Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or the “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 A preferred stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC, a Delaware limited liability company (“DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”). DTLA Holdings is an indirect partially-owned subsidiary of Brookfield Property Partners L.P., an exempted limited partnership under the Laws of Bermuda (“BPY”), which in turn is the flagship commercial property entity and the primary vehicle through which Brookfield Asset Management Inc., a corporation under the Laws of Canada (“BAM”) invests in real estate on a global basis.

As of JuneSeptember 30, 2019 and December 31, 2018, Brookfield DTLA owned BOA Plaza, EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, which are Class A office properties, and Figat7th, a retail center nested between EY Plaza and 777 Tower, all of which are located in the Los Angeles Central Business District (the “LACBD”).

Brookfield DTLA receives its income primarily from lease income generated from the operations of its office and retail properties, and to a lesser extent, income from its parking garages.

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.

The accompanying unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America (“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 data as of December 31, 2018 has been derived from Brookfield DTLA’s audited financial statements; however, the accompanying notes to the condensed consolidated financial statements do not include all disclosures required by GAAP.

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. 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.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to amend the accounting for credit losses for certain financial instruments. Under the new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. In November 2018, the FASB released ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. This amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Subtopic 842-30, Leases—Lessor. ASU 2016-13 and ASU 2018-19 are effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019, with early adoption permitted as of the fiscal year beginning after December 15, 2018, including adoption in an interim period. We are currently evaluating the impact ofthis guidance but do not believe that the adoption of this guidanceamendment will have a material impact on Brookfield DTLA’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), and made changes to its conceptual framework, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, that are intended to improve the effectiveness of disclosures in notes to financial statements. ASU 2018-13 removes, modifies and adds certain disclosure requirements related to fair value measurements required by Topic 820. The guidance is effective for interim and annual periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for any eliminated or modified disclosures. We are currently evaluating the impact of the adoption of this guidance on Brookfield DTLA’s consolidated financial statements.

On the date of adoption, Brookfield DTLA elected the package of practical expedients provided for in Topic 842, including:

The package of practical expedients was made as a single election and was consistently applied to all existing leases as of January 1, 2019. The Company also elected the practical expedient provided to lessors in a subsequent amendment to Topic 842 that removed the requirement to separate lease and nonlease components, provided certain conditions were met.

Brookfield DTLA leases its office properties to lessees in exchange for payments from tenants comprised of monthly payments that cover rent, property taxes, insurance and certain cost recoveries. Payments from tenants for reimbursement are considered nonlease components that are separated from lease components and are generally accounted for in accordance with the revenue recognition standard. However, the Company qualified for and elected the practical expedient related to combining the components because the lease component is classified as an operating lease and the timing and pattern of transfer of tenant reimbursements, which is not the predominant component, is the same as the lease component. As such, consideration for tenant reimbursements is accounted for as part of the overall consideration in the lease. Lease income related to variable payments includes fixed and contingent rental payments and tenant recoveries. Tenant recoveries, including reimbursements of utilities, repairs and maintenance, common area expenses, real estate taxes and insurance, and other operating expenses, are recognized as part of lease income in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises. Such payments from customers are considered nonlease components of the lease and therefore no consideration is allocated to them because they do not transfer a

Some of the Company’s leases have termination and/or extension options. Termination options allow the tenant to terminate the lease prior to the end of the lease term under certain circumstances. Termination options generally become effective half way or further into the original lease term and require advance notification from the tenant and payment of a termination fee that reimburses the Company for a portion of the remaining rent under the original lease term and the undepreciated lease inception costs such as commissions, tenant improvements and lease incentives. Termination fees are recognized at the later of when the tenant has vacated the space or the lease has expired, and a fully executed lease termination agreement has been delivered, the amount of the fee is determinable and collectability of the fee is reasonably assured.

Rents, deferred rents and other receivables, net also includes amounts paid to a tenant for improvements owned or costs incurred by the tenant. Such amounts are treated as tenant inducements and are presented in the condensed consolidated balance sheet net of accumulated amortization. Amortization of tenant inducements is recorded on a straight-line basis over the term of the related lease as a reduction of lease income in the condensed consolidated statement of operations. The new standard also requires the Company to reduce its lease income for credit losses associated with lease receivables. In addition, straight-line rent receivables are written off when the Company believes there is uncertainty regarding a tenant’s ability to complete the term of the lease.

Topic 842 requires lessors to capitalize and amortize only incremental direct leasing costs. All leasing commissions paid in connection with new leases or lease renewals are capitalized and amortized on a straight-line basis over the initial fixed terms of the respective leases as part of depreciation and amortization in the condensed consolidated statement of operations. Initial direct costs, primarily commissions, related to the leasing of our office properties are deferred and are presented as deferred charges in the condensed consolidated balance sheet net of accumulated amortization totaling $55.9$58.6 million and $50.3 million as of JuneSeptember 30, 2019 and December 31, 2018, respectively.

Beginning January 1, 2019, any costs incurred by the Company to negotiate or arrange a lease regardless of its outcome, such as fixed employee compensation, tax or legal advice to negotiate lease terms, and lessor costs related to advertising or soliciting potential tenants are required to be expensed as incurred. During sixthe nine months ended JuneSeptember 30, 2019, Brookfield DTLA had no indirect leasing costs that would have been capitalized prior to the adoption of Topic 842.

The election of the package of practical expedients described above permits the Company to continue to account for its leases that commenced before January 1, 2019 under the previous lease accounting guidance for the remainder of their lease terms, and to apply the new lease accounting guidance to leases commencing or modified after January 1, 2019. The Company recorded no net cumulative effect adjustment to the accumulated deficit in the condensed consolidated balance sheet on January 1, 2019 as a result of the adoption of this guidance as there were no indirect leasing costs that were required to be written off.

As described above, rental income and tenant reimbursements related to our operating leases for which Brookfield DTLA is the lessor qualified for the single component practical expedient and are classified as lease income in our condensed consolidated statement of operations. Prior to the adoption of Topic 842, the Company reported rental income and tenant reimbursements separately in the condensed consolidated statement of operations, in accordance with Topic 840. Upon adoption of the new lease accounting standard, the comparative statements of operations for prior years have been reclassified to conform to the new single component presentation of rental income and tenant reimbursements, classified within lease income in the Company’s condensed consolidated statement of operations.

As of JuneSeptember 30, 2019, Brookfield DTLA has six Class A office properties and one retail center aggregating 7.6 million net building rentable square feet located in the LACBD. We are susceptible to adverse developments in the markets for office space, particularly in Southern California. Such adverse developments could include oversupply of or reduced demand for office space; declines in property values; business layoffs, downsizings, relocations or industry slowdowns affecting tenants of the Company’s properties; changing demographics; increased telecommuting; terrorist targeting of or acts of war against high-rise structures; infrastructure quality; California state budgetary constraints and priorities; increases in real estate and other taxes; costs of complying with state, local and federal government regulations or increased regulation and other factors. None of our tenants accounted for more than 10% of our lease income for the sixnine months ended JuneSeptember 30, 2019.

As of JuneSeptember 30, 2019, all of the leases in which the Company is the lessor are classified as operating leases. Our leases generally contain options to extend lease terms at prevailing market rates at the time of expiration. Certain leases with retail tenants also provide for the payment by the lessee of additional rent based on a percentage of the tenant’s sales. Percentage rents are recognized only after the tenant sales thresholds have been achieved.

A reconciliation of the revenue line items that were reclassified in Brookfield DTLA’s condensed consolidated statements of operations to conform to the current period presentation pursuant to the adoption of Topic 842 and the election of the single component practical expedient is as follows (in thousands):

As of JuneSeptember 30, 2019, the undiscounted cash flows for future minimum base rents to be received from tenants under executed noncancelable operating leases for future periods are as follows (in thousands):

As of December 31, 2018, the undiscounted cash flows for future minimum base rents to be received from tenants under executed noncancelable operating leases for future periods are as follows (in thousands):

As a result of the derecognition of assets, during the nine months ended September 30, 2019 the Company recognized a gain representing the difference between the amount of consideration measured and allocated to the assets and their carrying amount as follows (in thousands):

The Company’s interest in the joint venture as of May 31, 2019 was 54.3% while Brookfield DTLA FP IV Holdings LLC’s interest was 45.7% based on its $29.6 million cash contribution made in exchange for controlling interests in the joint venture. The gain from derecognition of assets is recognized in the condensed consolidated statements of operations for the three and sixnine months ended JuneSeptember 30, 2019.

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. Brookfield DTLA is required to continually evaluate its VIE relationships and consolidation conclusion.

The liabilities of the investment in unconsolidated real estate joint venture may only be settled using the assets of 755 South Figueroa and the liabilities of the joint venture are not recourse to the Company. The Company’s exposure to its investment in the joint venture is limited to its investment balance. TheAs of September 30, 2019, the Company’s ownership interest in the joint venture is 54.3% as of June 30, 2019.. Pursuant to the operating agreement of the joint venture, the other venture partnerBrookfield DTLA FP IV Holdings LLC 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.

As of JuneSeptember 30, 2019, the estimate of the amortization/accretion of intangible assets and liabilities for future periods is as follows (in thousands):

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

The weighted average interest rate of our debt was 4.35%4.18% and 4.34% as of JuneSeptember 30, 2019 and December 31, 2018, respectively.

As Brookfield DTLA’s debt matures, principal payment obligations present significant future cash requirements. As of JuneSeptember 30, 2019, our debt to be repaid in future periods is as follows (in thousands):

All of Brookfield DTLA’s $2.2 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 DTLA Holdings or one of its subsidiaries, if certain triggering events (as defined in the loan agreements) occur.

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 JuneSeptember 30, 2019 and were in compliance with the amounts required by the loan agreements.

Mezzanine equity in the condensed consolidated balance sheets is comprised of the Series A preferred stock, a Series A-1 preferred interest, a senior participating preferred interest, and a Series B preferred interest (collectively, the “Preferred Interests”). The Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest are held by a noncontrolling interest holder. The Preferred Interests are classified in 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 the part of Brookfield DTLA or DTLA Holdings to redeem the Preferred Interests.

The Preferred Interests included within mezzanine equity were recorded at fair value on the date of issuance and have been adjusted to the greater of their carrying amount or redemption value as of JuneSeptember 30, 2019 and December 31, 2018.

As of JuneSeptember 30, 2019 and December 31, 2018, 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.

No dividends were declared on the Series A preferred stock during the sixnine months ended JuneSeptember 30, 2019 and 2018. Dividends on the Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.90625 per share.

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. 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. The Series A preferred stock is not convertible into or exchangeable for any other property or securities of Brookfield DTLA.

As of JuneSeptember 30, 2019, the Series A preferred stock is reported at its redemption value of $419.2$423.8 million calculated using the redemption price of $25.00 per share plus $175.9$180.6 million of accumulated and unpaid dividends on such Series A preferred stock through JuneSeptember 30, 2019.

The Series A-1 preferred interest is held by DTLA Holdings or wholly-owned subsidiaries of DTLA Holdings. Interest on the Series A-1 preferred interest is cumulative and accrues at an annual rate of 7.625%.

Brookfield DTLA Fund Properties III LLC (“DTLA OP”) issued a senior participating preferred interest to DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition. The senior participating preferred interest represents a 4.0% participating interest in the residual value of DTLA OP.

During the sixnine months ended JuneSeptember 30, 2019 and 2018, Brookfield DTLA made distributions totaling $2.0$0.4 million and $2.6 million, respectively, to DTLA Holdings as returns of investment related to the senior participating preferred interest using cash on hand.

As of JuneSeptember 30, 2019, the senior participating preferred interest is reported at its redemption value of $22.7$22.9 million using the value of the participating interest.

At the time of the merger with MPG, 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 market rate of return determined at the time of contribution (“preferred return”).

During the sixnine months ended JuneSeptember 30, 2019, the Company received cash contributions totaling $27.4$31.4 million from DTLA Holdings under this commitment, which are entitled to a 9.0% preferred return. The Company used the funds for capital expenditures and leasing costs. As of JuneSeptember 30, 2019, $57.8$53.8 million is available to the Company under this commitment for future funding.

During the sixnine months ended JuneSeptember 30, 2019 and 2018, Brookfield DTLA made distributions to DTLA Holdings totaling $2.7$10.2 million as preferred returns on the Series B preferred interest using cash on hand. During the six months ended June 30, 2018, Brookfield DTLA made distributions totaling $12.5and $14.4 million, to DTLA Holdingsrespectively, as preferred returns on the Series B preferred interest using cash on hand.

As of JuneSeptember 30, 2019, the Series B preferred interest is reported at its redemption value of $215.1$216.6 million calculated using its liquidation value of $202.2$206.2 million plus $12.9$10.4 million of unpaid preferred returns on such Series B preferred interest through JuneSeptember 30, 2019.

A summary of the change in mezzanine equity is as follows (in thousands, except share amounts):