18.5 million on the Consolidated Statements of Comprehensive Income (Loss)for the three and nine months ended September 30, 2018.

Joint ventures were formed with the Teachers Insurance and Annuity Association of America. The Company contributed properties and recognized a gain of $981.6 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018. In addition, the Company recognized a gain in Unconsolidated Real Estate Affiliates - Gain on Investment of $19.4 million on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

Joint ventures were formed with CBRE Global Investment Partners. The Company contributed properties and recognized a gain of $461.2 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

Joint ventures were formed with the California Public Employees' Retirement System. The Company contributed properties and recognized a gain in Unconsolidated Real Estate Affiliates - Gain on Investment of $440.3 million for the three and nine months ended September 30, 2018.

A new joint venture, BPY Retail Holdings LLC, was formed with an institutional investor. As a result of this investment, the institutional investor owns a noncontrolling interest in all retail assets of the Company, as all retail assets are wholly or partially owned by the Operating Partnership.

On August 3, 2018, we completed the sale of an anchor box at The Oaks Mall for a gross sales price of $5.0 million, which resulted in a loss of $13.8 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

On July 13, 2018, we completed the sale of the commercial office unit at 685 Fifth Avenue for a gross sales price of $135.0 million. In conjunction with the sale, we paid down a $100.0 million loan and recognized a gain of $11.4 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

On January 29, 2018, we completed the sale of a 49.49% joint venture interest in an anchor box at Oakbrook Center to our joint venture partner for a sales price of $44.7 million, which resulted in a gain of $12.7 million recognized in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2018.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


On September 15, 2016, joint ventures we formed with Simon Property Group and ABG acquired Aeropostale, Inc. ("Aeropostale") for $80.0 million in total cash which included cash for working capital requirements of the retail business. The intellectual property and brand related assets were assigned to the Aero IpCo, LLC venture ("IPCO") and the assets and liabilities necessary to run the stores were assigned to the Aero OpCo, LLC venture. In connection with the transaction, our total investment was $20.4 million of cash contributed to the ventures for an effective ownership of approximately 26% in the 2 joint ventures. Aeropostale is a tenant at certain properties for which we receive rental income included in rental revenues on the Consolidated Statements of Comprehensive Income (Loss).

On December 29, 2017, we sold approximately 54% of our interest in IPCO to ABG for a sales price of $16.6 million, which resulted in a gain of $12.0 million recognized in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2017. On March 30, 2018, ABG exercised their call right to purchase the remaining 46% of our original interest in IPCO for a sales price of $13.9 million, which resulted in a gain of $10.4 million recognized in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2018. In addition, we invested $30.5 million in ABG units on December 29, 2017. The investment is considered a cost method investment and is included in investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets. On August 9, 2019, the Company completed the sale of 49.3% of its interest in ABG for a gross sales price of $32.1 million (see above for further discussion).

NOTE 4        FAIR VALUE
 
Nonrecurring Fair Value Measurements

We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the negotiated sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based upon these inputs, we determined that our valuations of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For our properties for which the estimated fair value was based on negotiated sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy.

The following table summarizes certain of our assets that are measured at fair value on a nonrecurring basis as a result of impairment charges recorded. During the three months ended September 30, 2020, we recognized no impairment charges. During the nine months ended September 30, 2020, we recognized $71.5 million in impairment charges. During the three and nine months ended September 30, 2019, we recognized $38.8 million and $223.1 million in impairment charges, respectively. During
Total Fair Value MeasurementQuoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Provisions for Impairment
Nine months ended September 30, 2020
Investments in real estate (1)$86,337 $— $— $86,337 $71,455 
Three months ended September 30, 2019
Investments in real estate (1)$419,327 $— $— $419,327 $38,794 
Nine months ended September 30, 2019
Investments in real estate (1)$599,721 $— $— $599,721 $223,142 
(1)    The impairment recorded on the three and nine months ended September 30, 2018, we recognized $7.5 million and$45.9 millionInvestments in real estate balance represents a loss incurred at a consolidated property. Refer to Note 5 for information regarding the impairment charges, respectively.losses recorded on our Unconsolidated Real Estate Affiliates.

23

 
Total Fair Value
Measurement
 
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 Significant
Unobservable Inputs
(Level 3)
 Provisions for Impairment
Three months ended September 30, 2019         
Investments in real estate (1)$419,327
 $
 $
 $419,327
 38,794
Nine months ended September 30, 2019         
Investments in real estate (1)$599,721
 $
 $
 $599,721
 $223,142
Three months ended September 30, 2018         
Investments in real estate (1)$62,490
 $
 $
 $62,490
 7,487
Nine months ended September 30, 2018         
Investments in real estate (1)$62,490
 $
 $
 $62,490
 45,866
Table of Contents

(1)Refer to Note 2 for more information regarding impairment. Investments in real estate includes consolidated properties and Unconsolidated Real Estate Affiliates.
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Unobservable Quantitative InputRate
Nine months ended September 30, 2020
Discount rate10.75%
Terminal capitalization rate9.50%
Three months ended September 30, 2019
Agreed upon purchase priceN/A
Nine months ended September 30, 2019
Discount raterates5.50%
Terminal capitalization rate4.00%
Three and nine months ended September 30, 2018
Discount rates9.75% to 11.00%
Terminal capitalization rates9.50% to 10.25%


Disclosure of Fair Value of Financial Instruments

The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt. Management's estimates of fair value are presented below for our debt as of September 30, 20192020 and December 31, 2018.2019.
  September 30, 2019 December 31, 2018
  Carrying Amount (1) 
Estimated Fair
Value
 Carrying Amount (2) 
Estimated Fair
Value
Fixed-rate debt $6,979,976
 $7,026,813
 $6,073,193
 $6,048,104
Variable-rate debt 7,327,227
 7,413,350
 6,516,456
 6,614,172
  $14,307,203
 $14,440,163
 $12,589,649
 $12,662,276
September 30, 2020December 31, 2019
 Carrying Amount (1)Estimated Fair
Value
Carrying Amount (2)Estimated Fair
Value
Fixed-rate debt$8,854,870 $8,813,125 $8,627,332 $8,631,704 
Variable-rate debt7,475,259 7,527,617 7,275,562 7,355,744 
 $16,330,129 $16,340,742 $15,902,894 $15,987,448 
(1) Includes net market rate adjustments of $6.5 million and deferred financing costs of $132.7 million, net.
(2)Includes net market rate adjustments of $7.7 million and deferred financing costs of $123.8 million, net.
(1)     Includes net market rate adjustments of $3.5 million and deferred financing costs of $113.3 million, net.
(2)    Includes net market rate adjustments of $4.7 million and deferred financing costs of $131.8 million, net.

The fair value of our junior subordinated notes approximates their carrying amount as of September 30, 20192020 and December 31, 2018.2019. We estimated the fair value of mortgages, notes and other loans payable using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current LIBOR, U.S. treasury obligation interest rates and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and assume that the debt is outstanding through maturity. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.

24

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 5        UNCONSOLIDATED REAL ESTATE AFFILIATES

Following is summarized financial information for all of our real estate related Unconsolidated Real Estate Affiliates accounted for using the equity method and a reconciliation to our total investment in Unconsolidated Real Estate Affiliates. The reconciliation to our total investment in Unconsolidated Real Estate Affiliates is inclusive of investments accounted for using the cost method (adjusted for impairment and observable price changes) (Note 2).
September 30, 2020December 31, 2019
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates  
Assets:  
Land$3,470,227 $3,458,485 
Buildings and equipment21,973,927 22,119,745 
Less accumulated depreciation(4,525,417)(4,303,109)
Construction in progress411,147 657,170 
Net investment in real estate21,329,884 21,932,291 
Cash and cash equivalents548,509 662,879 
Accounts receivable, net737,208 344,946 
Notes receivable20,648 22,497 
Deferred expenses, net397,361 428,460 
Prepaid expenses and other assets551,389 692,407 
Total assets$23,584,999 $24,083,480 
Liabilities and Owners' Equity:\ 
Mortgages, notes and loans payable$14,757,099 $15,173,099 
Accounts payable, accrued expenses, and other liabilities946,378 1,079,915 
Cumulative effect of foreign currency translation ("CFCT")(33,230)(9,985)
Owners' equity, excluding CFCT7,914,752 7,840,451 
Total liabilities and owners' equity$23,584,999 $24,083,480 
Investment in Unconsolidated Real Estate Affiliates, Net:  
Owners' equity$7,881,522 $7,830,466 
Less: joint venture partners' equity(4,414,973)(4,357,244)
Plus: excess investment/basis differences829,842 954,262 
Investment in Unconsolidated Real Estate Affiliates, net (equity method)4,296,391 4,427,484 
Investment in Unconsolidated Real Estate Affiliates, net (securities)34,405 57,061 
Retail investment, net24,182 
Investment in Unconsolidated Real Estate Affiliates, net$4,330,796 $4,508,727 
Reconciliation - Investment in Unconsolidated Real Estate Affiliates:  
Asset - Investment in Unconsolidated Real Estate Affiliates$4,461,997 $4,634,292 
Liability - Investment in Unconsolidated Real Estate Affiliates(131,201)(125,565)
Investment in Unconsolidated Real Estate Affiliates, net$4,330,796 $4,508,727 


25

 September 30, 2019 December 31, 2018
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates 
  
Assets: 
  
Land$3,608,922
 $3,595,706
Buildings and equipment23,342,387
 23,468,110
Less accumulated depreciation(4,830,466) (4,361,210)
Construction in progress958,722
 489,250
Net property and equipment23,079,565
 23,191,856
Investment in unconsolidated joint ventures72,171
 632,060
Net investment in real estate23,151,736

23,823,916
Cash and cash equivalents714,812
 540,905
Accounts receivable, net383,495
 348,655
Notes receivable22,151
 22,881
Deferred expenses, net473,797
 511,814
Prepaid expenses and other assets740,947
 796,815
Total assets$25,486,938
 $26,044,986
Liabilities and Owners' Equity:\
  
Mortgages, notes and loans payable$16,489,813
 $16,139,498
Accounts payable, accrued expenses and other liabilities1,103,734
 1,118,663
Redeemable non-controlling interest125
 
Cumulative effect of foreign currency translation ("CFCT")(12,574) (21,384)
Owners' equity, excluding CFCT7,905,840
 8,808,209
Total liabilities and owners' equity$25,486,938
 $26,044,986
Investment in Unconsolidated Real Estate Affiliates, Net: 
  
Owners' equity$7,893,266
 $8,786,824
Less: joint venture partners' equity(4,379,829) (4,796,896)
Plus: excess investment/basis differences1,258,943
 1,220,632
Investment in Unconsolidated Real Estate Affiliates, net (equity method)4,772,380
 5,210,560
Investment in Unconsolidated Real Estate Affiliates, net (cost method)57,061
 30,483
Retail investment, net20,271
 19,912
Investment in Unconsolidated Real Estate Affiliates, net$4,849,712
 $5,260,955
Reconciliation - Investment in Unconsolidated Real Estate Affiliates: 
  
Asset - Investment in Unconsolidated Real Estate Affiliates$4,935,345
 $5,385,582
Liability - Investment in Unconsolidated Real Estate Affiliates(85,633) (124,627)
Investment in Unconsolidated Real Estate Affiliates, net$4,849,712
 $5,260,955



Table of Contents
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates (1)  
  
    
Revenues:  
  
    
Rental revenues, net $622,704
 $507,749
 $1,885,482
 $1,355,703
Condominium sales 9,390
 28,401
 9,390
 77,674
Other 51,224
 16,278
 85,059
 47,280
Total revenues 683,318
 552,428
 1,979,931
 1,480,657
Expenses:  
  
    
Real estate taxes 61,633
 47,160
 184,215
 121,516
Property maintenance costs 11,886
 10,047
 40,026
 22,655
Marketing 4,111
 4,379
 13,930
 13,296
Other property operating costs 87,034
 71,226
 249,925
 184,218
Condominium cost of sales 6,844
 20,701
 6,844
 56,625
Provision for doubtful accounts 
 3,882
 
 7,802
Property management and other costs (2) 27,645
 25,821
 83,649
 71,681
General and administrative 1,309
 566
 3,440
 2,232
Depreciation and amortization 254,413
 174,295
 780,729
 458,617
Total expenses 454,875
 358,077
 1,362,758
 938,642
Interest income 3,288
 1,763
 8,783
 5,187
Interest expense (188,722) (149,139) (538,394) (369,786)
Benefit from income taxes (354) (320) (743) (722)
(Loss) income in unconsolidated joint ventures (6,254) 555
 (23,498) (17,116)
Income from continuing operations 36,401
 47,210
 63,321
 159,578
Allocation to noncontrolling interests (13) (17) (40) (54)
Net income attributable to the ventures $36,388
 $47,193
 $63,281
 $159,524
Equity In Income (loss) of Unconsolidated Real Estate Affiliates:  
  
    
Net income attributable to the ventures $36,388
 $47,193
 $63,281
 $159,524
Joint venture partners' share of income (15,576) (16,287) (28,202) (64,528)
Elimination of gain from consolidated real estate investment with interest owned through joint venture 
 53
 
 679
Gain (loss) on retail investment 5,785
 10,526
 1,249
 3,427
Amortization of capital or basis differences (10,452) (21,149) (35,894) (39,896)
Equity in income (loss) of Unconsolidated Real Estate Affiliates $16,145
 $20,336
 $434
 $59,206
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Condensed Combined Statements of Income (Loss) - Unconsolidated Real Estate Affiliates  
Revenues:  
Rental revenues, net$463,181 $622,704 $1,507,450 $1,885,482 
Condominium sales9,390 16,215 9,390 
Other6,695 51,224 32,650 85,059 
Total revenues469,876 683,318 1,556,315 1,979,931 
Operating Expenses:  
Real estate taxes51,806 61,633 162,846 184,215 
Property maintenance costs9,668 11,886 33,326 40,026 
Marketing3,810 4,111 12,923 13,930 
Other property operating costs72,908 87,034 208,412 249,925 
Condominium cost of sales6,844 9,930 6,844 
Property management and other costs (1)20,780 27,645 59,973 83,649 
General and administrative183 1,309 1,153 3,440 
Provision for impairment4,939 88,856 
Depreciation and amortization228,222 254,413 680,430 780,729 
Total operating expenses392,322 454,875 1,257,849 1,362,758 
Interest income372 3,288 4,087 8,783 
Interest expense(161,672)(188,722)(495,283)(538,394)
Provision for income taxes(640)(354)(1,471)(743)
Equity in loss of unconsolidated joint ventures(6,254)(23,498)
Income (loss) from continuing operations(84,386)36,401 (194,201)63,321 
Allocation to noncontrolling interests(2)(13)(26)(40)
Net income (loss) attributable to the ventures$(84,388)$36,388 $(194,227)$63,281 
Equity In Income (Loss) of Unconsolidated Real Estate Affiliates:  
Net income (loss) attributable to the ventures$(84,388)$36,388 $(194,227)$63,281 
Joint venture partners' share of (income) loss45,615 (15,576)108,146 (28,202)
Gain on retail investment5,785 1,249 
Amortization of capital or basis differences(5,382)(10,452)(19,343)(35,894)
Equity in loss of Unconsolidated Real Estate Affiliates$(44,155)$16,145 $(105,424)$434 
(1)
The Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates include income from the joint ventures formed in conjunction with the BPY Transaction subsequent to August 27, 2018 (Note 3).
(2)     Includes management fees charged to the unconsolidated joint ventures by BPRRS and BRMI.BPRI.
 
The Unconsolidated Real Estate Affiliates represent our investments in real estate joint ventures that are not consolidated. We hold interests in 2725 domestic joint ventures, comprising 6559 U.S. retail properties and 1 joint venture in Brazil. Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures. We account for investments in joint ventures where we own a non-controlling joint interest using either the equity method or the cost
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share method (adjusted for impairment and per share amounts)
(Unaudited)


method.observable price changes). If we have significant influence but not control over the investment, we utilize the equity method. If we have neither control nor significant influence, we utilize the cost method. If we control the joint venture, we account for the venture as a consolidated investment.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

As of September 30, 2019,2020, the balance of ROU assets was $68.7$68.1 million, net and lease liabilities of $78.7$70.1 million for 2524 ground leases in the Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates under Topic 842, included in prepaid expenses and other assets and accounts payable, and accrued expenses, and other liabilities, respectively. As of December 31, 2019, the balance of ROU assets was $68.9 million, net and lease liabilities was $71.0 million for 24 ground leases in the Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates under Topic 842, included in prepaid expenses and other assets and accounts payable, accrued expenses, and other liabilities, respectively. All of these leases are operating leases; we do not have any finance leases.

On September 30, 2019,May 27, 2020, the Company completedacquired an additional ownership interest of 49.5% in the sale of certain space formerly occupied by Barneys at Grand Canal ShoppesWater Tower Joint Venture from its joint venture partner for nominal consideration. Following this, the Company has a gross sales price of $37.6 million, which resulted93.93% ownership interest in $15.9 million included in Equity in Income of Unconsolidated Real Estate Affiliates on the Consolidated Statements of Comprehensive Income (Loss) forjoint venture and its wholly owned subsidiary.

During the three months and nine months ended September 30, 2019.2020, we recorded $4.9 million and $88.9 million, respectively, of impairment charges on our Condensed Combined Statements of Income (Loss) - Unconsolidated Real Estate Affiliates related to three operating properties.

Unconsolidated Mortgages, Notes and Loans Payable, and Retained Debt

Our proportionate share of the mortgages, notes and loans payable of the unconsolidated joint ventures was $7.7$7.0 billion as of September 30, 20192020 and $7.6$7.2 billion as of December 31, 2018,2019, including Retained Debt (as defined below). There can be no assurance that the Unconsolidated Properties will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

On August 9, 2019,February 28, 2020, the Company closed ona new debtloan at the SoNo Collection for $305.0 million. ThisMiami Design District joint venture in the amount of $500.0 million with an interest rate of 4.13%, which matures on March 1, 2030. The loan replaced the previous debt is comprised of a $245.0$480.0 million mortgage loan and a $60.0 million mezzanine loan with respectivean interest ratesrate of LIBOR plus 3.015% and LIBOR plus 6.75%. The loans2.50% that was scheduled to mature on August 6, 2023.May 14, 2021. As a result of the refinancing, the joint venture incurred $3.7 million of deferred financing costs that were capitalized.

During the nine months ended September 30, 2020, the Company suspended equity contributions to make contractual interest and/or principal payments on eight property level mortgages. The Company is currently engaging in negotiations with the creditors on these mortgages to obtain potential lender concessions or other relief. If the Company is unsuccessful in obtaining concessions from these creditors, it is possible that the property securing these loans would be transferred to the lenders. In such circumstances, the carrying value of the property may no longer be recoverable and may trigger an impairment charge. These mortgages are non-recourse and the creditors do not have security claims against the Company aside from the collateral property. In total at share, as of September 30, 2020, the Company has suspended equity contributions to make contractual interest and/or principal payments on a total of $560.9 million of property level mortgages and the related Investment in Real Estate securing these loans has a carrying value of $548.1 million.

We have debt obligations in excess of our pro rata share of the debt for 1 of our Unconsolidated Real Estate Affiliates ("Retained Debt"). This Retained Debt represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our pro rata share of the non-recourse mortgage indebtedness. The proceeds of the Retained Debt which were distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates. We had Retained Debt of $82.0$80.2 million at 1 property as of September 30, 2019,2020, and $83.3$81.5 million as of December 31, 2018.2019. We are obligated to contribute funds on an ongoing basis, as needed, to our Unconsolidated Real Estate Affiliates in amounts sufficient to pay debt service on such Retained Debt. If we do not contribute such funds, our interest in or our distributions from such Unconsolidated Real Estate Affiliates could be reduced to the extent of such deficiencies. As of September 30, 2019,2020, we do not anticipate an inability to perform on our obligations with respect to Retained Debt.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

NOTE 6        MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable and the weighted-average interest rates are summarized as follows:
  September 30, 2019 (1) 
Weighted-Average
Interest Rate (2)
 December 31, 2018 (3) 
Weighted-Average
Interest Rate (2)
Fixed-rate debt:  
  
  
  
Collateralized mortgages, notes and loans payable $5,991,736
 4.34% $6,073,193
 4.38%
Senior secured notes - silver bonds 988,240
 5.75% 
 
Total fixed-rate debt 6,979,976
 4.54% 6,073,193
 4.38%
Variable-rate debt:  
  
  
  
Collateralized mortgages, notes and loans payable (4) 2,606,811
 4.57% 1,702,142
 4.22%
Unsecured corporate debt (5) 4,720,416
 4.41% 4,814,314
 4.86%
Total variable-rate debt 7,327,227
 4.47% 6,516,456
 4.69%
Total Mortgages, notes and loans payable $14,307,203
 4.50% $12,589,649
 4.54%
Junior subordinated notes $206,200
 3.72% $206,200
 3.97%
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


September 30, 2020 (1)Weighted-Average
Interest Rate (2)
December 31, 2019 (3)Weighted-Average
Interest Rate (2)
Fixed-rate debt:    
Collateralized mortgages, notes and loans payable$7,923,131 4.21 %$7,638,697 4.21 %
Senior secured notes - silver bonds931,739 5.75 %988,635 5.75 %
Total fixed-rate debt8,854,870 4.37 %8,627,332 4.39 %
Variable-rate debt:    
Collateralized mortgages, notes and loans payable (4)2,565,216 3.25 %2,594,182 4.20 %
Unsecured corporate debt (5)4,910,043 2.81 %4,681,380 4.16 %
Total variable-rate debt7,475,259 2.96 %7,275,562 4.17 %
Total Mortgages, notes and loans payable$16,330,129 3.72 %$15,902,894 4.29 %
Junior subordinated notes$206,200 1.72 %$206,200 3.39 %
(1) Includes $6.5 million of market rate adjustments and $132.7 million of deferred financing costs, net.
(2) Represents the weighted-average interest rates on our principal balances, excluding the effects of market rate adjustments and deferred financing costs.
(3) Includes $7.7 million of market rate adjustments and $123.8 million of deferred financing costs, net.
(4) $1.3 billion of the variable-rate balance is cross-collateralized.
(5)Includes deferred financing costs, which are shown as a reduction to the debt balance. See table below for the balance excluding deferred financing costs.
(1)     Includes $3.5 million of market rate adjustments and $113.3 million of deferred financing costs, net.
(2)    Represents the weighted-average interest rates on our principal balances, excluding the effects of market rate adjustments and deferred financing costs.
(3)     Includes $4.7 million of market rate adjustments and $131.8 million of deferred financing costs, net.
(4)     $1.3 billion of the variable-rate balance is cross-collateralized.
(5)    Includes deferred financing costs, which are shown as a reduction to the debt balance. See table below for the balance excluding deferred financing costs.
 
Collateralized Mortgages, Loan Extension, Notes and Loans Payable

As of September 30, 2019, $11.42020, $15.8 billion of land, buildings and equipment (before accumulated depreciation) and construction in progress have been pledged as collateral for our mortgages, notes and loans payable. Certain of these consolidated secured loans, representing $1.3 billion of debt, are cross-collateralized. Although a majority of the $8.6$10.5 billion of fixed and variable rate collateralized mortgages, notes and loans payable are non-recourse, $744.9$726.6 million of such mortgages, notes and loans payable are recourse to the Company as guarantees on secured financings. In addition, certain mortgage loans contain other credit enhancement provisions which have been provided by BPR.BPYU. Certain mortgages, notes and loans payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.

During the nine months ended September 30, 2020, the Company suspended equity contributions to make contractual interest and/or principal payments on ten consolidated property level mortgages, including one mortgage that is in maturity default. The Company is currently engaging in negotiations with the creditors on these mortgages to obtain potential lender concessions or other relief. If the Company is unsuccessful in obtaining concessions from these creditors, it is possible that the property securing these loans would be transferred to the lenders. In such circumstances, the carrying value of the property may no longer be recoverable and may trigger an impairment charge. These mortgages are non-recourse and the creditors do not have security claims against the Company aside from the collateral property. In total, as of September 30, 2020, the Company has suspended equity contributions to make contractual interest and/or principal payments on a total of $1.3 billion of consolidated property level mortgages and the related Investment in Real Estate securing these loans has a carrying value of $1.4 billion.

On September 6,April 24, 2020, the Company completed a one-year extension of a $1.3 billion loan secured by cross-collateralized mortgages on 15 properties with an interest rate of LIBOR plus 1.75%, which matures on April 25, 2021. An extension fee of $1.6 million was paid in conjunction with the extension.


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

During the year ended December 31, 2019, the Company closedcompleted the following transactions:

New loan at Shops at Merrick Park in the amount of $390.0 million with an interest rate of 3.90% which matures on November 1, 2024. The loan replaced previous debt of $161.0 million with an interest rate of 5.73% that was scheduled to mature on April 1, 2021. In connection with the refinancing, the Company incurred prepayment penalties of $7.9 million. As the refinancing plan was contemplated in connection with the acquisition of the property, such fees were factored in to the fair value of debt recognized on the consolidation date.

New loans at Park Meadows in the amount of $700.0 million which mature on November 1, 2024. These loans consist of a newsenior loan in the amount of $615.0 million with an interest rate of 3.18% and a mezzanine loan in the amount of $85.0 million with an interest rate of 6.25%. These loans replaced previous debt of $360.0 million with an interest rate of 4.6% that was scheduled to mature on December 1, 2023. In connection with the refinancing, the Company incurred prepayment penalties of $35.6 million. As the refinancing plan was contemplated in connection with the acquisition of the property, such fees were factored in to the fair value of debt recognized on the consolidation date.

New loan at Park City Center in the amount of $135.0 million with an interest rate of LIBOR plus 3.00% which matures on September 9, 2021. This loan replaced the previous debt of $172.2 million that matured June 6, 2019 and included a pay down of the existing mezzanine loan in the amount of $36.8 million. For the period between the maturity date of the previous debt and the effective date of the new loan, the companyCompany extended forbearance and paid forbearance fees in total amount of $450.4 thousand.$0.5 million.

On August 26, 2019, the Company closed a new loan onNew loans at 730 Fifth Avenue in the amount of $807.5 million with a 5-year loan at LIBOR plus 3.53% which maturesmature on September 1, 2024. ThisThe loans consist of a senior loan in amount of $587.3 million with a 5-year term at LIBOR plus 3.00%, a senior mezzanine loan in amount of $97.9 million with a 5-year term at LIBOR plus 4.25%, and a junior loan in amount of $122.3 million with a 5-year term at LIBOR plus 5.50%. The loans replaced the previous debt of $720.0 million that was previously extended to August 27, 2019 and included a pay down of $180.0 million on June 28, 2019.

On July 10, 2019, the Company closed a newNew loan onat Westlake Center in the amount of $48.8 million with a 2-year floatingan interest rate atof LIBOR plus 2.50% which matures on July 10, 2021. This loan replaced the previous debt of $42.5 million that matured July 10, 2019.

On July 5, 2019, the Company closed on newNew loans onat The Woodlands Mall for a totalin the amount of $465.0 million which mature on August 1, 2029. This consists of a $425.0 million loan with an interest rate of 4.25% and a $40.0 million loan with an interest rate of 5.50%. The loan hasloans have a weighted average interest rate of 4.36% which matures on August 1, 2029.. The loanloans replaced the previous debt at the property of $294.0 million on the property that hadwith a weighted average interest rate of 4.83% andthat were scheduled to mature on June 10, 2023. In accordanceconnection with the previous debt agreement,refinancing, the Company incurred a prepayment penalty of $27.5 million which is recorded as a loss on extinguishment of debt on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine monthsyear ended September 30,December 31, 2019.

On July 1, 2019, the Company closed on a one-yearOne year loan extension on the loan at 830 North Michigan Ave in the amount of $78.0 million at LIBOR plus 1.60% which matures on July 1, 2020. This loan replaced the previous debt of $85.0 million that matured on July 1, 2019 and includesAvenue. A principal repayment of $7.0 million was made in conjunction with the extension.

On June 3, 2019, the Company closed a new loan on the Grand Canal Shoppes in the amount of $975.0 million with a 10-year fixed interest rate of 4.29%, which matures on July 2, 2029. This loan replaced the previous debt of $625.0 million on the property that matured on June 3, 2019.

On April 25, 2019, the Company obtained a one-yearOne-year extension of a $1.3 billion loan secured by cross-collateralized mortgages on 15 properties with an interest rate of LIBOR plus 1.75%., which was scheduled to mature on April 25, 2020 and was subsequently further extended in April 2020. A principal repayment of $10.1 million was made in conjunction with the extension.


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


On April 9, 2019, the Company closed a new loan on three properties included in the BPR-FF JV LLC joint venture. The three properties are Coronado Center, Governor's Square and Lynnhaven Mall. These properties were previously encumbered by $462.0 million of third-party debt which was replaced by a $515.0 million loan with an interest rate of LIBOR plus 340 basis points, maturing May 1, 2024. The new loan was recorded as an extinguishment of the previous loans and allocation of the new debt to the three properties.

During the year ended December 31, 2018, we refinanced a consolidated mortgage note at 685 Fifth Avenue. The prior $340.0 million variable-rate consolidated mortgage note matured on July 1, 2018 and had an interest rate of LIBOR plus 2.75%. In connection with the refinancing, $100.0 million remained related to the commercial office unit and a new $275.0 million fixed-rate consolidated mortgage note with a term-to-maturity of 10.0 years and an interest rate of 4.53% was obtained on the retail unit. The $100.0 million was paid down in full in conjunction with the sale of the commercial office unit on July 13, 2018. In addition, we obtained a new fixed-rate subordinate loan at The Woodlands Mall for $62.4 million with an interest rate of 4.05% and obtained a new fixed-rate loan at 605 North Michigan Avenue for $80.0 million with an interest rate of 4.76%. We also refinanced mortgage notes totaling $117.0 million at two properties. The prior loans totaling $152.3 million had a weighted-average interest rate of 4.42%. The new loans have a weighted-average term-to-maturity of 4.3 years and a weighted-average interest rate of 5.24%. We released Columbiana Centre from the $1.4 billion term loan, substituting Columbia Mall and Quail Springs Mall, and conveyed Oak View Mall to the lender in full satisfaction of $74.7 million in outstanding debt. The Oak View transaction resulted in a $12.4 million gain on extinguishment of debt for the year ended December 31, 2018.

Corporate and Other Unsecured Loans

We have certain debt obligations, the terms of which are described below:
September 30, 2020 (1)Weighted-Average
Interest Rate
December 31, 2019 (2)Weighted-Average
Interest Rate
Corporate debt:    
Senior secured corporate debt$4,981,767 2.81 %$4,769,510 4.16 %
Senior secured notes - silver bonds945,360 5.75 %999,950 5.75 %
Total corporate debt$5,927,127 3.28 %5,769,460 4.44 %
  September 30, 2019 (1) 
Weighted-Average
Interest Rate
 December 31, 2018 (2) 
Weighted-Average
Interest Rate
Corporate debt:  
  
  
  
Unsecured corporate debt $4,814,014
 4.41% $4,923,740
 4.86%
Senior secured notes - silver bonds 1,000,000
 5.75% 
 
Total corporate debt $5,814,014
 4.64% $4,923,740
 4.86%
(1)    Excludes deferred financing costs of $85.3 million in 2020 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.
(2)    Excludes deferred financing costs of $99.4 million in 2019 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.

(1)Excludes deferred financing costs of $105.4 million in 2019 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.
(2)Excludes deferred financing costs of $109.4 million in 2018 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.

On May 24, 2020, the Company executed a series of transactions to repurchase corporate debt on the open market, funded by intercompany loans from BPY. The total amounts of debt repurchased had a par value of $59.6 million, and a cash repurchase price of $45.3 million. Following each repurchase, the repurchased debt is formally cancelled. As a result of the debt repurchase and cancellation, the Company recognized a gain of $14.3 million included in Gain on extinguishment of debt on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2020.

On May 1, 2019, the Company and BPR Cumulus LLC, BPR Nimbus LLC and GGSI Sellco LLC (each, an indirect subsidiary of the Company) issued $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes - Silver Bonds due 2026. The notes bear interest at an annual rate of 5.75% payable on May 15 and November 15 of each year, beginning on November 15, 2019 and will mature on May 15, 2026. During the last quarter of 2019, the Company made a principal payment in amount of $50.0 thousand. During the nine months ended September 30, 2020, the Company made additional principal payments totaling $54.6 million. The remaining outstanding balance as of September 30, 2020 was $945.4 million.

On March 25, 2019, the Company secured a $341.8 million subordinated unsecured note with Brookfield BPY Holdings Inc.,
a related party. The note bearsbore interest at a rate equal to LIBOR plus 2.75% and iswas scheduled to mature on March 25, 2029. During the quarteryear ended September 30,December 31, 2019, the Company made a principal payment of $115.6 millionrepaid this loan in addition to the principal payment of $200.1 million made in the second quarter of 2019. The balance at September 30, 2019 was $26.1 million.full. The Company borrowed an additional $70.5 million during the second quarter of 2019, with a maturity date of June 25, 2029. During the year ended December 31, 2019, the Company made principal payments totaling $68.0 million. The Company borrowed an additional $31.7 million during the last quarter of 2019 which was due on January 6, 2020 and has been repaid. On February 10, 2020, the Company secured an additional $27.0 million subordinated unsecured note with Brookfield BPY Holdings Inc, and another $29.0 million note on March 25, 2020. The notes bear interest at rate equal to LIBOR plus 2.75%, and mature on February 10, 2030 and March 25, 2030, respectively. On May 19, 2020, the Company secured an additional $25.0 million subordinated unsecured note with Brookfield BPY Holdings Inc., and another $45.0 million on May 22, 2020. The notes were repaid in full on June 18, 2020 and July 16, 2020, respectively. On June 25, 2020, the Company secured another $25.0 million subordinated unsecured note at an interest rate equal to LIBOR plus 1.94% that is scheduled to mature on August 27, 2022. On July 16, 2020 and August 27,2020, the Company made a principal payments in the amount of $45.0 million and $22.1 million, respectively. The total outstanding balance atof the notes as of September 30, 20192020 was $70.5 million.

$61.5 million, including $1.2 million of accrued interest.

The Company entered into a new credit agreement (the "Agreement""Credit Agreement") dated as of August 24, 2018 consisting of a revolving credit facility (the "Facility"), Term A-1 and A-2 loans, and a Term B loan. The Facility provides for revolving loans of up to $1.5 billion and borrowings bear interest at a rate equal to LIBOR plus 225 basis points.2.25%. The Facility is scheduled to mature in August 2022 and had outstanding borrowings of $315.0$920.0 million as of September 30, 2019.2020. The Term A-1 Loan has a total commitment outstanding of $900.0 million, with $700.0 million attributable to BPRBPYU and $200.0 million attributable to an affiliate, and is scheduled to mature in August 2021, bearing interest at a rate equal to LIBOR plus 225 basis points.2.25%. During the quarter ended September 30, 2020, the Company didn't make principal payments, and the remaining outstanding balance was $34.8 million. The Term A-2 Loan has a total commitment outstanding of $2.0 billion and is scheduled to mature in August 2023, bearing interest at a rate equal to LIBOR plus 2.25%, and the outstanding balance at September 30, 2020 was $2.0 billion. The
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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


and is scheduled to mature in August 2023 bearing interest at a rate equal to LIBOR plus 225 basis points. The Term B Loan has a total commitment outstanding of $2.0 billion and is scheduled to mature in August 2025 bearing interest at a rate equal to LIBOR plus 250 basis points.2.50%. During the quarter ended September 30, 2020, the Company made a principal payment in the total amount of $5.0 million. The total outstanding balance of the Term B loan as of September 30, 2020 was $1,955.0 million. The Term A-1, A-2, and B Loans are contractually obligated to be prepaid through net proceeds from property level refinances and asset sales as outlined in the Credit Agreement.

The Credit Agreement contains certain restrictive covenants which limit material changes in the nature of our business conducted, including, but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required not to exceedmaintain compliance with certain financial covenants related to a maximum net debt-to-value ratio and a minimum fixed-charge-coverage ratio, as defined in the Credit Agreement.

On July 29, 2020, the Company entered into the First Amendment of its Credit Agreement in order to give effect to certain amendments, including, but not limited to the following:

The lenders have agreed to certain covenant relief in respect of the financial covenants through the fiscal quarter ending June 30, 2021 (the “Covenant Relief Period”). The maximum total indebtedness to value ratio financial maintenance covenant is being eliminated permanently. The minimum fixed charge coverage ratio. ratio is being reduced to 1.20x during the Covenant Relief Period and increasing to 1.35x thereafter.

The applicable margin for the Term A Loans and the Facility will be LIBOR plus 3.00% during the Covenant Relief Period – and thereafter, will be LIBOR plus 3.00% if the total net indebtedness to value ratio is greater than 70%.

The Company agreed to maintain an ongoing liquidity covenant (set at $500 million) which will be tested as of the last day of each month against the amount of unrestricted cash, undrawn available amounts under the Facility and undrawn amounts under the new Brookfield Liquidity Facility. The Company will enter into and maintain a $500 million Brookfield Liquidity Facility (the “Brookfield Liquidity Facility”) and prior to the date the Company demonstrates compliance with the financial covenants in effect under the Credit Agreement prior to the First Amendment, any interest and principal payments thereunder must be paid-in-kind.

The Company will be required to "match-fund" drawings under the Facility in excess of $1.0 billion using proceeds of either the Brookfield Liquidity Facility or issuances of qualified equity interests. The match-funding requirement will be required to be made (i) monthly, whereby any drawing during that month is in excess of the prior highest balance of the revolver (in excess of $1.0 billion), (ii) within 10 business days of a request from the agent if as of any day during a month, the excess draw amount would exceed $10 million and (iii) at any time of request for a revolving loan that the excess would be $100 million or greater (which would be match-funded substantially concurrently with the requested revolving loan draw).

The Company will also be required to make additional prepayments of the Term A loans with proceeds of certain equity, debt issuances and asset sales.

The Company also agreed to a number of additional restrictions, including restrictions on incurring additional indebtedness, making of certain restricted payments and the use of proceeds under the revolving facility, which will apply either through the end of the Covenant Relief Period – and in the case of certain provisions, until the Company demonstrates compliance with the financial covenants in effect under the Credit Agreement prior to the First Amendment.

As of September 30, 2019,2020, we are not aware of any instances of non-compliance with such covenants. Though there is potential for a risk of default (See Note 17 for discussion specific to COVID-19), in the event the Company fails to maintain compliance with its financial covenants, the Credit Agreement provides for a cure period, during which the Company has the opportunity to raise additional cash and reduce net debt balance, such as through capital contributions from BPY, or disposition of assets. Management has determined that in the event of a default, it is probable that these market-based alternatives would be available, and that these actions would provide the necessary cash flows to prevent or cure an event of default, although there is no guarantee that these market-based alternatives would be available.


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

Junior Subordinated Notes

GGP Capital Trust I, a Delaware statutory trust (the "Trust"), completed a private placement of $200.0 million of trust preferred securities ("TRUPS") in 2006. The Trust also issued $6.2 million of common securities to BPROP. The Trust used the proceeds from the sale of the TRUPS and common securities to purchase $206.2 million of floating rate junior subordinated notes of BPROP due 2036. Distributions on the TRUPS are equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The TRUPS mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if the Trust exercises its right to redeem a like amount of junior subordinated notes. The junior subordinated notes bear interest at LIBOR plus 1.45% and are fully recourse to the Company. We have recorded the junior subordinated notes as a liability and our common equity interest in the Trust as prepaid expenses and other assets in our Consolidated Balance Sheets as of September 30, 20192020 and December 31, 2018.2019.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $46.9$49.9 million as of September 30, 20192020 and $42.4$50.0 million as of December 31, 2018.2019. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

We are not aware of any instances of material non-compliance with our financial covenants related to our mortgages, notes and loans payable as of September 30, 2019.2020.

NOTE 7        LEASES

Lessee arrangements
We are the lessee in several ground lease agreements for the land under some of our owned buildings. Generally, we own the land underlying the properties; however, at certain properties, all or part of the underlying land is owned by a third party that leases the land to us through a long-term ground lease. In addition, we lease office space for our corporate headquarters and field offices. Our material consolidated leases have reasonably certain lease terms ranging from four years to forty years. Certain leases provide the lessee with 2 to 3 renewal options which are considered to be termination options unless it is reasonably certain that the Company will elect to renew and generally range from five years to ten years each, with renewal rent payments based on a predetermined annual increase, market rates at the time of exercise of the renewal, or changes in the Consumer Price Index ("CPI").

As of September 30, 2019,2020, the balance of ROU assets was $116.0$395.0 million, net and lease liabilities of $71.2$75.8 million for 7 ground leases and 1 office lease in the Consolidated Balance Sheets under Topic 842, included in prepaid expenses and other assets and accounts payable and accrued expenses, respectively.

The maturity of ouroperating lease liabilities as of September 30, 2020 is as follows:
YearAmount
Remainder of 2020$2,316 
20219,470 
20229,704 
20239,968 
202410,200 
202510,439 
2026 and thereafter155,012 
Total undiscounted lease payments207,109 
Less: Present value adjustment(131,281)
Total lease liability$75,828 

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


The maturity of ouroperating lease liabilities as of September 30, 2019 is as follows:
Year Amount
Remainder of 2019 $2,138
2020 8,755
2021 8,970
2022 9,191
2023 9,418
2024 9,650
2025 and thereafter 93,732
Total undiscounted lease payments 141,854
Less: Present value adjustment (70,640)
Total lease liability $71,214


The maturity of ouroperating lease liabilities as of December 31, 2018 is as follows:
YearAmount
2019$9,948
202010,164
202110,386
202210,592
202310,794
2024 and thereafter118,835
Total$170,719

Straight-line rent expense recognized for our consolidated operating leases was $0.6 million and $2.0 million for ground leases and $2.2 million and $5.9 millionis as follows:
Three Months Ended September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Ground leases1,773 620 5,944 1,998 
Office leases1,964 2,164 5,892 5,892 

for the office leasefor the three and nine months ended September 30, 2019, respectively, and
Straight-line rent expense is included in other property operating costs for ground leases and property management and other costs for the office lease, respectively, in the Consolidated Statements of Operations and Comprehensive Income (Loss). Several lease agreements include variable lease payments which vary based on factors such as sublease income received, the revenues or net operating income of the properties constructed on the leased premises, increases in CPI, and changes in market rents. In addition, our leases require us to reimburse the lessor for the lessor’s tax, insurance and common area costs. Variable lease payments and short-term lease costs recognized as rent expense for operating leases were not significant for each of the three and nine months ended September 30, 2020 and 2019 and are included in other property operating costs in the Consolidated Statements of Operations and Comprehensive Income (Loss).


The following summarizes additional information related to our operating leases as of September 30, 2020 and September 30, 2019:
September 30, 2020September 30, 2019
Weighted-average remaining lease term (years)23.216.9
Weighted-average discount rate7.68%7.36%
Supplemental disclosure for the consolidated statements of cash flows:
Cash paid for amounts included in the measurement of lease liabilities$6,947$6,406
Weighted-average remaining lease term (years)16.9
Weighted-average discount rate7.36%
Supplemental disclosure for the statement of cash flows:
Cash paid for amounts included in the measurement of lease liabilities$6,406

Lessor arrangements
We own a property portfolio comprised primarily of Class A retail properties and lease this retail space to tenants. As of September 30, 2019,2020, we own a controlling interest in and consolidated 5863 retail properties located throughout the United States comprising approximately 5055 million square feet of GLA. We enter into operating leases with a variety of tenants, the majority of which are national and regional retail chains and local retailers. These operating leases expire starting in the remainder of year 20192020 and typically include
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


renewal options, which are generally exercisable only by the tenant. Certain leases also include early termination options which are typically exercisable only by the tenant. Our leases do not allow the tenant to purchase the retail space.


The maturity analysis of the lease payments we expect to receive from our operating leases as of September 30, 20192020 is as follows:
YearAmount
Remainder of 2020$276,694 
20211,047,375 
2022947,590 
2023828,518 
2024693,861 
2025566,118 
Subsequent1,820,055 
$6,180,211 
YearAmount
Remainder of 2019$250,860
2020933,247
2021861,283
2022770,277
2023679,050
2024574,700
Subsequent2,001,802
 $6,071,219

The maturity analysis of the lease payments we expect to receive from our operating leases as of December 31, 2018 is as follows:
YearAmount
2019$764,196
2020696,381
2021621,582
2022543,232
2023464,453
Subsequent1,442,312
 $4,532,156

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

All lease-related income is reported as a single line item, rental revenues, in our Consolidated Statements of Operations and Comprehensive Income (Loss). Effective January 1, 2019, with the adoption of Topic 842, rental revenues is presented net of provision for doubtful accounts. Rental income recognized on a straight-line basis consists primarily of fixed and in-substance fixed lease payments (including lease payments related to non-lease components which have been combined with the lease component). Variable rental income represents variable lease payments, which consist primarily of overage rents; reimbursements for tenants’ pro rata share of real estate taxes, insurance, property operating and marketing expenses, and utilities; lease payments related to CPI-based escalations and market rent resets; and lease termination income.


In accordance with the terms of our operating leases, we bill our tenants separately for minimum rents, tenant recoveries, and overage rents and lease termination income as shown below for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Minimum rents, billed$249,167 $224,326 $752,053 $665,263 
Tenant recoveries, billed101,133 89,253 298,029 269,346 
Lease termination income, billed2,637 3,875 5,004 6,320 
Overage rent, billed1,567 2,865 7,060 9,159 
Total contractual operating lease billings354,504 320,319 1,062,146 950,088 
Adjustment to recognize contractual operating lease billings on a straight-line basis1,757 1,684 5,943 5,633 
Above and below-market tenant leases, net7,193 (37)7,995 7,250 
Less provision for doubtful accounts(36,747)(4,497)(56,475)(8,243)
Total rental revenues, net$326,707 $317,469 $1,019,609 $954,728 
 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Minimum rents, billed$224,326
 $665,263
Tenant recoveries, billed89,253
 269,346
Lease termination income, billed3,875
 6,320
Overage rent, billed2,865
 9,159
Total contractual operating lease billings320,319
 950,088
Adjustment to recognize contractual operating lease billings on a straight-line basis1,684
 5,633
Above and below-market tenant leases, net(37) 7,250
Less provision for doubtful accounts(4,497) (8,243)
Total rental revenues, net$317,469
 $954,728


Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Of the total contractual rental revenues we have billed, 82.4% and 81.5% are fixed lease payments for the three and nine months ended September 30, 2020, respectively, and 78.0% and 78.9% are fixed lease payments for the three and nine months ended September 30, 2019, respectively.

NOTE 8        INCOME TAXES

The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. We intend to maintain REIT status. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our taxable ordinary income. In addition, the Company is required to meet certain asset and income tests.

As a REIT, we will generally not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to Federal income and excise taxes on our undistributed taxable income and capital gains. WeDepending on the extended due date for partnership and corporate income tax returns, we are currently statutorily open to audit by the Internal Revenue Service for the years ended December 31, 2016 or December 31, 2017 through 20182019 and are generally statutorily open to audit by state taxing authorities for the years ended December 31, 2015 or December 31, 2016 through 2018.2019.

We have 0 unrecognized tax benefits recorded pursuant to uncertain tax positions as of September 30, 2019.2020.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

NOTE 9     EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

Allocation to Noncontrolling Interests

Noncontrolling interests consists of the redeemable interests related to BPROP Common, Preferred, and LTIP Units and the noncontrolling interest in our consolidated joint ventures. The following table reflects the activity included in the allocation to noncontrolling interests.
  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Distributions to preferred BPROP units ("Preferred Units") $(1,352) $(1,554) $(4,389) $(2,814)
Net income allocation to noncontrolling interests in BPROP from continuing operations ("Common Units") 
 (30,425) 
 (31,803)
Net income allocation to noncontrolling interests in BPROP from continuing operations ("LTIP Units") 
 (7,835) 
 (8,159)
Net loss (income) allocated to noncontrolling interest in consolidated real estate affiliates 389
 (379) 10,309
 (1,226)
Net loss (income) allocated to noncontrolling interest of the Operating Partnership (1) 4,329
 11,212
 28,697
 11,212
Allocation to noncontrolling interests 3,366
 (28,981) 34,617
 (32,790)
Other comprehensive (income) loss allocated to noncontrolling interests 
 (124) 
 (39)
Comprehensive loss (income) allocated to noncontrolling interests $3,366
 $(29,105) $34,617
 $(32,829)

 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Distributions to preferred BPROP units ("Preferred Units")$(900)$(1,352)$(2,716)$(4,389)
Net loss allocated to noncontrolling interest in consolidated real estate affiliates724 389 10,089 10,309 
Net loss allocated to noncontrolling interest of the Operating Partnership (1)19,806 4,329 53,434 28,697 
Allocation to noncontrolling interests19,630 3,366 60,807 34,617 
Other comprehensive loss allocated to noncontrolling interests96 1,722 
Comprehensive loss allocated to noncontrolling interests$19,726 $3,366 $62,529 $34,617 

(1)    Represents the noncontrolling interest of our institutional investor (Note 3).investor.

Noncontrolling Interests

The noncontrolling interest related to the Common, Preferred, and LTIP Units of BPROP are presented either as redeemable noncontrolling interests in mezzanine equity or as noncontrolling interests in our permanent equity on our Consolidated Balance Sheets. Classification as redeemable or permanent equity is considered on a tranche-by-tranche basis and is dependent on whether we could be required, under certain events outside of our control, to redeem the securities for cash by the holders of the securities,
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


securities. Those tranches for which we could be required to redeem the security for cash are included in redeemable equity. If we control the decision to redeem the securities for cash, the securities are classified as permanent equity.

The redeemable Common and Preferred Units of BPROP are recorded at the greater of the carrying amount adjusted for the noncontrolling interest’s share of the allocation of income or loss (and its share of other comprehensive income or loss) and dividends or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period to period is recorded within additional paid-in capital in our Consolidated Balance Sheets. Allocation to noncontrolling interests is presented as an adjustment to net income (loss) to arrive at net income (loss) attributable to BPR.BPYU. The preferred redeemable noncontrolling interests have been recorded at carrying value.

Holders of Series B Preferred Units, Series D Preferred Units, Series E Preferred Units and Series G Preferred Units of BPROP are each entitled to periodic distributions at the rates set forth in the Sixth Amended and Restated Agreement of Limited Partnership of BPROP. Generally, each Series K Preferred Unit of BPROP entitles its holder to distributions and a liquidation preference identical to those established for each share of BPR'sBPYU's Class A Stock. The holders of Series L Preferred Units of BPROP are generally entitled to a pro rata distribution of an aggregate cash amount equal to the sum of (i) the aggregate cash dividends declared on all outstanding shares of BPR'sBPYU's Class B Stock and (ii) the aggregate cash dividends declared on all outstanding shares of BPR'sBPYU's Series B Preferred Stock. Holders of Common Units of BPROP are entitled to distributions of all or a portion of BPROP’s remaining net operating cash flow, when and as declared by BPROP’s general partner. However, the Sixth Amended and Restated Agreement of Limited Partnership of BPROP permits distributions solely to BPRBPYU if such distributions were required to allow the Company to comply with the REIT distribution requirements or to avoid the imposition of excise tax.


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

Noncontrolling Interests - Permanent

As of September 30, 2019,2020, there were 9,717.658 Series B Preferred Units of BPROP outstanding. As of July 10, 2017, theThe Series B Preferred Unit conversion option expired, and each Series B Preferred Unit now hasUnits have a carrying value of $50 per unit.

Also, as of September 30, 2019,2020, there were 4,156,971.851788,734.3886 Common Units of BPROP outstanding and 1,691,144.853320,873.9798 Series K Preferred Units of BPROP (former(held by former common unit holders). These Series K Units were established at $21 per unit and are not subject to adjustment based on fair value.

During the quarter ended March 31, 2020, BPYU entered into an agreement with a Limited Partner to redeem 3,318,399.56 Common Units at a purchase price per unit of $0.32440587 for an aggregate cost of approximately $1.1 million. Furthermore, there were 1,349,995.76 Series K Preferred Units of BPROP redeemed at a price per unit of $19.635 for an aggregate cost of approximately $26.5 million.

During the quarter ended September 30, 2020, BPYU entered into an agreement with a Limited Partner to redeem 49,837.90 Common units at a purchase price per unit of $.32440587 and 20,275.12 Series K preferred Units redeemed at a purchase price per unit of $11.57 for an aggregate combined cost of $0.25 million.

Noncontrolling Interests - Redeemable

The Series D Preferred Units of BPROP are convertible based on a conversion ratio of 1.50821, which is the quotient of the Series D Preferred Unit’s $50 liquidation preference and $33.151875 conversion price. Upon conversion, each Series D Preferred Unit entitles its holder to (i) $21.9097 in cash, (ii) a number of Series K Preferred Units of BPROP equal to (x) 0.40682134 Series K Preferred Units (which is subject to adjustment), multiplied by (y) the Series D conversion ratio; and (iii) a number of Common Units of BPROP equal to (x) one Common Unit (which is subject to adjustment), multiplied by (y) the Series D conversion ratio. As of September 30, 2019,2020, there were 532,749.6574 Series D Preferred Units of BPROP outstanding.

The Series E Preferred Units of BPROP are convertible based on a conversion ratio of 1.29836, which is the quotient of the Series E Preferred Unit’s $50 liquidation preference and $38.51 conversion price. Upon conversion, each Series E Preferred Unit entitles its holder to (i) $18.8613 in cash, (ii) a number of Series K Preferred Units of BPROP equal to (x) 0.40682134 Series K Preferred Units (which is subject to adjustment), multiplied by (y) the Series E conversion ratio; and (iii) a number of Common Units of BPROP equal to (x) one Common Unit (which is subject to adjustment), multiplied by (y) the Series E conversion ratio. As of September 30, 2019,2020, there were 502,657.8128 Series E Preferred Units of BPROP outstanding.

The holder of each Series K Preferred Unit of BPROP issued upon conversion of Series D Preferred Units or Series E Preferred Units of BPROP has the right to redeem such Series K Preferred Unit for a cash amount equal to the average closing price of BPR’sBPYU’s Class A Stock for the five consecutive trading days ending on the date of the notice of redemption, provided that BPRBPYU may elect to satisfy such redemption by delivering one share of BPR’sBPYU’s Class A Stock. The holder of each Common Unit of BPROP issued upon conversion of Series D Preferred Units or Series E Preferred Units of BPROP has the right to redeem such Common Unit for a cash amount equal to $0.324405869, subject to adjustment.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Each LTIP Unit of BPROP is convertible into, and, except for the level of preference, entitles its holder to regular and liquidating distributions equivalent to that of 0.016256057 Series K Preferred Units, subject to adjustment. Each Series K Preferred Unit received by an LTIP holder in connection with the BPY Transaction is redeemable for a cash amount equal to the average closing price of BPR'sBPYU's Class A Stock for five consecutive trading days ending on the date of the notice of redemption, provided that BPRBPYU may elect to satisfy such redemption by delivering one share of BPR'sBPYU's Class A Stock. If the holders had requested redemption of the Class A Stock and Preferred Units as of September 30, 2019,2020, the aggregate amount of cash the Company would have paid would have been $1.35 billion$510.9 million and $58.6$55.5 million, respectively.


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

The following table reflects the activity of the common redeemable noncontrolling interests for the three and nine months ended September 30, 2019,2020 and 2018.2019.
Balance at January 1, 2019$73,696 
Net income3,358 
Series K Preferred Unit redemption(14,935)
Balance at March 31, 201962,119 
Net income103 
Balance at June 30, 201962,222 
Net income42 
Balance at September 30, 2019$62,264 
Balance at January 1, 2020$62,235 
Net loss(441)
Series K Preferred Unit redemption(388)
Balance at March 31, 202061,406 
Net income441 
Series K Preferred Unit redemption(10)
Balance at June 30, 202061,837 
Series K Preferred Unit redemption(167)
Balance at September 30, 2020$61,670 
Balance at January 1, 2018$248,126
Net income560
Distributions(1,842)
Other comprehensive loss(2)
Fair value adjustment for noncontrolling interests in Operating Partnership(23,252)
Balance at March 31, 2018223,590
Net income818
Distributions(1,842)
Other comprehensive income (loss)(84)
Fair value adjustment for noncontrolling interests in Operating Partnership857
Balance at June 30, 2018223,339
Net income30,425
Distributions(1)
Adjustment of Mezzanine Equity to fair value(40,294)
Other comprehensive income (loss)125
Common Unit Redemption to Common Stock(85,818)
Reclassification of Mezzanine Equity to Permanent Equity(37,840)
Fair value adjustment for noncontrolling interests in Operating Partnership22,395
Pre-Closing Dividend(60,673)
BPR Equity Recapitalization21,923
Balance at September 30, 2018$73,581
  
Balance at January 1, 2019$73,696
Net income3,358
Series K Preferred Unit redemption(14,935)
Balance at March 31, 201962,119
Net income103
Balance at June 30, 201962,222
Net income42
Balance at September 30, 2019$62,264


Redeemable Class A Stock

Class A Stock refers to the Company's Class A Stock, par value $0.01 per share, authorized and issued to unaffiliated GGP common stockholders that were unaffiliated with BPY as part of the BPY Transaction. The Company's Class A Stock is listed on the Nasdaq Global Select Market ("Nasdaq"). Our Class A Stock has traded on Nasdaq under the symbol "BPYU" since March 2, 2020, prior to which it traded under the symbol "BPR".

Each share of Class A Stock is entitled to cumulative dividends per share in a cash amount equal in value to the amount of any distribution made on a BPY limited partnership unit ("BPY unit"). In addition, each share of Class A Stock is exchangeable for
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


one BPY unit or its cash equivalent (the form of payment to be determined by BP US REIT LLC,BPY or an affiliate, in its sole discretion). Such exchange and distribution rights are subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR.BPYU. If and to the extent declared by the Company's board of directors, the record and payment dates for the dividends or other distributions upon the shares of Class A Stock, to the extent not prohibited by applicable law, is expected to be the same as the record and payment dates for the dividends or other distributions upon the BPY units. Pursuant to the terms of the Company's charter, all such dividends to holders of Class A Stock will be paid prior and in preference to any dividends or distributions on the Class B Stock, Series B Preferred Stock or Class C Stock will be fully declared and paid before any dividends are declared and paid or any other distributions are made on any Class B Stock, Series B Preferred Stock or Class C Stock. The holders of Class A Stock shall not be entitled to any dividends from BPRBPYU other than the Class A dividend.

Upon any liquidation, dissolution or winding up of the Company that is not a Market Capitalization Liquidation Event (as defined below) or substantially concurrent with the liquidation, dissolution or winding up of BPY, the holders of Class A Stock are entitled to a cash amount, for each share of Class A Stock, equal to the market price of one BPY unit (subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR)BPYU) on the date immediately preceding announcement of such liquidation, dissolution or winding up, plus all declared and unpaid dividends. If, upon any such liquidation, dissolution or winding up, the assets of BPRBPYU are insufficient to make such payment in full, then the assets of BPRBPYU will be distributed among the holders of Class A Stock ratably in proportion to the full amounts to which they would otherwise be respectively entitled to receive.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

If the market capitalization of the Class A Stock (i.e., if the price per share of Class A Stock, multiplied by the number of shares of Class A Stock outstanding) averages, over any period of 30 consecutive trading days, less than one (1) billion dollars, the BPRBPYU board will have the right to liquidate BPR’sBPYU’s assets and wind up BPR’sBPYU’s operations (a "Market Capitalization Liquidation Event"). Upon any Market Capitalization Liquidation Event, the holders of Class A Stock shall be entitled to a cash amount, for each share of Class A Stock, equal to the dollar volume-weighted average price of one BPY unit over the ten (10) trading days immediately following the public announcement of such Market Capitalization Liquidation Event, plus all declared and unpaid dividends. If, upon any such Market Capitalization Liquidation Event, the assets of BPRBPYU are insufficient to make such payment in full, then the assets of BPRBPYU will be distributed among the holders of Class A Stock ratably in proportion to the full amounts which they would otherwise be respectively entitled to receive. Notwithstanding the foregoing, upon any Market Capitalization Liquidation Event, BPY may elect to exchange all of the outstanding shares of the Class A Stock for BPY units on a one-for-one basis, subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR.BPYU.

Holders of Class A Stock shall have the right to exchange all or a portion of their Class A Stock for cash at a price equal to the value of an equivalent number of BPY units, subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR.BPYU. Upon receipt of a request for exchange, BPRBPYU will deliver a notice of exchange to BPY within one (1) business day and will have ten (10) business days to deliver the cash amount to the tendering holder. Upon receipt of the notice of exchange, BPY or an affiliate may elect to satisfy BPR’sBPYU’s exchange obligation by exchanging all of the shares of the Class A Stock tendered for BPY units on a one-for-one basis. This initial one-for-one conversion factor is subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR.BPYU. If so elected, BPY will have to satisfy such obligation within ten (10) business days from the date of the notice of exchange. If BPY exercises its right to assume the exchange obligation, units of BPY units will be delivered in exchange for the Class A Stock and such Class A Stock will automatically be converted into Class B Stock.

As there are certain events outside of the Company’s control whereby it could be required to redeem the Class A Stock for cash by the holders of the securities, the Class A Stock is included in redeemable equity. Accordingly, the Class A Stock are recorded at the greater of the carrying amount or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period to period is recorded within additional paid-in capital in the Company’s Consolidated Balance Sheets. There is no adjustment within additional paid-in capital for the Class A stock when the fair value is less than the carrying value.

Class B Stock

The Company’s shareholders approved the amendment and restatement of the Company’s charter at its annual stockholder meeting on June 19, 2019 (the “Restated Charter”"Restated Charter"), which became effective on June 26, 2019 and, among other things, authorized the Company’s issuance of up to 965,000,000 shares of a new class of stock called Class B-2 Stock.Stock, par value of $0.01 per share. Each share of Class B-2 Stock shall have terms (including the same powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions) identical to the terms of a share of Class B-1 Stock other than voting rights. The following
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


description sets forth certain general terms and provisions of the Company's Class B-1 Stock and Class B-2 Stock (together the "Class B Stock").
Pursuant to the Restated Charter and subject to the prior rights of holders of all classes, including the Class A Stock, and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Class B Stock entitles its holder to cumulative dividends per share in a cash amount at a rate of 6.5% per year of the Class B liquidation amount per share (which rate was 10.0% per year until the effective date of the Restated Charter on June 26, 2019) equal to $21.39 per share. On October 18, 2018, each holder of the Class B-1 Stock hereby irrevocably waived, all of its right, title and interest in and to 2.5% of the dividend rate, including without elimination all rights and entitlement to payment of such amounts. This partial dividend waiver resulted in a 7.5% effective rate per year of the Class B Liquidation Amount per share and was terminated upon the effectiveness of the Restated Charter. Dividends on the Class B Stock may also be paid by an in-kind distribution of additional shares of Class B Stock or any other class of shares of capital stock of BPRBPYU ranking junior to the Class A Stock. Dividends on the Class B Stock shall be cumulative and shall be payable quarterly in arrears, when, as and if declared by the Company's Board of Directors with respect to dividends on the Class B Stock.
Holders of the Class B Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPRBPYU has paid the aggregate dividends owed to the holders of Class A Stock and (b) the dividend coverage ratio (as
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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

defined below) is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange or (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor. The dividend coverage ratio is referred to as a ratio of (i) BPR’sBPYU’s funds from operations, as calculated in accordance with the definition of funds from operations used by the National Association of Real Estate Investment Trusts ("Nareit"), for the immediately preceding fiscal quarter, to (ii) the product of (a) the amount of the most recent regular quarterly distribution declared by BPY on each BPY unit, times (b) the number of shares of Class A Stock outstanding at such time.
Series B Preferred Stock
The following description sets forth certain general terms and provisions of the Series B Preferred Stock, par value $0.01 per share, of the Company (the "Series B Preferred Stock").
Pursuant to the Restated Charter and subject to the prior rights of holders of all classes, including the Class A Stock, Class B Stock and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Series B Preferred Stock will entitle its holder to cumulative dividends per share in a cash amount at a rate of 8.65% per year of the Class B liquidation amount per share (which rate was 10.0% until the effective date of the Restated Charter on June 26, 2019), with such Class B liquidation amount per share equal to $21.39. Dividends on the Series B Preferred Stock may also be paid by an in-kind distribution of additional shares of Series B Preferred Stock or any other class of shares of capital stock of BPRBPYU ranking junior to the Class A Stock and Class B Stock. Dividends on the Series B Preferred Stock shall be cumulative and shall be payable quarterly in arrears, when, as and if declared by the Company's Board of Directors with respect to dividends on the Series B Preferred Stock.

Holders of the Series B Preferred Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPRBPYU has paid the aggregate dividends owed to the holders of Class A Stock and Class B Stock and (b) the dividend coverage ratio (as defined below) is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange or (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor. The dividend coverage ratio is referred to as a ratio of (i) BPR’sBPYU’s funds from operations, as calculated in accordance with the definition of funds from operations used by Nareit, for the immediately preceding fiscal quarter, to (ii) the product of (a) the amount of the most recent regular quarterly distribution declared by BPY on each BPY unit, times (b) the number of shares of Class A Stock outstanding at such time.

Class C Stock

Class C Stock refers to the Company's Class C Stock, par value $0.01 per share, authorized as part of the BPY Transaction. Pursuant to the amended charter and subject to the prior rights of holders of all classes, including the holders of Class A Stock, Class B Stock, Series B Preferred Stock and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Class C Stock will entitle its holder to dividends when, as and if declared by the Company's Board of Directors out of any assets of BPRBPYU legally available therefore. The record and payment date for dividends on shares of Class C Stock shall be such date that the Company's Board of Directors shall designate.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Notwithstanding the foregoing, holders of the Class C Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPRBPYU has paid the aggregate dividends owed to the holders of Class A Stock and (b) the dividend coverage ratio is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange, (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor or (iv) unless and until the full cumulative dividends on the Class B Stock and Series B Preferred Stock for all past dividend periods and any current dividend periods have been (or contemporaneously are) (a) declared or paid in cash or (b) declared and a sum sufficient for the payment thereof in cash is set apart for such payment.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

Voting Rights
Stock ClassAuthorizedIssuedShares OutstandingVotes per Share
Class A Stock4,517,500,000 43,161,423 41,743,422 1:1
Class B-1 Stock4,517,500,000 196,886,256 196,886,256 1:1
Class B-2 Stock965,000,000 121,203,654 121,203,654 0:1
Series B Preferred Stock425,000,000 202,438,184 202,438,184 1:1
Class C Stock1,000,000,000 640,051,301 640,051,301 1:1
Stock ClassAuthorizedIssuedShares OutstandingVotes per Share
Class A Stock4,517,500,000
66,704,069
66,056,819
1:1
Class B-1 Stock4,517,500,000
154,525,991
154,525,991
1:1
Class B-2 Stock965,000,000
121,203,654
121,203,654
0:1
Series B Preferred Stock425,000,000
202,438,184
202,438,184
1:1
Class C Stock1,000,000,000
640,051,301
640,051,301
1:1

All share counts in table above are as of September 30, 2019.2020.

Class A Stock Dividend

Our Board of Directors declared Class A Stock dividends during 20192020 and 20182019 as follows:
Declaration DateRecord DatePayment DateDividend Per Share
2020
November 5November 30December 31$0.3325 
August 5August 31September 300.3325 
May 7May 29June 300.3325 
February 5February 28March 310.3325 
2019
November 4November 29December 31$0.3300 
August 1August 30September 300.3300 
May 6May 31June 280.3300 
February 6February 28March 290.3300 
Declaration Date Record Date Payment Date Dividend Per Share
2019      
November 4 November 29 December 31 $0.330
August 1 August 30 September 30 0.330
May 6 May 31 June 28 0.330
February 6 February 28 March 29 0.330
2018      
October 31 November 30 December 31 $0.315
August 28 August 31 September 28 0.315


Class A Stock Repurchases and Conversions

On August 28, 2018,1, 2019, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time to time as market conditions warrant. This repurchase authorization expired on August 1, 2020.

On March 29, 2019, BPRBPYU purchased for cancellation 4,679,802 shares of Class A Stock at a purchase price of $20.30 per share, for an aggregate cost of approximately $95 million, excluding fees and expenses.

In the second quarter of 2019, BPRBPYU purchased 200,000 shares of Class A Stock at an average purchase price of $18.37 per share for an aggregate cost of approximately $3.68 million, which were subsequently canceled in July 2019.

Furthermore, there were 647,250 shares of Class A Stock that were purchased in relation to the 2019 restricted stock grant.grants. These shares were purchased at an average purchase price of $19.40 per share for an aggregate cost of approximately $12.59 million.

In the third quarter of 2019, BPRBPYU purchased 197,225 shares of Class A Stock at an average purchase price of $18.56 per share for an aggregate cost of approximately $3.66 million, which were subsequently canceled in the quarter.


In the first quarter of 2020, BPYU purchased 855,000 shares of Class A Stock in relation to the 2020 restricted stock grant. These shares were purchased at an average price of $18.57 per share for an aggregate cost of approximately $15.87 million.

On August 6, 2020, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s
Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time
to time as market conditions warrant.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

On August 18, 2020, a total of 7,321,155 shares of Class A stock were properly tendered for an aggregate cost of approximately $87.9 million, equal to $12.00 per share.

In the third quarter of 2020, BPYU purchased for cancellation 2,606,289 shares of Class A Stock at an average purchase price of $11.46 per share for an aggregate cost of approximately $29.87 million.

During the nine months ended September 30, 2020, there were 11,578,482 shares of Class A Stock converted to 7,495,510 shares of Class B-1 Stock, at a weighted average price of $13.85 and $21.39, respectively.

Class B Stock and Series B Preferred Stock Dividends

Our Board of Directors did not declare dividends on Class B-1 Stock, Class B-2 Stock, or Series B Preferred Stock during the nine months ended September 30, 2020. Our Board of Directors declared dividends on the Class B-1 Stock, Class B-2 Stock and the Series B Preferred Stockthese classes of stock during 2019 as follows:

Class B-1 Stock Dividends
Declaration DateRecord DatePayment DateAverage Dividend Per Share
2019
November 4December 25December 25$0.110 
Declaration Date Record Date Payment Date Average Dividend Per Share
2019      
November 4 December 25 December 25 $0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11$0.11 per share of the Class B-1 Stock.

Class B-2 Stock Dividends
Declaration DateRecord DatePayment DateAverage Dividend Per Share
2019
November 4December 25December 25$0.110 
Declaration Date Record Date Payment Date Average Dividend Per Share
2019      
November 4 December 25 December 25 $0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11$0.11 per share of the Class B-2 Stock.

Combined Class B stock and Series B Preferred Stock (Prior to Restated Charter)
Declaration DateRecord DatePayment DateAverage Dividend Per Share
2019
May 25June 25June 25$0.397 
March 25March 27March 271.015 
Declaration Date Record Date Payment Date Average Dividend Per Share
2019      
May 25 June 25 June 25 $0.397
March 25 March 27 March 27 1.015


A dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from the date of issue to March 31, 2019 at the rate of 7.5% per annum payable on March 27, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on March 27, 2019 for a combined distribution total of approximately $467.3 million.

In the second quarter of 2019, a dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from March 31, 2019 to June 25, 2019 at the rate of 7.5% per annum payable on June 25, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on June 25, 2019 for a combined distribution total of approximately$183.8approximately $183.8 million.


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

Class B-1 Stock RedemptionIssuance & Repurchase

In the first quarter of 2019, BPR redeemedBPYU repurchased 10,496,703 shares of Class B-1 Stock held by BPR FIN 1 Subco LLC, a related party, for fair market value consideration of $224.5 million, being the redemption amount of the shares acquired at $21.39 per share.

In the fourth quarter of 2019, BPYU issued 13,712,834 shares of Class B-1 Stock to BPR FIN 1 Subco LLC, a related party, due to a contribution of $293.3 million, equal to $21.39 per share.

In the third quarter 2020, BPYU issued 19,367,288 shares of Class B-1 Stock to BPR FIN I Subco LLC, a related party, due to total contributions of $414.3 million, equal to $21.39 per share.

Class B-2 Stock Exchange

On June 26, 2019, following the effectiveness of the Restated Charter, certain subsidiaries of BPR FIN 1 Subco LLC, a related party, exchanged an aggregate of 121,203,654 shares of Class B-1 Stock held by such subsidiaries for 121,203,654 shares of Class B-2 Stock.



Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Common Stock Dividend

Our Board of Directors declared common stock dividends during 2018 as follows:
Declaration Date (1) Record Date Payment Date Dividend Per Share
2018      
May 3 July 13 July 31 $0.22
February 7 April 13 April 30 0.22

(1)     Excludes the Pre-Closing Dividend (Note 1).

A Dividend Reinvestment Plan ("DRIP") provided eligible holders of GGP's common stock with a convenient method of increasing their investment in the Company by reinvesting all or a portion of cash dividends in additional shares. Pursuant to the DRIP, eligible stockholders who enrolled in the DRIP on or before the fourth business day preceding the record date for a dividend payment were able to have that dividend reinvested. As a result of the DRIP elections, 0 shares were issued during the nine months ended September 30, 2019 and September 30, 2018. The Company terminated the registration statement relating to the DRIP (File No. 333-172795) with the filing of a post-effective amendment on August 28, 2018.

Preferred Stock

On February 13, 2013, we issued, in a public offering, 10,000,000 shares of 6.375% Series A Cumulative Perpetual Preferred Stock (the "Pre-Merger Preferred Stock") at a price of $25.00 per share, resulting in net proceeds of $242.0 million after issuance costs. In connection with the BPY Transaction, each share of Pre-Merger Preferred Stock was converted into one share of 6.375% Series A cumulative redeemable preferred stock of BPRBPYU (the "Series A Preferred Stock"). The Company's Series A Preferred Stock is listed on Nasdaq. Our Series A Preferred Stock has traded on Nasdaq under the symbol "BPYUP" since March 2, 2020, prior to which it traded under the symbol "BPRAP". The Series A Preferred Stock is recorded net of issuance costs within equity on our Consolidated Balance Sheets, and accrues a quarterly dividend at an annual rate of 6.375%. The dividend is paid in arrears in preference to dividends on our Class A Stock, and reduces net income available to stockholders, and therefore, earnings per share.

The Series A Preferred Stock does not have a stated maturity date but we may redeem the Series A Preferred Stock for $25.00 per share plus all accrued and unpaid dividends. Upon certain circumstances surrounding a change of control, holders of Series A Preferred Stock may elect to convert each share of their Series A Preferred Stock into a number of shares of Class A Stock or Class C Stock, at the option of the holder, equivalent to $25.00 plus accrued and unpaid dividends, but not to exceed a cap of 2.4679 shares of Class A Stock or Class C Stock (subject to certain adjustments related to splits, subdivisions, or combinations). The BPY Transaction did not meet the definition of a change in control per the certificate of designation governing the Series A Preferred Stock.

Our Board of Directors declared preferred stock dividends during 20192020 and 20182019 as follows:
Declaration DateRecord DatePayment DateDividend Per Share
2020
November 5December 15, 2020January 1, 2021$0.3984 
August 5September 15, 2020October 1, 20200.3984 
May 7June 15, 2020July 1, 20200.3984 
February 5March 15, 2020April 1, 20200.3984 
2019
November 4December 13, 2019January 1, 2020$0.3984 
August 1September 13, 2019October 1, 20190.3984 
May 6June 14, 2019July 1, 20190.3984 
February 6March 15, 2019April 1, 20190.3984 
Declaration Date Record Date Payment Date Dividend Per Share
2019      
November 4 December 13 January 1 $0.3984
August 1 September 13 October 1 0.3984
May 6 June 14 July 1 0.3984
February 6 March 15 April 1 0.3984
2018      
November 1 December 14 January 1 $0.3984
July 31 September 17 October 1 0.3984
May 3 June 15 July 2 0.3984
February 7 March 15 April 2 0.3984


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Accumulated Other Comprehensive Loss

The following table reflects the components of accumulated other comprehensive loss as of September 30, 20192020 and 2018:2019:
September 30, 2020September 30, 2019
Net unrealized gains on financial instruments$30 $12 
Foreign currency translation(104,351)(87,530)
AOCI - minority interest1,722 
Accumulated other comprehensive loss$(102,599)$(87,518)
  September 30, 2019 September 30, 2018
Net unrealized gains on financial instruments $12
 $132
Foreign currency translation (87,530) (84,824)
Accumulated other comprehensive loss $(87,518) $(84,692)


NOTE 10    EARNINGS PER SHARE

Class A Stock

Income available to Class A stockholders is limited to distributed income or dividends declared. Additionally, for purposes of allocating earnings to Class A Stock, the portion of the change in the carrying amount of Class A Stock that reflects a redemption in excess of fair value is considered a dividend to the Class A stockholders. As the Class A Stock redemption value approximates its fair value, basic and diluted earnings per share ("EPS") for Class A Stock is equivalent to the dividends declared for the period January 1, 20192020 through September 30, 2019.2020. There were 109,804,51364,024,422 and 66,056,81941,743,422 shares of Class A Stock outstanding as of December 31, 20182019 and September 30, 2019,2020, respectively. EPS is not presented for Class B Stock, Series B Preferred Stock or Class C Stock as these classes of stock are not publicly traded.

Common Stock

In 2018, basic EPS for common stock was computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS for common stock was computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of options and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation plans), were computed using the "treasury" method. The dilutive effect of the Preferred Units was computed using the "if-converted" method.

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Information related to our EPS calculations is summarized as follows:
   July 1, 2018 through August 27, 2018January 1, 2018 through August 27, 2018
Numerators - Basic:    
Net income  $3,698,966
$3,860,424
Preferred Stock dividends  (3,984)(11,952)
Allocation to noncontrolling interests  (39,240)(43,049)
Net income attributable to common stockholders  $3,655,742
$3,805,423
Numerators - Diluted:    
Distributions to Preferred Units  450
1,711
Net income attributable to common stockholders  3,656,192
3,807,134
Denominators:    
Weighted-average number of common shares outstanding - basic  777,208
914,066
Effect of dilutive securities  3,822
3,831
Weighted-average number of common shares outstanding - diluted  781,030
917,897
Anti-dilutive Securities:    
Effect of Common Units  5,438
7,662
Effect of LTIP Units  1,721
1,748
Weighted-average number of anti-dilutive securities  7,159
9,410

For the period July 1, 2018 through August 27, 2018 and the period January 1, 2018 through August 27, 2018, dilutive options and dilutive shares related to the Preferred Units are included in the denominator of dilutive EPS. Distributions to Preferred Units are included in the numerator of dilutive EPS.

Outstanding Common Units and LTIP Units have been excluded from the diluted earnings per share calculation because including such units would also require that the share of BPROP income attributable to such units be added back to the net income therefore resulting in no effect on EPS.

NOTE 11    STOCK-BASED COMPENSATION PLANS

The GGP Inc. 2010 Equity Plan (the "Equity Plan") was, renamed as the Amended and Restated Brookfield Property REIT Inc. 2010 Equity Incentive Plan on August 28, 2018 in connection with the BPY Transaction.Transaction, reserves for the issuance of 4% of outstanding Class A Stock on a fully diluted basis. The Equity Plan provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation (collectively, the "Awards"). The Company's directors, officers and other employees and those of its subsidiaries and affiliates are eligible for the Awards. The Equity Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended. No participant may be granted more than 4,000,000 shares, or the equivalent dollar value of such shares, in any year. Options granted under the Equity Plan will be designated as either nonqualified stock options or incentive stock options. An option granted as an incentive stock option will, to the extent it fails to qualify as an incentive stock option, be treated as a nonqualified option. The exercise price of an option may not be less than the fair value of a share of BPR'sBPYU's Class A Stock on the date of grant. The term of each option will be determined prior to the date of grant, but may not exceed 10 years. In addition to the Equity Plan, effective February 20, 2019, the Brookfield Property Group Restricted BPR Class A Stock Plan and Brookfield Property L.P. FV LTIP Unit Plan (the "2019 Plans") provide for grants of Restricted Class A Shares of BPR, now BPYU, stock and FV LTIP Units of Brookfield Property L.P. respectively. Officers and employees of any member of the Brookfield Properties Group and of their respective affiliates are eligible for Awards under these plans.

In connection with the BPY Transaction, the Equity Plan was amended and certain outstanding awards were modified. All outstanding GGP in and out of the money options were canceled and replaced with Class A Stock of BPRBPYU and BPY options, respectively. Certain existing appreciation only LTIP awards were canceled and replaced with substitute awards of a BPY affiliate. Outstanding restricted GGP shares were replaced with restricted shares of Class A Stock. As the awards were modified in conjunction with an equity restructuring, they were accounted for as modifications. Incremental compensation cost was measured as the excess of the fair value of the replacement awards over the fair value of the original awards immediately before the terms were modified. Total compensation cost measured at the date of modification was the grant-date fair value of the original awards for which the requisite service is expected to be rendered (or has already been rendered) plus the incremental cost associated with the replacement
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


awards. For vested awards, incremental compensation cost was recognized on the modification date. For unvested awards, incremental compensation cost is being recognized over the remaining service period.

Compensation expense related to stock-based compensation plans for the three and nine months ended September 30, 2019 and 2018 is summarized in the following table in thousands:
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Stock options - Property management and other costs$10
 $41
 $40
 $188
Stock options - General and administrative
 38
 4
 112
Restricted stock - Property management and other costs1,477
 5,952
 4,601
 9,056
Restricted stock - General and administrative508
 10,231
 1,268
 12,125
LTIP Units - Property management and other costs51
 552
 206
 1,187
LTIP Units - General and administrative204
 13,176
 1,578
 21,138
Total$2,250
 $29,990
 $7,697
 $43,806


The following tables summarize stock option, LTIP Unit and restricted stock activity for the Equity Plan for the nine months ended September 30, 2019 and 2018:
 2019 2018
 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price
Stock options Outstanding at January 1,1,011,523
 $19.71
 14,427,103
 $17.84
Granted
 
 1,068,818
 19.70
Exercised(773,642) 17.91
 (338,715) 16.55
Forfeited(13) 26.05
 (1,082) 28.86
Expired
 
 (55,917) 23.27
Conversion effect (1)
 
 (14,081,389) 17.85
Stock options Outstanding at September 30,237,868
 $25.59
 1,018,818
 $19.76

43

(1) In connection with the BPY Transaction, outstanding GGP in and out of the money options were canceled and replaced with Class A Stock of BPR and BPY options, respectively. The BPY options remain outstanding as of September 30, 2019 as they are held by employees of BPR subsidiaries. Stock compensation costs related to the grant of BPY option awards to employees of BPR subsidiaries are recognized as compensation expense with a corresponding capital contribution from BPY.


 2019 2018
 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
LTIP Units Outstanding at January 1,3,921,175
 $25.96
 14,427,103
 $17.84
Granted (1)
 
 1,068,818
 19.70
Exercised(1,715,722) 28.34
 (338,715) 16.55
Forfeited(19,793) 22.42
 (1,082) 28.86
Expired
 
 (55,917) 23.27
Conversion effect (1)
 
 (14,081,389) 17.85
LTIP Units Outstanding at September 30,2,185,660
 $24.12
 1,018,818
 $19.76

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


(1) In connection with the BPY Transaction, certain existing LTIP awards were canceled and replaced with substitute awards of a BPY affiliate. The substitute LTIP awards remain outstanding as of September 30, 2019 as they are held by employees of BPR subsidiaries. Stock compensation costs related to the grant of BPY affiliate LTIP awards to employees of BPR subsidiaries are recognized as compensation expense with a corresponding capital contribution from BPY.

Compensation expense related to stock-based compensation plans for the three and nine months ended September 30, 2020 and 2019 is summarized in the following table in thousands:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Stock options - Property management and other costs$$10 $$40 
Stock options - General and administrative
Restricted stock - Property management and other costs (1)2,945 1,477 5,269 4,601 
Restricted stock - General and administrative802 508 2,051 1,268 
LTIP Units - Property management and other costs51 18 206 
LTIP Units - General and administrative15 204 36 1,578 
Total$3,770 $2,250 $7,374 $7,697 
 2019 2018
 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
Class A Restricted Stock Outstanding at January 1,986,937
 $22.48
 1,089,364
 $25.29
Granted647,226
 19.94
 1,074,137
 21.52
Vested(401,528) 22.60
 (394,995) 23.69
Forfeited(39,776) 21.16
 (123,232) 24.42
Conversion effect (1)
 
 (635,698) 24.52
Class A Restricted Stock Outstanding at September 30,1,192,859
 $21.11
 1,009,576
 $22.49
(1)    As a part of the reduction in workforce and early retirement plan offers, the expense of the restricted stock acceleration occurred in the third quarter. However, the vesting of the stock will not occur until the fourth quarter due to timing of the agreements.

The following tables summarize stock option, LTIP Unit and restricted stock activity for the Equity Plan and the 2019 Plans for the nine months ended September 30, 2020 and 2019:
 20202019
SharesWeighted Average Exercise PriceSharesWeighted Average Exercise Price
Stock options Outstanding at January 1,175,799 $25.66 1,011,523 $19.71 
Granted
Exercised(773,642)17.91 
Forfeited(13)26.05 
Expired(39,137)24.30 
Stock options Outstanding at September 30,136,662 $26.05 237,868 $25.59 

20202019
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
LTIP Units Outstanding at January 1,2,177,668 $24.11 3,921,175 $25.96 
Granted (1)24,251 18.56 
Exercised(54,540)26.83 (1,715,722)28.34 
Forfeited(19,793)22.42 
Expired(271,463)22.42 
LTIP Units Outstanding at September 30,1,875,916 $24.20 2,185,660 $24.12 
(1)    Granted by an affiliated operating partnership of the Company.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

(1) In connection with the BPY Transaction, outstanding restricted GGP shares were replaced with restricted shares of Class A Stock.

20202019
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Restricted Stock Outstanding at January 1,1,149,164 $20.98 986,937 $22.48 
Granted851,102 18.57 647,226 19.94 
Vested(256,329)22.09 (401,528)22.60 
Forfeited(66,585)19.75 (39,776)21.16 
Restricted Stock Outstanding at September 30,1,677,352 $19.64 1,192,859 $21.11 

NOTE 12    ACCOUNTS RECEIVABLE, NET

The following table summarizes the significant components of accounts receivable, net.
September 30, 2020December 31, 2019
Trade receivables$484,046 $111,582 
Short-term tenant receivables6,271 4,198 
Straight-line rent receivable158,519 144,249 
Other accounts receivable3,334 2,725 
Total accounts receivable652,170 262,754 
Provision for doubtful accounts(88,558)(27,826)
Total accounts receivable, net$563,612 $234,928 
  September 30, 2019 December 31, 2018
Trade receivables $96,542
 $97,329
Short-term tenant receivables 4,143
 4,378
Straight-line rent receivable 142,232
 137,387
Other accounts receivable 56
 3,126
Total accounts receivable 242,973
 242,220
Provision for doubtful accounts (24,051) (19,658)
Total accounts receivable, net $218,922
 $222,562


For leases where collectability of substantially all the lease payments is probable, the Company records an allowance for doubtful accounts against the portion of accounts receivable, net, including straight-line rents, which is estimated to be uncollectible to account for portfolio-level collection issues. The Company estimates the allowance based on previous recovery experience and expectations of future lease concessions, in consideration of weighted average remaining lease terms and the period of time elapsed on such lease terms. Changes in the allowance is recognized in rental income in our Consolidated Statements of Operations and Comprehensive Income (Loss).
Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 13    NOTES RECEIVABLE

The following table summarizes the significant components of notes receivable.
 September 30, 2020December 31, 2019
Notes receivable$40,566 $69,963 
Accrued interest4,006 6,347 
Total notes receivable$44,572 $76,310 
  September 30, 2019 December 31, 2018
Notes receivable $38,765
 $239,597
Accrued interest 5,785
 17,340
Total notes receivable $44,550
 $256,937


DuringOn December 20, 2019 the period, theCompany issued a $31.7 million subordinated unsecured note receivable from our joint venture partners related to the acquisition of 730 Fifth Avenue in New York was satisfied as part of the transaction which included payment of principal of $249.5 million and interest of $54.7 million (Note 3).

On January 30, 2019, we entered into a revolving credit facility with BPY Bermuda Holdings IV Limited, a related party, in which we lent $330.0 million.an institutional investor. The note had an interest rate of LIBOR plus 2.50% and maturedwas repaid in full on January 30,7, 2020. On March 25, 2019, the note was paid down

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in full.thousands, except share and per share amounts)

(Unaudited)

NOTE 14    PREPAID EXPENSES AND OTHER ASSETS
 
The following table summarizes the significant components of prepaid expenses and other assets.
 September 30, 2020December 31, 2019
 Gross AssetAccumulated
Amortization
BalanceGross AssetAccumulated
Amortization
Balance
Intangible assets:      
Above-market tenant leases, net$152,078 $(68,651)$83,427 $177,480 $(79,467)$98,013 
Real estate tax stabilization agreement, net111,506 (62,438)49,068 111,506 (57,704)53,802 
Total intangible assets$263,584 $(131,089)$132,495 $288,986 $(137,171)$151,815 
Remaining prepaid expenses and other assets:      
Restricted cash93,442 77,683 
Security and escrow deposits  1,303 1,259 
Prepaid expenses  43,694 27,632 
Other non-tenant receivables  65,543 56,948 
Operating lease right of use assets, net394,987 402,573 
Finance lease right of use assets, net7,899 7,995 
Other  18,469 19,155 
Total remaining prepaid expenses and other assets  625,337   593,245 
Total prepaid expenses and other assets  $757,832   $745,060 
 September 30, 2019 December 31, 2018
 Gross Asset 
Accumulated
Amortization
 Balance Gross Asset 
Accumulated
Amortization
 Balance
Intangible assets: 
  
  
  
  
  
Above-market tenant leases, net$112,399
 $(84,842) $27,557
 $160,363
 $(125,152) $35,211
Below-market ground leases, net
 
 
 61,983
 (8,293) 53,690
Real estate tax stabilization agreement, net111,506
 (56,126) 55,380
 111,506
 (51,393) 60,113
Total intangible assets$223,905

$(140,968) $82,937
 $333,852

$(184,838) $149,014
Remaining prepaid expenses and other assets: 
  
  
  
  
  
Restricted cash    47,877
     51,674
Security and escrow deposits 
  
 1,196
     1,394
Prepaid expenses 
  
 32,008
     39,816
Other non-tenant receivables 
  
 47,108
     53,016
Right of use assets, net    116,039
     
Other 
  
 22,667
     18,734
Total remaining prepaid expenses and other assets 
  
 266,895
  
  
 164,634
Total prepaid expenses and other assets 
  
 $349,832
  
  
 $313,648


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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 15    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following table summarizes the significant components of accounts payable and accrued expenses.
 September 30, 2020December 31, 2019
 Gross 
Liability
Accumulated
Accretion
BalanceGross 
Liability
Accumulated
Accretion
Balance
Intangible liabilities:      
Below-market tenant leases, net227,451 (64,897)$162,554 218,608 (56,893)$161,715 
Total intangible liabilities$227,451 $(64,897)$162,554 $218,608 $(56,893)$161,715 
Remaining accounts payable and accrued expenses:      
Accrued interest  66,955   42,371 
Accounts payable and accrued expenses  100,400   71,720 
Accrued real estate taxes  82,845   53,210 
Deferred gains/income  85,762   85,598 
Accrued payroll and other employee liabilities  65,876   61,002 
Construction payable  265,716   301,096 
Tenant and other deposits  15,221   15,078 
Insurance reserve liability  12,433   12,787 
Finance lease obligations  9,093   9,094 
Conditional asset retirement obligation liability  2,528   3,275 
Lease liability right of use75,828 78,500 
Other  79,833   131,684 
Total remaining Accounts payable and accrued expenses  862,490   865,415 
Total Accounts payable and accrued expenses  $1,025,044   $1,027,130 
 September 30, 2019 December 31, 2018
 
Gross 
Liability
 
Accumulated
Accretion
 Balance 
Gross 
Liability
 
Accumulated
Accretion
 Balance
Intangible liabilities: 
  
  
  
  
  
Below-market tenant leases, net134,320
 (58,814) $75,506
 194,858
 (76,825) $118,033
Above-market ground leases, net
 
 
 754
 (73) 681
Total intangible liabilities$134,320

$(58,814) $75,506
 $195,612

$(76,898) $118,714
Remaining accounts payable and accrued expenses: 
  
  
  
  
  
Accrued interest 
  
 56,540
  
  
 29,576
Accounts payable and accrued expenses 
  
 52,002
  
  
 68,425
Accrued real estate taxes 
  
 61,331
  
  
 59,877
Deferred gains/income 
  
 68,868
  
  
 75,841
Accrued payroll and other employee liabilities 
  
 50,339
  
  
 64,515
Construction payable 
  
 221,995
  
  
 267,102
Tenant and other deposits 
  
 13,441
  
  
 12,248
Lease liability right of use    71,214
     
Insurance reserve liability 
  
 12,053
  
  
 12,281
Capital lease obligations 
  
 5,385
  
  
 5,385
Conditional asset retirement obligation liability 
  
 2,240
  
  
 2,484
Other 
  
 152,863
  
  
 236,921
Total remaining Accounts payable and accrued expenses 
  
 768,271
  
  
 834,655
Total Accounts payable and accrued expenses 
  
 $843,777
  
  
 $953,369


NOTE 16    LITIGATION

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity.

The Company is subject to litigation related to the BPY Transaction. The Company cannot predict the outcome of pending litigation, nor can it predict the amount of time and expense that will be required to resolve such litigation.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)

NOTE 17    COMMITMENTS AND CONTINGENCIES

We lease land or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. Rental payments are expensed as incurred and have, to the extent applicable, been straight-lined over the term of the lease. The following is a summary of our contractual rental expense as presented in our Consolidated Statements of Operations and Comprehensive Income:Income (Loss):
Brookfield Property REIT Inc.
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in thousands)
Contractual rent expense, including participation rent$4,254 $3,475 $13,249 $9,667 
Contractual rent expense, including participation rent and excluding amortization of above and below-market ground leases and straight-line rent3,315 3,475 9,805 9,667 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
 (Dollars in thousands)
Contractual rent expense, including participation rent$3,475
 $1,982
 $9,667
 $6,323
Contractual rent expense, including participation rent and excluding amortization of above and below-market ground leases and straight-line rent3,475
 1,204
 9,667
 4,441


The future impact of the shutdown on our level of liquidity is uncertain at this time. Measures undertaken by governments and companies in our principal markets have resulted in the temporary closure of many of our operating assets with the vast majority of the assets now open. The duration of such measures may impact our ability to collect rental income in our retail assets. The longer-term impact of the pandemic and resulting economic downturn could reduce demand for retail space.

Consequently, we are reviewing, and where appropriate adjusting, our current capital expenditure and financing assumptions on existing and future projects to reflect any potential shorter- and longer-term impact of the global economic shutdown.

We are also reviewing contractual arrangements with our tenants to assess the rights and responsibilities of the Company and our tenants in response to the impact of the measures undertaken by governments and/or tenants. Potential responses may include, but are not limited to, extension of payment terms from tenants, adjustments to the duration of leases, payment holidays, and renegotiation of lease terms.

We expect to be able to refinance the majority of debt obligations maturing in the near term or to exercise contractual extension options thereon, although there is no guarantee we will be able to do so. In certain instances, we plan to seek certain modifications to mortgages, including lease restructuring approvals and technical default waivers, and potentially interest deferrals.

In addition, certain debt obligations are subject to financial covenants. As a result, in the shorter-term, the global economic shutdown may negatively impact our ability to meet such covenants. We are reviewing the financial covenants of each debt instrument and, where applicable, working with our lenders to address debt instruments which may potentially approach or breach covenant limits. Such adjustments may include, but are not limited to, adjustment to the covenant limits, interest payment holidays, and temporary suspension of covenant testing.

In order to maintain financial flexibility, we maintain capacity under the Facility. As of September 30, 2020, the available liquidity under such credit facility was $580.0 million. We believe we will be able to continue to borrow funds on the Facility when and as required.

NOTE 18    SUBSEQUENT EVENTS

Subsequent to September 30, 2020, the Company repurchased 2,613,565 shares of Class A Stock at an average purchase price of $13.32 per share for an aggregate cost of approximately $34.8 million.

Subsequent to September 30, 2020, the Company issued 1,469,319 shares of Class B-1 Stock at an average price of $21.39 per share, for total aggregate proceeds of $31.4 million.

On October 25, 2019,30, 2020, the Company closed on a new loan on First Colony Mall for a totalconveyed one property to the lender in satisfaction of $220.0$59.0 million with a 10-year fixed interest rate at 3.55%in outstanding debt.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and a maturity date of November 1, 2029. This loan replaced the previous debt of $169.1 million with an interest rate of 4.50% that matured on November 1, 2019.per share amounts)
(Unaudited)

On November 1, 2019,6, 2020, the Company closed on a new loan on Natick Mall for a total of $505.0 million with a 5-year fixed interest rate at 3.72% and a maturity date of November 1, 2024. This loan replaced the previous debt of $419.4 million with an interest rate of 4.60% that matured on November 1, 2019.

On November 1, 2019, the Company completed the purchase of all of our joint venture partners' interests in Park Meadows, Shops at Merrick Park, Towson Town Center, and Perimeter Mall. This resulted in the Company obtaining 100% ownership of the entities. Concurrently, we sold all of our interest in Bridgewater Commonsextended its forbearance agreement related to the same joint venture partner. Additionally, we obtained a new loan for Park Meadows Mall for $700.0 million with a five-year fixed interest rate at 3.56% and a maturity date of November 1, 2024. This loan replaced the previous debt of $360.0 million with an interest rate at 4.60% that was scheduled to mature on December 1, 2023 and resulted in a $35.6 million prepayment penalty. We also obtained a new loan at Shops at Merrick Park for a totalThe Mall in Columbia until November 23, 2020 while replacement financing is finalized. A principal repayment of $390.0$28.0 million was made in conjunction with a five-year fixed interest rate of 3.90% and a maturity date of November 1, 2024. This loan replaced the previous debt of $161.0 million with an interest rate of 5.73% that was scheduled to mature on April 1, 2021 and resulted in a $8.0 million prepayment penalty.extension.

49


ITEM 2MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references to numbered Notes are to specific footnotes to our Consolidated Financial Statements included in this Quarterly Report and whosewhich descriptions are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as in such Notes.

Overview

GGP Inc., ("GGP" or the "Company") (now known as Brookfield Property REIT Inc. ("the Company" or "BPR""BPYU"), a Delaware corporation, was organized in July 2010 and is an externally managed real estate investment trust, referred to as a "REIT".

On March 26, 2018, GGP andindirect subsidiary of Brookfield Property Partners L.P. ("BPY") entered into a definitive agreement (the "Merger Agreement") pursuant to which BPY would acquire all of the shares of GGP common stock, par value $0.01 per share, that BPY and its affiliates did not already own through a series of transactions (collectively, the "BPY Transaction"), including, among other things, the exchange of all shares of GGP common stock owned by certain affiliates of BPY and any subsidiary of GGP for Series B Preferred Stock (the "Class B Exchange") and the payment of a special dividend payable to certain holders of record of GGP common stock pursuant to the terms of the Merger Agreement (the "Pre-Closing Dividend").

BPR is an indirect subsidiary of BPY, one of the world's largest commercial real estate companies. As used herein, the terms "we", "us" and "our" refer to BPRBPYU and its subsidiaries. BPR,BPYU, through its subsidiaries and affiliates, is an owner and operator of retail properties.

Overview—Introduction

We own a property portfolio comprised primarily of Class A regional malls (defined primarily by sales per square foot). As of September 30, 2019,2020, we were the owner, either entirely or with joint venture partners, of 123122 retail properties located throughout the United States comprising approximately 122120 million square feet of gross leasable area, or GLA.

Substantially all of our business is conducted through BPR OP, LP ("BPROP"), which we sometimes refer to herein as the Operating Partnership, and its subsidiaries. As of September 30, 2019, BPR held approximately 99% of the common equity of BPROP, while the remaining 1% was held by limited partners and certain previous contributors of properties to BPROP.

In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through BPR REIT Services LLC. ("BPRRS"), Brookfield Properties Retail Inc. ("BPRI") and General Growth Management, Inc. ("GGMI"). Each of GGMI and BPRI is a taxable REIT subsidiary ("TRS"), which earn real estate management and leasing fees, development fees, financing fees for other ancillary services for a majority of our unconsolidated real estate affiliates and for substantially all of our consolidated properties. BPRI also serves as a contractor to GGMI for these services. BPRRS generally provides financial, accounting, tax, legal, development, and other services to our consolidated properties.

Our primary businessobjective is owningto be an owner and operatingoperator of best-in-class retail properties that provide an outstanding environment and experience for our communities, retailers consumers and stockholders.consumers. We ownoperate our business to achieve this objective with a property portfolio comprised primarilylong term view and will continue to make decisions with that in mind, however, we will caution that in light of Class A retail properties (defined primarily by sales per square foot). We provide managementthe novel coronavirus pandemic ("COVID-19" or "the global economic shutdown" or "the shutdown") and other servicesits impact on the global economy, we may be unable to substantially allachieve these objectives in the near term.

Our strategy includes:

increasing the permanent occupancy of our regional mall portfolio by converting temporary leases to permanent leases and leasing vacant space;

renewing or replacing expiring leases at greater rental rates;

actively recycling capital through the disposition of assets; investing in whole or partial interests in high-quality regional malls, anchor pads, and our development pipeline and repaying debt; and

continuing to execute on our existing redevelopment projects and seeking additional opportunities within our portfolio for redevelopment.

Despite the recent economic disruption caused by COVID-19, we expect that the high quality nature of our stabilized properties including properties which we own through joint venture arrangements and which are unconsolidated for GAAP purposes. Our management operating philosophies and strategies areassociated cash flows will continue to be in demand from investors, although our ability to execute on recycling of capital initiatives will likely be impacted in the same whether the properties are consolidated or unconsolidated.short term.

As of September 30, 2019,2020, the portfolio was 95.0%93.4% leased, compared to 95.7%95.0% leased at September 30, 2018.2019. On a suite-to-suite basis, the leases commencing occupancy in the trailing 12 months exhibited initial rents that were 5.4%4.5% higher than the final rents paid on expiring leases.

WeOverview—Financial

The COVID-19 pandemic has spread globally, and has caused a global economic shutdown. The actions taken in response to the shutdown have identified approximately $1.1 billioninterrupted business activities and supply chains; disrupted travel; contributed to significant volatility in the financial markets, resulting in a general decline in equity prices and lower interest rates; impacted social conditions; and adversely impacted local, regional, national and international economic conditions, as well as the labor markets. Accordingly, we caution you that our financial position and consolidated performance presented below may not be indicative of developmentour results in future periods as a result of the ongoing and redevelopment projects within our portfolio, including re-development of anchor box spaces, over 80% of which is being invested into Class A retail properties. We currently expect to achieve stabilized returns of approximately 6-9% for all projects.developing COVID-19 pandemic and its resulting impact on the global economy.

We believe our long-term strategy can provide our stockholders with a competitive risk-adjusted total return comprised of dividends and share price appreciation.





Financial Overview

Net income (loss)loss attributable to BPR decreasedBPYU increased from $3.8 billion for the nine months ended September 30, 2018 to $(229.0)$229.0 million for the nine months ended September 30, 2019 primarily due to gains related to joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. Our funds from operations ("FFO") decreased 63.1% from $1.3 billion for the nine months ended September 30, 2018 to $479.1$461.5 million for the nine months ended September 30, 20192020 primarily due to joint ventures formedthe increase in conjunction withequity in loss of unconsolidated real estate
50


affiliates and the BPY Transaction.decrease in gains on the sale of unconsolidated properties from the nine months ended September 30, 2019 compared to the nine months ended September 30, 2020.

See Non-GAAP Supplemental Financial Measures below for a discussion of FFO,funds from operations ("FFO"), along with a reconciliation to Net (loss) income attributable to BPR.BPYU.

Operating Metrics

The following table summarizes selected operating metrics for our portfolio.
  September 30, 2019 (1) September 30, 2018 (1)
In-Place Rents Per Square Foot for Total Retail Properties (2) $80.16
 $78.31
     
Percentage Leased for Total Retail Properties 95.0% 95.7%
 September 30, 2020 (1)September 30, 2019 (1)
In-Place Rents Per Square Foot (all less anchors) (2)$81.08 $79.95 
In-Place Rents Per Square Foot (<10K square feet) (2)$61.87 $61.88 
Percentage Occupied for Total Retail Properties92.8 %93.6 %
Percentage Leased for Total Retail Properties93.4 %95.0 %
(1)Metrics exclude properties acquired in the year ended December 31, 2018 and the nine months ended September 30, 2019, reductions in ownership as a result of sales or other transactions, and certain redevelopments and other properties.
(2)Rent is presented on a cash basis and consists of base minimum rent and common area costs.
(1)     Metrics exclude properties acquired in the year ended December 31, 2019 and the nine months ended September 30, 2020, reductions in ownership as a result of sales or other transactions, and certain redevelopments and other properties.
(2)    Rent is presented on a cash basis and consists of base minimum rent and common area costs.

Lease Spread Metrics

The following table summarizes signed leases compared to expiring leases in the same suite, for leases where (1) the downtime between new and previous tenant was less than 24 months, (2) the occupied space between the previous tenant and new tenant did not change by more than 10,000 square feet and (3) the new lease is at least a year.
 # of Leases SF (in thousands) 
Term
(in years)
 Initial Rent PSF (1)(3) Expiring Rent PSF (2)(3) 
Initial Rent
Spread (3)
 % Change (3)
Trailing 12 Month Commencements1,266
 4,973
 6.8
 $61.88
 $58.71
 $3.17
 5.4%

 # of Leases SF (in thousands) 
Term
(in years)
 Initial Rent PSF (1)(4) Expiring Rent PSF (2)(4) 
Initial Rent
Spread (4)
 % Change (4)
Trailing 12 Month Commencements1,266
 4,973
 6.8
 $47.04
 $43.84
 $3.20
 7.3%
# of LeasesSF (in thousands)Term
(in years)
Initial Rent PSF (1)Expiring Rent PSF (2)Initial Rent
Spread
% Change
Trailing 12 Month Commencements870 3,109 6.6 $52.14 $49.90 $2.24 4.5 %
(1)
(1)     Represents initial annual rent over the lease consisting of base minimum rent and common area maintenance.
(2)Represents expiring rent at end of lease consisting of base minimum rent and common area maintenance.
(3)These metrics are weighted based on the operating income contribution of the properties.
(4)These metrics are not weighted based on the operating income contribution of the properties.

(2)     Represents expiring rent at end of lease consisting of base minimum rent and common area maintenance.

Results of Operations
 
Three months ended September 30, 20192020 and 20182019
 
The following table is a breakout of the components of rental revenues:
 Three Months Ended September 30,    
 2019 2018 $ Change % Change
 (Dollars in thousands)    
Components of Rental Revenues: 
  
  
  
Base minimum rents$224,325
 $311,683
 $(87,358) (28.0)%
Lease termination income3,875
 1,320
 2,555
 193.6 %
Straight-line rent1,685
 (1,359) 3,044
 (224.0)%
Above and below-market tenant leases, net(37) (1,661) 1,624
 (97.8)%
Tenant recoveries89,253
 133,103
 (43,850) (32.9)%
Overage rent2,865
 4,681
 (1,816) (38.8)%
Less provision for doubtful accounts(4,497) 
 (4,497) 
Total rental revenues, net$317,469
 $447,767
 $(130,298) (29.1)%

Base minimum rents decreased $87.4Rental revenues increased $9.2 million, primarily due to the joint ventures formedacquisition of an additional interest in conjunction with the BPY Transactionfour operating properties in the thirdfourth quarter of 2018.2019. The joint venturesacquisition resulted in a $83.5$43.4 million decreaseincrease in permanent base minimum rentsRental Revenues during the third quarter of 20192020 compared to the third quarter of 2018 (Note 3).

Tenant recoveries decreased $43.92019. This is partially offset by the provision for doubtful accounts, resulting in a $32.2 million primarily due to the joint ventures formed in conjunction with the BPY Transaction indecrease from the third quarter of 2018. The joint ventures resulted in a $36.3 million decrease in tenant recoveries during the third quarter of 20192020 compared to the third quarter of 2018 (Note 3).2019.

Management fees and other corporate revenuesReal estate taxes increased $13.7$7.3 million, primarily due to the joint ventures formedacquisition of an additional interest in conjunction with the BPY Transactionfour operating properties in the thirdfourth quarter of 2018.2019. The joint venturesacquisition resulted in a $13.4$4.7 million increase in property management and leasing fees during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

Real estate taxes decreased $11.4 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $13.1 million decrease in real estate taxes during the third quarter of 20192020 compared to the third quarter of 2018 (Note 3).2019.

Other property operating costs decreased $21.1The provision of impairment of $38.8 million primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $19.8 million decrease in other property operating costs during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

The provision for impairment during the three months ended September 30, 2019 is related to an impairment charge recorded on one operating property (Note 2). There were no operating property impairment charges during the third quarter of 2020.

Depreciation and amortization decreased $36.2increased $45.0 million, primarily due to the joint ventures formedacquisition of an additional interest in conjunction with the BPY Transactionfour operating properties in the thirdfourth quarter of 2018.2019. The joint venturesacquisition resulted in a $36.6$30.5 million decreaseincrease in depreciation and amortization during the third quarter of 20192020 compared to the third quarter of 2018.2019.

Interest expense increased $36.1Gain from changes in control of investment properties of $39.7 million primarily due to a $60.4 million increase in interest expense on the new credit agreement entered into during the third quarter of 2018 (Note 6). This was partially offset by the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The formation of the joint ventures resulted in a $32.4 million decrease in interest expense during the third quarter of 2019 comparedis related to the acquisition of an additional interest at one operating property (Note 3).
51



Loss on extinguishment of debt of $27.5 million is related to the pre-payment penalty related to the refinancing of debt at one property that occurred in the third quarter of 20182019 (Note 6).

Benefit from (provision for) income taxes decreased $19.8 million, primarily due to the recognition of deferred taxes related to certain transactions effectuated in the BPY Transaction in 2019

Equity in loss of Unconsolidated Real Estate Affiliates increased $60.3 million during the third quarter of 2020, primarily related to decreased revenues in unconsolidated joint ventures. Additionally, impairment charges of $2.5 million were recorded on one operating property (Note 5).

Unconsolidated Real Estate Affiliates - gain on investment during the third quarter of 2019 is due to the 49.3% sale of our interest in Authentic Brands Group LLC ("ABG") (Note 3).

Nine months ended September 30, 2020 and 2019
Rental revenues increased $64.9 million, primarily due to the acquisition of an additional interest in four operating properties in the fourth quarter of 2019. The acquisition resulted in a $139.2 million increase in Rental Revenues during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This is partially offset by the provision for doubtful accounts, resulting in $48.2 million decrease during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2019.

Real estate taxes increased $20.6 million, primarily due to the acquisition of an additional interest in four operating properties in the fourth quarter of 2019. The acquisition resulted in a $14.1 million increase in real estate taxes during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

The provision for impairment of $71.5 million during the nine months ended September 30, 2020 is related to an impairment charges recorded on one operating property and the provision of impairment of $223.1 million during the nine months ended September 30, 2019 is related to impairment charges recorded on two operating properties (Note 2).

Depreciation and amortization increased $128.0 million, primarily due to the acquisition of an additional interest in four operating properties in the fourth quarter of 2019. The acquisition resulted in a $103.0 million increase in depreciation and amortization during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Loss from changes in control of investment properties of $15.4 million during the nine months ended September 30, 2020 is related to the acquisition of an additional interest at one operating property (Note 3). The gain from changes in control of investment properties and other of $39.7 million during the threenine months ended September 30, 2019 is related to the acquisition of the remainingan additional interest in 730 Fifth Aveat one operating property (Note 3).

The gain from changes in controlon extinguishment of investment properties and otherdebt of $2.9 billion$14.3 million during the threenine months ended September 30, 20182020 is duerelated to the joint ventures formed in conjunction with the BPY Transactiondebt buyback transactions that occurred in the thirdsecond quarter of 2018, the sale of an anchor box at The Oaks Mall and the sale of the commercial office unit at 685 Fifth Avenue2020 (Note 3)6).


The loss on extinguishment of debt of $27.5 million during the threenine months ended September 30, 2019 is due to a pre-payment penalty related to the refinancing of debt at one property (Note 6).

The benefitBenefit from income taxes of $14.0decreased $10.7 million, during the three months ended September 30, 2019 is primarily due to the recognition of deferred taxes related to certain transactions effectuated in the BPY Transaction.

The unconsolidated real estate affiliates - gain on investment during the three months ended September 30, 2019 is due to the 49.3% sale of our interest in Authentic Brands Group LLC ("ABG") (Note 3).

Nine months ended September 30, 2019 and 2018

The following table is a breakout of the components of rental revenues:
 Nine Months Ended September 30,    
 2019 2018 $ Change % Change
 (Dollars in thousands)    
Components of Rental Revenues: 
  
  
  
Base minimum rents$665,264
 $1,036,243
 $(370,979) (35.8)%
Lease termination income6,320
 27,229
 (20,909) (76.8)%
Straight-line rent5,633
 (766) 6,399
 (835.4)%
Above and below-market tenant leases, net7,250
 (4,889) 12,139
 (248.3)%
Tenant recoveries269,346
 446,260
 (176,914) (39.6)%
Overage rent9,159
 14,853
 (5,694) (38.3)%
Less provision for doubtful accounts(8,244) 
 (8,244) 
Total rental revenues, net$954,728
 $1,518,930
 $(564,202) (37.1)%

Base minimum rents decreased $371.0 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter2019.

Equity in loss of 2018. The joint ventures resulted in a $347.7 million decrease in permanent base minimum rents during the first nine monthsUnconsolidated Real Estate Affiliates of 2019 compared to the first nine months of 2018 (Note 3).

Tenant recoveries decreased $176.9 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $154.4 million decrease in tenant recoveries during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

Management fees and other corporate revenues increased $41.2 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $38.9 million increase in property management and leasing fees during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

Real estate taxes decreased $50.5 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $53.8 million decrease in real estate taxes during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

Other property operating costs decreased $80.1 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $77.9 million decrease in other property operating costs during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

The provision for impairment during the nine months ended September 30, 2019 is related to the impairment charges recorded on two operating properties and the provision for impairment during the nine months ended September 30, 2018 is related to impairment charges recorded on one operating property (Note 2).

Depreciation and amortization decreased $158.0 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $159.1 million decrease in depreciation and amortization during the first nine months of 2019 compared to the first nine months of 2018.

Interest expense increased $71.2 million, primarily due to a $201.5 million increase in interest expense on the new credit agreement entered into during the third quarter of 2018 (Note 6). This was partially offset by the joint ventures formed in conjunction with

the BPY Transaction in the third quarter of 2018. The formation of the joint ventures resulted in a $134.5 million decrease in interest expense during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

The gain from changes in control of investment properties and other of $39.7$105.4 million during the nine months ended September 30, 20192020 is primarily related to the acquisitionimpairment charges on three operating properties (Note 5) and a loss of the remaining interest in 730 Fifth Ave (Note 3). Therevenues.

Unconsolidated Real Estate Affiliates - gain from changes in control ofon investment properties and other of $2.9 billion during the nine months ended September 30, 2018 is due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018, the sale of an anchor box at The Oaks Mall, the sale of the commercial office unit at 685 Fifth Avenue, and the sale of 49.9% joint venture interest in the Sears Box at Oakbrook Center (Note 3).

The loss on extinguishment of debt during the nine months ended September 30, 2019 is due to a pre-payment penalty related to the refinance at one property (Note 6).

Benefit from income taxes of $6.1 million during the nine months ended September 30, 20192020 is primarily due to the recognitionsales of deferred taxes related to certain transactions effectuatedremaining interests in the BPY Transaction.

Equity in income of unconsolidated real estate affiliates decreased $58.8 million, primarily due to a decrease in income recognition on condominiums.

ABG and Aero OpCo LLC (Note 3). The unconsolidated real estate affiliatesUnconsolidated Real Estate Affiliates - gain on investment during the nine months ended September 30, 2019 relates to the sale of our 12.0% interest in Bayside Marketplace and the 49.3% sale of our interest in ABG (Note 3). The unconsolidated real estate affiliates - gain on investment during the nine months ended September 30, 2018 is due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018 and the sale of a portion of our interest in Aeropostale (Note 3).

52


Liquidity and Capital Resources

Our primary source of cash is from the ownership and management of our properties and strategic dispositions. In addition, we will also use financings as a source of capital. We may generate cash from refinancings or borrowings under our revolving credit facility.facility (the "Facility"). Our primary uses of cash include payment of operating expenses, debt service, reinvestment in and redevelopment of properties, tenant allowances, dividends, share repurchases and strategic acquisitions.
 
We anticipate maintaining financial flexibility by managing our future maturities and amortization of debt. We believe that we currently have sufficient liquidity to satisfy all of our commitments in the form of $189.2$173.3 million of consolidated unrestricted cash and $1.2 billion$580.0 million of available creditcapacity under our revolving credit facility as of September 30, 2019,2020, as well as anticipated cash provided by operations.

Our key financing objectives include:

to obtain property-secured debt with laddered maturities; and
to minimize the amount of debt that is cross-collateralized and/or recourse to us.

We may raise capital through public or private issuances of debt securities, preferred stock, Class A Stock, Common Units of BPROP, share repurchasesBPR OP, LP ("BPROP"), or other capital raising activities. In addition, we or our affiliates may repurchase our shares or corporate debt and bonds.

The future impact of the global economic shutdown on our level of liquidity is uncertain at this time. Measures undertaken by governments and companies in our principal markets have resulted in the temporary closure of many of our operating assets with the vast majority of the assets now open. The duration of such measures may impact our ability to collect rental income in our retail assets. The longer-term impact of the shutdown and resulting economic downturn could reduce demand for retail space.

Consequently, we are reviewing, and where appropriate adjusting, our current capital expenditure and financing assumptions on existing and future projects to reflect any potential shorter- and longer-term impact of the shutdown.

We are also reviewing contractual arrangements with our tenants to assess the rights and responsibilities of the Company and our tenants in response to the impact of the measures undertaken by governments and/or tenants. Potential responses may include, but are not limited to, extension of payment terms from tenants, adjustments to the duration of leases, payment holidays, and renegotiation of lease terms.

We expect to be able to refinance the majority of debt obligations maturing in the near term or to exercise contractual extension options thereon, although there is no guarantee we will be able to do so. In certain instances, we plan to seek certain modifications to mortgages, including lease restructuring approvals and technical default waivers, and potentially interest deferrals.

In addition, certain debt obligations are subject to financial covenants. As a result, in the shorter-term, the shutdown may negatively impact our ability to meet such covenants. We are reviewing the financial covenants of each debt instrument and, where applicable, working with our lenders to address debt instruments which may potentially approach or breach covenant limits. Such adjustments may include, but are not limited to, adjustment to the covenant limits, interest payment holidays, and temporary suspension of covenant testing.

In order to maintain financial flexibility, we maintain capacity under our Facility. As at September 30, 2020, the available capacity under such credit facility was $580.0 million. We believe we will be able to continue to borrow funds on the Facility when and as required.

The Company entered into a new credit agreement (the "Agreement""Credit Agreement") dated as of August 24, 2018 consisting of a revolving credit facility (the "Facility"),the Facility, Term A-1 and A-2 loans, and a Term B loan. The Facility provides for revolving loans of up to $1.5 billion and borrowings bear interest at a rate equal to LIBOR plus 225 basis points.2.25%. The Facility is scheduled to mature in August 2022 and had outstanding borrowings of $315.0$920.0 million as of September 30, 2019.2020. The Term A-1 Loan has a total commitment outstanding of $900.0 million, with $700.0 million attributable to BPRBPYU and $200.0 million attributable to an affiliate, and is scheduled to mature in August 2021, bearing interest at a rate equal to LIBOR plus 225 basis points.2.25%. During the quarter ended September 30, 2020, the Company didn't make principal payments, and the remaining outstanding balance was $34.8 million. The Term A-2 Loan has a total commitment outstanding of $2.0 billion and is scheduled to mature in August 2023, bearing interest at a rate equal to LIBOR plus 225 basis points.2.25%, and the outstanding balance at September 30, 2020 was $2.0 billion. The Term B Loan has a total commitment outstanding of $2.0 billion and is scheduled to mature in August 2025 bearing interest at a rate equal to LIBOR plus 250 basis points.2.50 %. During the quarter ended September 30, 2020, the Company made a principal payment in the total amount of
53


$5.0 million. The total outstanding balance of the Term B Loan as of September 30, 2020 was $1,955.0 million. The Term A-1, A-2, and B Loans are contractually obligated to be prepaid through net proceeds from property level refinances and asset sales as outlined in the Credit Agreement.

The Credit Agreement contains certain restrictive covenants which limit material changes in the nature of our business conducted, including, but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required not to exceedmaintain compliance with certain financial covenants related to a maximum net debt-to-value ratio and a minimum fixed-charge-coverage ratio, as defined in the Credit Agreement.

On July 29, 2020, the Company entered into the First Amendment of its Credit Agreement in order to give effect to certain amendments, including, but not limited to the following:

The lenders have agreed to certain covenant relief in respect of the financial covenants through the fiscal quarter ending June 30, 2021 (the “Covenant Relief Period”). The maximum total indebtedness to value ratio financial maintenance covenant is being eliminated permanently. The minimum fixed charge coverage ratio. ratio is being reduced to 1.20x during the Covenant Relief Period and increasing to 1.35x thereafter.

The applicable margin for the Term A Loans and the Facility will be LIBOR plus 3.00% during the Covenant Relief Period – and thereafter, will be LIBOR plus 3.00% if the total net indebtedness to value ratio is greater than 70%.

The Company agreed to maintain an ongoing liquidity covenant (set at $500 million) which will be tested as of the last day of each month against the amount of unrestricted cash, undrawn available amounts under the Facility and undrawn amounts under the new Brookfield Liquidity Facility. The Company will enter into and maintain a $500 million Brookfield Liquidity Facility (the “Brookfield Liquidity Facility”) and prior to the date the Company demonstrates compliance with the financial covenants in effect under the Credit Agreement prior to the First Amendment, any interest and principal payments thereunder must be paid-in-kind.

The Company will be required to "match-fund" drawings under the Facility in excess of $1.0 billion using proceeds of either the Brookfield Liquidity Facility or issuances of qualified equity interests. The match-funding requirement will be required to be made (i) monthly, whereby any drawing during that month is in excess of the prior highest balance of the revolver (in excess of $1.0 billion), (ii) within 10 business days of a request from the agent if as of any day during a month, the excess draw amount would exceed $10 million and (iii) at any time of request for a revolving loan that the excess would be $100 million or greater (which would be match-funded substantially concurrently with the requested revolving loan draw).

The Company will also be required to make additional prepayments of the Term A loans with proceeds of certain equity, debt issuances and asset sales.

The Company also agreed to a number of additional restrictions, including restrictions on incurring additional indebtedness, making of certain restricted payments and the use of proceeds under the revolving facility, which will apply either through the end of the Covenant Relief Period – and in the case of certain provisions, until the Company demonstrates compliance with the financial covenants in effect under the Credit Agreement prior to the First Amendment.

As of September 30, 2019,2020, we are not aware of any instances of non-compliance with such covenants. Though there is potential for a risk of default (See Note 17 for discussion specific to COVID-19), in the event the Company fails to maintain compliance with its financial covenants, the Credit Agreement provides for a cure period, during which the Company has the opportunity to raise additional cash and reduce net debt balance, such as through capital contributions from BPY, or disposition of assets. Management has determined that in the event of a default, it is probable that these market-based alternatives would be available, and that these actions would provide the necessary cash flows to prevent or cure an event of default, although there is no guarantee that these market-based alternatives would be available.


On May 24, 2020, the Company executed a series of transactions to repurchase corporate debt on the open market, funded by intercompany loans from BPY. The total amounts of debt repurchased had a par value of $59.6 million, and a cash repurchase price of $45.3 million. Following each repurchase, the repurchased debt was formally cancelled. As a result of the debt repurchase and cancellation, the Company recognized a gain of $14.3 million included in gain on extinguishment of debt on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2020.

54


During the yearnine months ended December 31, 2018, we refinanced aSeptember 30, 2020, the Company suspended equity contributions to make contractual interest and/or principal payments on eighteen consolidated and unconsolidated property level mortgages, including one mortgage note at 685 Fifth Avenue.that is in maturity default. The prior $340.0 million variable-rate consolidated mortgage note matured on July 1, 2018 and had an interest rate of LIBOR plus 2.75%. In connectionCompany is currently engaging in negotiations with the refinancing, $100.0 million remained relatedcreditors on these mortgages to obtain potential lender concessions or other relief. If the Company is unsuccessful in obtaining concessions from these creditors, it is possible that the property securing these loans would be transferred to the commercial office unit and a new $275.0 million fixed-rate consolidated mortgage note with a term-to-maturity of 10.0 years and an interest rate of 4.53% was obtained onlenders. In such circumstances, the retail unit. The $100.0 million was paid down in full in conjunction with the salecarrying value of the commercial office unit on July 13, 2018. In addition, we refinanced mortgage notes totaling $1.1 billion at nine properties. The prior loans totaling $1.2 billion had a weighted-average interest rate of 4.89%. The new loansproperty may no longer be recoverable and may trigger an impairment charge. These mortgages are non-recourse and the creditors do not have a weighted-average term-to-maturity of 5.1 years and a weighted-average interest rate of 5.21%. We also obtained new mortgage notes totaling $416.2 million at six properties with a weighted-average term-to-maturity of 4.6 years and a weighted-average interest rate of 4.72%.

On September 6, 2019,security claims against the Company closed a new loan at Park City Center inaside from the amountcollateral property. In total, as of $135.0 million with an interest rate of LIBOR plus 3.00% which matures on September 9, 2021. This loan replaced the previous debt of $172.2 million that matured June 6, 2019 and included a pay down of the existing mezzanine loan in the amount of $36.8 million. For the period between the maturity date of the previous debt and the effective date of the new loan, the company extended forbearance and paid forbearance fees in total amount of $450.4 thousand.

On August 26, 2019,30, 2020, the Company closed a new loanhas suspended equity contributions to make contractual interest and/or principal payments on 730 Fifth Avenue in the amount of $807.5 million with a 5-year loan at LIBOR plus 3.53% which matures on September 1, 2024. This loan replaced the previous debt of $720.0 million that was previously extended to August 27, 2019 and included a pay down of $180.0 million on June 28, 2019.

On July 10, 2019, the Company closed a new loan on Westlake Center in the amount of $48.8 million with a 2-year floating rate at LIBOR plus 2.50% which matures on July 10, 2021. This loan replaced the previous debt of $42.5 million that matured July 10, 2019. The previous debt has been extinguished.

On July 5, 2019, the Company closed on new loans on The Woodlands Mall for a total of $465.0 million, which consists$1.8 billion of $425.0 million with an interest rate of 4.25%property level mortgages and $40.0 million with an interest rate of 5.50%. The loanthe related Investment in Real Estate securing these loans has a weighted average interest ratecarrying value of 4.36% which matures on August 1, 2029. The loan replaced the previous debt of $294.0 million on the property that had a weighted average interest rate of 4.83% and was scheduled to mature on June 10, 2023. In accordance with the previous debt agreement, the Company incurred a prepayment penalty of $27.5 million which is recorded as loss on extinguishment of debt.$1.9 billion.

On July 1, 2019, the Company closed on a one-year extension on 830 North Michigan Ave in the amount of $78.0 million at LIBOR plus 1.60% which matures on July 1, 2020. This loan replaces the previous debt of $85.0 million that matured on July 1, 2019 and includes principal repayment of $7.0 million made in conjunction with the extension.

On June 3, 2019, the Company closed a new loan on the Grand Canal Shoppes in the amount of $975.0 million with a 10-year fixed interest rate of 4.29%, which matures on July 2, 2029. This loan replaced the previous debt of $625.0 million on the property that matured on June 3, 2019.

On April 25, 2019,24, 2020, the Company obtainedcompleted a one-year extension of a $1.3 billion loan secured by cross-collateralized mortgages on 15 properties with an interest rate of LIBOR plus 1.75%. A principal repayment, which matures on April 25, 2021. An extension fee of $10.1$1.6 million was madepaid in conjunction with the extension.

On April 9, 2019,February 28, 2020, the Company closed a new loan on three properties includedat the Miami Design District joint venture in the BPR-FF JV LLC joint venture.amount of $500.0 million with an interest rate of 4.13%, which matures on March 1, 2030. The three properties are Coronado Center, Governor's Square and Lynnhaven Mall. These properties were previously encumbered by $462.0loan replaced the previous debt of $480.0 million of third-party debt which was replaced by a $515.0 million loan with an interest rate of LIBOR plus 340 basis points, maturing May 1, 2024. The new loan2.50% that was recorded as an extinguishment of the previous loans and allocation of the new debt to the three properties.

On May 1, 2019, the Company and BPR Cumulus LLC, BPR Nimbus LLC and GGSI Sellco LLC (each, an indirect subsidiary of the Company) issued $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2026. The notes bear interest at an annual rate of 5.75% payable on May 15 and November 15 of each year, beginning on November 15, 2019 and will mature on May 15, 2026.

On March 25, 2019, the Company secured a $341.8 million subordinated unsecured note with Brookfield BPY Holdings Inc., a related party. The note bears interest at a rate equal to LIBOR plus 2.75% and is scheduled to mature on March 25, 2029. DuringMay 14, 2021. As a result of the quarter ended September 30, 2019,refinancing, the Company made a principal paymentjoint venture incurred $3.7 million of $115.6 million in addition to the principal payment of $200.1 million made in the second quarter of 2019. The balance at September 30, 2019 was $26.1 million. The Companydeferred financing costs that were capitalized.

borrowed an additional $70.5 million during the second quarter of 2019, with a maturity date of June 25, 2029. The balance at September 30, 2019 was $70.5 million.

As of September 30, 2019,2020, we had $6.8$8.2 billion of debt pre-payable at our proportionate share without penalty. We may pursue opportunities to refinance this debt at lower interest rates and longer maturities.

As of September 30, 2019,2020, our proportionate share of total debt aggregated $22.2$27.0 billion. Our total debt includes our consolidated debt of $14.5$16.5 billion and our share of unconsolidated real estate affiliates debt of $7.7$10.4 billion. Of our proportionate share of total debt, $4.8$6.8 billion is recourse to the Company or its subsidiaries (including the Facility) due to guarantees or other security provisions for the benefit of the note holder.
 
The amount of debt due in the next three years represents 26.0%30.2% of our total debt at maturity. The maximum amount due in any one of the next ten years is no more than $4.0$3.7 billion at our proportionate share or approximately of 18.7%13.7% our total debt at maturity.

The following table illustrates the scheduled payments for our proportionate share of total debt as of September 30, 2019.2020. The $206.2 million of junior subordinated notes are due in 2036, but we may redeem them any time after April 30, 2011 (Note 6). As we do not expect to redeem the notes prior to maturity, they are included in the consolidated debt maturing subsequent to 2023.2025.
 Consolidated Unconsolidated
 (Dollars in thousands)
2019$
 $303,898
2020773,501
 901,732
2021 (1)2,817,677
 755,451
20221,370,585
 1,373,827
2023 (2)2,933,024
 1,181,407
Subsequent (3)6,618,616
 3,210,922
Total$14,513,403
 $7,727,237
 ConsolidatedUnconsolidated
 (Dollars in thousands)
Remainder of 2020$532,539 $278,541 
2021(1)2,926,152 1,103,845 
20222,039,508 1,266,138 
2023(2)2,826,245 918,490 
20242,203,411 1,580,310 
2025(3)3,200,001 500,927 
Subsequent2,808,473 4,777,473 
Total$16,536,329 $10,425,724 
(1)
(1)    Includes the Term A-1 Loan (Note 6).
(2)    Includes the Term A-2 Loan (Note 6).
(3)    Includes the Term B Loan (Note 6).

We believe we will be able to extend the maturity date, repay under our available line of credit or refinance the Term A-1 Loan (Note 6).
(2)Includes the Term A-2 Loan (Note 6).
(3)Includes the Term B Loan (Note 6).

As of September 30, 2019, we do not have any consolidated debt that is scheduled to mature in 2019.2020. We also believe that the joint ventures will be able to refinance the debt of our unconsolidated real estate affiliates upon maturity; however, there can be no assurance that we will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.
55



Reserves

With respect to our consolidated properties, for the three and nine months ended September 30, 2020, we have recorded $36.9 million and $59.8 million, respectively, associated with potentially uncollectible revenues, which includes $2.4 million and $7.4 million, respectively, for straight-line rent receivables. With respect to our Unconsolidated Real Estate Affiliates, for the three and nine months ended September 30, 2020, our Unconsolidated Real Estate Affiliates have recorded $47.4 million and $81.0 million, respectively, associated with potentially uncollectible revenues, which includes $3.0 million and $10.1 million, respectively, for straight-line rent receivables. Of these amounts for the three and nine months ended September 30, 2020, our share totaled $24.9 million and $40.1 million, respectively, which includes $1.5 million and $4.8 million, respectively, for straight-line rent receivables.

As of September 30, 2020, the Company, including consideration of our share of Unconsolidated Real Estate Affiliates, has collected approximately 65% of third quarter rents, and collections continue to increase subsequent to quarter end. While working to preserve our profitability and cash flow, we are also working with our tenants regarding requests for lease concessions and other forms of assistance, although we have not executed a significant number of agreements. While we anticipate that we may grant further rent concessions, such as the deferral or abatement of lease payments, such rent concession requests are evaluated on a case-by-case basis. Not all requests for rent relief will be granted as the Company does not intend to forgo its legally enforceable contractual rights that exist under its lease agreements.

Acquisitions and Joint Venture Activity

From time-to-time we may acquire whole or partial interests in high-quality retail properties or make strategic dispositions. Refer to Note 3 for more information.


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Developments and Redevelopments
 
We are currently redeveloping several consolidated and unconsolidated properties primarily to improve the productivity and value of the property, convert large-scale anchor boxes into smaller leasable areas and to create new in-line retail space and new restaurant venues. The execution of these redevelopment projects within our portfolio was identified as providing compelling risk-adjusted returns on investment.

We have development and redevelopment activities totaling approximately $525.0$445.0 million under construction and $556.0$365.0 million in the pipeline. We continue to evaluate a number of other redevelopment projects to further enhance the quality of our assets. Expected returns are based on the completion of current and future redevelopment projects, and the success of the leasing and asset management plans in place for each project. Expected returns are subject to a number of variables, risks, and uncertainties including those disclosed within Part II, Item 1A of this Quarterly Report and those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 (our "Annual Report").Report. We also refer the reader to our disclosure related to forward-looking statements, below. The following table illustrates our planned redevelopments:

Stabilized
Year
Proportionate Cost (1)
PropertyLocationDescription Total To-Date
Major Development Summary (in millions, at share unless otherwise noted)
Active redevelopments
Tysons GalleriaMcLean, VAMacy's Redevelopment for theater and multi level small shop expansion2023$111 $28 
AlderwoodLynnwood, WASears Redevelopment - Residential202213 
Stonestown GalleriaSan Francisco, CAAnchor Redevelopment for Retail and Entertainment2022149 99 
Other ProjectsVarious2020-2023172 61 
Active developments/redevelopments$445 $191 
In planning
Oxmoor CenterLouisville, KYSears Redevelopment for Entertainment and Restaurants2024$30 $
CumberlandAtlanta, GAResidential202419 — 
NorthridgeNorthridge, CAResidential202550 — 
Ala MoanaHonolulu, HIResidential Tower2025157 
Other ProjectsVarious2021-2025109 16 
In planning$365 $18 
Total retail developments$810 $209 
   Stabilized
Year
Proportionate Cost (1)
PropertyLocationDescription Total To-Date
Major Development Summary (in millions, at share unless otherwise noted)
Active redevelopments    
      
AlderwoodLynnwood, WASears - Residential202212

Northbrook CourtNorthbrook, ILMacy's Redevelopment (Retail)202250
2
Stonestown GalleriaSan Francisco, CAAnchor Redevelopment for Retail and Entertainment2022149
27
Tysons GalleriaMcLean, VAMacy's Redevelopment2021108
4
Other ProjectsVarious 2020-2022116
24
Active developments/redevelopments $435
$57
In planning    
      
Ala MoanaHonolulu, HIResidential Tower2025153

CumberlandAtlanta, GAResidential202419

North PointAlpharetta, GASears Redevelopment - Residential202262

Northbrook CourtNorthbrook, ILResidential202250

NorthridgeNorthridge, CAResidential - Phase #1202548

Oxmoor CenterLouisville, KYSears Redevelopment (both Phases + Restaurant Pads)202230
1
Shops at Merrick ParkCoral Gables, FLHotel202332

Other ProjectsVarious 2021-2025162
2
In planning  $556
$3
Total retail developments  $991
$60
(1)Costs are at BPR's ownership share post August 28, 2018, with closing of new joint venture partnerships.
(1)     Costs are at BPYU's ownership share post August 28, 2018, with closing of new joint venture partnerships.

Our investment in these projects for the nine months ended September 30, 20192020 increased from December 31, 20182019 in conjunction with the applicable development plan and as projects near completion. The continued progression of redevelopment projects resulted in increases to our investment to date. Prior to the COVID-19 pandemic, our current projects were generally progressing in accordance with their timeline and budget. The impact of the pandemic and associated restrictions that have been put in place by local governments may cause delays in construction and may impact our ability to progress pre-leasing efforts.


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Capital Expenditures, Capitalized Interest and Overhead (at share)

The following table illustrates our capital expenditures, capitalized interest, and initial direct costs associated with leasing and development, which primarily relate to ordinary capital projects at our operating properties. In addition, we incurred tenant allowances and capitalized leasing costs for our operating properties as outlined below. Capitalized interest is based upon qualified expenditures and interest rates; capitalized leasing and development costs are initial direct costs as incremental costs of a lease that would not have been incurred if the lease had not been obtained. These costs are amortized over lives which are consistent with the related asset.
 Nine Months Ended September 30,
 20202019
 (Dollars in thousands)
Operating capital expenditures (1)$93,606 $122,537 
Tenant allowances and capitalized leasing costs (2)59,598 149,234 
Capitalized interest and capitalized overhead16,149 17,848 
Total$169,353 $289,619 
  Nine Months Ended September 30,
  2019 2018
  (Dollars in thousands)
Operating capital expenditures (1) $122,537
 $107,488
Tenant allowances and capitalized leasing costs (2) 149,234
 146,785
Capitalized interest and capitalized overhead 17,848
 52,852
Total $289,619
 $307,125
(1)Reflects only non-tenant operating capital expenditures.
(2)Tenant allowances paid on 6.4 million square feet.


(1)Reflects only non-tenant operating capital expenditures.
(2)Tenant allowances paid on 3.5 million square feet.

Class A Stock Dividend


Our Board of Directors declared Class A Stock dividends during 2020 and 2019 as follows:
Declaration DateRecord DatePayment DateDividend Per Share
2020
November 5November 30December 31$0.3325 
August 5August 31September 300.3325 
May 7May 29June 300.3325 
February 5February 28March 310.3325 
2019
November 4November 29December 31$0.3300 
August 1August 30September 300.3300 
May 6May 31June 280.3300 
February 6February 28March 290.3300 
Declaration Date Record Date Payment Date Dividend Per Share
2019      
November 4 November 29 December 31 $0.330
August 1 August 30 September 30 0.330
May 6 May 31 June 28 0.330
February 6 February 28 March 29 0.330
2018      
October 31 November 30 December 31 $0.315
August 28 August 31 September 28 0.315

Class B Stock Dividend

Our Board of Directors did not declare dividends on Class B-1 Stock, Class B-2 Stock, or Series B Preferred Stock during the nine months ended September 30, 2020. Our Board of Directors declared dividends on the Class B-1 Stock, Class B-2 Stock and the Series B Preferred Stockthese classes of stock during 2019 as follows:

Class B-1 Stock Dividends
Declaration DateRecord DatePayment DateAverage Dividend Per Share
2019
November 4December 25December 25$0.110 
Declaration Date Record Date Payment Date Average Dividend Per Share
2019      
November 4 December 25 December 25 $0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11$0.11 per share of the Class B-1 Stock.

Class B-2 Stock Dividends
Declaration DateRecord DatePayment DateAverage Dividend Per Share
2019
November 4December 25December 25$0.110 
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Declaration Date Record Date Payment Date Average Dividend Per Share
2019      
November 4 December 25 December 25 $0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11$0.11 per share of the Class B-2 Stock.

Combined Class B stockStock and Series B Preferred Stock (Prior to Restated Charter)
Declaration DateRecord DatePayment DateAverage Dividend Per Share
2019
May 25June 25June 25$0.397 
March 25March 27March 271.015 
Declaration Date Record Date Payment Date Average Dividend Per Share
2019      
May 25 June 25 June 25 $0.397
March 25 March 27 March 27 1.015

A dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from the date of issue to March 31, 2019 at the rate of 7.5% per annum payable on March 27, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on March 27, 2019 for a combined distribution total of approximately $467.3 million.

In the quarter ended June 30, 2019, a dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from March 31, 2019 to June 25, 2019 at the rate of 7.5% per annum payable on June 25, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on June 25, 2019 for a combined distribution total of approximately$183.8approximately $183.8 million.



Common Stock Dividends

GGP's Board of Directors declared common stock dividends during 2018 as follows:
Declaration Date (1) Record Date Payment Date Dividend Per Share
2018      
May 3 July 13 July 31 $0.22
February 7 April 13 April 30 0.22
(1)     Excludes the Pre-Closing Dividend (Note 1).

Preferred Stock Dividends

On February 13, 2013, GGP issued, under a public offering, 10,000,000 shares of 6.375% Series A Cumulative Stock at a price of $25.00 per share. In connection with the BPY Transaction, each share was converted into one share of 6.375% Series A Preferred Stock. Our Board of Directors declared preferred stock dividends during 20192020 and 20182019 as follows:
Declaration DateRecord DatePayment DateDividend Per Share
2020
November 5December 15, 2020January 1, 2021$0.3984 
August 5September 15, 2020October 1, 20200.3984 
May 7June 15, 2020July 1, 20200.3984 
February 5March 15, 2020April 1, 20200.3984 
2019
November 4December 13, 2019January 1, 2020$0.3984 
August 1September 13, 2019October 1, 20190.3984 
May 6June 14, 2019July 1, 20190.3984 
February 6March 15, 2019April 1, 20190.3984 
Declaration Date Record Date Payment Date Dividend Per Share
2019      
November 4 December 13 January 1 $0.3984
August 1 September 13 October 1 0.3984
May 6 June 14 July 1 0.3984
February 6 March 15 April 1 0.3984
2018      
November 1 December 14 January 1 $0.3984
July 31 September 17 October 1 0.3984
May 3 June 15 July 2 0.3984
February 7 March 15 April 2 0.3984

Summary of Cash Flows

Cash Flows from Operating Activities

Net cash (used in) provided by operating activities was $(93.7) million for the nine months ended September 30, 2020 and $252.2 million for the nine months ended September 30, 2019. Significant components of net cash (used in) provided by operating activities include:

in 2020, equity in loss of Unconsolidated Real Estate Affiliates of $105.4 million;
in 2020, depreciation and amortization of $485.4 million;
in 2020, unconsolidated real estate affiliates - loss on investment, net of $(10.9) million;
in 2020, loss from changes in control of investment properties and other, net of $15.4 million;
in 2020, provision for impairment of $71.5 million;
in 2020, gain on extinguishment of debt of $(14.3) million;
in 2020, accounts and notes receivable, net of $(364.6) million;
in 2020, prepaid expenses and other assets of $(27.6) million;
in 2020, account payable and accrued expenses of $53.7 million;
in 2019, depreciation and $488.2amortization of $357.4 million;
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in 2019, unconsolidated real estate affiliates - loss on investment, net of $(138.0) million;
in 2019, provision for impairment of $223.1 million; and
in 2019, account payable and accrued expenses of $(39.9) million.

Cash Flows from Investing Activities

Net cash (used in) investing activities was $(182.9) million for the nine months ended September 30, 2018. Significant changes in the components of net cash provided by operating activities include:

in 2019, a decrease of cash inflows was primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018 (Note 3);
in 2019, gain from changes of investment properties2020 and other, net of $(39.7) million; and
in 2018, gain from changes of investment properties and other, net of $(2.9) billion.

Cash Flows from Investing Activities

Net cash (used in) provided by investing activities was $(396.0) million for the nine months ended September 30, 2019 and $2.6 billion for the nine months ended September 30, 2018.2019. Significant components of net cash used in(used in) investing activities include:
 
in 2020, development of real estate and property improvements of $(219.7) million;
in 2020, proceeds from sales of investment properties and unconsolidated real estate affiliates of $84.5 million;
in 2020, contributions to unconsolidated real estate affiliates of $(75.2) million;
in 2020, distributions received from unconsolidated real estate affiliates in excess of income of $29.7 million;
in 2019, development of real estate and property improvements of $(381.8) million;
in 2019, proceeds from repayment of loans to joint venture partners of $18.0 million;
in 2019, contributions to unconsolidated real estate affiliates of $(208.3) million;
in 2019, distributions received from unconsolidated real estate affiliates in excess of income of $269.5 million;
in 2019, loans to affiliates of $(330.0) million;
in 2019, proceeds from loan to affiliates of $330.0 million; and
in 2019, loans to joint venture and joint venture partners of $(97.5) million;million.
in 2019, proceeds from loan to affiliates of $330.0 million;
in 2019, loans to affiliates of
$(330.0) million;
in 2018, development of real estate and property improvements of $(587.4) million;
in 2018, proceeds from repayment of loans to joint venture partners of $82.0 million;

in 2018, contributions to unconsolidated real estate affiliates of $(102.1) million; and
in 2018, distributions received from unconsolidated real estate affiliates in excess of income of $343.0 million; and
in 2018, proceeds from sales of investment properties and unconsolidated real estate affiliates of $2.9 billion.

Cash Flows from Financing Activities

Net cash provided by (used in) financing activities was $267.9 million for the nine months ended September 30, 2020 and $82.2 million for the nine months ended September 30, 2019 and $(3.0) billion for the nine months ended September 30, 2018.2019. Significant components of net cash provided by (used in) financing activities include:

in 2020, proceeds from the refinancing or issuance of mortgages, notes and loans payable of $811.1 million;
in 2020, principal payments on mortgages, notes, and loans payable of $(751.2) million;
in 2020, buyback of Class A Stock of $(133.6) million;
in 2020, issuance of Class B Stock of $414.3 million;
in 2020, series K preferred units redemptions of $(28.3) million;
in 2020, payment received on note receivable of $31.7 million;
in 2020, cash distributions paid to stockholders of $(54.9) million;
in 2019, proceeds from the refinancing or issuance of mortgages, notes and loans payable of $4.7 billion, which includes a $1 billion bonds issuance;
in 2019, principal payments on mortgages, notes, and loans payable of $(3.4) billion;
in 2019, buyback of Class A Stock of $(114.9) million;
in 2019, buyback of Class B-1 Stock of $(224.5) million;
in 2019, cash distributions to noncontrolling interests in consolidated real estate affiliates of $(67.0) million; and
in 2019, cash distributions to noncontrolling interests in consolidated real estate affiliates of $(67.0) million
in 2019, cash distributions paid to stockholders of $(738.0) million;million.
in 2018, proceeds from the refinancing or issuance of mortgages, notes and loans payable of $6.6 billion;
in 2018, principal payments on mortgages, notes, and loans payable of $(1.2) billion;
in 2018, cash contributions from noncontrolling interests in consolidated real estate affiliates of $1.5 billion; and
in 2018, cash distributions paid to common stockholders of $(9.8) billion.

Seasonality

Although we have a year-long temporary leasing program, occupancies for short-term tenants and, therefore, rental income recognized, are higher during the fourth quarter of the year. In addition, the majority of our tenants have December or January lease years for purposes of calculating annual overage rent amounts. Accordingly, overage rent thresholds are most commonly achieved in the fourth quarter. As a result, revenue production is generally highest in the fourth quarter of each year.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated interim financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the preparation of the consolidated financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making
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judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A disclosure of our critical accounting policies which affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements is included in our Annual Report in Management's Discussion and Analysis of Financial Condition and Results of Operations.

For the nine months ended September 30, 2019,2020, there were no significant changes to these policies, except for the policies related to the adoptionapplication of lease modification guidance in Accounting Standards Update ("ASU") 2016-02, Leases ("ASC 842", "Topic 842", or "the new leasing standard") as a result of January 1, 2019the COVID-19 pandemic as described in Note 2 and below.

LeasesTopic 842 - Lease Modification Q&A

Effective January 1, 2019, we adoptedDue to the requirementsbusiness disruptions and challenges severely affecting the global economy caused by the global economic shutdown, lessors may provide rent deferrals and other lease concessions to lessees. In April 2020, the Financial Accounting Standards Board staff issued a question and answer document (the "Lease Modification Q&A") focused on the application of lease accounting guidance to lease concessions provided as a result of the newshutdown. Under existing lease guidance, economic relief that is agreed to or negotiated outside of the original lease agreement is typically considered a lease modification, in which case both the lessee and lessor would be required lessees to recognizeapply the respective modification frameworks. However, if the lessee was entitled to the economic relief because of either contractual or legal rights, the relief would be accounted for outside of the modification framework. Although the original lease modification guidance in Accounting Standards Codification (“ASC”) 842, Leases remain appropriate to address routine lease modifications, the Lease Modification Q&A established a liabilitydifferent framework to makeaccount for certain lease payments and a right-of-use asset, initially measured atconcessions granted in response to the present value of lease payments, for both operating and finance leases. For leases with a term of 12 months or less, lessees were permittedshutdown. The Lease Modification Q&A allows the Company, if certain criteria have been met, to make an accounting policy election by class of underlying asset to not recognizeaccount for COVID-19 related lease liabilities andconcessions as either a lease assets. The guidance allowed lessors and lessees to make an accounting policy election, by class of underlying asset, to not separate non-lease components from lease components. The guidance also provided an optional transition method which allowed entities to initially apply the new guidance in the period of adoption, recognizingmodification or a cumulative-effectnegative variable adjustment to the opening balance of retained earnings, if necessary. rental revenue. Such election is required to be applied consistently to leases with similar characteristics and similar circumstances.

The Company has elected to apply such relief and will avail itself of the alternative transition method and no cumulative-effect adjustmentelection to treat leases as lease modifications, thereby avoiding performing a lease by lease analysis for the lease concessions that were (1) granted as relief due to the opening balance of retained earnings was deemed necessary to record.shutdown and (2) result in the cash flows remaining substantially the same or less than the original contract.


Refer also to the accounting policies discussed in Note 2.

REIT Requirements

In order to remain qualified as a REIT for Federal income tax purposes, we must distribute at least 90% of our taxable ordinary income to stockholders. We are also subject to federal income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. See Note 8 to the Consolidated Financial Statements for more detail on our ability to remain qualified as a REIT.

Recently Issued Accounting Pronouncements

Refer to Note 2 of the Consolidated Financial Statements for recently issued accounting pronouncements.

Non-GAAP Supplemental Financial Measures and Definitions

Proportionate or At Share Basis

The following non-GAAP supplemental financial measures are all presented on a proportionate basis. The proportionate financial information presents the consolidated and unconsolidated properties at the Company's ownership percentage or "at share". This form of presentation offers insights into the financial performance and condition of the Company as a whole, given the significance of the Company's unconsolidated property operations that are owned through investments accounted for under GAAP using the equity method.

The proportionate financial information is not, and is not intended to be, a presentation in accordance with GAAP. The non-GAAP proportionate financial information reflects our proportionate economic ownership of each asset in our property portfolio that we do not wholly own. The amounts in the column labeled "Noncontrolling Interests" were derived on a property-by-property basis by including the share attributable to noncontrolling interests in each line item from each individual property. The Company does not have legal claim to the noncontrolling interest of assets, liabilities, revenue, and expenses. The amount of cash each noncontrolling interest receives is based on the specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions. The amounts in the column labeled "Unconsolidated Properties" were derived on a property-by-property basis by including our share of each line item from each individual entity. This provides visibility into our share of the operations of our joint ventures.

We do not control the unconsolidated joint ventures and the presentations of the assets and liabilities and revenues and expenses do not represent our legal claim to such items. The operating agreements of the unconsolidated joint ventures generally provide that partners may receive cash distributions (1) to the extent there is available cash from operations, (2) upon a capital event, such as a refinancing or sale or (3) upon liquidation of the venture. The amount of cash each partner receives is based upon specific provisions of each operating agreement and varies depending on factors including the amount of capital contributed by each partner and whether any contributions are entitled to priority distributions. Upon liquidation of the joint venture and after all liabilities, priority distributions and initial equity contributions have been repaid, the partners generally would be entitled to any residual cash remaining based on their respective legal ownership percentages.

We provide non-GAAP proportionate financial information because we believe it assists investors and analysts in estimating our economic interest in our unconsolidated joint ventures when read in conjunction with the Company's reported results under GAAP. Other companies in our industry may calculate their proportionate interest differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the non-GAAP proportionate financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.

Funds From Operations ("FFO")

The Company determines FFO based upon the definition set forth by Nareit. The Company determines FFO to be its share of consolidated net income (loss) attributable to Brookfield Property REIT Inc.BPYU computed in accordance with GAAP, adjusted for real estate related depreciation and amortization, amortization of above and below market rent on ground leases, excluding gains and losses from extraordinary items, excluding cumulative effects of accounting changes, excluding gains and losses from the sales of, or any impairment charges related to, previously depreciated operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon the Company's economic

ownership interest, and all determined on a consistent basis in accordance with GAAP. The Company's presentation of FFO has been reflected on a proportionate basis.

The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry. FFO facilitates an understanding of the operating performance of the Company's properties between periods because it does not give effect to real
61


estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company's operating performance.

We calculate FFO in accordance with standards established by Nareit, which may not be comparable to measures calculated by other companies who do not use the Nareit definition of FFO or do not calculate FFO in accordance with Nareit guidance. In addition, although FFO is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

In order to provide a better understanding of the relationship between the Company's non-GAAP financial measures of FFO, a reconciliation of GAAP net income attributable to BPRBPYU to FFO has been provided. None of the Company'sThe Company’s non-GAAP financial measures representsmeasure does not represent cash flow from operating activities in accordance with GAAP noneand should not be considered as an alternative to GAAP net income (loss) attributable to BPRBPYU and none areis not necessarily indicative of cash flow. In addition, the Company has presented such financial measures on a consolidated and unconsolidated basis (at the Company's proportionate share) as the Company believes that given the significance of the Company's operations that are owned through investments accounted for by the equity method of accounting, the detail of the operations of the Company's unconsolidated properties provides important insights into the income and FFO produced by such investments.

The following table reconciles GAAP net income attributable to BPRBPYU to FFO for the three and nine months ended September 30, 20192020 and 2018:2019:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net loss Attributable to BPYU$(170,620)$(33,423)$(461,497)$(228,988)
Provision for impairment excluded from FFO - Consolidated Properties— 38,941 71,455 223,287 
Provision for impairment excluded from FFO - Unconsolidated Properties2,470 — 45,145 — 
Unconsolidated Real Estate Affiliates - gain on investment— — — (104,354)
Gain on sales of investment properties(1,824)(5,093)(8,474)(10,640)
Above and below market ground rent939 — 3,444 — 
Preferred stock dividends(3,984)(3,984)(11,952)(11,952)
Loss (gain) from changes in control of investment properties and other— (39,712)15,433 (39,712)
Depreciation and amortization of capitalized real estate costs - Consolidated Properties160,379 115,490 471,106 343,054 
Depreciation and amortization of capitalized real estate costs - Unconsolidated Properties114,527 131,987 344,720 406,818 
Allocation of noncontrolling interests (1)(27,671)(24,177)(93,019)(98,425)
FFO$74,216 $180,029 $376,361 $479,088 
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
        
Net (Loss) Income Attributable to BPR$(33,423) $3,683,274
 $(228,988) $3,840,924
Allocation of noncontrolling interests of the JV partner for impairment
 
 (18,011) 
Redeemable noncontrolling interests
 37,601
 
 39,303
Provision for impairment excluded from FFO38,941
 6,757
 223,287
 45,866
Noncontrolling interests in depreciation(24,763) (10,410) (75,498) (15,738)
Unconsolidated Real Estate Affiliates - gain on investment
 (3,692) (104,354) (3,692)
Allocation of noncontrolling interests of partner to Consolidated and Unconsolidated Properties586
 (2,303) (4,916) (2,304)
Gain on sales of investment properties(5,093) (473,274) (10,640) (473,252)
Preferred stock dividends(3,984) (3,984) (11,952) (11,952)
Gain from changes in control of investment properties and other(39,712) (2,850,017) (39,712) (2,862,681)
Depreciation and amortization of capitalized real estate costs - Consolidated Properties115,490
 151,494
 343,054
 492,870
Depreciation and amortization of capitalized real estate costs - Unconsolidated Properties131,987
 93,921
 406,818
 249,843
FFO$180,029
 $629,367
 $479,088
 $1,299,187
(1)    Noncontrolling interest holders' share of adjustments including depreciation, impairment, gain (loss) from changes in control of investment properties and other, Unconsolidated Real Estate Affiliates - gain on investment and gain on sales of investment properties.

Forward-Looking Statements

Certain statements made in this section or elsewhere in this report may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities

Exchange Act of 1934, as amended.amended (the "Exchange Act"). Statements that do not relate to historical or current facts or matters are forward-looking statements. When used, the words “may,"may," "will," "seek," "expects," "anticipates," "believes," "targets," "intends," "should," "estimates," "could," "continue," "assume," "projects," "plans," or similar expressions,
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are intended to identify forward-looking statements. Although we believe the expectations reflected in any forward-looking statement are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors.factors, including the recent novel coronavirus outbreak. Our future results may be impacted by risks associated with the global economic shutdown and the related global reduction in commerce and travel and substantial volatility in stock markets worldwide, which may result in a decrease of cash flows and impairment losses on our investments and real estate properties, and we may be unable to achieve our expected returns. Accordingly, investors should use caution in relying on forward-looking statements.

Some of the other risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:

Generalthe market price of BPY units and the combined business performance of BPY as a whole;
general volatility of conditions affecting the retail sector;
our inability to acquire and maintain tenants or to lease space on terms favorable to us;
risks related to the bankruptcy or store closures of national tenants with chains of stores in many of our properties;
our inability to sell real estate quickly;
risks related to perceptions by retailers and shoppers of the convenience and attractiveness of our retail properties;
risks related to the development, expansion and acquisitions of properties;
risks related to competition in our business;
risks related to natural disasters, pandemics/epidemics or terrorist attacks;
risks related to cyber and data security breaches or information technology failures;
environmental uncertainties and related costs, including costs resulting from uninsured potential losses;
general risks related to inflation or deflation;
risks relating to impairment charges for our real estate assets;
risks related to conflicts of interest with BPY and our status as a "controlled company" within the meaning of the rules of Nasdaq;
our dependence on our subsidiaries for cash;
risks related to our joint venture partners, including risks related to conflicts of interests, potential bankruptcies, tax-related obligations and financial support relating to such joint venture partners;
our inability to maintain status as a REIT, and possible adverse changes to tax laws;
risks related to our indebtedness and debt restrictions and covenants;
our inability to refinance, extend, restructure or repay near and indeterminate debt;
our inability to raise capital through financing activities;activities or asset sales; and
risks related to the BPY Transaction.structure and trading of Class A Shares.

We discuss these and other risks and uncertainties in our Annual Report and our quarterly periodic reports filed with the Securities and Exchange Commission. The Company may update that discussion in its periodic reports, but otherwise takes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

ITEM 3        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
In July 2017, the Financial Conduct Authority (“FCA”("FCA") announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”("SOFR") as its preferred alternative to USD-LIBOR. The Company is not able to predict when LIBOR will cease to be published or precisely how SOFR will be calculated and published. Any changes adopted by FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

The Company has contracts that are indexed to LIBOR and is monitoring and evaluating the related risks, which include interest amounts on our variable rate debt and the swap rate for our interest rate swaps as discussed in Note 6 - Mortgages, Notes and Loans Payable. In the event that LIBOR is discontinued, the interest rates will be based on a fallback reference rate specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect the Company’s ability to borrow or maintain already outstanding borrowings or swaps, but the alternative reference rate could be higher and more volatile than LIBOR.
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Certain risks arise in connection with transitioning contracts to an alternative reference rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require substantial negotiation with each respective counterparty.

If a contract is not transitioned to an alternative reference rate and LIBOR is discontinued, the impact is likely to vary by contract. If LIBOR is discontinued or if the method of calculating LIBOR changes from its current form, interest rates on our current or future indebtedness may be adversely affected.

While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

ITEM 4        CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the persons performing the functions of principal executive and principal financial officers for us pursuant to athe Master Services Agreement, dated August 27, 2018, among us, Brookfield Asset Management Inc.BAM and other parties thereto (the "Master Services Agreement"), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))Act).

Based on that evaluation, the persons performing the functions of principal executive and principal financial officers for us pursuant to the Master Services Agreement have concluded that our disclosure controls and procedures were effective atas of the end of the period covered by this report.

Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 pandemic on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II    OTHER INFORMATION

ITEM 1        LEGAL PROCEEDINGS

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity.

The Company is subject to litigation related to the BPY Transaction. The Company cannot predict the outcome of pending litigation, nor can it predict the amount of time and expense that it will be required to resolve such litigation.

ITEM 1A    RISK FACTORS

There are no material changes toThe following risk factors supplement the risk factors previously discloseddescribed under Part I, Item 1A. "Risk Factors" in our Annual Report, and should be read in conjunction with the other risk factors presented in the Annual Report.

In the near term, we expect to be impacted by the ongoing and developing COVID-19 pandemic, which has interrupted business activities and supply chains; disrupted travel; contributed to significant volatility in the financial markets, resulting in a general decline in equity prices and lower interest rates; impacted social conditions; and adversely impacted local, regional, national and international economic conditions, as well as the labor markets.

Public Health Risk

Our business could be materially adversely affected by the effects of the COVID-19 pandemic and the future outbreak of other highly infectious or contagious diseases. As a result of the rapid spread of COVID-19, many companies and various governments have imposed restrictions on business activity and travel which may continue and could expand. Business has slowed around the globe including in our retail business, and there can be no assurance that strategies to address potential disruptions in operations will mitigate the adverse impacts related to the outbreak. Given the ongoing and dynamic nature of the circumstances surrounding COVID-19, it is difficult to predict how significant the impact of this coronavirus outbreak, including any responses to it, will be on the global economy, our company and our business or for how long disruptions are likely to continue. The extent of such impact will depend on future developments, which are highly uncertain, rapidly evolving and cannot be predicted, including new information which may emerge concerning the severity of this coronavirus and actions taken to contain the COVID-19 or its impact, among others. Such developments, depending on their nature, duration, and intensity, could have a material adverse effect on our business, financial position, results of operations or cash flows.

We operate in industries or geographies impacted by COVID-19. Many of these are facing financial and operational hardships due to COVID-19 and responses to it. Adverse impacts on our business may include:

a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or tenant action;
a slowdown in business activity may severely impact our tenants' businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to fund their business operations, meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;
an increase in re-leasing timelines, potential delays in lease-up of vacant space and the market rates at which such lease will be executed;
reduced economic activity could result in a prolonged recession, which could negatively impact consumer discretionary spending; and
expected completion dates for our development and redevelopment projects may be subject to delay as a result of local economic conditions that may continue to be disrupted as a result of the COVID-19 pandemic.

If these and potential other disruptions caused by COVID-19 continue, our business could be materially adversely affected.

Credit Risk

The recent global economic shutdown has increased the risk in the near-term of our tenants’ ability to fulfill lease commitments, which has been materially impacted by retail store closures, quarantines and stay-at-home orders. Many of our tenants could declare bankruptcy or become insolvent and cease business operations as a result of prolonged mitigation efforts.

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Lease Roll-over Risk

Lease roll-over risk arises from the possibility that we may experience difficulty renewing leases as they expire or in re-leasing space vacated by tenants upon early lease expiry. Due to the shutdown, we may experience an increase in re-leasing timelines, potential delays in lease-up of vacant space and the market rates at which such leases will be executed could be impacted.

Economic Risk

Real estate is relatively illiquid and may be even more illiquid in the context of an economic downturn that may result from the global economic shutdown. Such illiquidity may limit our ability to vary our portfolio promptly in response to changing economic or investment conditions. Also, financial difficulties of other property owners resulting in distressed sales could depress real estate values in the markets in which we operate.

Interest Rate and Financing Risk

We have an on-going need to access debt markets to refinance maturing debt as it comes due. There is a risk that lenders will not refinance such maturing debt on terms and conditions acceptable to us or on any terms at all. This risk may be increased as a result of disrupted market conditions resulting from the shutdown. Our strategy to stagger the maturities of our mortgage portfolio attempts to mitigate our exposure to excessive amounts of debt maturing in any one year and to maintain relationships with a large number of lenders to limit exposure to any one counterparty.

ITEM 2        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Period(a) Total number of shares (or units) purchased(b) Average price paid per share (or unit)(c) Total number of shares (or units) purchased as part of publicly announced plans or programs(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
July 1 - July 31, 2020$— $— $— (1)
August 1 - August 31, 2020— — — (2)
September 1 - September 30, 20202,606,289 11.4600 2,606,289 (2)
Total$2,606,289 $— $2,606,289 (3)

(1)On August 1, 2019, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time to time as market conditions warrant.
(2)On August 5, 2020, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time to time as market conditions warrant.
(3)As of August 5, 2020, the number of shares of Class A Stock comprising 10% of the Company's public float was greater than 5% of the Company's issued and outstanding Class A Stock, and was equal to 5,219,854 shares of Class A Stock. As of September 30, 2020, 2,613,565 shares of Class A Stock were available for repurchase under the Company's stock repurchase plan.
Class B-1 Stock Issuances
Period(a) Total number of shares (or units) purchased (b) Average price paid per share (or unit) (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
July 1 - July 31, 2019$
 $
 $
 (1)
August 1 - August 31, 2019197,225
 18.5583
 197,225
 (1)
September 1 - September 30, 2019
 
 
 (1)
Total$197,225
 $18.5583
 $197,225
 (2)


(1)On August 28, 2018, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time to time as market conditions warrant.
(2)As of September 30, 2019, the number of shares of Class A Stock comprising 10% of the Company's public float was greater than 5% of the Company's issued and outstanding Class A Stock, and was equal to 6,604,504 shares of Class A Stock. As of September 30, 2019, 6,207,279 shares of Class A Stock were available for repurchase under the Company's stock repurchase plan.

In the third quarter 2020, BPYU issued 19,367,288 shares of Class B-1 Stock to BPR FIN I Subco LLC, a related party, due to total contributions of $414.3 million, equal to $21.39 per share. These Shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.


ITEM 3        DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4         MINE SAFETY DISCLOSURES

Not applicable.
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ITEM 5        OTHER INFORMATION

None.
The other information presented below is being filed as a result of the Company's adoption of the new accounting guidance for lease accounting ("ASC 842") on January 1, 2019. As part of that adoption, the Company elected the available practical expedient, for all classes of assets, not to separate lease components in contracts from the nonlease components in those contracts, when recording revenues associated with operating leases where it is the lessor. Since the lease component is the predominant component under the Company's leases, combined revenues from both the lease and nonlease components are accounted for in accordance with ASC 842 and will be reported in all periods subsequent to the adoption of the new accounting guidance in a single caption, "rental revenues", onthe Company's Consolidated Statements of Comprehensive Income. The presentation and disclosure of rental revenueshave been adjusted to reflect these changes for the nine months ended September 30, 2019. Refer to Note 2 of Part I, Item 1 "Financial Statements" for further details on these updates to significant accounting policies.


This information is intended to assist investors in making comparisons of the Company's historical financial information with future financial information. The reported financial information below has been reclassified to conform to the current presentation.

The table below summarizes the reclassified presentation of our total revenues by year due to the adoption of the new leasing standard.
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 Years Ended December 31,
 2018 2017 2016
Minimum rents$1,297,945
 $1,455,039
 $1,449,704
Tenant recoveries540,376
 643,607
 668,081
Overage rents29,659
 34,874
 42,534
Management fees and other corporate revenues125,776
 105,144
 95,814
Other70,278
 89,198
 90,313
Total revenues, as reported$2,064,034
 $2,327,862
 $2,346,446

The table below summarizes our total revenues as originally reported in our Annual Report to reflect the revised presentation of total combined rental revenues due to the adoption of the new leasing standard.


 Years Ended December 31,
 2018 2017 2016
Total rental revenues$1,867,980
 $2,133,520
 $2,160,319
Management fees and other corporate revenues125,776
 105,144
 95,814
Other70,278
 89,198
 90,313
Total revenues, as reported$2,064,034
 $2,327,862
 $2,346,446


ITEM 6         EXHIBITS
Incorporated by Reference Herein
Exhibit NumberDescriptionFormExhibitFiling DateFile No.
10.1
First Amendment to the Credit Agreement, dated as of July 29, 2020, by and among Brookfield Retail Holdings VII Sub 3 LLC, a Delaware limited liability company, Brookfield Property REIT Inc., a Delaware corporation (f/k/a GGP Inc.), BPR Nimbus LLC, a Delaware limited liability company (f/k/a GGP Nimbus, LLC), BPR Cumulus LLC, a Delaware limited liability company (f/k/a GGP Limited Partnership LLC), BPR OP, LP (f/k/a GGP Operating Partnership, LP), a Delaware limited partnership, GGSI Sellco, LLC, a Delaware limited liability company, GGPLP Real Estate 2010 Loan Pledgor Holding, LLC, a Delaware limited liability company, GGPLPLLC 2010 Loan Pledgor Holding, LLC, a Delaware limited liability company, GGPLP 2010 Loan Pledgor Holding, LLC, a Delaware limited liability company and GGPLP L.L.C., a Delaware limited liability company, the Lenders party hereto, and Wells Fargo Bank, National Association, in its capacities as administrative agent and collateral agent for the Lenders.
8-K10.17/29/2020001-34948
31.1* 
   
31.2* 
   
32.1** 
   
32.2** 
   
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).
Incorporated by Reference Herein
Exhibit NumberDescriptionFormExhibitFiling DateFile No.
31.1*
31.2*
32.1**
32.2**
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
104*Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).
*Filed herewith.
**    Furnished herewith.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Brookfield Property REIT Inc.
Date: November 8, 20199, 2020By:/s/ Michelle Campbell
Michelle Campbell
Secretary
Date: November 8, 20199, 2020By:/s/ Bryan K. Davis
Bryan K. Davis
Chief Financial Officer*
Brookfield Property Group LLC

*
*     Mr. Davis performs the functions of chief financial officer for Brookfield Property REIT Inc. (the "Company") pursuant to a Master Services Agreement, dated August 27, 2018, among Brookfield Asset Management Inc., the Company and certain other parties thereto.

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