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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 20172021
or
¨

☐		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: 001-36135
________________________
BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.
(Exact name of registrant as specified in its charter)
Maryland46-2616226
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer Identification No.)
Maryland46-2616226
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer Identification No.)
250 Vesey Street, 15th Floor
New York, NY
(Address of principal executive offices)
10281
(Zip Code)
250 Vesey Street, 15th Floor
New York, NY, 10281
(Address of principal executive offices and zip code)

(212) 417-7000
(Registrant’s telephone number, including area code)


None
(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)		Name of each exchange on which registered
7.625% Series A Cumulative Redeemable Preferred Stock,
$0.01 par value per share		DTLA-PNew York Stock Exchange

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 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 x☑ No ¨☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☑ 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 filer¨
¨
Accelerated filer¨
¨
Non-accelerated filerx☑
Smaller 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. ¨☐


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




As of November 10, 2017, 100%5, 2021, none of the registrant’s common stock (all of which is privately owned and is notwas traded on any public market) was held by Brookfield DTLA Holdings LLC.market.




BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 20172021


TABLE OF CONTENTS

Page
PART I—FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited).Page
PART I—FINANCIAL INFORMATION
Item 1.Financial Statements.
Condensed Consolidated Balance Sheets
(unaudited)
as of September 30, 20172021 and December 31, 20162020
1
Condensed Consolidated Statements of Operations
(unaudited)
for the three and nine months ended
September 30, 20172021 and 20162020
3
Condensed Consolidated Statements of Comprehensive Loss
(unaudited)
for the three and nine months ended
September 30, 20172021 and 20162020
4
Condensed Consolidated Statements of Stockholders’ Deficit
(unaudited)
for the three and nine months ended September 30, 2021 and 2020
5
Consolidated Statements of Cash Flows
for the nine months ended
September 30, 20172021 and 20162020
57
CondensedNotes to Consolidated Financial Statements of Cash Flows
(unaudited) for the nine months ended
September 30, 2017 and 2016
69
Item 2.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
8
Item 2.
Management’s Discussion and Analysis of Financial Condition

and Results of Operations.
2739
Item 3.
4761
Item 4.
4761
PART II—OTHER INFORMATION
Item 1.
4862
Item 1A.
4862
Item 2.
5062
Item 3.
5062
Item 4.
5062
Item 5.
5062
Item 6.
5163
Signatures
5263


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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 (as set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act). Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the potential future impact of the novel strain of coronavirus (“COVID-19”) pandemic, our operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts,” “likely,” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.”

Although Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or “we”) believes that its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond its control, which may cause Brookfield DTLA’s actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

In particular, in the near term, we expect to be impacted by the COVID-19 pandemic, which has interrupted business activities and supply chains; disrupted travel; and adversely impacted local, regional, national and international economic conditions, as well as the labor markets.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to:

•Risks incidental to the ownership and operation of real estate properties, including local real estate conditions;

•The impact or unanticipated impact of general economic, political and market factors in the regions in which Brookfield DTLA or any of its subsidiaries does business, including as a result of the capacity limits imposed by both local and state governments on higher-risk activities and businesses, such as dine-in restaurants, bars, gyms and conference or convention centers, to combat the spread of the COVID-19 pandemic;

•The ability to enter into new leases or renew leases on favorable terms;

•Business competition;

•Dependence on tenants’ financial condition;

•The use of debt to finance Brookfield DTLA’s business or that of its subsidiaries;

•The behavior of financial markets, including fluctuations in interest rates;

•Uncertainties of real estate development or redevelopment;


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•Global equity and capital markets and the availability of equity and debt financing and refinancing within these markets;

•Risks relating to Brookfield DTLA’s insurance coverage;

•The possible impact of international conflicts and other developments, including terrorist acts;

•Potential environmental liabilities;

•Changes in tax laws and other tax-related risks;

•Dependence on management personnel;

•Illiquidity of investments in real estate;

•Operational and reputational risks;

•Catastrophic events, such as earthquakes or pandemics/epidemics;

•Other factors that are described in Part I, “Item IA. Risk Factors” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 25, 2021, and Part II, “Item IA. Risk Factors” in this Report; and

•Other risks and factors detailed from time to time in reports filed by Brookfield DTLA with the United States Securities and Exchange Commission.

Brookfield DTLA cautions that the foregoing list of important factors that may affect future results is not exhaustive. When relying on Brookfield DTLA’s forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, Brookfield DTLA undertakes no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.


Table of Contents
PART I—FINANCIAL INFORMATION


Item 1.
Item 1.    Financial Statements.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)

September 30, 2021December 31, 2020
ASSETS
Investments in Real Estate:
Land$222,555 $222,555 
Buildings and improvements2,309,388 2,307,762 
Tenant improvements439,329 437,114 
Investments in real estate, gross2,971,272 2,967,431 
Less: accumulated depreciation584,209 517,329 
Investments in real estate, net2,387,063 2,450,102 
Investment in unconsolidated real estate joint venture42,959 42,395 
Cash and cash equivalents36,480 37,394 
Restricted cash52,503 46,089 
Rents, deferred rents and other receivables, net128,165 133,639 
Intangible assets, net17,444 22,046 
Deferred charges, net55,422 63,406 
Due from affiliates, net of allowance for loan losses of $0 and $2,653 as of September 30, 2021 and December 31, 2020, respectively7,012 10,847 
Prepaid and other assets, net2,324 10,538 
Total assets$2,729,372 $2,816,456 
LIABILITIES AND DEFICIT
Liabilities:
Secured debt, net$2,254,072 $2,239,640 
Accounts payable and other liabilities85,992 96,041 
Due to affiliates1,299 1,700 
Intangible liabilities, net4,835 6,005 
Total liabilities2,346,198 2,343,386 
Commitments and Contingencies (See Note 15)
00

 September 30, 2017 December 31, 2016
    
ASSETS   
Investments in Real Estate:   
Land$227,555
 $227,555
Buildings and improvements2,199,966
 2,191,676
Tenant improvements309,840
 321,542
 2,737,361
 2,740,773
Less: accumulated depreciation331,480
 329,149
Investments in real estate, net2,405,881
 2,411,624
    
Cash and cash equivalents48,122
 30,301
Restricted cash48,393
 60,084
Rents, deferred rents and other receivables, net122,474
 118,211
Intangible assets, net61,811
 75,586
Deferred charges, net62,467
 64,967
Prepaid and other assets, net3,557
 9,186
Total assets$2,752,705
 $2,769,959
    
LIABILITIES AND DEFICIT   
Liabilities:   
Mortgage loans, net$1,990,984
 $2,076,804
Accounts payable and other liabilities84,442
 85,504
Due to affiliates, net3,330
 14,327
Intangible liabilities, net17,622
 22,227
Total liabilities$2,096,378
 $2,198,862
    
Commitments and Contingencies (See Note 13)
 










See accompanying notes to condensed consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited; in thousands, except share amounts)

September 30, 2021December 31, 2020
LIABILITIES AND DEFICIT (continued)
Mezzanine Equity:
7.625% Series A Cumulative Redeemable Preferred Stock,
   $0.01 par value, 9,730,370 shares issued and outstanding
    as of September 30, 2021 and December 31, 2020
$460,940 $447,028 
Noncontrolling Interests:
Series A-1 preferred interest448,150 435,242 
Senior participating preferred interest20,542 20,413 
Series B preferred interest166,951 198,827 
Total mezzanine equity1,096,583 1,101,510 
Stockholders’ Deficit:
Common stock, $0.01 par value, 1,000 shares
    issued and outstanding as of September 30, 2021
    and December 31, 2020
— — 
Additional paid-in capital202,869 202,369 
Accumulated deficit(847,595)(726,369)
Noncontrolling interests(68,683)(104,440)
Total stockholders’ deficit(713,409)(628,440)
Total liabilities and deficit$2,729,372 $2,816,456 

 September 30, 2017 December 31, 2016
    
LIABILITIES AND DEFICIT (continued)   
Mezzanine Equity:   
7.625% Series A Cumulative Redeemable Preferred Stock,
    $0.01 par value, 9,730,370 shares issued and
    outstanding as of September 30, 2017
    and December 31, 2016
$386,763
 $372,852
Noncontrolling Interests:   
Series A-1 preferred interest379,206
 366,297
Senior participating preferred interest25,519
 25,019
Series B preferred interest186,326
 65,364
Total mezzanine equity977,814
 829,532
    
Stockholders’ Deficit:
   
Common stock, $0.01 par value, 1,000 shares
    issued and outstanding as of September 30, 2017
    and December 31, 2016
—
 —
Additional paid-in capital194,210
 194,210
Accumulated deficit(245,902) (215,264)
Accumulated other comprehensive loss(1,020) (1,607)
Noncontrolling interest – Series B common interest(268,775) (235,774)
Total stockholders’ deficit(321,487) (258,435)
Total liabilities and deficit$2,752,705
 $2,769,959



























See accompanying notes to condensed consolidated financial statements.

2

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands)

For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2021202020212020
Revenue:
Lease income$61,880 $63,953 $188,855 $192,669 
Parking6,816 6,354 18,187 21,521 
Interest and other124 286 680 779 
Total revenue68,820 70,593 207,722 214,969 
Expenses:
Rental property operating and maintenance24,895 24,544 69,894 71,436 
Real estate taxes10,132 9,697 30,212 29,077 
Parking2,474 2,388 5,940 8,439 
Other expenses707 4,336 6,676 8,910 
Depreciation and amortization26,523 25,509 80,183 78,848 
Interest18,755 19,576 61,131 63,093 
Total expenses83,486 86,050 254,036 259,803 
Other Income (Expense):
Equity in earning (loss) of unconsolidated
    real estate joint venture		268 172 564 (531)
Total other income (expense)268 172 564 (531)
Net loss(14,398)(15,285)(45,750)(45,365)
Net loss (income) attributable to
   noncontrolling interests:
Series A-1 preferred interest returns4,303 4,303 12,908 12,909 
Senior participating preferred interest
    redemption measurement adjustment		(325)(37)575 (2,343)
Series B preferred interest returns3,896 4,689 12,324 13,464 
Series B common interest –
    allocation of net income (loss)		27,222 (9,889)35,757 90,023 
Net loss attributable to Brookfield DTLA(49,494)(14,351)(107,314)(159,418)
Series A preferred stock dividends4,637 4,637 13,912 13,911 
Net loss attributable to common interest
    holders of Brookfield DTLA		$(54,131)$(18,988)$(121,226)$(173,329)

 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
Revenue:       
Rental income$40,628
 $40,334
 $120,843
 $124,071
Tenant reimbursements24,368
 23,481
 72,138
 69,318
Parking9,216
 9,251
 27,785
 27,772
Interest and other2,855
 4,342
 8,286
 10,028
Total revenue77,067
 77,408
 229,052
 231,189
        
Expenses:       
Rental property operating and maintenance25,422
 24,435
 73,332
 71,509
Real estate taxes9,886
 9,573
 28,806
 28,413
Parking2,196
 2,213
 6,926
 6,259
Other expense1,122
 1,428
 3,489
 3,125
Depreciation and amortization24,335
 25,695
 74,020
 78,032
Interest23,243
 23,458
 70,223
 71,479
Total expenses86,204
 86,802
 256,796
 258,817
        
Net loss(9,137) (9,394) (27,744) (27,628)
Net loss attributable to
    noncontrolling interests:
       
Series A-1 preferred interest –
    current dividends
4,303
 4,303
 12,909
 12,909
Senior participating preferred interest –
    redemption measurement adjustment
385
 908
 250
 1,964
Series B preferred interest –
    current dividends
3,965
 881
 9,470
 949
Series B common interest –
    allocation of net loss
(11,738) (10,532) (33,646) (30,023)
Net loss attributable to Brookfield DTLA(6,052) (4,954) (16,727) (13,427)
Series A preferred stock –
    current dividends
4,637
 4,637
 13,911
 13,911
Net loss available to common interest
    holders of Brookfield DTLA
$(10,689) $(9,591) $(30,638) $(27,338)
















See accompanying notes to condensed consolidated financial statements.

3

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited; in thousands)

For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2021202020212020
Net loss$(14,398)$(15,285)$(45,750)$(45,365)
Other comprehensive income:
Interest rate swap contracts designated as cash flow hedges:
Unrealized derivative holding gains— 984 — 562 
Reclassification adjustment for realized loss
    included in net loss		— 1,779 — 1,779 
Total other comprehensive income— 2,763 — 2,341 
Comprehensive loss(14,398)(12,522)(45,750)(43,024)
Less: comprehensive income (loss) attributable to noncontrolling interests35,096 (934)61,564 114,053 
Comprehensive loss attributable to common interest holders of Brookfield DTLA$(49,494)$(11,588)$(107,314)$(157,077)

 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
        
Net loss$(9,137) $(9,394) $(27,744) $(27,628)
        
Other comprehensive loss:       
Derivative transactions:       
    Derivative holding gains (losses)469
 1,832
 1,232
 (3,290)
        
Comprehensive loss(8,668) (7,562) (26,512) (30,918)
Less: comprehensive loss attributable to
         noncontrolling interests
(2,840) (3,481) (10,372) (15,922)
Comprehensive loss available to
    common interest holders of
    Brookfield DTLA
$(5,828) $(4,081) $(16,140) $(14,996)

































































See accompanying notes to condensed consolidated financial statements.



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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited; in thousands, except share amounts)

Number of
Shares		Common
Stock		Additional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Non-
controlling
Interests
Total
Stockholders’
Deficit
Common
Stock
Balance, December 31, 20201,000 $— $202,369 $(726,369)$— $(104,440)$(628,440)
Net (loss) income(42,124)24,390 (17,734)
Other comprehensive loss— — 
Contributions— — 
Dividends, preferred returns and
  redemption measurement
  adjustments on mezzanine equity		(4,637)(9,186)(13,823)
Balance, March 31, 20211,000 — 202,369 (773,130)— (89,236)(659,997)
Net (loss) income(15,696)2,078 (13,618)
Other comprehensive income— 0— 
Contributions500 500 
Dividends, preferred returns and
  redemption measurement
  adjustments on mezzanine equity		(4,638)(8,747)(13,385)
Balance, June 30, 20211,000 — 202,869 (793,464)— (95,905)(686,500)
Net (loss) income(49,494)35,096 (14,398)
Other comprehensive income— 0— 
Contributions— — 
Dividends, preferred returns and
  redemption measurement
  adjustments on mezzanine equity		(4,637)(7,874)(12,511)
Balance, September 30, 20211,000 $— $202,869 $(847,595)$— $(68,683)$(713,409)

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Number of
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Non-
controlling
Interest
 
Total
Stockholders’
Deficit
  
Common
Stock
     
               
Balance, December 31, 2016 1,000
 $—
 $194,210
 $(215,264) $(1,607) $(235,774) $(258,435)
Net loss       (16,727)   (11,017) (27,744)
Other comprehensive income         587
 645
 1,232
Dividends on Series A
    preferred stock, Series A-1
    preferred interest,
    senior participating
    preferred interest and
    Series B preferred interest
       (13,911)   (22,629) (36,540)
Balance, September 30, 20171,000
 $—
 $194,210
 $(245,902) $(1,020) $(268,775) $(321,487)
Number of
Shares		Common
Stock		Additional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Non-
controlling
Interests
Total
Stockholders’
Deficit
Common
Stock
Balance, December 31, 20191,000 $— $197,535 $(499,793)$(2,341)$(216,183)$(520,782)
Net (loss) income(32,894)18,108 (14,786)
Other comprehensive loss(1,242)(1,242)
Contributions— — 
Dividends, preferred returns and
  redemption measurement
  adjustments on mezzanine equity		(4,637)(8,286)(12,923)
Balance, March 31, 20201,000 — 197,535 (537,324)(3,583)(206,361)(549,733)
Net (loss) income(112,173)96,879 (15,294)
Other comprehensive income820 0820 
Contributions— — 
Dividends, preferred returns and
  redemption measurement
  adjustments on mezzanine equity		(4,637)(6,789)(11,426)
Balance, June 30, 20201,000 — 197,535 (654,134)(2,763)(116,271)(575,633)
Net loss(14,351)(934)(15,285)
Other comprehensive income2,763 02,763 
Contributions500 500 
Dividends, preferred returns and
  redemption measurement
  adjustments on mezzanine equity		(4,637)(8,955)(13,592)
Balance, September 30, 20201,000 $— $198,035 $(673,122)$— $(126,160)$(601,247)



  
Number of
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Non-
controlling
Interest
 
Total
Stockholders’
Deficit
  
Common
Stock
     
               
Balance, December 31, 20151,000
 $—
 $191,710
 $(177,879) $(2,580) $(195,788) $(184,537)
Net loss       (13,427)   (14,201) (27,628)
Other comprehensive loss         (1,568) (1,722) (3,290)
Contribution from
    Brookfield DTLA Holdings
     2,500
       2,500
Dividends on Series A
    preferred stock, Series A-1
    preferred interest,
    senior participating
    preferred interest and
    Series B preferred interest
       (13,911)   (15,822) (29,733)
Balance, September 30, 20161,000
 $—
 $194,210
 $(205,217) $(4,148) $(227,533) $(242,688)






















See accompanying notes to condensed consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)

 For the Nine Months Ended
 September 30, 2017 September 30, 2016
Cash flows from operating activities:   
Net loss$(27,744) $(27,628)
Adjustments to reconcile net loss to net cash
     provided by operating activities:		   
Depreciation and amortization74,020
 78,032
Recovery of doubtful accounts(7) (239)
Amortization of below-market leases/
    above-market leases
(1,639) (2,733)
Straight-line rent amortization(6,989) (14,574)
Amortization of tenant inducements2,808
 2,502
Amortization of discounts and deferred financing costs4,659
 3,499
Changes in assets and liabilities:   
Rents, deferred rents and other receivables(83) (2,508)
Deferred charges(5,600) (3,912)
Prepaid and other assets5,630
 5,585
Accounts payable and other liabilities5,117
 (2,761)
Due to affiliates, net(10,997) (6,064)
Net cash provided by operating activities39,175
 29,199
Cash flows from investing activities:   
Expenditures for improvements to real estate(54,308) (41,189)
Decrease (increase) in restricted cash11,691
 (5,832)
Net cash used in investing activities(42,617) (47,021)
Cash flows from financing activities:   
Proceeds from mortgage loans470,000
 470,000
Principal payments on mortgage loans(553,001) (460,543)
Dividends paid on Series A preferred stock—
 (21,893)
Contribution from (distributions to)
    senior participating preferred interest, net
250
 (336)
Contribution from Brookfield DTLA Holdings—
 2,500
Contributions from Series B preferred interest111,492
 43,000
Financing fees paid(7,478) (3,138)
Net cash provided by financing activities21,263
 29,590
Net change in cash and cash equivalents17,821
 11,768
Cash and cash equivalents at beginning of period30,301
 53,736
Cash and cash equivalents at end of period$48,122
 $65,504



For the Nine Months Ended
September 30,
20212020
Cash flows from operating activities:
Net loss$(45,750)$(45,365)
Adjustments to reconcile net loss to net cash
     provided by operating activities:
Depreciation and amortization80,183 78,848 
Equity in (earning) loss of unconsolidated real estate joint venture(564)531 
Recovery of lease receivables previously deemed uncollectible(880)— 
Amortization of acquired below-market leases,
    net of acquired above-market leases		207 744 
Straight-line rent amortization(2,414)4,129 
Amortization of tenant inducements3,233 2,872 
Amortization and write-off of debt financing costs5,976 4,095 
Loss on early extinguishment of debt4,575 — 
Unrealized (gain) loss on interest rate cap contracts(2)52 
Realized loss on interest rate swap contracts— 1,779 
Changes in assets and liabilities:
Rents, deferred rents and other receivables, net4,282 (1,290)
Deferred charges, net(3,415)(5,574)
Due from affiliates4,969 938 
Prepaid and other assets, net8,278 7,228 
Accounts payable and other liabilities7,761 9,613 
Due to affiliates(401)(373)
Net cash provided by operating activities66,038 58,227 
Cash flows from investing activities:
Expenditures for real estate improvements(20,211)(40,040)
Net cash used in investing activities(20,211)(40,040)
Cash flows from financing activities:
Proceeds from secured debt465,000 305,000 
Principal payments on secured debt(450,000)(265,000)
Proceeds from Series B preferred interest6,000 25,150 
Proceeds from senior participating preferred interest254 440 
Distributions to Series B preferred interest(12,672)(13,176)
Repurchases of Series B preferred interest(37,528)(13,507)
Distributions to senior participating preferred interest(700)(1,059)
Contributions to additional paid-in capital500 500 
Purchase of interest rate cap contracts(62)(56)
Payment for early extinguishment of debt(4,575)(849)
Debt financing costs paid(6,544)(5,660)
Net cash (used in) provided by financing activities(40,327)31,783 
Net change in cash, cash equivalents and restricted cash5,500 49,970 
Cash, cash equivalents and restricted cash at beginning of period83,483 58,988 
Cash, cash equivalents and restricted cash at end of period$88,983 $108,958 
See accompanying notes to condensed consolidated financial statements.


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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited; in thousands)

For the Nine Months Ended
September 30,
20212020
Supplemental disclosure of cash flow information:
Cash paid for interest$51,383 $59,258 
Cash paid for income taxes$1,723 $167 
Supplemental disclosure of non-cash investing and
    financing activities:
Accrual for current-period additions to real estate
    investments		$11,072 $49,666 
Increase in fair value of interest rate swaps$— $562 

 For the Nine Months Ended
 September 30, 2017 September 30, 2016
Supplemental disclosure of cash flow information:   
Cash paid for interest$66,809
 $67,901
    
Supplemental disclosure of non-cash activities:   
Accrual for real estate improvements$19,526
 $6,758
Accrual for deferred leasing costs3,204
 2,169
Writeoff of fully depreciated buildings and improvements3,992
 —
Writeoff of fully depreciated tenant improvements48,790
 —
Writeoff of fully amortized intangible assets57,088
 —
Writeoff of fully amortized intangible liabilities16,320
 —
Increase (decrease) in fair value of interest rate swap, net1,232
 (3,290)
    
The following is a reconciliation of Brookfield DTLA’s cash, cash equivalents and restricted cash at the beginning and end of the nine months ended September 30, 2021 and 2020:

For the Nine Months Ended
September 30,
20212020
Cash and cash equivalents at beginning of period$37,394 $33,964 
Restricted cash at beginning of period46,089 25,024 
Cash, cash equivalents and restricted cash at
    beginning of period		$83,483 $58,988 
Cash and cash equivalents at end of period$36,480 $56,897 
Restricted cash at end of period52,503 52,061 
Cash, cash equivalents and restricted cash at
    end of period		$88,983 $108,958 




















See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


As used in these notes to consolidated financial statements, tabular amounts are presented in thousands, except share amounts, percentage data and dates.


Note 1—Organization and Description of Business


Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA”DTLA” or the “Company”“Company”) is a Maryland corporation and was incorporated on April 19, 2013. Brookfield DTLA was formed for the purpose of consummating the transactions contemplated in the Agreement and Plan of Merger dated as of April 24, 2013, as amended, (the “Merger Agreement”), and the issuance of shares of 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series“Series A preferred stock”stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”“MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC, (“Brookfield DTLA Holdings”), a Delaware limited liability company and an indirect partially-owned subsidiary of Brookfield Office Properties Inc., a corporation under the Laws of Canada (“BPO”DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”“Manager”). DTLA Holdings is an indirect partially‑owned subsidiary of Brookfield Property Partners L.P. (“BPY”), an exempted limited partnership under the Laws of Bermuda, which in turn is the flagship commercial property entity and the primary vehicle through which Brookfield Asset Management Inc. (“BAM”), a corporation under the Laws of Canada, invests in real estate on a global basis. On April 1, 2021, BAM and BPY announced an agreement for BAM to acquire 100% of the limited partnership units of BPY. The acquisition was completed in July 2021. The acquisition did not have any impact to the Company.


As of September 30, 2021 and December 31, 2020, Brookfield DTLA owns owned Bank of America Plaza (“BOA Plaza”), EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, each of which is aare Class A office propertyproperties, and FIGat7th, a retail center nestled between EY Plaza and 777 Tower. Additionally, Brookfield DTLA Fund Properties II LLC (“Fund II”) has a noncontrolling interest in an unconsolidated real estate joint venture with Brookfield DTLA FP IV Holdings LLC (“DTLA FP IV Holdings”), a wholly‑owned subsidiary of DTLA Holdings, which owns 755 South Figueroa, a residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”“LACBD”).


Brookfield DTLA primarily receives its income primarily from rentallease income, (includingincluding tenant reimbursements)reimbursements, generated from the operations of its office and retail properties, and to a lesser extent, revenue from its parking garages.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 2—2—Basis of Presentation


As used in these condensed consolidated financial statements and related notes, unless the context requires otherwise, the terms “Brookfield DTLA,” the “Company,” “us,” “we” and “our” refer to Brookfield DTLA Fund Office Trust Investor Inc. together with its direct and indirect subsidiaries.


Principles of Consolidation and Basis of Presentation


The accompanying unaudited condensed consolidated financial statements and related disclosuresnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”GAAP”) applicable to interim financial information and with the instructions to Form 10‑Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal and recurring nature, considered necessary for a fair presentation of the financial position and interim results of Brookfield DTLA as of and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of those that may be expected for a full fiscal year.


The condensed consolidated balance sheet datasheets as of September 30, 2021 and December 31, 20162020 include the accounts of Brookfield DTLA and subsidiaries in which it has a controlling financial interest. All intercompany transactions have been derived from Brookfield DTLA’s audited financial statements; however,eliminated in consolidation as of September 30, 2021 and December 31, 2020, and for each of the three and nine months ended September 30, 2021 and 2020.

The accompanying notes to the condensedunaudited consolidated financial statements do not include all disclosures required by GAAP.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The unaudited consolidated financial information included herein should be read in conjunction with the audited consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the U.S.United States Securities and Exchange Commission (the “SEC”“SEC”) on March 20, 2017.25, 2021.


Determination of Controlling Financial Interest

We consolidate entities in which Brookfield DTLA is considered to be the primary beneficiary of a variable interest entity (“VIE”) or has a majority of the voting interest in the entity. We are deemed to be the primary beneficiary of a VIE when we have (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. We do not consolidate entities in which the other parties have substantive kick-out rights to remove the Company’s power to direct the activities, and most significantly impacting the economic performance, of the VIE. In determining whether we are the primary beneficiary, we consider factors such as ownership interest, management representation, authority to control decisions, and contractual and substantive participating rights of each party.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Brookfield DTLA Fund Properties II LLC. The Company earns a return through an indirect investment in Fund II. DTLA Holdings, the parent of Brookfield DTLA, owns all of the common interest in Fund II. Brookfield DTLA has an indirect preferred stock interest in Fund II and its wholly-owned subsidiary is the managing member of Fund II. The Company determined that Fund II is a VIE. As a result of having the power to direct the significant activities of Fund II that impact Fund II’s economic performance, and the obligation to absorb losses of, or the right to receive benefits from, Fund II that could potentially be significant to the Fund II, Brookfield DTLA meets the two conditions for being the primary beneficiary of Fund II.

We consolidate entities through which we conduct substantially all of our business, and own, directly and through subsidiaries, substantially all of our assets. As of September 30, 2021, these consolidated VIEs had in aggregate total consolidated assets of $2.7 billion(of which $2.4 billion is related to investments in real estate) and total consolidated liabilities of $2.4 billion(of which $2.3 billion is related to non-recourse debt secured by our office and retail properties). The Company is obligated to repay substantially all of the liabilities of our consolidated VIEs, except for the non-recourse secured debt.

Investment in Unconsolidated Real Estate Joint Venture. Fund II has a noncontrolling interest in a joint venture, Brookfield DTLA Fund Properties IV LLC (“Fund IV”), with DTLA FP IV Holdings. The Company determined that the joint venture is a VIE mainly because its equity investment at risk is insufficient to finance the joint venture’s activities without additional subordinated financial support. While the joint venture meets the definition of a VIE, Brookfield DTLA is not its primary beneficiary as the Company lacks the power through voting or similar rights to direct the activities that most significantly impact the joint venture’s economic performance. Therefore, the Company accounts for its ownership interest in the joint venture under the equity method. As of September 30, 2021, the Company’s ownership interest in the joint venture was 37.2%, a decrease from 47.8% as of December 31, 2020 as a result of additional capital contributed by DTLA FP IV Holdings to the joint venture during the nine months ended September 30, 2021.

The liabilities of the joint venture may only be settled using the assets of 755 South Figueroa and are not recourse to the Company. Brookfield DTLA’s exposure to its investment in the joint venture is limited to its investment balance and the Company has no obligation to make future contributions to the joint venture. Pursuant to the operating agreement of the joint venture, DTLA FP IV Holdings may be required to fund additional amounts for the development of 755 South Figueroa, routine operating costs, and guaranties or commitments of the joint venture.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Impact of COVID-19

Prior to the end of the first quarter of 2020, there was a global outbreak of a new strain of Coronavirus (“COVID-19”) which prompted government and businesses to take unprecedented measures in response. Many states, including California where our properties are located, have implemented “stay-at-home” restrictions to help combat the spread of COVID-19. The State of California order included the shutdown of all nonessential services, such as dine-in restaurants, bars, gyms and conference or convention centers, and other businesses not deemed to support critical infrastructure (the “Shutdown”). Essential services, such as grocery stores, pharmacies, gas stations, food banks, convenience stores and delivery restaurants, were allowed to remain open. Consequently, business activities and supply chains were interrupted; travel was disrupted; and local, regional, national and international economic conditions were adversely impacted.

The U.S. began a large-scale COVID-19 vaccination campaign in December 2020. On June 15, 2021, with California fully reopened its economy, restrictions such as physical distancing, capacity limits and the county tier system were lifted. However, the spread of the Delta variant brought uncertainty to the economic recovery. In July 2021, amid a rise in coronavirus cases and hospitalizations, Los Angeles County reinstated its mask mandate that requires masking indoors regardless of vaccination status. In California, after a record number of COVID-19 cases in July 2021, there was a sharp decline in cases reported statewide in September 2021.

During the nine months ended September 30, 2021, the COVID-19 pandemic and the measures taken to combat the spread of the pandemic has continued to impact numerous aspects of our business and our properties, which are located in the City of Los Angeles. Some of the effects include the following:

•Capacity limits were imposed on higher-risk activities and businesses such as indoor dining, bars, fitness centers and movie theaters according to the tier system of the California state’s reopening framework. As a result, our tenants in FIGat7th, which include retail shops, restaurants and a big box gym, experienced the most immediate impact of the restrictions imposed. Due to the uncertainties posed to our tenants in FIGat7th by these restrictions, adjustments of $1.7 million and $3.1 million, respectively, were recognized during the three and nine months ended September 30, 2020, to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. In contrast, as a result of the re-opening of California’s economy in June 2021, various retail tenants benefited from higher visitor traffic. As such, the Company recorded favorable lease income adjustmentsof $1.0 million and $0.5 million, respectively, during the three and nine months ended September 30, 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
•While our office properties have remained open, most of our office tenants have been working remotely since the “stay-at-home” order was issued. Although state and local authorities began easing restrictions on businesses, the physical occupancy of our office properties has remained well below capacity as infection rates fluctuated and most employers continued their COVID-19 response protocols and allowed employees to work from home when possible. As of September 30, 2021, most of our office tenants have been current in paying amounts due to us under their leases. Due to the uncertainties posed to our office property tenants by the COVID-19 pandemic, during the three and nine months ended September 30, 2020, adjustments of $0.9 million and $1.9 million, respectively, were recognized to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. In contrast, as a result of the re-opening of California’s economy in June 2021 and office employees returning to offices, the Company recorded favorable lease income adjustments of $0.5 million and $0.4 million, respectively, during the three and nine months ended September 30, 2021.

•Decline in property values resulting from lower than anticipated revenues due to reduced increases in forecasted rental rates on new or renewal leases, applied credit losses, lower leasing velocity and reductions in projected leasing of available space. While the carrying values of the properties are recorded at cost less accumulated depreciation, we estimate the undiscounted cashflows and fair values of the properties as part of our impairment review of investments in real estate. See Note 2—“Basis of Presentation—Impairment Review” for further discussion.

Use of Estimates


The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts reported inof assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidateddate of the financial statements, and accompanying notes.the reported amounts of revenues and expenses during the reporting periods presented. The Company bases its estimates on historical experience and on various other assumptions that it considers to be reasonable under the circumstances, including the impact of events such as the Shutdown and measures taken to combat the spread of the pandemic. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for purposes of applying the acquisition method of accounting, the useful lives of assets, recoverable amounts of receivables, impairment of long-lived assets and the fair value of debt. Actual results could ultimately differ from such estimates.


Recent Accounting Pronouncements
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In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluating the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 establishing ASC Topic 842, Leases. The guidance in this update supersedes the guidance in ASC Topic 840, Leases. ASU 2016-02 revises GAAP related to accounting for leases by lessees. Under this new guidance, lessees will be required to recognize a lease liability and a right-of-use asset in the balance sheet for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification determining the pattern of expense recognition in the statement of operations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and should be applied using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2016-02 on Brookfield DTLA’s consolidated financial statements.



BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Impairment Review
In August 2016,
Investments in long-lived assets, including our investments in real estate, are reviewed for impairment quarterly or if events or changes in circumstances indicate that the FASB issued ASU 2016-15, Classificationcarrying amount of Certain Cash Receiptsthe long-lived assets might not be recoverable, which is referred to as a “triggering event” or an “impairment indicator.” The carrying amount of long-lived assets to be held and Cash Payments to ASC Topic 230, Statementused is deemed not recoverable if it exceeds the sum of Cash Flows. ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement ofundiscounted cash flows expected to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation toresult from the effective interest rateuse and eventual disposition of the borrowing, (iii) contingent consideration payments made afterasset. Triggering events or impairment indicators for long-lived assets to be held and used are assessed by property and include significant fluctuations in estimated net operating income, changes in occupancy, significant near-term lease expirations, current and historical operating and/or cash flow losses, rental rates, and other market factors. The impact of the measures imposed to combat the spread of the COVID-19 pandemic on economic and market conditions, together with many of our office property tenants working from home, was deemed to be a business combination, (iv) proceeds fromtriggering event during the settlementthree and nine months ended September 30, 2021.

When conducting the impairment review of insurance claims, (v) proceeds fromour investments in real estate, we assessed the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiableexpected undiscounted cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, with early adoption permitted. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Restricted Cash to ASC Topic 230, Statement of Cash Flows. ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted,based upon numerous factors, including adoption in an interim period. Upon adoption, we will retrospectively reconcile the activity in our cash, cash equivalents, restricted cash and restricted cash equivalents during reporting periods.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business to ASC Topic 805, Business Combinations. ASU 2017-01 introduced amendments that are intended to make the guidance on the definition of a business more consistent and cost-efficient. The objective of the update is to add further guidance that assists entities in evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business by providing a screen to determine when a set of assets and activities acquired is not a business. ASU 2017-01 is effective for annual periods beginning after December 15, 2017 including interim periods within those periods. ASU 2017-01 must be applied prospectively on or after the effective date. We are currently evaluating the impact of the adoptionShutdown and measures taken to combat the spread of ASU 2017-01the pandemic. These factors include, but are not limited to, the credit quality of our tenants, available market information, known trends, current market/economic conditions that may affect the asset, and historical and forecasted financial and operating information relating to the property, such as net operating income, occupancy statistics, vacancy projections, renewal percentage, and rent collection rates. If the undiscounted cash flows expected to be generated by a property are less than its carrying amount, the Company determines the fair value of the property and an impairment loss would be recorded to write down the carrying amount of such property to its fair value. Based on its review, management concluded that none of Brookfield DTLA’s consolidated financial statements.real estate properties were impaired as of September 30, 2021 and December 31, 2020.


In February 2017,The Company’s investment in its unconsolidated real estate joint venture is also reviewed for impairment quarterly or if events or changes in circumstances indicate that the FASB issued ASU 2017-05, Clarifyingcarrying amount of our investment might not be recoverable using similar criteria as its investments in real estate. An impairment loss is measured based on the Scopeexcess of Asset Derecognition Guidancethe carrying amount of an investment compared to its estimated fair value. Impairment analyses are based on current plans, intended holding periods and Accounting for Partial Salesinformation available at the time the analyses are prepared. Based on its review, management concluded that Brookfield DTLA’s investment in its unconsolidated real estate joint venture was not impaired as of Nonfinancial AssetsSeptember 30, 2021 and December 31, 2020.

Our future results may continue to ASC Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets. ASU 2017-05 clarifies the scope of recently established guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. This update conforms the derecognition guidance on nonfinancial assetsbe impacted by risks associated with the model for transactionsmeasures taken to combat the spread of the pandemic and the related global reduction in ASC 606. ASU 2017-05 is effective for interimservices, investments, commerce, and annual reporting periodstravel, which may result in fiscal years beginning after December 15, 2017. We do not expect the adoptiona decrease in our cash flows and a potential increase in impairment losses and/or revaluations of this update to have a material impact on Brookfield DTLA’s consolidated financial statements.our investments in real estate and unconsolidated real estate joint venture.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Rents, Deferred Rents and Other Receivables
In August 2017,
Under Accounting Standards Codification (“ASC”) Topic 842, Leases, Brookfield DTLA must assess on an individual lease basis whether it is probable that the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging. ASU 2017-12 introduced amendments intended to make targeted improvements to simplifyCompany will collect the applicationfuture lease payments throughout the term of the hedge accounting guidance inlease. The Company considers the tenant’s payment history and current GAAP. The objectivecredit status when assessing collectibility. If the collectibility of the updatelease payments is to improveprobable at lease commencement, the financial reporting of hedging relationships to better portrayCompany recognizes lease income over the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. All transition requirements and elections should be applied to hedging relationships existing asterm of the date of adoption andlease on a straight-line basis. During the effectterm of the adoption should be reflected aslease, Brookfield DTLA monitors the credit quality and any related material changes of our tenants by (i) reviewing financial statements of the beginning oftenants that are publicly available or that are required to be delivered to us pursuant to the fiscal year of adoption. We are currently evaluatingapplicable lease, (ii) monitoring news reports regarding our tenants and their respective businesses, including the impact of the adoptionmeasures taken to combat the spread of ASU 2017-01the COVID-19 pandemic on Brookfield DTLA’sthe tenant’s business, (iii) monitoring the tenant’s payment history and current credit status, and (iv) analyzing current economic trends. When collectibility is not deemed probable at the lease commencement date, the Company’s lease income is constrained to the lesser of (i) the income that would have been recognized if collection were probable, or (ii) the lease payments that have been collected from the lessee. If the collectibility assessment changes to probable after the lease commencement date, any difference between the lease income that would have been recognized if collectibility had always been assessed as probable and the lease income recognized to date is recognized as a current-period adjustment to lease income. If the collectibility assessment changes to not probable after the lease commencement date, lease income is reversed to the extent that the lease payments that have been collected from the lessee are less than the lease income recognized to date. Changes to the collectibility of operating leases are recorded as adjustments to lease income in the consolidated statements of operations. As the result of our assessment of the collectibility of amounts due under leases with our tenants, the Company recognized a recovery of lease income totaling $1.5 million and $0.9 million, respectively, during the three and nine months ended September 30, 2021, and a reduction in lease income totaling $2.7 million and $5.1 million, respectively, during the three and nine months ended September 30, 2020.

The Company received certain rent relief requests for certain periods in 2020 and 2021 from many of our retail tenants and some of our office tenants as a result of the measures taken to combat the spread of the COIVD-19 pandemic. Some of our tenants have availed themselves of various federal and state relief funds, such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program, which can be utilized to partially meet rental obligations. While our tenants are required to fulfill their commitments to us under their leases, we have implemented and will continue to carefully consider temporary rent deferrals and rent abatements on a lease-by-lease basis and only consider those which have a justifiable financial basis. For leases with deferrals, the Company elected to account for the lease concessions as if they were part of the enforceable rights rather than as a modification. For leases with abatements, the Company accounted for the lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework. During the three and nine months ended September 30, 2021 and 2020, the impact of lease concessions granted did not have a material effect on the Company’s consolidated financial statements.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Income Taxes


Brookfield DTLA has elected to be taxed as a real estate investment trust (“REIT”REIT”) pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, (the “Code”), commencing with its tax period ended December 31, 2013. Brookfield DTLA conducts and intends to conduct its operations so aswith the intent to continue to qualify as a REIT. Accordingly, Brookfield DTLA is not subject to U.S. federal income tax, provided that it continues to qualify as a REIT and makes distributions to its stockholders, if any, that generally equal or exceed its taxable income.

Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”TRS”). CertainA TRS is permitted to engage in activities that we undertake must be conducted by a TRS,REIT cannot engage in directly, such as non-customaryperforming non‑customary services for ourthe Company’s tenants, and holding assets that wethe Company cannot hold directly.directly and conducting certain affiliate transactions. A TRS is subject to both federal and state income taxes.

Qualification and taxation as a REIT depends upon Brookfield DTLA’s ability to meet theThe Company’s various qualification tests imposed under the Code related to annual operating results, asset diversification, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that Brookfield DTLA will be organizedTRS did not have significant tax provisions or be able to operate in a manner so as to continue to qualify as a REIT. If Brookfield DTLA fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax on its taxable income at regular corporate tax rates, and it may be ineligible to qualify as a REIT for four subsequent tax years. Brookfield DTLA may also be subject to certain state or local income taxes, or franchise taxes on its REIT activities.

Brookfield DTLA made provisions for income taxes of $291 thousand and $482 thousand during the three and nine months ended September 30, 2017, respectively. Brookfield DTLA made no provision and a $419 thousand provision for incomedeferred taxes during the three and nine months ended September 30, 2016, respectively. Brookfield DTLA’s taxable income or loss is different than its financial statement income or loss.2021 and 2020.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 3—Recently Issued Accounting Literature
Brookfield DTLA recognizes tax benefits from uncertain tax positions when it is more likely than not that
New Accounting Pronouncements Adopted

There have been no new accounting pronouncements adopted during the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition threshold. Brookfield DTLA had no unrecognized tax benefits as ofnine months ended September 30, 20172021.

Accounting Pronouncements Issued But Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides accounting relief from the future impact of the cessation of LIBOR by, among other things, providing optional expedients to treat contract modifications resulting from such reference rate reform as a continuation of the existing contract and for hedging relationships to not be de-designated resulting from such changes provided certain criteria are met. The guidance is effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively through December 31, 2016,2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refines the scope of ASC Topic 848, Reference Rate Reform, and Brookfield DTLA does not expectclarifies some of its unrecognized tax benefits balanceguidance as part of the FASB’s ongoing monitoring of global reference rate reform activities. ASU 2021-01 permits entities to change duringelect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the next 12 months. As of September 30, 2017, Brookfield DTLA’s 2013 tax periodinterest rates used for discounting cash flows, computing variation margin settlements, and 2014, 2015 and 2016 tax years remain open due to the statute of limitationscalculating price alignment interest in connection with reference rate reform activities under way in global financial markets. ASU 2021-01 became effective upon issuance and may be subjectapplied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to examinationMarch 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company’s variable debt and interest rate cap contracts currently reference LIBOR. The Company is currently in the process of identifying its LIBOR-based contracts that will be impacted by federal, statethe cessation of LIBOR, incorporating fallback language in negotiated contracts and local authorities. The short tax period ended October 15, 2013incorporating non-LIBOR reference rate and/or fallback language in new contracts to prepare for Brookfieldthese changes. Notwithstanding these efforts, the Company expects to utilize the optional expedients provided by ASU 2020-04 for debt contracts left unmodified. In addition, the fair value of interest rate cap contracts was de minimis as of September 30, 2021 and the Company does not use hedge accounting for these contracts. As such, we do not expect the adoption of ASU 2020-04 and 2021-01 to have a material effect on the Company’s consolidated financial statements.




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BROOKFIELD DTLA and its subsidiaries remains open due to the statute of limitations and may be subject to examination by federal, state and local tax authorities.FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 3—4—Rents, Deferred Rents and Other Receivables, Net


Brookfield DTLA’s rents, deferred rents and other receivables are presented netcomprised of the following amounts infollowing:
September 30, 2021December 31, 2020
Straight-line and other deferred rents$110,476 $109,196 
Tenant inducements receivable32,737 33,280 
Tenant receivables3,498 5,057 
Other receivables660 2,079 
Rents, deferred rents and other receivables, gross147,371 149,612 
Less: accumulated amortization of tenant inducements19,206 15,973 
Rents, deferred rents and other receivables, net$128,165 $133,639 

See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of assessments regarding the condensed consolidated balance sheets (in thousands):

 September 30, 2017 December 31, 2016
    
Allowance for doubtful accounts$206
 $213
Accumulated amortization of tenant inducements12,029
 9,924

Brookfield DTLA recorded recoveriescollectibility of doubtful accounts of $2 thousandrents and $7 thousanddeferred rent receivables and related adjustments made during the three and nine months ended September 30, 2017, respectively. Brookfield DTLA recorded recoveries2021 and 2020 due to the measures taken to combat the spread of doubtful accounts of $311 thousand and $239 thousand during the three and nine months ended September 30, 2016, respectively.COVID-19 pandemic.



BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 4—5—Intangible Assets and Liabilities


Brookfield DTLA’s intangible assets and liabilities are summarized as follows (in thousands):follows:

September 30, 2021December 31, 2020
Intangible Assets
In-place leases$46,448 $46,448 
Tenant relationships6,900 6,900 
Above-market leases19,874 19,874 
Intangible assets, gross73,222 73,222 
Less: accumulated amortization55,778 51,176 
Intangible assets, net$17,444 $22,046 
Intangible Liabilities
Below-market leases$46,945 $46,945 
Less: accumulated amortization42,110 40,940 
Intangible liabilities, net$4,835 $6,005 

 September 30, 2017 December 31, 2016
Intangible Assets   
In-place leases$71,439
 $110,519
Tenant relationships33,524
 46,248
Above-market leases34,652
 39,936
 139,615
 196,703
Less: accumulated amortization77,804
 121,117
Intangible assets, net$61,811
 $75,586
    
Intangible Liabilities   
Below-market leases$60,023
 $76,344
Less: accumulated amortization42,401
 54,117
Intangible liabilities, net$17,622
 $22,227

The impactA summary of the amortizationeffect of acquired below-market leases, netamortization/accretion of acquired above-market leases, on rental incomeintangible assets and of acquired in-place leases and tenant relationships on depreciation and amortization expenseliabilities reported in the consolidated financial statements is as follows (in thousands):follows:

For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2021202020212020
Lease income$(49)$(578)$(207)$(744)
Depreciation and amortization expense$1,058 $1,634 $3,225 $4,596 

18
 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
        
Rental income$747
 $(158) $1,639
 $2,733
Depreciation and amortization expense3,239
 4,994
 10,809
 14,796


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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

As of September 30, 2017,2021, the estimate of theestimated amortization/accretion of intangible assets and liabilities during the remainder of 2017, the next four years and thereafterin future periods is as follows (in thousands):follows:

In-Place
Leases		Other
Intangible Assets		Intangible
Liabilities
Remainder of 2021$748 $606 $381 
20222,757 2,275 1,493 
20231,947 1,949 794 
20241,091 1,864 278 
2025951 1,191 263 
2026580 449 245 
Thereafter1,033 3 1,381 
Total future amortization/accretion of intangibles$9,107 $8,337 $4,835 

19
 
In-Place
Leases
 
Other
Intangible Assets
 
Intangible
Liabilities
      
2017$2,001
 $1,416
 $1,326
20186,747
 5,116
 3,799
20195,698
 4,310
 3,225
20205,052
 3,417
 3,017
20214,815
 3,381
 2,893
Thereafter9,319
 10,539
 3,362
 $33,632
 $28,179
 $17,622


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Note 5—Deferred Charges, Net

Brookfield DTLA’s deferred charges are presented net of the following amounts in the condensed consolidated balance sheets (in thousands):

 September 30, 2017 December 31, 2016
    
Accumulated amortization of deferred leasing costs$39,808
 $49,575



BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 6—Secured Debt, Net
Note 6—Mortgage Loans


Brookfield DTLA’s secured debt is as follows (in thousands, except percentage amounts):follows:

Maturity Date (1)Contractual Interest RatesPrincipal Amount as of
September 30, 2021December 31, 2020
Variable-Rate Loans:
Wells Fargo Center–North Tower (2)10/9/2023LIBOR + 1.65%$400,000 $400,000 
Wells Fargo Center–North Tower (2)10/9/2023LIBOR + 4.00%65,000 65,000 
Wells Fargo Center–North Tower (2)(3)10/9/2023LIBOR + 5.00%35,000 35,000 
Wells Fargo Center–South Tower (4)11/4/2023LIBOR + 1.80%260,796 260,796 
777 Tower (5)10/31/2024LIBOR + 1.60%231,842 231,842 
777 Tower (6)10/31/2024LIBOR + 4.15%43,158 43,158 
EY Plaza (7)10/9/2025LIBOR + 2.86%275,000 275,000 
EY Plaza (7)10/9/2025LIBOR + 6.85%30,000 30,000 
Gas Company Tower (7)2/9/2026LIBOR + 1.89%350,000 — 
Gas Company Tower (7)2/9/2026LIBOR + 5.00%65,000 — 
Gas Company Tower (7)2/9/2026LIBOR + 7.75%50,000 — 
Total variable-rate loans1,805,796 1,340,796 
Fixed-Rate Debt:
BOA Plaza9/1/20244.05 %400,000 400,000 
FIGat7th3/1/20233.88 %58,500 58,500 
Total fixed-rate debt458,500 458,500 
Debt Refinanced:
Gas Company Tower— 319,000 
Gas Company Tower— 131,000 
Total debt refinanced— 450,000 
Total secured debt2,264,296 2,249,296 
Less: unamortized debt financing costs10,224 9,656 
Total secured debt, net$2,254,072 $2,239,640 
(1)Maturity dates include the effect of extension options that the Company controls, if applicable. As of September 30, 2021 and December 31, 2020, we meet the criteria specified in the loan agreements to extend the loan maturity dates.
(2)As required by the loan agreements, we have entered into interest rate cap contracts that limit the LIBOR portion of the interest rate to 3.85%.
(3)BAM owns a significant interest in a company whose subsidiary is the lender of this loan. See Note 13—“Related Party Transactions.”
(4)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 3.63%. As of September 30, 2021, a future advance amount of $29.2 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, leasing commissions, and common area improvements.
(5)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.00%. As of September 30, 2021, a future advance amount of $36.8 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mezzanine loan future advance amount.
20
 
Contractual
Maturity Date
   Principal Amount as of
  Interest Rate September 30, 2017 December 31, 2016
Floating-Rate Debt       
Variable-Rate Loans:       
Wells Fargo Center–North Tower (1)4/9/2019 3.49% $370,000
 $—
Wells Fargo Center–North Tower (2)4/9/2019 6.49% 55,000
 —
Wells Fargo Center–North Tower (3)4/9/2019 8.24% 45,000
 —
Wells Fargo Center–South Tower (4)12/6/2018 4.93% 250,000
 250,000
777 Tower (5)11/1/2018 3.42% 220,000
 220,000
Figueroa at 7th (6)12/10/2017 3.41% 35,000
 35,000
Total variable-rate loans    975,000
 505,000
        
Variable-Rate Swapped to Fixed-Rate Loan:       
EY Plaza (7)11/27/2020 3.93% 177,858
 180,859
Total floating-rate debt    1,152,858
 685,859
        
Fixed-Rate Debt:       
BOA Plaza9/1/2024 4.05% 400,000
 400,000
Gas Company Tower8/6/2021 3.47% 319,000
 319,000
Gas Company Tower8/6/2021 6.50% 131,000
 131,000
Total fixed-rate debt    850,000
 850,000
        
Debt Refinanced:       
Wells Fargo Center–North Tower    —
 550,000
        
Total debt    2,002,858
 2,085,859
Less: unamortized discounts and debt issuance costs    11,874
 9,055
Total debt, net    $1,990,984
 $2,076,804

__________
(1)This loan bears interest at LIBOR plus 2.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).
(2)This loan bears interest at LIBOR plus 5.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).
(3)This loan bears interest at LIBOR plus 7.00%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

(6)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.00%. As of September 30, 2021, a future advance amount of $6.8 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mortgage loan future advance amount.
(4)
This loan bears interest at LIBOR plus 3.69%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 3.00%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). As of September 30, 2017, a maximum future advance amount of $20.0 million is available under this loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures.
(5)
This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).
(6)
This loan bears interest at LIBOR plus 2.25%. On November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After this extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). See Note 14 “Subsequent Event.”
(7)This loan bears interest at LIBOR plus 1.75%. As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178%. The effective interest rate of 3.93% includes interest on the swap.

(7)As required by the loan agreements, we have entered into interest rate cap contracts that limit the LIBOR portion of the interest rate to 4.00%.

The weighted average interest rate of the Company’s secured debt was 2.89% and 3.19% as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, the weighted average term to maturity of our debt was approximately three years.

Debt RefinancedMaturities


The following table provides information regarding the Company’s minimum future principal payments due on the Company’s secured debt (after the impact of extension options that the Company controls, if applicable) as of September 30, 2021:

Remainder of 2021$— 
2022— 
2023819,296 
2024675,000 
2025305,000 
2026465,000 
Total secured debt$2,264,296 

As of September 30, 2021, $1,035.8 million of the Company’s secured debt may be prepaid without penalty, $400.0 million may be defeased (as defined in the underlying loan agreements) and $828.5 million may be prepaid with prepayment penalties.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Gas Company Tower—

On AprilFebruary 5, 2017,2021, Brookfield DTLA refinanced the $550.0its Gas Company Tower secured loans. The original $450.0 million mortgage loan secured by Wells Fargo Center–North Tower. In connectionloans were replaced with the refinancing, the Company repaid $80.0secured loans of $465.0 million, of principal and incurred transaction costs totaling $7.4 million. During April 2017, the Company received an $82.0 million cash contribution from Brookfield DTLA Holdings that was used to pay for costs associated with the refinancing of Wells Fargo Center–North Tower.

The new $470.0 million loan is comprised of a $370.0$350.0 million mortgage loan, a $55.0$65.0 million mezzanine loan and a $45.0$50.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 2.25%1.89%, 5.25%5.00% and 7.00%7.75%, respectively, and require the payment of interest-only until maturity. As required by the mortgage and mezzanine loan agreements, on April 5, 2017 the Company entered into interest rate cap agreements with a total notional amount of $470.0 million that limit the LIBOR portion of the interest rates to 2.75%.

respectively. The mortgage and mezzanine loans mature on April 9, 2019. Brookfield DTLA has three options to extend theinitial maturity date of thethese interest-only loans each for a period of one year, subject to meeting certain debt yield ratios (as specified in the mortgage and mezzanine loan agreements).

is February 9, 2023. The mortgage and mezzanine loansloan can be prepaid, in whole or in part, with prepayment penaltiesfees (as defined in the underlying loan agreements)agreement) until July 9, 2018February 2022 after which the loans canloan may be repaid without penalty.prepayment fees. A voluntary prepayment of the mortgage or mezzanine loans requires a simultaneous pro-rata prepayment of all loans encumbering this property.


BROOKFIELD Brookfield DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Debt Maturities

As Brookfield DTLA’s debt matures, principal payment obligations present significant future cash requirements. Ashas 3 options to extend the loans maturity dates for a period of September 30, 2017, our debt to be repaid duringone year each, as long as the remaindermaturity date of 2017, the next four yearsmezzanine loans is extended simultaneously with the mortgage loan, and thereafter is as follows (in thousands):

2017 (1)$36,025
2018474,233
2019474,449
2020168,151
2021450,000
Thereafter400,000
 $2,002,858
__________
(1)
On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th from December 10, 2017 until January 8, 2018. See Note 14 “Subsequent Event.”

Asno Event of September 30, 2017, $343.9 million of our debt may be prepaid without penalty, $400.0 million may be defeasedDefault (as defined in the underlying loan agreement),agreements) has occurred. All proceeds from the new secured loans were used to pay off the original $450.0 million encumbrance and $1,259.0to satisfy the new loans’ required reserves. The Company recognized a loss on early extinguishment of debt of $4.6 million, may be prepaid withwhich represented a prepayment penalties.

Debt Extension—

On August 14, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th until December 10, 2017. Then on November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After the second extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight monthspremium and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specifiedmaintenance fee, in interest expense in the loan agreement). The Company plans to refinance this loan on or prior to January 8, 2018 and does not expect to make a principal paydown when the loan is refinanced. See Note 14 “Subsequent Event.”consolidated statements of operations.


Non-Recourse Carve Out Guarantees


All of Brookfield DTLA’s $2.0 billion of mortgageour secured debt is subject to “non-recourse carve out” guarantees that expire upon elimination of the underlying loan obligations. In connection with all of these loans, Brookfield DTLA entered into “non-recourse carve out” guarantees, which provide for these otherwise non-recourse loans to become partially or fully recourse against Brookfield DTLA Holdings, or one of its subsidiaries, if certain triggering events (as defined in the loan agreements) occur.



Debt Compliance

As of September 30, 2021 and December 31, 2020, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements.

Certain loan agreements held by Brookfield DTLA contain debt yield and debt service coverage ratios. As of September 30, 2021, Brookfield DTLA was meeting or exceeding these financial ratios, with the exception of the loans secured by Wells Fargo Center—South Tower and Wells Fargo Center—North Tower that did not meet their respective minimum debt yield ratio.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Wells Fargo Center–South Tower —
Debt Reporting

Pursuant to the terms of certain of our mortgage loan agreements, Brookfield DTLA is required to report a debt service coverage ratio (“DSCR”) calculated using the formulas specified in the underlying loan agreements. We have submitted the required reports to the lenders for the measurement periods ended September 30, 2017 and were in compliance with the amounts required by the loan agreements.

Pursuant to the terms of the EY Plaza and Figueroa at 7thWells Fargo Center–South Tower mortgage loan agreements, weagreement, effective September 2020, a cash sweep event commenced as the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, any excess operating cash flows are requiredcurrently swept to provide annual audited financial statements of Brookfield DTLA Holdingsa cash account controlled by the loan administrative agent. Funds within this account shall be applied to the lenders or agents. The receipt ofborrower's approved operating expenses, capital expenditures and leasing costs; property taxes and insurance; interest and any opinion other than an “unqualified” audit opinion on our annual audited financial statements is an event of defaultamounts due and payable under the loan agreementsand interest rate cap contracts; and fees and expenses due to the loan administrative agent.

Wells Fargo Center–North Tower —

As of September 30, 2021, the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, following the occurrence of such debt yield event, any excess operating cash flows are to be swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses, capital expenditures and leasing costs; property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; reserve accounts; and fees and expenses due to the loan administrative agent. The cash sweep has not started as of September 30, 2021.

London Interbank Offered Rate (“LIBOR”) Transition

The chief executive of the United Kingdom Financial Conduct Authority (“FCA”), which regulates the LIBOR, previously announced that the FCA intends to stop compelling banks to submit rates for the properties listed above. If ancalculation of LIBOR after 2021. In response, 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”) as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. In November 2020, the Intercontinental Exchange (“ICE”) Benchmark Administration Limited, the benchmark administrator for USD-LIBOR rates, proposed extending the publication of certain commonly-used USD-LIBOR settings until June 30, 2023 and the FCA issued a statement supporting such proposal. In connection with this proposal, certain U.S. banking regulators issued guidance strongly encouraging banks to generally cease entering into new contracts referencing USD-LIBOR as soon as practicable and in any event by December 31, 2021. It is not possible to predict the effect of default occurs, the lenders have the right to pursue the remedies containedthese changes, including when there will be sufficient liquidity in the loan documents, including accelerationSOFR markets.

We have outstanding variable debt and interest rate cap contracts that are indexed to LIBOR. The Company is currently in the process of all identifying its LIBOR-based contracts that will be impacted by the cessation of LIBOR, incorporating fallback language in negotiated contracts and incorporating non-LIBOR reference rate and/or fallback language in new contracts to prepare for these changes.

If LIBOR changes or is replaced, the interest rates on our debt which is indexed to USD-LIBOR will be determined using a portiondifferent successor rate, which may adversely affect interest expense and may result in interest obligations which are more than the payments that would have been made on such debt if USD-LIBOR was available in its current form.
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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 7—Accounts Payable and Other Liabilities

Brookfield DTLA’s accounts payable and other liabilities are comprised of the debt and foreclosure.following:

September 30, 2021December 31, 2020
Tenant improvements and inducements payable$33,696 $47,679 
Unearned rent and tenant payables28,162 27,331 
Accrued capital expenditures and leasing commissions9,233 15,201 
Accrued expenses and other liabilities14,901 5,830 
Accounts payable and other liabilities$85,992 $96,041 

Note 7—8—Noncontrolling Interests

Mezzanine Equity Component


Mezzanine equity in the condensed consolidated balance sheets is comprised of the following:

Series A Preferred Stock. As of September 30, 2021 and December 31, 2020, 9,730,370 shares of Series A preferred stock were outstanding, of which 9,357,469 shares were issued to third parties and 372,901 shares were issued to DTLA Fund Holding Co., a subsidiary of DTLA Holdings.

Series A Preferred Interest. The Series A preferred interest in Fund II is indirectly held by the Company through wholly owned subsidiaries (subject to certain REIT accommodation preferred interests).

Series A-1 Preferred Interest. The Series A-1 preferred interest is held by DTLA Holdings or wholly-owned subsidiaries of DTLA Holdings.

Senior Participating Preferred Interest. Brookfield DTLA Fund Properties III LLC (“Fund III”), a wholly-owned subsidiary of DTLA Holdings, issued a senior participating preferred interest to DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition.

Series B Preferred Interest.Pursuant to the Limited Liability Company Agreement (“LLCA”) of Fund II and the subsequent amendment to the LLCA, DTLA Holdings made a commitment to contribute up to $310.0 million in cash or property to Fund II, which directly or indirectly owns the Brookfield DTLA properties. As of September 30, 2021, $40.7 million is available to the Company under this commitment for future funding. The Series B preferred interest (collectively,in Fund II held by DTLA Holdings is effectively senior to the “Preferred Interests”). interest in Fund II indirectly held by the Company and has a priority on distributions senior to the equity securities of such subsidiaries held indirectly by the Company and, as a result, effectively rank senior to the Series A preferred stock. The Series B preferred interest in Fund II may limit the amount of funds available to the Company for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
The Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest are held by a noncontrolling interest holder. The Series A preferred stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest (collectively, the “Preferred Interests”) are classified inas mezzanine equity because they are callable, and the holder of the Series A-1 preferred interest, senior participating preferred interest, Series B preferred interest, and some of the Series A preferred stock indirectly controls the ability to elect to redeem such instruments, through its controlling interest in the Company and its subsidiaries. There is no commitment or obligation on theSee Note 9—“Mezzanine Equity.”

Stockholders’ Deficit Component

Common interests held by DTLA Holdings are presented as “noncontrolling interests” as part of BrookfieldStockholders’ Deficit in the consolidated balance sheets.


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BROOKFIELD DTLA or Brookfield DTLA Holdings to redeemFUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 9—Mezzanine Equity

A summary of the Preferred Interests.

The Preferred Interests included withinchange in mezzanine equity were recorded at fair value onis as follows:
Number of
Shares of
Series A
Preferred
Stock		Series A
Preferred
Stock		Noncontrolling InterestsTotal
Mezzanine
Equity
Series A-1
Preferred
Interest		Senior
Participating
Preferred
Interest		Series B
Preferred
Interest
Balance, December 31, 20209,730,370 $447,028 $435,242 $20,413 $198,827 $1,101,510 
Issuance of Series B preferred interest2,600 2,600 
Dividends4,637 4,637 
Preferred returns4,303 4,282 8,585 
Redemption measurement adjustments601 601 
Contributions from noncontrolling
    interests		171 171 
Repurchases of noncontrolling interests(16,156)(16,156)
Distributions to noncontrolling interests(242)(4,244)(4,486)
Balance, March 31, 20219,730,370 451,665 439,545 20,943 185,309 1,097,462 
Issuance of Series B preferred interest3,400 3,400 
Dividends4,638 4,638 
Preferred returns4,302 4,146 8,448 
Redemption measurement adjustments299 299 
Contributions from noncontrolling
    interests		— — 
Repurchases of noncontrolling interests(11,117)(11,117)
Distributions to noncontrolling interests(304)(4,283)(4,587)
Balance, June 30, 20219,730,370 456,303 443,847 20,938 177,455 1,098,543 
Issuance of Series B preferred interest— — 
Dividends4,637 4,637 
Preferred returns4,303 3,896 8,199 
Redemption measurement adjustments(325)(325)
Contributions from noncontrolling
    interests		83 83 
Repurchases of noncontrolling interests(10,255)(10,255)
Distributions to noncontrolling interests(154)(4,145)(4,299)
Balance, September 30, 20219,730,370 $460,940 $448,150 $20,542 $166,951 $1,096,583 
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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Number of
Shares of
Series A
Preferred
Stock		Series A
Preferred
Stock		Noncontrolling InterestsTotal
Mezzanine
Equity
Series A-1
Preferred
Interest		Senior
Participating
Preferred
Interest		Series B
Preferred
Interest
Balance, December 31, 20199,730,370 $428,480 $418,029 $22,362 $185,352 $1,054,223 
Issuance of Series B preferred interest7,800 7,800 
Dividends4,637 4,637 
Preferred returns4,303 4,208 8,511 
Redemption measurement adjustments(225)(225)
Contributions from noncontrolling
    interests		— — 
Repurchases of noncontrolling interests(6,869)(6,869)
Distributions to noncontrolling interests(263)(4,401)(4,664)
Balance, March 31, 20209,730,370 433,117 422,332 21,874 186,090 1,063,413 
Issuance of Series B preferred interest17,350 17,350 
Dividends4,637 4,637 
Preferred returns4,303 4,567 8,870 
Redemption measurement adjustments(2,081)(2,081)
Contributions from noncontrolling
    interests		302 302 
Repurchases of noncontrolling interests— — 
Distributions to noncontrolling interests(45)(3,500)(3,545)
Balance, June 30, 20209,730,370 437,754 426,635 20,050 204,507 1,088,946 
Issuance of Series B preferred interest— — 
Dividends4,637 4,637 
Preferred returns4,303 4,689 8,992 
Redemption measurement adjustments(37)(37)
Contributions from noncontrolling
    interests		138 138 
Repurchases of noncontrolling interests(6,638)(6,638)
Distributions to noncontrolling interests(751)(5,275)(6,026)
Balance, September 30, 20209,730,370 $442,391 $430,938 $19,400 $197,283 $1,090,012 

During the date of issuance and have been adjusted to the greater of their carrying amount or redemption value as ofnine months ended September 30, 20172021 and December 31, 2016. Adjustments2020, the Company used cash received from the issuance of the Series B preferred interest for capital expenditures and leasing costs. During the three and nine months ended September 30, 2021, repurchases of and distributions to increasenoncontrolling interests were made using the carrying amountexcess operating cash flows generated from properties. During the three months ended September 30, 2020, repurchases of and distributions to redemption value are recordednoncontrolling interests were made using the excess cash from upsized refinancing of the loans secured by EY Plaza in September 2020. During the condensed consolidated statementsix months ended June 30, 2020, repurchases of operationsand distributions to noncontrolling interests were made mainly using the excess cash from upsized refinancing of the loans secured by 777 Tower in October 2019, as a redemption measurement adjustment.well as operating cash flows generated from other properties.


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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Series A Preferred Stock


As of September 30, 2017 and December 31, 2016, 9,730,370 shares of2021, the Series A preferred stock were outstanding,is reported at its redemption value of which 9,357,469 shares were issued to third parties$460.9 million calculated using the redemption price of $243.3 million plus $217.7 million of accumulated and 372,901 shares were issued to DTLA Fund Holding Co., a subsidiary of Brookfield DTLA Holdings.unpaid dividends on such Series A preferred stock through September 30, 2021.


No dividends were declared on the Series A preferred stock during the three and nine months ended September 30, 20172021 and 2016.2020. Dividends on the Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.90625 per share. As of September 30, 2017, the cumulative amount of unpaid dividends totals $143.5 million and has been reflected in the carrying amount of the Series A preferred stock.



BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The Series A preferred stock does not have a stated maturity and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A preferred stock will rank senior to our common stock with respect to the payment of distributions.provision. We may, at our option, redeem the Series A preferred stock, in whole or in part, for cash at a redemption price of $25.00 per share, plus all accumulated and unpaid dividends on such Series A preferred stock up to and including the redemption date. There is no commitment or obligation on the part of Brookfield DTLA or DTLA Holdings to redeem the Series A preferred stock. The Series A preferred stock is not convertible into or exchangeable for any other property or securities of Brookfield DTLA.


AsNoncontrolling Interests

There is no commitment or obligation on the part of September 30, 2017,Brookfield DTLA or DTLA Holdings to redeem the Series A preferred stock is reported at its redemption value of $386.8 million calculated using the redemption price of $25.00 per share plus all accumulated and unpaid dividends on such Series A preferred stock through September 30, 2017.Preferred Interests.


Series A-1 Preferred Interest

The Series A-1 preferred interest is held by Brookfield DTLA Holdings or wholly owned subsidiaries of Brookfield DTLA Holdings.

The Series A-1 preferred interest has mirror rights to the Series A preferred interests issued by Brookfield DTLA Fund Properties II LLC (“New OP”), which are held by a wholly owned subsidiary of Brookfield DTLA, but only with respect to their respective preferred liquidation preferences, and share pro rata with 48.13% to the Series A-1 preferred interest and 51.87% to the Series A preferred interest based on their current liquidation preferences in accordance with their respective preferred liquidation preferences in distributions from New OP, until their preferred liquidation preferences have been reduced to zero. Thereafter, distributions will be made 47.66% to the common component of the Series A interest and 52.34% to the common component of the Series B interest, which is held by Brookfield DTLA
Holdings. The economic terms of the Series A preferred stock mirror those of the New OP Series A preferred interests, including distributions in respect of the preferred liquidation preference.


As of September 30, 2017,2021, the Series A-1 preferred interest is reported at its redemption value of $379.2$448.2 million calculated using its liquidation value of $225.7 million plus $153.5$222.4 million of accumulated and unpaid dividendsinterest through September 30, 2021. Interest earned on suchthe Series A-1 preferred interest through September 30, 2017.is cumulative and accrues at an annual rate of 7.625%.


Senior Participating Preferred Interest

Brookfield DTLA Fund Properties III LLC (“DTLA OP”) issued a senior participating preferred interest to Brookfield DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition. The senior participating preferred interest was comprised of $240.0 million in preferred interests with a 7.0% coupon and a 4.0% participating interest in the residual value of DTLA OP.

During the nine months ended September 30, 2017, the Company received a net cash contribution totaling $250 thousand from Brookfield DTLA Holdings, which was used for general corporate purposes.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


As of September 30, 2017,2021, the senior participating preferred interest is reported at its redemption value of $25.5$20.5 million using the 4.0% participating interest in the residual value of the participating interest.BOA Plaza, EY Plaza and FIGat7th upon disposition or liquidation.


Series B Preferred Interest

At the time of the merger with MPG, Brookfield DTLA Holdings made a commitment to make capital contributions in cash or property to New OP, which directly or indirectly owns the Brookfield DTLA properties, to fund up to $260.0 million of its future cash needs, for which it will be entitled to receive a preferred return, if and when called by New OP.

The Series B preferred interest in New OP held by Brookfield DTLA Holdings is effectively senior to the interest in New OP held by Brookfield DTLA and has a priority on distributions senior to the equity securities of such subsidiaries held indirectly by Brookfield DTLA and, as a result, effectively rank senior to the Series A preferred stock. The Series B preferred interest in New OP may limit the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock.

On February 27, 2017, the Company received a $29.5 million cash contribution from Brookfield DTLA Holdings, which is entitled to a preferred return of 9.0% as part of the Series B preferred interest. The Company used these funds for general corporate purposes.

On April 4, 2017, the Company received an $82.0 million cash contribution from Brookfield DTLA Holdings, which is entitled to a preferred return of 9.0% as part of the Series B preferred interest. The Company used these funds to pay for costs associated with the refinancing of the Wells Fargo Center–North Tower mortgage loan.


As of September 30, 2017,2021, the Series B preferred interest is reported at its redemption value of $186.3$167.0 million calculated using its liquidation value of $174.8$163.1 million plus $11.5$3.9 million of accumulated and unpaid dividendspreferred returns on such Series B preferred interest through September 30, 2017.2021. Brookfield DTLA is entitled to receive a market rate of return on its contributions, currently 9.0% as of September 30, 2021.



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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Distribution Waterfall
Change
Brookfield DTLA may, at its discretion, distribute all or a portion of its available cash (as defined in Mezzanine Equitythe limited liability company agreement of Fund II) in the following priority: (1)

First to:Series B preferred interest unpaid preferred return
Second to:Series B preferred interest unreturned preferred capital
Third, proportionally in respect of
    unpaid preferred return to:
Series A preferred interest unpaid preferred return (2)
Series A-1 preferred interest unpaid preferred return (3)
Fourth, proportionally in respect
    of unreturned capital to: (2) (4)
Series A preferred interest unreturned capital
Series A-1 preferred interest unreturned capital (3)
And fifth to:Common interests to Brookfield DTLA and DTLA Holdings (5)
A summary__________
(1)Cash available to Fund II arises from its interests in its investments. Fund II owns indirectly all of the changeinterests in mezzanineGas Company Tower, Wells Fargo Center–South Tower, Wells Fargo Center–North Tower, 777 Tower and an interest in the 755 South Figueroa development site which will decrease as capital is called to fund the development. See Note 1 “Organization and Description of Business”. In addition, Fund II owns 96% indirectly of the interests in EY Plaza, FIGat7th and BOA Plaza (the “Fund III Assets”). DTLA Holdings owns the remaining 4% interest in the Fund III Assets. The amounts due to DTLA Holdings on the senior participating preferred interest for its preferred return and unreturned capital in Fund III were fully paid as of December 31, 2015. All of Fund II’s interests in these assets are subject to certain REIT accommodation preferred interests. This waterfall may be effected by future equity issuances in respect of Fund II, Fund III, Fund IV, or their subsidiaries, and are subject to all of the indebtedness of the entities.
(2)The Fund II Series A preferred interest is comprised of two parts, one is a preferred component with the analogous economic terms as the Company’s Series A Preferred Stock and a common component, which is junior to the preferred component of the Series A interest on analogous terms to the relationship between the Company’s Series A Preferred Stock and Common Stock. The Series A preferred interest is junior to the Fund II Series B preferred interest. See Note 8 “Noncontrolling Interests — Series B Preferred Interest”. Amounts paid in respect of the Fund II’s Series A preferred interest are generally available upon distribution to the Company for further distribution in respect of the nine months ended September 30, 2017 isCompany’s Series A Preferred Stock, and, when and if distributed in respect of the Series A Preferred Stock, will be distributed first to accumulated and unpaid dividends and to reduce its unreturned liquidation capital.
(3)DTLA Holdings in its capacity as follows (in thousands, except share amounts):

  
Number of
Shares of
Series A
Preferred
Stock
 
Series A
Preferred
Stock
 Noncontrolling Interests 
Total
Mezzanine
Equity
    
Series A-1
Preferred
Interest
 
Senior
Participating
Preferred
Interest
 
Series B
Preferred
Interest
 
             
Balance, December 31, 20169,730,370
 $372,852
 $366,297
 $25,019
 $65,364
 $829,532
Issuance of Series B preferred interest         111,492
 111,492
Current dividends   13,911
 12,909
 —
 9,470
 36,290
Contribution from senior participating
    preferred interest, net
       250
   250
Redemption measurement adjustment       250
   250
Balance, September 30, 20179,730,370
 $386,763
 $379,206
 $25,519
 $186,326
 $977,814

Note 8—Noncontrolling Interests

Mezzanine Equity Component

Thethe holder of the Series A-1 preferred interest senior participatingcan waive receipt of distributions that would otherwise be made to it in respect of the Series A-1 preferred interest and Series B preferred interest consist of equity interests of New OP, DTLA OP and New OP, respectively, which are owned directly by Brookfield DTLA Holdings. These noncontrolling interests are presented as mezzanine equity in the condensed consolidated balance sheet. See Note 7 “Mezzanine Equity.”

Stockholders’ Deficit Component

The Series B common interest ranks juniorsuch amounts shall be paid instead to the Series A preferred stockinterest or as otherwise provided by the subsequent provisions of the waterfall. Any amounts waived by DTLA Holdings shall not reduce the Series A-1 unpaid preferred return or unreturned capital.
(4)Applicable if distribution is (a) in connection with a liquidating event or redemption or (b) at the election of Brookfield DTLA.
(5)Based on the interests of the Series A and Series B interests of the Fund after repayment of the preferred capital portion of each of them, until the Senior A junior unreturned liquidation capital is reduced to dividends and upon liquidation and is presented in the condensed consolidated balance sheet as noncontrolling interest.zero.





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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 9—10—Accumulated Other Comprehensive Loss


A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s derivative financial instruments designated as cash flow hedges is as follows (in thousands):follows:

For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2021202020212020
Balance at beginning of period$— $(2,763)$— $(2,341)
Other comprehensive gain before reclassifications— 984 — 562 
Amounts reclassified from accumulated other comprehensive loss— 1,779 — 1,779 
Net current-period other comprehensive gain— 2,763 — 2,341 
Balance at end of period$— $— $— $— 

Note 11—Financial Instruments
 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
        
Balance at beginning of period$(2,610) $(10,537) $(3,373) $(5,415)
Other comprehensive income (loss)
    before reclassifications
469
 1,832
 1,232
 (3,290)
Amounts reclassified from accumulated
    other comprehensive loss
—
 —
 —
 —
Net current-period
    other comprehensive income (loss)
469
 1,832
 1,232
 (3,290)
Balance at end of period$(2,141) $(8,705) $(2,141) $(8,705)


Derivative Financial Instruments
Note 10—Fair Value Measurements


The valuation of Brookfield DTLA’sfollowing table presents the interest rate swap is determined using widely accepted valuation techniques, including discounted cash flow analysis oncap contracts pursuant to the expected cash flow of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We have incorporated credit valuation adjustments to appropriately reflect both our own and the respective counterparty’s non-performance risk in the fair value measurements.certain of its loan agreements as of September 30, 2021:

Brookfield DTLA’s (liabilities) assets measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, are as follows (in thousands):

Notional
Amount		Strike
Rate (1)		Expiration
Date
Interest Rate Caps:
Wells Fargo Center–North Tower (2)$400,000 3.85%10/15/2021
Wells Fargo Center–North Tower (2)65,000 3.85%10/15/2021
Wells Fargo Center–North Tower (2)35,000 3.85%10/15/2021
Wells Fargo Center–South Tower290,000 3.63%11/4/2022
777 Tower (3)268,600 4.00%11/10/2021
777 Tower (3)50,000 4.00%11/10/2021
EY Plaza275,000 4.00%10/15/2022
EY Plaza30,000 4.00%10/15/2022
Gas Company Tower350,000 4.00%2/15/2023
Gas Company Tower65,000 4.00%2/15/2023
Gas Company Tower50,000 4.00%2/15/2023
Total derivatives not designated
    as cash flow hedging instruments		$1,878,600 
30
    Fair Value Measurements Using
  
Total
Fair
Value
 
Quoted Prices in
Active Markets
for Identical
(Liabilities)
Assets (Level 1)
 
Significant
Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs (Level 3)
Interest rate swap at:        
September 30, 2017 $(2,141) $—
 $(2,141) $—
December 31, 2016 (3,373) —
 (3,373) —
         
Interest rate caps at:        
September 30, 2017 $17
 $—
 $17
 $—
December 31, 2016 53
 —
 53
 —


Table of Contents



BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

__________
Note 11—Financial Instruments(1)The index used for all derivative financial instruments shown above is 1-Month LIBOR.

(2)In September 2021, Brookfield DTLA exercised the second one-year option to extend the maturity date of the $500.0 million mortgage and mezzanine loans secured by Wells Fargo Center—North Tower to October 2022. In October 2021, Brookfield DTLA entered interest rate cap contracts of aggregate notional amount of $500.0 million that limit the LIBOR portion of the interest rate to 2.57% with expiration date on October 15, 2022.
Derivative Financial Instruments(3)In November 2021, Brookfield DTLA entered interest rate cap contracts of aggregate notional amount of $318.6 million that limit the LIBOR portion of the interest rate to 4.00% with expiration date on November 10, 2022.


A summary of the fair value of Brookfield DTLA’s derivative financial instruments is as follows (in thousands):follows:

Fair Value as of
Balance Sheet LocationSeptember 30, 2021December 31, 2020
Derivatives not designated as
    hedging instruments:
        Interest rate caps		Prepaid and other assets, net$7 $5 

   Fair Value
   September 30, 2017 December 31, 2016
Derivatives designated as cash flow hedging instruments:    
Interest rate swap  $(2,141) $(3,373)
The following table presents the gain recorded on interest rate swaps for the three and nine months ended September 30, 2021 and 2020:

Gain
Recognized
in OCL		Loss Reclassified from AOCL to Other Expense in Consolidated Statements of Operations
Derivatives designated as cash flow hedging instruments:
For the three months ended:
September 30, 2021$— $— 
September 30, 2020$984 $(1,779)
For the nine months ended:
September 30, 2021$— $— 
September 30, 2020$562 $(1,779)
A summary
Changes in fair value of interest rate cap contracts recognized in the consolidated statements of operations during the three and nine months ended September 30, 2021 and 2020 were de minimis.

Other Financial Instruments

Brookfield DTLA’s other financial instruments that are exposed to concentrations of credit risk consist primarily of bank deposits and rents receivable. Brookfield DTLA places its bank deposits with major commercial banks. Cash balances with any one institution may at times be in excess of the effectFederal Deposit Insurance Corporation-insured limit of derivative financial instruments reported in$250,000.

See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of assessments regarding the condensed consolidated financial statements is as follows (in thousands):

 
Amount of Gain (Loss)
Recognized in AOCL
 
Amount of Gain (Loss)
Reclassified from
AOCL to Statement
of Operations
Derivatives designated as cash flow hedging instruments:   
Interest rate swap for the nine months ended:   
September 30, 2017$1,232
 $—
September 30, 2016(3,290) —

Interest Rate Swap—

Ascollectibility of rents and deferred rents receivable and related adjustments made during the three and nine months ended September 30, 20172021 and December 31, 2016, Brookfield DTLA held an interest rate swap assigned2020 due to the EY Plaza mortgage loan with notional amountsmeasures taken to combat the spread of $177.9 million and $180.9 million, respectively. The swap requires net settlement each month and expires on November 2, 2020.the COVID-19 pandemic.




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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 12—Fair Value Measurements and Disclosures
Interest Rate Caps—

Brookfield DTLA holds interest rate caps pursuant to the terms of certain of its mortgage loan agreements with the following notional amounts (in thousands):

 September 30, 2017 December 31, 2016
    
Wells Fargo Center–North Tower$370,000
 $—
Wells Fargo Center–North Tower55,000
 —
Wells Fargo Center–North Tower45,000
 —
Wells Fargo Center–South Tower270,000
 270,000
777 Tower220,000
 220,000
 $960,000
 $490,000

As required by the Wells Fargo Center–North Tower mortgage and mezzanine loan agreements, on April 5, 2017 the Company entered into interest rate cap agreements with a total notional amount of $470.0 million that limit the LIBOR portion of the interest rate to 2.75%.

Other Financial Instruments

The estimatedASC Topic 820, Fair Value Measurement, defines fair value and carrying amountestablishes a framework for measuring fair value. The objective of Brookfield��DTLA’s mortgage loansfair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the “exit price”).

ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three categories:
•Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date.
•Level 2—Observable prices that are based on inputs not quoted in active markets but corroborated by market data.
•Level 3—Unobservable prices that are used when little or no market data is available.

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Brookfield DTLA utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible, as follows (in thousands):well as consider counterparty credit risk in its assessment of fair value.


Recurring Measurements—
 September 30, 2017 December 31, 2016
    
Estimated fair value$2,003,116
 $2,059,449
Carrying amount2,002,858
 2,085,859


We calculated the estimatedThe fair value of our mortgage loans by discountingBrookfield DTLA’s interest rate swap contracts was determined using widely accepted valuation techniques, including discounted cash flow analyses on the future contractualexpected cash flows of the loans using currentderivatives. These analyses reflect the contractual terms of the derivatives, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The Company has incorporated credit valuation adjustments to appropriately reflect both our and the respective counterparty’s non‑performance risk adjusted rates available to borrowers with similar credit ratings.in the fair value measurements. The estimatedinterest rate swap contracts were terminated in September 2020. See Note 11 “Financial Instruments.”

The fair value of mortgage loans isinterest rate cap contracts was $7 thousand and $5 thousand as of September 30, 2021 and December 31, 2020, respectively. The Company classified them as Level 3.2 in the fair value hierarchy.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


Nonrecurring Measurements—

As of September 30, 2021 and December 31, 2020, the Company did not have any assets or liabilities that are measured at fair value on a nonrecurring basis. Refer to Note 2—“Basis of Presentation —Impairment Review” for further discussion.

Disclosures about Fair Value of Financial Instruments—

Secured debt — The Company estimates the fair value of its debt by calculating the credit-adjusted present value of principal and interest payments for each loan. The calculation incorporates observable market interest rates (Level 2 inputs), assumes that each loan will be outstanding until maturity, and excludes any options to extend the maturity date of the loan available per the terms of the loan agreement, if any. The table below presents the estimated fair value and carrying value of the Company’s secured debt included in liabilities:
September 30, 2021December 31, 2020
Fair Value$2,264,374 $2,246,225 
Carrying value$2,254,072 $2,239,640 

Other financial instruments — As of September 30, 2021 and December 31, 2020, the carrying values of cash and cash equivalents, restricted cash, tenant and other receivables, other assets, accounts payable and other liabilities, and balances with affiliates approximate fair value because of the short-term nature of these instruments.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 12—13—Related Party Transactions


Management Agreements


Certain subsidiaries of Brookfield DTLA have entered into arrangements with the Manager, pursuant to which the Manager provides property management and various other services. Property managementThe following table presents the basis of fees under the management agreements are calculated based on 2.75% of rents collected (as defined in the management agreements). In addition, the Company paysincurred to the Manager an asset management fee, which is calculated based on 0.75% ofand Brookfield affiliates during the capital contributed by Brookfield DTLA Holdings.three and nine months ended September 30, 2021 and 2020:


TypeAffiliateFee Description
Property management feeThe Manager2.75% of rents collected (as defined in the management agreements)
Asset management feeBPY and BAM0.75% of DTLA Holdings’ invested equity in Brookfield DTLA’s properties
Leasing management feeThe Manager and Brookfield affiliates1.00% to 4.00% of expected rents, depending on the terms of the lease and whether a third-party broker was paid a commission for the transaction
Construction management feeThe Manager3.00% of hard and soft construction costs
Development management feeOther3.00% of hard and soft construction costs
Entitlement feeOther20.00% of the entitlement costs incurred by BOA Plaza, if the entitlement budget is less than $3,000,000

A summary of costs incurred by the applicable subsidiaries of Brookfield DTLA subsidiaries under these arrangements is as follows (in thousands):follows:

For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2021202020212020
Property management fee expense$1,949 $1,910 $5,931 $6,038 
Asset management fee expense$1,538 $1,511 $4,618 $4,538 
Leasing and construction management fees$292 $1,749 $928 $4,668 
Development management fee (1)$586 $358 $1,292 $794 
Entitlement fee$185 $— $394 $— 
General, administrative and reimbursable expenses$676 $354 $1,895 $1,806 
__________
(1)Amounts presented are calculated by applying the Company’s ownership interest percentage in the unconsolidated real estate joint venture as of period end to the costs incurred during the period.

Expenses incurred under these arrangements are included in rental property operating and maintenance expense in the consolidated statements of operations, with the exception of asset management fee expense which is included in other expenses. Leasing management fees are capitalized as deferred charges, construction management fee and entitlement fee are capitalized as part of investments in real estate, and development management fee is capitalized and included in the investment in unconsolidated real estate joint venture in the consolidated balance sheets.
34
 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
        
Property management fee expense$2,021
 $1,955
 $6,112
 $5,864
Asset management fee expense1,583
 1,583
 4,748
 4,748
General, administrative and
    reimbursable expenses
623
 615
 1,860
 1,857
Leasing and construction management fees634
 410
 1,481
 1,321


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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Insurance Agreements


Properties held by certain Brookfield DTLA subsidiaries and affiliates are covered under insurance policies entered into by the Manager. Insurance premiums for Brookfield DTLA’s properties are paid by the Manager andManager. Brookfield DTLA reimburses the Manager for the actual costamount of fees and expenses related to such premiums.policies that have been allocated to the Company’s properties as determined by the Manager in its reasonable discretion taking into consideration certain facts and circumstances, including the value of the Company’s properties.


A summary of costs incurred by the applicable Brookfield DTLA subsidiaries and affiliates under this arrangement, which are included in rental property operating and maintenance expense in the consolidated statements of operations, is as follows (in thousands):follows:

For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2021202020212020
Insurance expense (1)$3,051 $2,872 $9,442 $8,659 
__________
(1)An affiliate of BAM secures insurance policies for the Company through third-party brokers and insurance companies and charges the Company a fee for the services it provides. Fees charged vary but will not exceed 2.50% of the total net insurance premiums of the Company and its covered properties. Fees incurred for these services totaled $76 thousand and $74 thousand, respectively, during the three months ended September 30, 2021 and 2020, and $230 thousand and $208 thousand, respectively, during the nine months ended September 30, 2021 and 2020. Additionally, the Company’s terrorism insurance coverage is purchased through a captive facility that is an affiliate of BPY. Insurance premiums incurred totaled $32 thousand and $38 thousand, respectively, during the three months ended September 30, 2021 and 2020, and $96 thousand and $115 thousand, respectively, during the nine months ended September 30, 2021 and 2020.

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 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
        
Insurance expense$1,948
 $1,950
 $5,828
 $5,873


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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Other Related Party Transactions with BAM Affiliates

A summary of the impact of other related party transactions with BAM affiliates on the Company’s consolidated statements of operations is as follows:
For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2021202020212020
(Reversal of) lease income (1)$(204)$3,619 $8,761 $11,092 
Parking revenue (1)$248 $384 $744 $1,144 
Interest and other revenue$— $48 $— $147 
Rental property operating and maintenance expense (2)$57 $182 $318 $444 
Other expenses$— $23 $— $90 
Interest expense (3)(4)$569 $462 $1,629 $1,521 
__________
(1)In September 2019, BAM acquired a significant interest in Oaktree Capital Group, LLC (“Oaktree”), an existing tenant at Wells Fargo Center–North Tower. Lease income and parking revenue from Oaktree and its subsidiaries have been reported as related party transactions since the date of acquisition by BAM.
(2)Amounts presented are for purchases of chilled water for air conditioning at one of the Company’s properties.
(3)A subsidiary of Oaktree is the lender of the $35.0 million mezzanine loan secured by Wells Fargo Center–North Tower. Interest payable to the lender totaled $79 thousand as of September 30, 2021 and is reported as part of accounts payable and other liabilities in the consolidated balance sheets. See Note 6—“Secured Debt, Net.” Interest expense on this loan has been reported as a related party transaction since the date of acquisition by BAM.
(4)In February 2021, BAM purchased $18.2 million of commercial mortgage-backed securities (“CMBS”) secured by the Gas Company Tower loans in the open market. The CMBS are payable in monthly installments over a two-year period at a fixed interest rate of 2.50%. The transaction was conducted on an arm’s length basis at fair market value. During the three and nine months ended September 30, 2021, the Company incurred interest expense of $113 thousand and $275 thousand, respectively, on this CMBS to BAM. In September 2021, this CMBS was sold to Brookfield Asset Management Reinsurance Partners Ltd., an affiliate of BAM.

The Manager or its affiliates may incur certain out-of-pocket expenses on behalf of the Company and pass through such expenses at cost to the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 13—14—Future Minimum Base Rents

Brookfield DTLA leases space to tenants primarily under non-cancelable operating leases that generally contain provisions for payment of base rent plus reimbursement of certain operating expenses. The table below presents the undiscounted cash flows for future minimum base rents to be received from tenants under executed non-cancelable office and retail leases as of September 30, 2021:
Remainder of 2021$41,273 
2022153,639 
2023140,748 
2024125,285 
2025111,510 
202699,252 
Thereafter471,713 
Total future minimum base rents$1,143,420 

Note 15—Commitments and Contingencies


Litigation

Brookfield DTLA and its subsidiaries may be subject to pending legal proceedings and litigation incidental to its business. After consultation with legal counsel, management believes that any liability that may potentially result upon resolution of such matters is not expected to have a material adverse effect on the Company’s business, financial condition or consolidated financial statements as a whole.


Concentration of Tenant Credit Risk
Note 14—Subsequent Event

Credit risk arises from the possibility that tenants may be unable to fulfill their lease commitments. Brookfield DTLA’s properties are typically leased to high credit-rated tenants for lease terms ranging from five to ten years, although we also enter into some short-term as well as longer-term leases. As our entire portfolio is located in the LACBD, any specific economic changes within that location could affect our tenant base, and by extension, our profitability.
On November 2, 2017,
Brookfield DTLA extendedgenerally does not require collateral or other security from its tenants, other than security deposits or letters of credit. Our credit risk is mitigated by the maturity datehigh quality of our existing tenant base, review of prospective tenants’ risk profiles prior to lease execution, and frequent monitoring of our tenant portfolio to identify problem tenants. However, since we may have a concentration of lease income from certain tenants, the inability of those tenants to make payments under their leases could have a material adverse effect on our results of operations, cash flows or financial condition.

The measures taken to combat the spread of the $35.0 million mortgage loan secured by Figueroa at 7th until January 8, 2018. After this extension,COVID-19 pandemic have increased the risk in the near term of our tenants’ ability to fulfill their lease commitments. Certain tenants could declare bankruptcy or become insolvent and cease business operations as a result of prolonged mitigation efforts. See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of collectibility of lease income for the three and nine months ended September 30, 2021 and 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Capital Commitments

As of September 30, 2021, the Company has two optionshad $38.2 million in tenant-related commitments, including tenant improvements, tenant inducements and leasing commissions, which are based on executed leases. As of September 30, 2021, $10.9 million of our tenant-related commitments were expected to extendbe paid during the maturity dateremainder of this loan,2021. Additionally, we had $0.2 million in construction-related commitments, mainly related to retention payable to contractors for the first for a periodatrium redevelopment project at Wells Fargo Center as of eight months and the second for a periodSeptember 30, 2021.







38

Table of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). The Company plans to refinance this loan on or prior to January 8, 2018 and does not expect to make a principal paydown when the loan is refinanced.Contents




Item 2.Management’s Discussion and Analysis of Financial Condition
Item 2.Management’s Discussion and Analysis of Financial Condition
and Results of Operations.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion should be read in conjunction with our Forward-Looking Statements disclaimer, and the condensed consolidated financial statements and the related notes thereto that appear in Part I, Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q.


As used in this section unless otherwise indicated, tabular amounts are presented in thousands, except leasing information, percentage data and years.

Overview and Background


Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA”DTLA” or the “Company”“Company”) is a Maryland corporation and was incorporated on April 19, 2013. Brookfield DTLA was formed for the purpose of consummating the transactions contemplated in the Agreement and Plan of Merger dated as of April 24, 2013, as amended, (the “Merger Agreement”), and the issuance of shares of 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series“Series A preferred stock”stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”“MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC, (“Brookfield DTLA Holdings”), a Delaware limited liability company and an indirect partially-owned subsidiary of Brookfield Office Properties Inc., a corporation under the Laws of Canada (“BPO”DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”“Manager”). DTLA Holdings is an indirect partially‑owned subsidiary of Brookfield Property Partners L.P. (“BPY”), an exempted limited partnership under the Laws of Bermuda, which in turn is the flagship commercial property entity and the primary vehicle through which Brookfield Asset Management Inc. (“BAM”), a corporation under the Laws of Canada, invests in real estate on a global basis. On April 1, 2021, BAM and BPY announced an agreement for BAM to acquire 100% of the limited partnership units of BPY. The acquisition was completed in July 2021. The acquisition did not have any impact to the Company.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Brookfield DTLA owns BOA Plaza, EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, each of which ismanages six Class A office propertyproperties and a retail center, consisting of 7,580,957 rentable square feet in total. Additionally, Brookfield DTLA also has an indirect noncontrolling interest in an unconsolidated real estate joint venture that owns a multifamily residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”“LACBD”). The following table sets forth information regarding these eight properties as of September 30, 2021:


NameProperty TypeRentable Square FeetOwnership Percentage
Occupancy (1)
Weighted-Average Remaining Lease Term (Years) (2)
Bank of America Plaza (“BOA Plaza”)
Class A office1,405,428100%86.1%6.9
Wells Fargo Center–North TowerClass A office1,400,639100%79.8%6.7
Gas Company TowerClass A office1,345,163100%76.0%5.8
EY PlazaClass A office963,682100%80.2%5.9
Wells Fargo Center–South TowerClass A office1,124,960100%62.0%4.6
777 TowerClass A office1,024,835100%76.6%4.1
FIGat7thRetail center316,250100%89.2%7.2
755 South FigueroaMultifamily (under development)N/A37.2%N/AN/A
Total7,580,95777.7%5.9
(1)    Represents properties’ leased square feet over total rentable square feet for executed leases as of September 30, 2021.
(2)    Represents weighted-average of the period remaining (denominated in years) for executed lease as of September 30, 2021, excluding tenant lease extension options.

Brookfield DTLA has elected to be taxed as a real estate investment trust (“REIT”) pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its tax period ended December 31, 2013. Brookfield DTLA conducts and intends to conduct its operations so as to continue to qualify as a REIT. Accordingly, Brookfield DTLA is not subject to U.S. federal income tax, provided that it continues to qualify as a REIT and distributions to its stockholders, if any, generally equal or exceed its taxable income. Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to both federal and state income taxes.

Brookfield DTLAprimarily receives its income primarily from rentallease income, (includingincluding tenant reimbursements)reimbursements, generated from the operations of its office and retail properties, and to a lesser extent, revenue from its parking garages.



Our goal is to continue to be the leading owner and operator of high-quality office properties in the LACBD and to focus on executing long-term leases with financially strong tenants. We operate our business to achieve these objectives with a long term view and will continue to make decisions with that in mind.


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Current Period Highlights

COVID-19 Update

Prior to the end of the first quarter of 2020, there was a global outbreak of a new strain of Coronavirus (“COVID-19”) which prompted government and businesses to take unprecedented measures in response. Many states, including California where our properties are located, have implemented “stay-at-home” restrictions to help combat the spread of COVID-19. The State of California order included the shutdown of all nonessential services, such as dine-in restaurants, bars, gyms and conference or convention centers, and other businesses not deemed to support critical infrastructure (the “Shutdown”). Essential services, such as grocery stores, pharmacies, gas stations, food banks, convenience stores and delivery restaurants, were allowed to remain open. Consequently, business activities and supply chains were interrupted; travel was disrupted; and local, regional, national and international economic conditions were adversely impacted.

The U.S. began a large-scale COVID-19 vaccination campaign in December 2020. On June 15, 2021, with California fully reopened its economy, restrictions such as physical distancing, capacity limits and the county tier system were lifted. However, the spread of the Delta variant brought uncertainty to the economic recovery. In July 2021, amid a rise in coronavirus cases and hospitalizations, Los Angeles County reinstated its mask mandate that requires masking indoors regardless of vaccination status. In California, after a record number of COVID-19 cases in July 2021, there was a sharp decline in cases reported statewide in September 2021.

During the nine months ended September 30, 2021, the COVID-19 pandemic and the measures taken to combat the spread of the pandemic has continued to impact numerous aspects of our business and our properties, which are located in the City of Los Angeles. Some of the effects include the following:

•Capacity limits were imposed on higher-risk activities and businesses such as indoor dining, bars, fitness centers and movie theaters according to the tier system of the California state’s reopening framework. As a result, our tenants in FIGat7th, which include retail shops, restaurants and a big box gym, experienced the most immediate impact of the restrictions imposed. During the three and nine months ended September 30, 2021, total lease income and parking revenue from FIGat7th represented approximately 6% and 5%, respectively, of the consolidated total, compared to 2% and 3% for the three and nine months ended September 30, 2020, respectively. Due to the uncertainties posed to our tenants in FIGat7th by these restrictions, adjustments of $1.7 million and $3.1 million, respectively, were recognized during the three and nine months ended September 30, 2020, to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. In contrast, as a result of the re-opening of California’s economy in June 2021, various retail tenants benefited from higher visitor traffic. As such, the Company recorded favorable lease income adjustmentsof $1.0 million and $0.5 million, respectively, during the three and nine months ended September 30, 2021.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
•While our office properties have remained open, most of our office tenants have been working remotely since the “stay-at-home” order was issued. Although state and local authorities began easing restrictions on businesses, the physical occupancy of our office properties has remained well below capacity as infection rates fluctuated and most employers continued their COVID-19 response protocols and allowed employees to work from home when possible. As of September 30, 2021, most of our office tenants have been current in paying amounts due to us under their leases. Due to the uncertainties posed to our office property tenants by the COVID-19 pandemic, during the three and nine months ended September 30, 2020, adjustments of $0.9 million and $1.9 million, respectively, were recognized to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. In contrast, as a result of the re-opening of California’s economy in June 2021 and office employees returning to offices, the Company recorded favorable lease income adjustments of $0.5 million and $0.4 million, respectively, during the three and nine months ended September 30, 2021.

•As a result of the restrictions imposed by state and local authorities that impacted the physical occupancy of both our office and retail properties, parking net operating income, which represents parking revenue less parking expense, declined by $0.8 million or 6% from $13.1 million during the nine months ended September 30, 2020 to $12.2 million during the same period in 2021.

•Decline in property values resulting from lower than anticipated revenues due to reduced increases in forecasted rental rates on new or renewal leases, applied credit losses, lower leasing velocity and reductions in projected leasing of available space. While the carrying values of the properties are recorded at cost less accumulated depreciation, we estimate the undiscounted cashflows and fair values of the properties as part of our impairment review of investments in real estate. See Item 1. “Financial Statements — Notes to Consolidated Financial Statements — Note 2 — Basis of Presentation — Impairment Review” for further discussion.

The Company received certain rent relief requests for certain periods in 2020 and 2021 from many of our retail tenants and some of our office tenants as a result of the measures taken to combat the spread of the COIVD-19 pandemic. Some of our tenants have availed themselves of various federal and state relief funds, such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program, which can be utilized to partially meet rental obligations. While our tenants are required to fulfill their commitments to us under their leases, we have implemented and will continue to carefully consider temporary rent deferrals and rent abatements on a lease-by-lease basis and only consider those which have a justifiable financial basis.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The following table sets forth information regarding the collection percentage as of September 30, 2021 related to the amounts due from our tenants:

As of September 30, 2021
Property Type
Second Quarter of 2020
Billings Collected(1)
Third Quarter of 2020
Billings Collected(1)
Fourth Quarter of 2020
Billings Collected(1)
First Quarter of 2021
Billings Collected(1)
Second Quarter of 2021
Billings Collected(1)
Third Quarter of 2021
Billings Collected(1)
Office100 %100 %100 %100 %100 %99 %
Retail68 %76 %77 %77 %86 %83 %
Total99 %99 %99 %99 %99 %99 %
(1)    Adjusted for rent concessions granted to tenants.

See Item 1. “Financial Statements — Notes to Consolidated Financial Statements — Note 2 — Basis of Presentation — Rents, Deferred Rents and Other Receivables, Net” for a discussion of how we assess the collectibility of amounts due under leases with our tenants.

While we cannot be certain as to the duration of the impact of COVID-19, we expect impacts of COVID-19 to affect our financial results at least through the rest of 2021. The future impact of the pandemic on the demand for office space is unclear, as companies consider the repercussion of the pandemic on their business and their demand for labor while, at the same time, evaluate their space requirements in light of their current and projected headcounts and the continued focus on social distancing and employees’ desire for more work-location flexibility. See “Risk Factors—The Company’s business, results of operations and financial condition have been adversely affected and could in the future be materially adversely affected by the ongoing global pandemic of novel strain of the coronavirus.” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 25, 2021 for additional information.

Leasing Activity and Occupancy Level

The first three quarters of 2021 has continued to be dominated by the COVID-19 pandemic causing significant uncertainty for most sectors, including the commercial real estate industry. Leasing activity, compared to the same period in 2020, decreased as a result. During the nine months ended September 30, 2021, we executed new and renewal leases totaling 185,747 square feet within our portfolio, compared to 319,823 square feet for the same period in 2020, a decrease of 42% year over year. Contractual expirations and early terminations of leases totaled 294,324 square feet during the nine months ended September 30, 2021, compared to 530,147 square feet for the same period in 2020, a decrease of 44% year over year. As a result of the negative net absorption, occupancy decreased from 80.2% during the nine months ended September 30, 2020 to 77.7% for the same period in 2021. See “Leasing Activity” for details.







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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Financing

In February 2021, Brookfield DTLA closed a $465.0 million interest-only debt secured by Gas Company Tower. This debt, which is scheduled to mature in February 2026, bears interest at LIBOR plus 2.95%. All the proceeds from this debt were used to pay off the original $450.0 million debt that previously encumbered the property and to satisfy the new loans’ required reserves. See “Indebtedness” for details.

Capital Improvements

The atrium development project at Wells Fargo Center was completed during the third quarter of 2020 and the construction of the food vendor spaces is ongoing with openings in the second and third quarter of 2021.

In response to the measures taken to combat the spread of the COVID-19 pandemic, Brookfield DTLA strategically deferred and cancelled various capital expenditure projects of lower priority since April 2020. Further, during the first three quarters of 2021, expenditures for tenant improvements has continued to decline in response to decreased leasing activity. Accordingly, expenditures for real estate improvements decreased from $54.7 million in the nine months ended September 30, 2020 to $10.9 million for the same period in 2021, a decrease of $43.8 million or 80% year over year.

755 South Figueroa Development

The 755 South Figueroa multifamily site is held by an unconsolidated real estate joint venture in which the Company had an ownership interest of 37.2%. As of September 30, 2021, construction is actively underway with concrete construction complete through eight levels of parking and twenty floors of the superblock. Substantial completion is expected in the fourth quarter of 2022. During the three and nine months ended September 30, 2021, net proceeds of $25.3 million and $57.6 million, respectively, compared to $11.0 million and $27.2 million, respectively, for the three and nine months ended September 30, 2020, were generated from loan draws to fund development costs. Furthermore, during the three and nine months ended September 30, 2021, additional capital contributions of $13.0 million and $26.8 million, respectively, compared to $9.0 million and $11.0 million, respectively, for the same period in 2020, were made by DTLA FP IV Holdings to fund development costs.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources


General


Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs.As of September 30, 2021, we have $150.0 million of liquidity comprised of $36.5 million of cash and cash equivalents, $40.7 million of unused capital contribution commitments available on Series B preferred interest, and $72.8 million available on our secured debt for future drawdown to fund approved leasing costs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover Brookfield DTLA’s operating,its investing and financing and investing activities without issuing additional debt or equity, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease, or that it will not increase, in the future. If Brookfield DTLA’s operating cash flow and capital are not sufficient to cover its operating costs or to repay its indebtedness as it comes due, we may issue additional debt and/or equity, including to affiliates of Brookfield DTLA, which issuances could further adversely impact the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock. In many cases, such securities may be issued if authorized by the board of directors of Brookfield DTLA without the approval of the holders of the Series A preferred stock. See “—Potential Uses of Liquidity—Property Operations” below.

Sources and Uses of Liquidity

Brookfield DTLA’s potential liquidity sources and uses are, among others, as follows:

SourcesUses
•Cash on hand;•Property operations;
•Cash generated from operations;•Capital expenditures;
•
Contributions from Brookfield
  DTLA Holdings; and
•Payments in connection with loans;
•Proceeds from additional secured or
unsecured debt financings.		•Distributions to Brookfield
DTLA Holdings; and
•
Dividend payment in connection
  with legal settlement.

Potential Sources of Liquidity—

Cash on Hand—

As of September 30, 2017 and December 31, 2016, Brookfield DTLA had cash and cash equivalents totaling $48.1 million and $30.3 million, respectively.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Cash Generated from Operations—

Brookfield DTLA’s cash generated from operations is primarily dependent upon (1) the occupancy level of its portfolio, (2) the rental rates achieved on its leases, and (3) the collectability of rent and other amounts billed to its tenants. Net cash generated from operations is tied to the level of operating expenses, described below under “—Potential Uses of Liquidity.”

Occupancy levels. The following table presents leasing information for Brookfield DTLA for leases in place as of September 30, 2017:

  Square Feet Leased % and In-Place Rents
Property 
Net
Building
Rentable
 
% of Net
Rentable
 
%
Leased
 
Total
Annualized
Rents (1)
 
Annualized
Rent
$/RSF (2)
           
BOA Plaza 1,405,428
 18.67% 93.0% $32,739,465
 $25.06
Wells Fargo Center–North Tower 1,400,639
 18.61% 86.0% 30,700,712
 25.48
Gas Company Tower 1,345,163
 17.87% 89.9% 30,029,055
 24.82
EY Plaza 1,224,967
 16.28% 89.0% 26,549,323
 24.36
Wells Fargo Center–South Tower 1,124,960
 14.95% 66.6% 19,272,575
 25.73
777 Tower 1,024,835
 13.62% 81.8% 20,224,383
 24.12
  7,525,992
 100.00% 85.0% $159,515,513
 $24.93
__________
(1)
Annualized rent represents the annualized monthly contractual rent under existing leases as of September 30, 2017. This amount reflects total base rent before any rent abatements as of September 30, 2017 and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a fully gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of September 30, 2017 for the twelve months ending September 30, 2018 are approximately $15.0 million, or $2.34 per leased square foot.
(2)Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of the same date.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following table presents a summary of lease expirations at Brookfield DTLA for leases in place at September 30, 2017, plus currently available space, for the remainder of 2017, each of the nine calendar years beginning January 1, 2018 and thereafter. This table assumes that none of our tenants will exercise renewal options or early termination rights, if any, at or prior to their scheduled expirations.

Year 
Total Area in
Square Feet
Covered by 
Expiring
Leases
 
Percentage
of Leased
Square Feet
 
Annualized
Rent (1)
 
Percentage of
Annualized
Rent
 
Current
Rent per
Leased
Square
Foot (2)
 
Rent per
Leased Square
Foot at
Expiration (3)
             
2017 27,982
 0.4% $753,032
 0.5% $26.91
 $27.17
2018 576,186
 9.0% 11,217,172
 7.0% 19.47
 19.65
2019 442,433
 6.9% 12,363,644
 7.8% 27.94
 29.89
2020 306,858
 4.8% 7,829,062
 4.9% 25.51
 28.19
2021 422,157
 6.6% 11,058,885
 6.9% 26.20
 29.44
2022 804,787
 12.6% 21,418,942
 13.4% 26.61
 30.67
2023 805,033
 12.6% 19,493,503
 12.2% 24.21
 28.66
2024 417,960
 6.6% 10,637,926
 6.7% 25.45
 30.93
2025 718,971
 11.2% 19,752,991
 12.4% 27.47
 33.10
2026 517,636
 8.1% 11,463,487
 7.2% 22.15
 28.74
Thereafter 1,358,811
 21.2% 33,526,869
 21.0% 24.67
 37.78
Total expiring leases 6,398,814
 100.0% $159,515,513
 100.0% $24.93
 $30.80
Currently available 1,127,178
          
Total rentable square feet7,525,992
          
__________
(1)
Annualized rent represents the annualized monthly contractual rent under existing leases as of September 30, 2017. This amount reflects total base rent before any rent abatements as of September 30, 2017 and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a fully gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of September 30, 2017 for the twelve months ending September 30, 2018 are approximately $15.0 million, or $2.34 per leased square foot.
(2)Current rent per leased square foot represents current base rent, divided by total leased square feet as of the same date.
(3)Rent per leased square foot at expiration represents base rent, including any future rent steps, and thus represents the base rent that will be in place at lease expiration.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Rental Rates and Leasing Activity. Average asking net effective rents in the LACBD were essentially flat during the nine months ended September 30, 2017. Management believes that on average our current in‑place rents are generally close to market in the LACBD.

The following table summarizes leasing activity at Brookfield DTLA for the nine months ended September 30, 2017:

 Leasing Activity Percentage Leased
    
Leased square feet as of December 31, 20166,619,016
 87.9 %
     Expirations(715,245) (9.5)%
     New leases185,873
 2.5 %
     Renewals309,170
 4.1 %
Leased square feet as of September 30, 20176,398,814
 85.0 %

Collectability of rent from our tenants. Brookfield DTLA’s rental income depends on collecting rent from its tenants, and in particular from its major tenants. In the event of tenant defaults, Brookfield DTLA may experience delays in enforcing its rights as landlord and may incur substantial costs in pursuing legal possession of the tenant’s space and recovery of any amounts due from the tenant. This is particularly true in the case of the bankruptcy or insolvency of a major tenant or where the Federal Deposit Insurance Corporation is acting as receiver.

Contributions from Brookfield DTLA Holdings—

Drawdowns under Capital Commitment—

At the time of the merger with MPG, Brookfield DTLA Holdings made a commitment to contribute up to $260.0 million in cash or property to Brookfield DTLA Fund Properties II LLC (“New OP”), which directly or indirectly owns the Brookfield DTLA properties, for which it will be entitled to receive a preferred return, if and when called by New OP.

On February 27, 2017, the Company received a $29.5 million cash contribution from Brookfield DTLA Holdings under this commitment, which is entitled to receive a preferred return of 9.0%. The Company used these funds for general corporate purposes.

On April 4, 2017, the Company received an $82.0 million cash contribution from Brookfield DTLA Holdings under this commitment, which is entitled to a preferred return of 9.0%. The Company used these funds to pay for costs associated with the refinancing of the Wells Fargo Center–North Tower mortgage loan. As of September 30, 2017, $85.2 million is available to the Company under this commitment for future funding.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Other Contributions—

In addition to amounts received under the commitment described above, during the nine months ended September 30, 2017 the Company received a net cash contribution totaling $250 thousand from Brookfield DTLA Holdings, which was used for general corporate purposes.

Proceeds from Additional Secured or Unsecured Debt Financings—

As of September 30, 2017, a maximum future advance amount of $20.0 million is available under the Wells Fargo Center–South Tower mortgage loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures. As of November 13, 2017, no funds have been drawn against the future advance amount.

Potential Uses of Liquidity—

The following are the projected uses, and some of the potential uses, of cash in the near term.

Property Operations—

Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover Brookfield DTLA’s operating, financing and investing activities, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease, or that it will not increase, in the future. Should the cash generated by Brookfield DTLA’s properties not be sufficient to fund their operations, such cash would be provided by Brookfield DTLA Holdings or another source of funds available to the Company or, if such cash were not made available, the Company might not have sufficient cash to fund its operations.

At the time of the merger with MPG, Brookfield DTLA Holdings made a commitment to make capital contributions in cash or property to New OP, which directly or indirectly owns the Brookfield DTLA properties, for up to $260.0 million of its future cash needs, for which it will be entitled to receive a preferred return, if and when called by New OP. As of September 30, 2017, $85.2 million is available to the Company under this commitment for future funding.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Capital Expenditures—

Capital expenditures fluctuate in any given period, subject to the nature, extent and timing of improvements required to maintain Brookfield DTLA’s properties. Leasing costs also fluctuate in any given period, depending upon such factors as the type of property, the length of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

Brookfield DTLA expects that leasing activities at its properties will require material amounts of cash for at least several years. Excluding tenant improvements and leasing commissions, Brookfield DTLA projects spending approximately $125 million over the next ten years, with the majority (approximately $106 million) over the next five years. The expected expenditures include, but are not limited to, renovations and physical capital upgrades to Brookfield DTLA’s properties, such as lobby renovations, upgrades to fire alarm, security and HVAC systems, and roof replacements.

As of September 30, 2017, a maximum future advance amount of $20.0 million is available under the Wells Fargo Center–South Tower mortgage loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures. As of November 13, 2017, no funds have been drawn against the future advance amount.

Payments in Connection with Loans—

Debt Refinanced—

On April 5, 2017, Brookfield DTLA refinanced the $550.0 million mortgage loan secured by Wells Fargo Center–North Tower. In connection with the refinancing, the Company repaid $80.0 million of principal and incurred transaction costs totaling $7.4 million. During April 2017, the Company received an $82.0 million cash contribution from Brookfield DTLA Holdings that was used to pay for costs associated with the refinancing of Wells Fargo Center–North Tower.

Debt Maturities—

On August 14, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th until December 10, 2017. Then on November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After the second extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). The Company plans to refinance this loan on or prior to January 8, 2018 and does not expect to make a principal paydown when the loan is refinanced. There can be no assurance that the refinancing can be accomplished, what terms will be available in the market for this type of financing at the time of any refinancing, or that any refinancing will generate net cash proceeds. See “Subsequent Event.”


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Distributions to Brookfield DTLA Holdings—

During thenine months ended September 30, 2016, the Company made a $336 thousand cash distribution to Brookfield DTLA Holdings related to the senior participating preferred interest using cash on hand.

Dividend Payment in Connection with Legal Settlement—

On January 4, 2016, Brookfield DTLA paid a cash dividend of $2.25 per share to holders of record of its Series A preferred stock at the close of business on December 15, 2015 using cash on hand. This dividend payment reduced the accumulated and unpaid dividends owed on the Series A preferred stock by $21.9 million. The dividend was declared on December 4, 2015 by the board of directors in connection with the settlement on a class-wide basis of the litigation brought in Maryland State Court and styled as In re MPG Office Trust Inc. Preferred Shareholder Litigation, Case No. 24-C-13-004097.

Indebtedness

As of September 30, 2017, Brookfield DTLA’s debt was comprised of mortgage loans secured by seven properties. A summary of our debt as of September 30, 2017 is as follows (in millions, except percentage and year amounts):

 
Principal
Amount
 
Percent of
Total Debt
 
Effective
Interest
Rate
 
Weighted Average
Term to
Maturity
        
Fixed-rate$850.0
 42.44% 4.21% 5 years
Variable-rate swapped to fixed-rate177.9
 8.88% 3.93% 3 years
Variable-rate (1) (2)975.0
 48.68% 4.23% 1 year
 $2,002.9
 100.00% 4.19% 3 years
__________
(1)
As of September 30, 2017, a maximum future advance amount of $20.0 million is available under the Wells Fargo Center–South Tower mortgage loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures. As of November 13, 2017, no funds have been drawn against the future advance amount.
(2)
On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th from December 10, 2017 until January 8, 2018. See “Subsequent Event.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Certain information with respect to our indebtedness as of September 30, 2017 is as follows (in thousands, except percentage amounts):

 Interest
Rate		 
Contractual
Maturity Date
 Principal
Amount (1)		 Annual Debt
Service
Floating-Rate Debt       
Variable-Rate Loans:       
Wells Fargo Center–North Tower (2)3.49% 4/9/2019 $370,000
 $13,074
Wells Fargo Center–North Tower (3)6.49% 4/9/2019 55,000
 3,616
Wells Fargo Center–North Tower (4)8.24% 4/9/2019 45,000
 3,757
Wells Fargo Center–South Tower (5)4.93% 12/6/2018 250,000
 12,496
777 Tower (6)3.42% 11/1/2018 220,000
 7,629
Figueroa at 7th (7)3.41% 12/10/2017 35,000
 1,208
Total variable-rate loans    975,000
 41,780
        
Variable-Rate Swapped to Fixed-Rate
    Loan:
       
EY Plaza (8)3.93% 11/27/2020 177,858
 7,083
Total floating-rate debt    1,152,858
 48,863
        
Fixed-Rate Debt       
BOA Plaza4.05% 9/1/2024 400,000
 16,425
Gas Company Tower3.47% 8/6/2021 319,000
 11,232
Gas Company Tower6.50% 8/6/2021 131,000
 8,633
Total fixed-rate rate debt    850,000
 36,290
Total debt    2,002,858
 $85,153
Less: unamortized debt issuance costs   11,874
  
Total debt, net    $1,990,984
  
__________
(1)Assuming no payment has been made in advance of its due date.
(2)This loan bears interest at LIBOR plus 2.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).
(3)This loan bears interest at LIBOR plus 5.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).
(4)This loan bears interest at LIBOR plus 7.00%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).
(5)
This loan bears interest at LIBOR plus 3.69%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 3.00%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). As of September 30, 2017, a maximum future advance amount of $20.0 million is available under this loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures. As of November 13, 2017, no funds have been drawn against the future advance amount.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(6)
This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).
(7)
This loan bears interest at LIBOR plus 2.25%. On November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After this extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). See “Subsequent Event.”
(8)This loan bears interest at LIBOR plus 1.75%. As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178%. The effective interest rate of 3.93% includes interest on the swap.

Debt Refinanced

On April 5, 2017, Brookfield DTLA refinanced the $550.0 million mortgage loan secured by Wells Fargo Center–North Tower. In connection with the refinancing, the Company repaid $80.0 million of principal and incurred transaction costs totaling $7.4 million. During April 2017, the Company received an $82.0 million cash contribution from Brookfield DTLA Holdings that was used to pay for costs associated with the refinancing of Wells Fargo Center–North Tower.

The new $470.0 million loan is comprised of a $370.0 million mortgage loan, a $55.0 million mezzanine loan and a $45.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 2.250%, 5.250% and 7.000%, respectively, and require the payment of interest-only until maturity. As required by the mortgage and mezzanine loan agreements, on April 5, 2017 the Company entered into interest rate cap agreements with a total notional amount of $470.0 million that limit the LIBOR portion of the interest rates to 2.75%.

The mortgage and mezzanine loans mature on April 9, 2019. Brookfield DTLA has three options to extend the maturity date of the loans, each for a period of one year, subject to meeting certain debt yield ratios (as specified in the mortgage and mezzanine loan agreements).

The mortgage and mezzanine loans can be prepaid, in whole or in part, with prepayment penalties (as defined in the underlying loan agreements) until July 9, 2018 after which the loans can be repaid without penalty. A voluntary prepayment of the mortgage or mezzanine loans requires a simultaneous pro-rata prepayment of all loans encumbering this property.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Debt Maturities

On August 14, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th until December 10, 2017. Then on November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After the second extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). The Company plans to refinance this loan on or prior to January 8, 2018 and does not expect to make a principal paydown when the loan is refinanced. There can be no assurance that the refinancing can be accomplished, what terms will be available in the market for this type of financing at the time of any refinancing, or that any refinancing will generate net cash proceeds. See “Subsequent Event.”

Non-Recourse Carve Out Guarantees

All of Brookfield DTLA’s $2.0 billion of mortgage debt is subject to “non-recourse carve out” guarantees that expire upon elimination of the underlying loan obligations. In connection with all of these loans, Brookfield DTLA entered into “non-recourse carve out” guarantees, which provide for these otherwise non-recourse loans to become partially or fully recourse against Brookfield DTLA Holdings or one of its subsidiaries, if certain triggering events (as defined in the loan agreements) occur.

Debt Reporting

Pursuant to the terms of certain of our mortgage loan agreements, Brookfield DTLA is required to report a debt service coverage ratio (“DSCR”) calculated using the formulas specified in the underlying loan agreements. We have submitted the required reports to the lenders for the measurement periods ended September 30, 2017 and were in compliance with the amounts required by the loan agreements.

Pursuant to the terms of the EY Plaza and Figueroa at 7th mortgage loan agreements, we are required to provide annual audited financial statements of Brookfield DTLA Holdings to the lenders or agents. The receipt of any opinion other than an “unqualified” audit opinion on our annual audited financial statements is an event of default under the loan agreements for the properties listed above. If an event of default occurs, the lenders have the right to pursue the remedies contained in the loan documents, including acceleration of all or a portion of the debt and foreclosure.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Results of Operations

Comparison of the Three Months Ended September 30, 2017 to September 30, 2016

Condensed Consolidated Statements of Operations Information
(In millions, except percentage amounts)

 For the Three Months Ended Increase/
(Decrease)		 %
Change
 Sept. 30, 2017 Sept. 30, 2016  
Revenue:       
Rental income$40.6
 $40.4
 $0.2
 — %
Tenant reimbursements24.3
 23.4
 0.9
 4 %
Parking9.2
 9.3
 (0.1) (1)%
Interest and other2.9
 4.3
 (1.4) (33)%
Total revenue77.0
 77.4
 (0.4) (1)%
        
Expenses:       
Rental property operating and maintenance25.4
 24.4
 1.0
 4 %
Real estate taxes9.9
 9.6
 0.3
 3 %
Parking2.2
 2.2
 —
 — %
Other expense1.1
 1.4
 (0.3) (21)%
Depreciation and amortization24.3
 25.7
 (1.4) (5)%
Interest23.2
 23.5
 (0.3) (1)%
Total expenses86.1
 86.8
 (0.7) (1)%
Net loss$(9.1) $(9.4) $0.3
  

Interest and Other Revenue

Interest and other revenue decreased $1.4 million, or 33%, for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016, mainly as a result of a $1.1 million settlement received during 2016 from the insurance carrier under the MPG directors and officers liability insurance policy that partially reimbursed the Company for amounts paid to settle the merger litigation with the MPG common and preferred stockholders for which there was no comparable activity during 2017.

Rental Property Operating and Maintenance Expense

Rental property operating and maintenance expense increased $1.0 million, or 4%, for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016 due to higher utility, repair and maintenance costs.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Depreciation and Amortization Expense

Depreciation and amortization expense decreased $1.4 million, or 5%, for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016, largely as a result of reduced amortization of acquired in-place lease intangible assets.

Comparison of the Nine Months Ended September 30, 2017 to September 30, 2016

Condensed Consolidated Statements of Operations Information
(In millions, except percentage amounts)

 For the Nine Months Ended Increase/
(Decrease)		 %
Change
 Sept. 30, 2017 Sept. 30, 2016  
Revenue:       
Rental income$120.8
 $124.1
 $(3.3) (3)%
Tenant reimbursements72.1
 69.3
 2.8
 4 %
Parking27.8
 27.8
 —
 — %
Interest and other8.3
 10.0
 (1.7) (17)%
Total revenue229.0
 231.2
 (2.2) (1)%
        
Expenses:       
Rental property operating and maintenance73.3
 71.5
 1.8
 3 %
Real estate taxes28.8
 28.4
 0.4
 1 %
Parking6.9
 6.3
 0.6
 10 %
Other expense3.5
 3.1
 0.4
 13 %
Depreciation and amortization74.0
 78.0
 (4.0) (5)%
Interest70.2
 71.5
 (1.3) (2)%
Total expenses256.7
 258.8
 (2.1) (1)%
Net loss$(27.7) $(27.6) $(0.1)  

Rental Income

Rental income decreased $3.3 million, or 3%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, primarily as a result of lower amortization of intangible assets into rental income.

Tenant Reimbursements Revenue

Tenant reimbursements revenue increased $2.8 million, or 4%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, primarily as a result of an increase in property operating expenses combined with contractual operating expense reimbursements owed to certain tenants during 2016 for which there was no comparable activity during 2017.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Interest and Other Revenue

Interest and other revenue decreased $1.7 million, or 17%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, mainly as a result of a $1.1 million settlement received during 2016 from the insurance carrier under the MPG directors and officers liability insurance policy that partially reimbursed the Company for amounts paid to settle the merger litigation with the MPG common and preferred stockholders for which there was no comparable activity during 2017.

Rental Property Operating and Maintenance Expense

Rental property operating and maintenance expense increased $1.8 million, or 3%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 due to higher utility, repair and maintenance costs.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased $4.0 million, or 5%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 as a result of decreased amortization of accrued in-place leases, which was partially offset by an acceleration of depreciation and amortization expense related to lease termination activity.

Interest Expense

Interest expense decreased $1.3 million, or 2%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, as a result of principal paydowns on the Wells Fargo Center–North Tower and South Tower mortgage loans and the Gas Company Tower mortgage loan in connection with refinancing activity.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Cash Flow

Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover Brookfield DTLA’s operating, financing and investing activities, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease, or that it will not increase, in the future. If Brookfield DTLA’s operating cash flowflows and capital are not sufficient to cover its operating costs or to repay its indebtedness as it comes due, we may issue additional debt and/or equity, including to affiliates of Brookfield DTLA, which issuances could further adversely impact the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock. In many cases, such securities may be issued if authorized by the board of directors of Brookfield DTLA without the approval of holders of the Series A preferred stock.

Brookfield DTLA’s primary liquidity sources and uses during the three and nine months ended September 30, 2021 and 2020 are as follows:

Sources:
•Cash provided by operating activities, see “Discussion of Consolidated Cash Flows — Operating Activities” ;
•Proceeds from additional secured debt financings, see “Indebtedness”; and
•Contributions from noncontrolling interests, see “Discussion of Consolidated Cash Flows — Financing Activities”.

Uses:
•Cash used in operating activities, see “Discussion of Consolidated Cash Flows — Operating Activities”;
•Capital expenditures and leasing costs, see “Capital Expenditures and Leasing Costs”;
•Payments in connection with secured debt, see “Indebtedness”; and
•Distributions to noncontrolling interests, see “Discussion of Consolidated Cash Flows — Financing Activities”.

Capital Expenditures and Leasing Costs

Capital expenditures fluctuate in any given period, subject to the nature, extent and timing of improvements required to maintain Brookfield DTLA’s properties. Leasing costs also fluctuate in any given period, depending upon such factors as the type of property, the length and type of lease, the involvement of external leasing agents and overall market conditions.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Brookfield DTLA expects that capital improvements and leasing activities at its properties will require material amounts of cash for at least several years. According to our 2021 business plan, Brookfield DTLA projects spending approximately $254.6 million over the next five years consisting of $174.5 million for tenant improvements, $68.9 million for leasing costs and $11.2 million for capital expenditures. The expected capital improvements include, but are not limited to, renovations and physical capital upgrades to Brookfield DTLA’s properties, upgrades to emergency generators and replacement of transformers. These projections are estimates and may be subject to changes per future revisions of speculative leasing plans.

See “Liquidity“Indebtedness” below for more information regarding future advance amounts available as of September 30, 2021 under the loans secured by the Wells Fargo Center–South Tower and Capital Resources—Potential Uses777 Tower office properties that can be drawn to fund approved leasing costs, including tenant improvements and inducements and leasing commissions, and, in the case of Liquidity—Property Operations” above.Wells Fargo Center–South Tower, common area improvements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Indebtedness

During the nine months ended September 30, 2021, our issuances and repayments of debt included the following:

Interest Rate TypeEffective DateMaturity Date/Term to MaturityInterest Rate as of Effective DatePrincipal Amount
Issuances
Gas Company TowerVariable2/5/2021
2/9/2026 (1)
2.01 %$350,000 
Gas Company TowerVariable2/5/2021
2/9/2026 (1)
5.12 %65,000 
Gas Company TowerVariable2/5/2021
2/9/2026 (1)
7.87 %50,000 
Weighted average/total5 years3.07 %$465,000 
Repayments of debt
Gas Company TowerFixed2/5/20218/6/20213.47 %$319,000 
Gas Company TowerFixed2/5/20218/6/20216.50 %131,000 
Weighted average/totalN/A4.35 %$450,000 
(1)    Maturity dates include the effect of extension options that the Company controls.
N/A    Not applicable since the loans were fully repaid as ofSeptember 30, 2021.

On February 5, 2021, Brookfield DTLA refinanced its Gas Company Tower secured loans. The original $450.0 million secured loans were replaced with secured loans of $465.0 million, comprised of a $350.0 million mortgage loan, a $65.0 million mezzanine loan and a $50.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 1.89%, 5.00% and 7.75%, respectively. The initial maturity date of these interest-only loans is February 9, 2023. The mortgage loan can be prepaid, in whole or in part, with prepayment fees (as defined in the underlying loan agreement) until February 2022 after which the loan may be repaid without prepayment fees. A voluntary prepayment of the mortgage or mezzanine loans requires a simultaneous pro-rata prepayment of all loans encumbering this property. Brookfield DTLA has three options to extend the loans maturity dates for a period of one year each, as long as the maturity date of the mezzanine loans is extended simultaneously with the mortgage loan, and no Event of Default (as defined in the underlying loan agreements) has occurred. All proceeds from the new secured loans were used to pay off the original $450.0 million encumbrance and to satisfy the new loans’ required reserves. The Company recognized a loss on early extinguishment of debt of $4.6 million, which represented a prepayment premium and debt yield maintenance fee, in interest expense in the consolidated statements of operations.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
As of September 30, 2021, Brookfield DTLA’s debt was comprised of mortgage and mezzanine loans secured by seven properties. A summary of our debt as of September 30, 2021 is as follows:
Principal
Amount		Percent of
Total Debt		Effective
Interest
Rate		Weighted Average
Term to
Maturity (3)
Fixed-rate$458,500 20 %4.03 %3 years
Variable-rate (1) (2)1,805,796 80 %2.60 %3 years
Total secured debt$2,264,296 100 %2.89 %3 years
__________
(1)As of September 30, 2021 and through the date of this Report, a future advance amount of $29.2 million is available under the Wells Fargo Center–South Tower mortgage loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, leasing commissions, and common area improvements.
(2)As of September 30, 2021 and through the date of this Report, a future advance amount of $43.6 million is available under the 777 Tower mortgage and mezzanine loans that can be drawn to fund approved leasing costs (as defined in the underlying loan agreements), including tenant improvements and inducements, and leasing commissions.
(3)Includes the effect of extension options that the Company controls, if applicable. As of September 30, 2021, we meet the criteria specified in the loan agreements to extend the loan maturity dates.

Non-Recourse Carve Out Guarantees

All of our secured debt is subject to “non-recourse carve out” guarantees that expire upon elimination of the underlying loan obligations. In connection with all of these loans, Brookfield DTLA entered into “non-recourse carve out” guarantees, which provide for these otherwise non-recourse loans to become partially or fully recourse against DTLA Holdings, if certain triggering events (as defined in the loan agreements) occur.

Debt Compliance

As of September 30, 2021 and December 31, 2020, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements.

Certain loan agreements held by Brookfield DTLA contain debt yield and debt service coverage ratios. As of September 30, 2021, Brookfield DTLA was meeting or exceeding these financial ratios, with the exception of the loans secured by Wells Fargo Center—South Tower and Wells Fargo Center—North Tower that did not meet their respective minimum debt yield ratio.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Wells Fargo Center–South Tower —

Pursuant to the terms of the Wells Fargo Center–South Tower mortgage loan agreement, effective September 2020, a cash sweep event commenced as the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, any excess operating cash flows are currently swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses, capital expenditures and leasing costs; property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; and fees and expenses due to the loan administrative agent.

Wells Fargo Center–North Tower —

As of September 30, 2021, the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, following the occurrence of such debt yield event, any excess operating cash flows are to be swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses, capital expenditures and leasing costs; property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; reserve accounts; and fees and expenses due to the loan administrative agent. The cash sweep has not started as of September 30, 2021.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Leasing Activity

Occupancy level. The following table summarizes leasing activity at Brookfield DTLA’s properties for the nine months ended September 30, 2021:
Leasing
Activity		Percentage
Leased
Leased square feet as of December 31, 20205,995,517 79.1 %
Contractual expirations and early terminations(294,324)(3.9)%
New leases72,406 1.0 %
Renewals113,341 1.5 %
Leased square feet as of September 30, 20215,886,940 77.7 %

Lease contractual expirations and early terminations. The following table summarizes the large contractual expiries and early terminations at Brookfield DTLA’s properties during the nine months ended September 30, 2021:
TenantPropertyLeased
Square Feet
Latham & Watkins LLPWells Fargo Center–South Tower, Gas Company Tower76,607 
ConveneWells Fargo Center–North Tower51,954 
Nossaman LLP777 Tower35,317 
Los Angeles Corporate Fitness, Inc.FIGat7th34,730 
CallisonRTKLBOA Plaza33,473 
Gibson, Dunn & Crutcher LLPWells Fargo Center–North Tower27,009 
Total259,090 

Decline in occupancy during the nine months ended September 30, 2021 was mainly attributable to contractual expirations and early terminations of lease agreements. Leasing volume for the nine months ended September 30, 2021, compared to the same period in 2020, is down significantly due to the continued impact of the measures taken to combat the spread of the COVID-19 pandemic. Many companies have paused anticipated leasing transactions while they re-direct their focus on addressing the impact of the COVID-19 restrictive measures on their business, including protecting their employees and managing financial and operating matters. At the same time, we have ongoing interest and lease negotiations with existing tenants on lease renewals/extensions and expansion of space and continued negotiations with prospective tenants on leasing of space. Although state and local authorities began easing restrictions on businesses throughout the first half of 2021, and while California reopened its economy in June 2021, the physical occupancy of our office properties has remained well below capacity as infection rates fluctuated and most employers continued their COVID-19 response protocols and allowed employees to work from home when possible.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Rental rates.The following table presents leasing information for executed leases at Brookfield DTLA’s properties as of September 30, 2021:
Square Feet
PropertyNet
Building
Rentable		% of Net
Rentable		%
Leased		Annualized
Rent (1)		Annualized
Rent
$/RSF (2)
BOA Plaza1,405,428 18.5 %86.1 %$33,882,451 $28.01 
Wells Fargo Center–North Tower1,400,639 18.5 %79.8 %32,665,814 29.23 
Gas Company Tower1,345,163 17.8 %76.0 %27,882,460 27.28 
EY Plaza963,682 12.7 %80.2 %20,936,025 27.07 
FIGat7th316,250 4.2 %89.2 %6,571,685 23.29 
Wells Fargo Center–South Tower1,124,960 14.8 %62.0 %19,349,701 27.75 
777 Tower1,024,835 13.5 %76.6 %21,433,566 27.31 
7,580,957 100.0 %77.7 %$162,721,702 $27.64 
__________
(1)Annualized rent represents the annualized monthly contractual rent under executed leases as of September 30, 2021. This amount reflects total base rent before any rent abatements as of September 30, 2021. Total abatements for executed leases as of September 30, 2021 for the twelve months ending September 30, 2022 are approximately $9.2 million, or $1.56 per leased square foot.
(2)Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of September 30, 2021.

Average asking net effective rents in the LACBD were essentially flat during the nine months ended September 30, 2021. Management believes that on average our current rents approximate market in the LACBD.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The following table presents a summary of lease expirations at Brookfield DTLA’s properties for executed leases as of September 30, 2021, plus currently available space, for future periods. This table assumes that none of our tenants will exercise renewal options or early termination rights, if any, at or prior to their scheduled expirations.
YearTotal Area in
Square Feet
Covered by 
Expiring
Leases		Percentage
of Leased
Square Feet		Annualized
Rent (1)		Percentage of
Annualized
Rent		Current
Rent per
Leased
Square
Foot (2)		Rent per
Leased Square
Foot at
Expiration (3)
    
Remainder of 202138,960 0.7 %$827,900 0.5 %$21.25 $21.25 
2022496,175 8.4 %13,828,397 8.5 %27.87 28.36 
2023930,912 15.8 %23,607,928 14.5 %25.36 27.10 
2024544,819 9.3 %15,374,792 9.4 %28.22 30.87 
2025719,922 12.2 %20,712,156 12.7 %28.77 31.49 
2026560,465 9.5 %14,095,695 8.7 %25.15 28.85 
2027193,883 3.3 %5,574,136 3.4 %28.75 34.05 
2028104,486 1.8 %3,139,804 1.9 %30.05 37.03 
2029303,025 5.1 %9,684,679 6.0 %31.96 42.03 
2030329,995 5.6 %10,015,348 6.2 %30.35 37.55 
Thereafter1,664,298 28.3 %45,860,867 28.2 %27.56 41.28 
Total expiring leases5,886,940 100.0 %$162,721,702 100.0 %$27.64 $33.99 
Currently available1,694,017 
Total rentable square feet7,580,957 
__________
(1)Annualized rent represents the annualized monthly contractual rent under executed leases as of September 30, 2021. This amount reflects total base rent before any rent abatements as of September 30, 2021. Total abatements for executed leases as of September 30, 2021 for the twelve months ending September 30, 2022 are approximately $9.2 million, or $1.56 per leased square foot.
(2)Current rent per leased square foot represents base rent for executed leases, divided by total leased square feet as of September 30, 2021.
(3)Rent per leased square foot at expiration represents base rent, including any future rent steps, and thus represents the base rent that will be in place at lease expiration.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Discussion of Consolidated Cash Flows

The following discussion of Brookfield DTLA’s cash flowflows is based on the condensed consolidated statements of cash flows in Item 1. “Financial Statements” and is not meant to be an all‑inclusive discussion of the changes in its cash flowflows for the periods presented below.


A summary of changes in Brookfield DTLA’s cash flows is as follows:
For the Nine Months EndedDollar
Change
For the Nine Months Ended Increase/
(Decrease)		September 30,
Sept. 30, 2017 Sept. 30, 2016 20212020
(In thousands)
Net cash provided by operating activities$39,175
 $29,199
 $9,976
Net cash provided by operating activities$66,038 $58,227 $7,811 
Net cash used in investing activities(42,617) (47,021) (4,404)Net cash used in investing activities$(20,211)$(40,040)$19,829 
Net cash provided by financing activities21,263
 29,590
 (8,327)
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities$(40,327)$31,783 $(72,110)


Operating Activities


Brookfield DTLA’s cash flowflows from operating activities isare primarily dependent upon (1) the occupancy level of its portfolio, (2) the rental rates achieved on its leases, and (3) the collectabilitycollectibility of rent and other amounts billed to tenants, (4) changes in working capital, and is also tied to the level of operating expenses. Net(5) interest expense. The increase in cash provided by operating activities during the nine months ended September 30, 2017 totaled $39.2 million, compared to net cash provided by operating activities of $29.2 million during the nine months ended September 30, 2016. The $10.0 million increase is primarily dueattributable to an increase incash inflows from working capital generatedchanges by operations year over year combined with a reduction$10.9 million and decreases in accounts payable and other liabilities, whichinterest payments on secured debt by $7.9 million. The cash inflows were partially offset by an increasedecreases in cash paidlease revenue by $11.4 million and rental property operating and maintenance expense by $1.5 million, reflecting the reduction in settlementboth contractual and physical occupancy resulting from measures taken to combat the spread of amounts due to affiliates during 2017.the COVID pandemic since March 2020.


Investing Activities


Brookfield DTLA’s cash flowflows from investing activities isare generally impacted by the amount of capital expenditures and tenant improvement activities for its properties. Net cash usedThe decrease in investing activities totaled $42.6 million during the nine months ended September 30, 2017, compared to net cash used in investing activities was mainly due to decreases in capital expenditures by $13.5 million following the completion of $47.0 million during the nine months ended September 30, 2016. The $4.4 million change is mainly a resultatrium development project at Wells Fargo Center in the third quarter of a decrease2020. Furthermore, in restricted cash, partially offset by an increaseresponse to the measures taken to combat the spread of the COVID-19 pandemic, Brookfield DTLA strategically deferred and cancelled various capital expenditure projects of lower priority since April 2020, which resulted in decreases in capital expenditures for improvements to real estate.across the portfolio.



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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Financing Activities


Brookfield DTLA’s cash flowflows from financing activities isare generally impacted by ourits loan activity, less any dividends and distributions paid to stockholderscontributions from and distributions to affiliated companies,its equity holders, if any. NetDuring the nine months ended September 30, 2021, net proceeds from the refinancing of the loans secured by the Gas Company Tower and the issuance of Series B preferred interest of $6.0 million were the main source of cash provided by financing activities. All proceeds from the new secured loans were used to pay off the original $450.0 million encumbrance and to satisfy the new loans’ required reserves. As Brookfield DTLA had excess cash from operating activities totaled $21.3generated from properties, it repurchased $37.5 million of the Series B preferred interest and made distributions of $12.7 million to the Series B preferred interest. In comparison, during the nine months ended September 30, 2017, compared to2020, net proceeds from the refinancing of the loans secured by EY Plaza office property and proceeds from the issuance of Series B preferred interest of $25.2 million were the main source of cash provided by financing activities. Cash outflows were mainly driven by repurchases of and distributions to Series B preferred interest of $13.5 million and $13.2 million, respectively, using the excess cash from upsized refinancing of the loans secured by 777 Tower and EY Plaza and operating activities generated from other properties.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Discussion of Results of Operations

Comparison of the Three Months Ended September 30, 2021 to September 30, 2020

Consolidated Statements of Operations Information
(In millions, except percentage amounts)
For the Three Months EndedIncrease/
(Decrease)		%
Change
September 30,
20212020
Revenue:
Lease income$61.9 $64.0 $(2.1)(3)%
Parking6.8 6.4 0.4 6 %
Interest and other0.1 0.3 (0.2)(67)%
Total revenue68.8 70.7 (1.9)(3)%
Expenses:
Rental property operating and maintenance24.9 24.5 0.4 2 %
Real estate taxes10.1 9.7 0.4 4 %
Parking2.5 2.4 0.1 4 %
Other expenses0.7 4.3 (3.6)(84)%
Depreciation and amortization26.5 25.5 1.0 4 %
Interest18.8 19.6 (0.8)(4)%
Total expenses83.5 86.0 (2.5)(3)%
Other Income:
Equity in earning of unconsolidated
    real estate joint venture		0.3 0.2 0.1 50 %
Total other income0.3 0.2 0.1 50 %
Net loss$(14.4)$(15.1)$0.7 (5)%

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Other Expenses

In September 2020, in conjunction with the extinguishment of the $265.0 million mortgage and mezzanine loans secured by EY Plaza, the Company early terminated the related LIBOR-based interest rate swap and cap contracts with notional amounts of $218.9 million and $35.0 million, respectively, and reclassified the entire loss of $1.8 million on interest rate swap contracts designated as cash flow hedges from accumulated other comprehensive loss to other expenses. In addition, the Company recognized a loss on early extinguishment of debt and termination of interest rate swap contracts of $1.0 million in other expenses.

Other expenses also include income tax expenses charged on various TRS. In December 2020, an affiliated tenant signed an early lease termination agreement with the Company. Accordingly, the Company recorded early lease termination income and accrued income tax expenses on such income during the ninefirst half of 2021. During the three months ended September 30, 2016. Contributions from2021, this affiliated tenant rescinded the Series B preferred interest, partially offset by cash used to refinance the Wells Fargo Center–North Tower mortgage loan, were the primary driverearly lease termination agreement, which resulted in a reversal of accrued income tax expenses of $1.3 million.


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the net cash provided by financing activitiesNine Months Ended September 30, 2021 to September 30, 2020

Consolidated Statements of Operations Information
(In millions, except percentage amounts)
For the Nine Months EndedIncrease/
(Decrease)		%
Change
September 30,
20212020
Revenue:
Lease income$188.9 $192.7 $(3.8)(2)%
Parking18.2 21.5 (3.3)(15)%
Interest and other0.7 0.8 (0.1)(13)%
Total revenue207.8 215.0 (7.2)(3)%
Expenses:
Rental property operating and maintenance69.9 71.4 (1.5)(2)%
Real estate taxes30.2 29.1 1.1 4 %
Parking5.9 8.4 (2.5)(30)%
Other expenses6.7 8.9 (2.2)(25)%
Depreciation and amortization80.2 78.8 1.4 2 %
Interest61.1 63.1 (2.0)(3)%
Total expenses254.0 259.7 (5.7)(2)%
Other Income (Expense):
Equity in earning (loss) of unconsolidated
    real estate joint venture		0.6 (0.5)1.1 (220)%
Total other income (expense)0.6 (0.5)1.1 (220)%
Net loss$(45.6)$(45.2)$(0.4)1 %

Lease Income

Lease income decreased largely as a result of a reduction in occupancy to combat the spread of the COVID-19 pandemic. See “Leasing Activity” for further details.

Parking revenue and expense

Parking revenue includes monthly and transient parking income. With the restrictive measures imposed on non‑essential businesses and employees working from home, both parking revenue and variable expense decreased accordingly.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Rental Property Operating and Maintenance Expense

Rental property operating and maintenance expense mainly includes janitorial, repairs and maintenance, utilities, insurance, and various other recurring expenses. As most of our office tenants have been working remotely since the issuance of the “stay-at-home” order in March 2020, rental property operating and maintenance expense decreased.

Other Expenses

Other expenses mainly represent asset management fee, audit and professional fees, and miscellaneous expenses. Decrease in other expenses was mainly due to nonrecurring charges made during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, contributions from the Series B preferred2020, including a realized loss on interest rate swap contracts of $1.8 million and Brookfield DTLA Holdings combined with proceeds from the 777 Tower loan modification,a loss on early extinguishment of debt and termination of interest rate swap contracts of $1.0 million, partially offset by the paymenta $1.0 million write-off charge of dividends on the Series A preferred stock and cash used to refinance the Gas Company Tower mortgage loan, comprised the net cash provided by financing activities.deferred cost.



Off-Balance Sheet Arrangements


Brookfield DTLA did not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital expenditures or capital resources that is material to stockholders as of the date this report was filed, September 30, 20172021 and December 31, 2016,2020, respectively.


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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Contractual Obligations


The following table provides information with respect to Brookfield DTLA’s commitments as of September 30, 2017,2021, including any guaranteed or minimum commitments under contractual obligations (in thousands):obligations:

 2017 2018 2019 2020 2021 Thereafter Total
  
Principal payments on
     mortgage loans (1)		$36,025
 $474,233
 $474,449
 $168,151
 $450,000
 $400,000
 $2,002,858
Interest payments –             
Fixed-rate debt (2)9,147
 36,290
 36,290
 36,390
 28,289
 43,875
 190,281
Variable-rate swapped to
    fixed-rate debt
1,777
 6,975
 6,789
 6,434
 —
 —
 21,975
Variable-rate debt (3)10,461
 38,428
 5,490
 —
 —
 —
 54,379
Tenant-related
     commitments (4)		53,042
 13,237
 12,890
 2,135
 1,504
 4,376
 87,184
 $110,452
 $569,163
 $535,908
 $213,110
 $479,793
 $448,251
 $2,356,677
Remainder
of 2021		2022202320242025ThereafterTotal
Principal payments on
     secured debt (1)(2)		$— $— $819,296 $675,000 $305,000 $465,000 $2,264,296 
Interest payments –
Fixed-rate debt (3)4,720 18,726 16,803 11,025 — — 51,274 
Variable-rate debt (4)11,993 47,575 44,175 30,004 22,284 1,569 157,600 
Tenant-related commitments (5)10,864 21,942 1,159 971 1,848 1,380 38,164 
Construction-related
commitments (6)
— 180 — — — — 180 
$27,577 $88,423 $881,433 $717,000 $329,132 $467,949 $2,511,514 
__________
(1)
On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th from December 10, 2017 until January 8, 2018. See “Subsequent Event.”
(2)Interest payments on fixed-rate debt are calculated based on contractual interest rates and scheduled maturity dates.
(3)
Interest payments on variable-rate debt are calculated based on scheduled maturity dates and the one-month LIBOR rate in place on the debt as of September 30, 2017 plus the contractual spread per the loan agreements.
(4)
Tenant-related commitments include tenant improvements and leasing commissions and are based on executed leases as of September 30, 2017.

(1)BAM owns a significant interest in a company whose subsidiary is the lender of the $35.0 million mezzanine loan secured by Wells Fargo Center–North Tower, which matures in October 2023. See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 13—Related Party Transactions.”

(2)Based on the maturity dates after the impact of extension options that the Company controls, if applicable.
(3)Interest payments on fixed-rate debt are calculated based on the maturity dates (after the impact of extension options that the Company controls, if applicable) and contractual interest rates.
(4)Interest payments on variable-rate debt are calculated based on the maturity dates (after the impact of extension options that the Company controls, if applicable) and the one-month LIBOR rate in place on the debt as of September 30, 2021 plus the contractual spread per the loan agreements. Interest payments due to the related party lender of the loan described in (1) above total $0.5 million for the remainder of 2021, $1.8 million for 2022, and $1.4 million for 2023.
(5)Tenant-related commitments include tenant improvements and leasing commissions and are based on executed leases as of September 30, 2021. Tenant-related commitments due to the related party lender of the loan described in (1) above total $0.3 million for the remainder of 2021.
(6)Construction-related commitments include amounts due to contractors related to redevelopment projects at Wells Fargo Center based on executed contracts as of September 30, 2021.
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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Related Party Transactions


Management AgreementsSee Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 13—Related Party Transactions” of this Quarterly Report on Form 10-Q.


Certain subsidiaries of Brookfield DTLA have entered into arrangements with the Manager, pursuant to which the Manager provides property management and various other services. Property management fees under the management agreements are calculated based on 2.75% of rents collected (as defined in the management agreements). In addition, the Company pays the Manager an asset management fee, which is calculated based on 0.75% of the capital contributed by Brookfield DTLA Holdings.

A summary of costs incurred by the applicable subsidiaries of Brookfield DTLA under these arrangements is as follows (in thousands):

 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
        
Property management fee expense$2,021
 $1,955
 $6,112
 $5,864
Asset management fee expense1,583
 1,583
 4,748
 4,748
General, administrative and
    reimbursable expenses
623
 615
 1,860
 1,857
Leasing and construction management fees634
 410
 1,481
 1,321

Insurance Agreements

Properties held by certain Brookfield DTLA subsidiaries are covered under insurance policies entered into by the Manager. Insurance premiums for Brookfield DTLA’s properties are paid by the Manager and Brookfield DTLA reimburses the Manager for the actual cost of such premiums.

A summary of costs incurred by the applicable Brookfield DTLA subsidiaries under this arrangement is as follows (in thousands):

 For the Three Months Ended For the Nine Months Ended
 Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
        
Insurance expense$1,948
 $1,950
 $5,828
 $5,873


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Litigation


See Part II, Item 1. “Legal Proceedings.”Proceedings” of this Quarterly Report on Form 10-Q.


Critical Accounting Policies


Please refer to Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 20, 201725, 2021 for a discussion of our critical accounting policies for “Business Combinations,” “Consolidation,” “Impairment Evaluation,” “Revenue Recognition,”the year ended December 31, 2020.

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 2—Basis of Presentation” of this Quarterly Report on Form 10-Q for a discussion of use of estimates, impairment review of investments in real estate and “Allowance for Doubtful Accounts.” There have been no changes to these policiesunconsolidated real estate joint venture, and collectibility assessment on rents, deferred rents and other receivables during the threenine months ended September 30, 2017.2021.


RecentRecently Issued Accounting PronouncementsLiterature


In May 2014, theSee Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 3—Recently Issued Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive modelLiterature” of this Quarterly Report on Form 10-Q for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluatinginformation regarding the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements.new accounting pronouncements during the nine months ended September 30, 2021.


In February 2016, the FASB issued ASU 2016-02 establishing ASC Topic 842, Leases. The guidance in this update supersedes the guidance in ASC Topic 840, Leases. ASU 2016-02 revises GAAP related to accounting for leases by lessees. Under this new guidance, lessees will be required to recognize a lease liability and a right-of-use asset in the balance sheet for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification determining the pattern of expense recognition in the statement of operations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and should be applied using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2016-02 on Brookfield DTLA’s consolidated financial statements.
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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


In August 2016, the FASB issued ASU 2016-15, ClassificationTable of Certain Cash Receipts and Cash Payments to ASC Topic 230, Statement of Cash Flows. ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of
corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, with early adoption permitted. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Restricted Cash to ASC Topic 230, Statement of Cash Flows. ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Upon adoption, we will retrospectively reconcile the activity in our cash, cash equivalents, restricted cash and restricted cash equivalents during reporting periods.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business to ASC Topic 805, Business Combinations. ASU 2017-01 introduced amendments that are intended to make the guidance on the definition of a business more consistent and cost-efficient. The objective of the update is to add further guidance that assists entities in evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business by providing a screen to determine when a set of assets and activities acquired is not a business. ASU 2017-01 is effective for annual periods beginning after December 15, 2017 including interim periods within those periods. ASU 2017-01 must be applied prospectively on or after the effective date. We are currently evaluating the impact of the adoption of ASU 2017-01 on Brookfield DTLA’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets to ASC Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets. ASU 2017-05 clarifies the scope of recently established guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. This update conforms the derecognition guidance on nonfinancial assets with the model for transactions in ASC 606. ASU 2017-05 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements.


BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)Contents

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging. ASU 2017-12 introduced amendments intended to make targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The objective of the update is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. All transition requirements and elections should be applied to hedging relationships existing as of the date of adoption and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the impact of the adoption of ASU 2017-01 on Brookfield DTLA’s consolidated financial statements.

Subsequent Event

On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th until January 8, 2018. After this extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). The Company plans to refinance this loan on or prior to January 8, 2018 and does not expect to make a principal paydown when the loan is refinanced. There can be no assurance that the refinancing can be accomplished, what terms will be available in the market for this type of financing at the time of any refinancing, or that any refinancing will generate net cash proceeds.



Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

See Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 20, 201725, 2021 for a discussion regarding our exposure to market risk. Our exposure to market risk has not changed materially since year end 2016.2020.


Item 4.Controls and Procedures.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures


Brookfield DTLA maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended)amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.


As required by SEC Rule 13a-15(b), Brookfield DTLA carried out an evaluation, under the supervision and with the participation of its management, including its principal executive officer and its principal financial officer, of the effectiveness of the design and operation of Brookfield DTLA’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, G. Mark Brown, our principal executive officer, and Edward F. Beisner,Bryan D. Smith, our principal financial officer, concluded that these disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2017.2021.


Changes in Internal Control over Financial Reporting


There have been no changes in Brookfield DTLA’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarterthree months ended September 30, 20172021 that have materially affected, or that are reasonable 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 Shutdown. We are continually monitoring and assessing the impact of the Shutdown on our internal controls to minimize the impact on their design and operating effectiveness.

61


Table of Contents
PART II—II—OTHER INFORMATION


Item 1.Legal Proceedings.

Item 1.Legal Proceedings.

Brookfield DTLA and its subsidiaries may be subject to pending legal proceedings and litigation incidental to its business. After consultation with legal counsel, management believes that any liability that may potentially result upon resolution of such matters is not expected to have a material adverse effect on the Company’s business, financial condition or consolidated financial statements as a whole.


Item 1A.Risk Factors.

Item 1A.Risk Factors.
Factors That May Affect Future Results
(Cautionary Statement Under the Private Securities Litigation Reform Act of 1995)

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 (as set forth in Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding our operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts,” “likely,” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.”

Although Brookfield DTLA believes that its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond its control, which may cause Brookfield DTLA’s actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to:

Risks generally incidentThere have been no material changes to the ownership of real property, including the ability to retain tenants and rent space upon lease expirations, the financial condition and solvency of our tenants, the relative illiquidity of real estate and changes in real estate taxes, regulatory compliance costs and other operating expenses;

Risks associated with the Downtown Los Angeles market, which is characterized by challenging leasing conditions, including limited numbers of new tenants coming into the market and the downsizing of large tenants in the market such as accounting firms, banks and law firms;


Risks related to increased competition for tenants in the Downtown Los Angeles market, including aggressive attempts by competing landlords to fill large vacancies by providing tenants with lower rental rates, increasing amounts of free rent and providing larger allowances for tenant improvements;

The impact or unanticipated impact of general economic, political and market factors in the regions in which Brookfield DTLA or any of its subsidiaries does business;

The use of debt to finance Brookfield DTLA’s business or that of its subsidiaries;

The behavior of financial markets, including fluctuations in interest rates;

Uncertainties of real estate development or redevelopment;

Global equity and capital markets and the availability of equity and debt financing and refinancing within these markets;

Risks relating to Brookfield DTLA’s insurance coverage;

The possible impact of international conflicts and other developments, including terrorist acts;

Potential environmental liabilities;

Dependence on management personnel;

The ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom;

Operational and reputational risks;

Catastrophic events, such as earthquakes and hurricanes; and

The impact of legislative, regulatory and competitive changes and other risk factors relating to the real estate industry, as detailed from time to timeincluded in the reports of Brookfield DTLA filed with the SEC.

Brookfield DTLA cautions that the foregoing list of important factors that may affect future results is not exhaustive. When relying on Part I, “Item IA. Risk Factors” in Brookfield DTLA’s forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, Brookfield DTLA undertakes no obligation to publicly update or revise any forward‑looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.


Additional material risk factors are discussed in other sections of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on March 20, 201725, 2021. Those risks are also relevant to our performance and financial condition. Moreover, we operate in a highly competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

None.


Item 3.Defaults Upon Senior Securities.

Item 3.Defaults Upon Senior Securities.

Dividends on the Series A preferred stock are cumulative and therefore will continue to accrue at an annual rate of $1.90625 per share. As of October 31, 2017,2021, the cumulative amount of unpaid dividends totaled $145.0$219.2 million.


Item 4.Mine Safety Disclosures.

Item 4.Mine Safety Disclosures.

Not applicable.


Item 5.Other Information.

Item 5.Other Information.

None.



62

Table of Contents
Item 6.Exhibits.

Item 6.Exhibit No.Exhibits.

Exhibit Description
Exhibit No.Exhibit Description
Certification of Principal Executive Officer dated November 13, 2017
12, 2021
Certification of Principal Financial Officer dated November 12, 2021
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer dated November 13, 2017
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of Principal Executive Officer and Principal Financial Officer dated
November 13, 201712, 2021 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS**101.INSInline XBRL Instance DocumentDocument. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH**101.SCHInline XBRL Taxonomy Extension Schema DocumentDocument.
101.CAL**101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentDocument.
101.DEF**101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentDocument.
101.LAB**101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentDocument.
101.PRE**101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentDocument.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
__________
*Filed herewith.
**Furnished herewith.


(1)This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

(1)This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

SIGNATURES


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


Date:As of November 13, 201712, 2021

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.
Registrant
BROOKFIELD DTLA FUND OFFICE
    TRUST INVESTOR INC.
By:
Registrant
By:/s/ G. MARK BROWN
G. Mark Brown
Chairman of the Board
(Principal executive officer)
By:/s/ EDWARD F. BEISNERBRYAN D. SMITH
Edward F. BeisnerBryan D. Smith
Chief Financial Officer
(Principal financial officer)

5263