Brookfield Property Preferred (BPYPM) 6-K Management’s Discussion and Analysis of Financial Results

Brookfield Property Partners L.P.

Condensed consolidated financial statements (unaudited)

As at September 30, 2016 and December 31, 2015 and

for the three and nine months ended September 30, 2016 and 2015

1

Brookfield Property Partners L.P.

Condensed Consolidated Balance Sheets

Unaudited		As at
(US$ Millions)	Note	Sep. 30, 2016		Dec. 31, 2015
Assets
Non-current assets
Investment properties	4	$	45,227	$	41,599
Equity accounted investments	5	16,830		17,638
Participating loan interests	6	510		449
Hospitality assets	7	4,880		5,016
Other non-current assets	8	3,939		3,883
Loans and notes receivable		207		217
Total non-current assets		71,593		68,802
Current assets
Loans and notes receivable		2		4
Accounts receivable and other	9	1,460		1,220
Cash and cash equivalents		1,562		1,035
Total current assets		3,024		2,259
Assets held for sale	10	3,033		805
Total assets		$	77,650	$	71,866
Liabilities and equity
Non-current liabilities
Debt obligations	11	$	27,166	$	21,946
Capital securities	12	3,777		3,528
Other non-current liabilities	14	726		388
Deferred tax liabilities		2,325		3,107
Total non-current liabilities		33,994		28,969
Current liabilities
Debt obligations	11	4,624		8,580
Capital securities	12	373		503
Accounts payable and other liabilities	15	2,457		2,639
Total current liabilities		7,454		11,722
Liabilities associated with assets held for sale	10	1,726		242
Total liabilities		43,174		40,933
Equity
Limited partners	16	7,650		7,425
General partner	16	6		6
Non-controlling interests attributable to:
Redeemable/exchangeable and special limited partnership units	16,17	14,660		14,218
Limited partnership units of Brookfield Office Properties Exchange LP	16,17	300		309
Interests of others in operating subsidiaries and properties	17	11,860		8,975
Total equity		34,476		30,933
Total liabilities and equity		$	77,650	$	71,866

See accompanying notes to the condensed consolidated financial statements.

2

Brookfield Property Partners L.P.

Condensed Consolidated Income Statements

Unaudited		Three months ended Sep. 30,					Nine months ended Sep. 30,
(US$ Millions, except per unit amounts)	Note	2016			2015		2016			2015
Commercial property revenue	18	$	946		$	805	$	2,632		$	2,396
Hospitality revenue		407			363		1,215			897
Investment and other revenue	19	56			99		142			293
Total revenue		1,409			1,267		3,989			3,586
Direct commercial property expense	20	367			333		1,008			968
Direct hospitality expense	21	254			240		783			642
Investment and other expense		—			54		1			114
Interest expense		430			397		1,247			1,137
Depreciation and amortization	22	63			45		188			122
General and administrative expense	23	146			174		415			406
Total expenses		1,260			1,243		3,642			3,389
Fair value gains, net	24	86			245		709			1,252
Share of net earnings from equity accounted investments	5	420			238		836			1,051
Income before income taxes		655			507		1,892			2,500
Income tax (benefit) expense	13	(961		)	72		(733		)	(109		)
Net income		$	1,616		$	435	$	2,625		$	2,609
Net income attributable to:
Limited partners		$	462		$	75	$	683		$	747
General partner		—			—		—			—
Non-controlling interests attributable to:
Redeemable/exchangeable and special limited partnership units		772			117		1,141			1,258
Limited partnership units of Brookfield Office Properties Exchange LP		21			1		31			47
Interests of others in operating subsidiaries and properties		361			242		770			557
Total		$	1,616		$	435	$	2,625		$	2,609
Net income per LP Unit:
Basic	16	$	1.61		$	0.25	$	2.37		$	2.62
Diluted	16	$	1.56		$	0.25	$	2.31		$	2.54

See accompanying notes to the condensed consolidated financial statements.

3

Brookfield Property Partners L.P.

Condensed Consolidated Statements of Comprehensive Income

Unaudited		Three months ended Sep. 30,						Nine months ended Sep. 30,
(US$ Millions)	Note	2016			2015			2016			2015
Net income		$	1,616		$	435		$	2,625		$	2,609
Other comprehensive (loss) income	26
Items that may be reclassified to net income:
Foreign currency translation		(17		)	(405		)	(68		)	(897		)
Cash flow hedges		(20		)	(74		)	(108		)	(55		)
Available-for-sale securities		(3		)	1			(3		)	4
Equity accounted investments		2			(36		)	2			52
Items that will not be reclassified to net income:
Equity accounted investments - revaluation surplus		(1		)	—			(11		)	2
Total other comprehensive (loss)income		(39		)	(514		)	(188		)	(894		)
Total comprehensive income (loss)		$	1,577		$	(79	)	$	2,437		$	1,715
Comprehensive income attributable to:
Limited partners
Net income		$	462		$	75		$	683		$	747
Other comprehensive (loss) income		(5		)	(104		)	(91		)	(162		)
		457			(29		)	592			585
Non-controlling interests
Redeemable/exchangeable and special limited partnership units
Net income		772			117			1,141			1,258
Other comprehensive (loss) income		(7		)	(175		)	(151		)	(274		)
		765			(58		)	990			984
Limited partnership units of Brookfield Office Properties Exchange LP
Net income		21			1			31			47
Other comprehensive (loss) income		—			(6		)	(4		)	(10		)
		21			(5		)	27			37
Interests of others in operating subsidiaries and properties
Net income		361			242			770			557
Other comprehensive (loss) income		(27		)	(229		)	58			(448		)
		334			13			828			109
Total comprehensive income (loss)		$	1,577		$	(79	)	$	2,437		$	1,715

See accompanying notes to the condensed consolidated financial statements.

4

Brookfield Property Partners L.P.

Condensed Consolidated Statements of Changes in Equity

	Limited partners														General partner								Non-controlling interests
Unaudited (US$ Millions)	Capital			Retained earnings			Ownership Changes		Accumulated other comprehensive (loss) income			Total limited partners equity			Capital		Retained earnings		Accumulated other comprehensive (loss) income		Total general partner equity		Redeemable / exchangeable and special limited partnership units			Limited partnership units of Brookfield Office Properties Exchange LP			Interests of others in operating subsidiaries and properties			Total equity
Balance as at Dec 31, 2015	$	5,815		$	1,791		$	126	$	(307	)	$	7,425		$	4	$	2	$	—	$	6	$	14,218		$	309		$	8,975		$	30,933
Net income	—			683			—					683			—		—		—		—		1,141			31			770			2,625
Other comprehensive (loss)	—			—			—		(91		)	(91		)	—		—		—		—		(151		)	(4		)	58			(188		)
Total comprehensive income (loss)	—			683			—		(91		)	592			—		—		—		—		990			27			828			2,437
Distributions	—			(220		)	—		—			(220		)	—		—		—		—		(368		)	(10		)	(566		)	(1,164		)
Issuance / repurchase of interests in operating subsidiaries	(61		)	(108		)	—		—			(169		)	—		—		—		—		(180		)	(4		)	2,623			2,270
Exchange of exchangeable units	21			—			1		—			22			—		—		—		—		—			(22		)	—			—
Balance as at Sep. 30, 2016	$	5,775		$	2,146		$	127	$	(398	)	$	7,650		$	4	$	2	$	—	$	6	$	14,660		$	300		$	11,860		$	34,476
Balance as at Dec 31, 2014	$	5,612		$	1,010		$	125	$	(161	)	$	6,586		$	4	$	1	$	—	$	5	$	13,147		$	470		$	8,091		$	28,299
Net income	—			747			—		—			747			—		—		—		—		1,258			47			557			2,609
Other comprehensive (loss)	—			—			—		(162		)	(162		)	—		—		—		—		(274		)	(10		)	(448		)	(894		)
Total comprehensive income (loss)	—			747			—		(162		)	585			—		—		—		—		984			37			109			1,715
Distributions	—			(207		)	—		—			(207		)	—		—		—		—		(348		)	(12		)	(662		)	(1,229		)
Issuance / repurchase of interest in operating subsidiaries	—			(8		)	—		—			(8		)	—		—		—		—		(14		)	—			925			903
Exchange of exchangeable units	202			—			1		(3		)	200			—		—		—		—		(3		)	(197		)	—			—
Balance as at Sep. 30, 2015	$	5,814		$	1,542		$	126	$	(326	)	$	7,156		$	4	$	1	$	—	$	5	$	13,766		$	298		$	8,463		$	29,688

See accompanying notes to the condensed consolidated financial statements.

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Brookfield Property Partners L.P.

Condensed Consolidated Statements of Cash Flows

Unaudited		Nine Months Ended Sep. 30,
(US$ Millions)	Note	2016			2015
Operating activities
Net income		$	2,625		$	2,609
Share of equity accounted earnings, net of distributions		(558		)	(851		)
Fair value (gains) losses, net	24	(709		)	(1,252		)
Deferred income tax expense (benefit)	13	(832		)	(154		)
Depreciation and amortization	22	188			122
Working capital and other		(853		)	98
		(139		)	572
Financing activities
Debt obligations, issuance		11,013			8,645
Debt obligations, repayments		(10,135		)	(5,262		)
Capital securities redeemed		(171		)	—
Non-controlling interests, issued		2,439			1,393
Non-controlling interests, purchased		(146		)	(295		)
Repurchases of limited partnership units		(25		)	(11		)
Distributions to non-controlling interests in operating subsidiaries		(593		)	(662		)
Distributions to limited partnership unitholders		(220		)	(207		)
Distributions to redeemable/exchangeable and special limited partnership unitholders		(368		)	(348		)
Distributions to holders of Brookfield Office Properties Exchange LP units		(10		)	(12		)
		1,784			3,241
Investing activities
Investment properties and subsidiaries, proceeds of dispositions		2,103			1,406
Property acquisitions and capital expenditures		(3,992		)	(6,598		)
Investment in equity accounted investments		(382		)	(1,997		)
Proceeds from sale and distributions of equity accounted investments and participating loan interests		953			955
Financial assets and other		285			508
Other property, plant and equipment investments, net of dispositions		(138		)	(24		)
Intangible assets, dispositions		147			—
Cash acquired in business combinations		85			85
Restricted cash and deposits		(199		)	1,814
		(1,138		)	(3,851		)
Cash and cash equivalents
Net change in cash and cash equivalents during the period		507			(38		)
Effect of exchange rate fluctuations on cash and cash equivalents held in foreign currencies		20			(56		)
Balance, beginning of period		1,035			1,282
Balance, end of period		$	1,562		$	1,188
Supplemental cash flow information
Cash paid for:
Income taxes		$	68		$	68
Interest (excluding dividends on capital securities)		$	816		$	1,064

See accompanying notes to the condensed consolidated financial statements.

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Brookfield Property Partners L.P.

Notes to the Condensed Consolidated Financial Statements

NOTE 1. ORGANIZATION AND NATURE OF THE BUSINESS

Brookfield Property Partners L.P. (“BPY” or the “partnership”) was formed as a limited partnership under the laws of Bermuda, pursuant to a limited partnership agreement dated January 3, 2013, as amended and restated on August 8, 2013. BPY is a subsidiary of Brookfield Asset Management Inc. (“Brookfield Asset Management” or the “parent company”) and is the primary entity through which the parent company and its affiliates own, operate, and invest in commercial and other income producing property on a global basis.

The partnership’s sole material asset at September 30, 2016 is a 37% managing general partnership unit interest in Brookfield Property L.P. (the “operating partnership”), which holds the partnership’s interest in commercial and other income producing property operations.

The partnership’s limited partnership units (“BPY Units” or “LP Units”) are listed and publicly traded on the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (“TSX”) under the symbols “BPY” and “BPY.UN”, respectively.

The registered head office and principal place of business of the partnership is 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Statement of compliance

The interim condensed consolidated financial statements of the partnership and its subsidiaries have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”), as issued by the International Accounting Standards Board (“IASB”). Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB, have been omitted or condensed.

These condensed consolidated financial statements as of and for the three and nine months ended September 30, 2016 were approved and authorized for issue by the Board of Directors of the partnership on November 1, 2016.

b) Basis of presentation

The interim condensed consolidated financial statements are prepared using the same accounting policies and methods as those used in the consolidated financial statements for the year ended December 31, 2015 with the exception of the adoption of Amendments to IFRS 11, Joint Arrangements: Accounting for Acquisitions of Interests in Joint Operations (“IFRS 11”) effective January 1, 2016, as discussed in Note 2(c) below. Consequently, the information included in these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the partnership’s annual report on Form 20-F for the year ended December 31, 2015.

The interim condensed consolidated financial statements are unaudited and reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented in accordance with IFRS. The results reported in these interim condensed consolidated financial statements should not necessarily be regarded as indicative of results that may be expected for the entire year.

The interim condensed consolidated financial statements are prepared on a going concern basis and have been presented in U.S. Dollars rounded to the nearest million unless otherwise indicated.

c) Adoption of Accounting Standards

The partnership adopted Amendments to IFRS 11 effective January 1, 2016. The amendments add new guidance to IFRS 11 on accounting for the acquisition of an interest in a joint operation in which the activity of the joint operation constitutes a business, as defined in IFRS 3, Business Combinations (“IFRS 3”). Acquirers of such interests are to apply the relevant principles on business combination accounting in IFRS 3 and other standards, as well as disclosing the relevant information specified in these standards for business combinations. The adoption of the amendments to this standard did not have a significant impact on the partnership’s condensed consolidated financial statements.

d) Estimates

The preparation of the partnership’s interim condensed consolidated financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates and assumptions. It also requires management to exercise judgment in applying the partnership’s accounting policies. The accounting policies and critical estimates and assumptions have been set out in Note 2, Summary ofSignificant Accounting Policies, to the partnership’s consolidated financial statements for the year ended December 31, 2015 and have been consistently applied in the preparation of the interim condensed consolidated financial statements as of and for the three and nine months ended September 30, 2016.

e) Change in operating segments

In the first quarter of 2016, the partnership realigned the organizational and governance structures of its businesses to align them more closely with the nature of the partnership’s investments. Such realignment gave rise to changes in how the partnership presents information for financial reporting and management decision-making purposes and resulted in a change in the partnership’s reportable segments. Consequently, as of January 1, 2016, the partnership’s operating segments are organized into four reportable segments: i) Core Office, ii) Core Retail, iii) Opportunistic and iv) Corporate. All prior period segment disclosures have been recast to reflect the changes in the partnership’s operating segments. See Note 31, Segment Information, for further discussion.

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NOTE 3. BUSINESS ACQUISITIONS AND COMBINATIONS

The partnership accounts for business combinations using the acquisition method of accounting under IFRS 3, pursuant to which the cost of acquiring a business is allocated to its identifiable tangible and intangible assets and liabilities on the basis of the estimated fair values at the date of acquisition. Financial results of each transaction are included within the partnership’s condensed consolidated statements of income from the dates of each acquisition.

On July 6, 2016, the partnership acquired an additional 67% of the voting equity of Rouse Properties, Inc. (“Rouse”) for consideration of $1,063 million or $18.25 per share. Rouse is a real estate investment trust focused on a diverse portfolio of malls and retail centers encompassing approximately 24.1 million square feet across the United States. The partnership previously owned 33% of the voting equity of Rouse and accounted for its interest as an equity accounted investment. As a result of the acquisition, the partnership owns 100% of the voting equity of Rouse. The partnership accounts for the acquisition as a step acquisition and remeasured its existing 33% equity interest in Rouse to fair value at acquisition date. At the time of the acquisition, holders of 12% of the voting equity of Rouse exercised their appraisal rights, which delayed the partnership’s payment for their shares of Rouse until the fair value of their equity as at the acquisition date is determined through legal proceedings. The partnership recorded a provision of $123 million in other non-current liabilities representing the partnership’s obligation to the third party former equity-holders of Rouse who exercised their rights. Total consideration for the acquisition consists of cash contribution of $587 million from a fund sponsored by Brookfield Asset Management, which was drawn on subscription facilities, the fair value of the partnership’s existing 33% equity in Rouse as at the acquisition, and the fair value of the delayed settlement to the shareholders who have exercised their appraisal rights. At the date the partnership’s condensed consolidated financial statements were approved for issuance, the valuations of investment properties, property debt obligations and tax obligations were still under evaluation by the partnership. Accordingly, they were accounted for on a provisional basis.

On May 10, 2016, the partnership acquired a portfolio of self-storage properties for total consideration of $151 million. The storage portfolio (“Southeastern Storage Portfolio”) consists of self-storage properties across the Southeastern United States. The acquisition was funded with a cash contribution of $83 million from a fund sponsored by Brookfield Asset Management which was drawn on subscription facilities, with the remainder funded through debt financing. At the date the partnership’s condensed consolidated financial statements were approved for issuance, the valuations of investment properties and property debt obligations were still under evaluation by the partnership. Accordingly, they were accounted for on a provisional basis.

On April 29, 2016, the partnership acquired a portfolio of student housing properties for total consideration of $397 million. The portfolio of student housing (“UK Student Housing”) consists of housing properties for students across the United Kingdom. The acquisition was funded with a cash contribution of $209 million from a fund sponsored by Brookfield Asset Management, with the remainder funded through debt financing. At the date the partnership’s condensed consolidated financial statements were approved for issuance, the valuations of investment properties and property debt obligations were still under evaluation by the partnership. Accordingly, they were accounted for on a provisional basis.

On March 22, 2016, the partnership acquired a portfolio of self-storage properties for total consideration of $320 million. Simply Self Storage (“Simply Storage”) consists of self-storage properties across the United States. The acquisition was funded with cash contribution of $289 million from a fund sponsored by Brookfield Asset Management which was drawn on subscription facilities, with the remainder funded through debt financing. At the date the partnership’s condensed consolidated financial statements were approved for issuance, the valuations of investment properties and property debt obligations were still under evaluation by the partnership. Accordingly, they were accounted for on a provisional basis.

On August 3, 2015, the partnership acquired 100% of the voting equity interests in Center Parcs Group (“Center Parcs UK”) for consideration of $1,958 million. Center Parcs UK operates five short-break destinations across the United Kingdom. The acquisition was funded with $249 million in cash from the partnership, $551 million in cash contributed from third party co-investors, $749 million contributed by funds sponsored by Brookfield Asset Management which was drawn on subscription facilities, and the remainder financed with debt. At the date the partnership’s September 30, 2015 consolidated financial statements were approved for issuance, the valuations of hospitality properties and intangible assets and goodwill, as well as deferred income taxes were still under evaluation by the partnership. Accordingly, they had been accounted for on a provisional basis. During the third quarter of 2016, the partnership completed the purchase price allocation for Center Parcs UK. No material changes were made to the provisional purchase price allocation disclosed in the December 31, 2015 audited financial statements.

8

The following table summarizes the impact of significant business combinations during the nine months ended September 30, 2016:

(US$ Millions)	Rouse			Simply Storage			UK Student Housing			Southeastern Storage Portfolio			Other			Total
Investment properties	$	3,010		$	839		$	608		$	205		$	1,030		$	5,692
Hospitality assets	—			—			—			—			197			197
Accounts receivable and other	107			26			9			4			10			156
Cash and cash equivalents	32			15			33			1			4			85
Total assets	3,149			880			650			210			1,241			6,130
Less:
Debt obligations	(1,840		)	(534		)	(202		)	(58		)	(22		)	(2,656		)
Accounts payable and other	(231		)	(11		)	(49		)	(1		)	(2		)	(294		)
Non-controlling interests(1)	(15		)	(15		)	(2		)	—			(1		)	(33		)
Net assets acquired	1,063			320			397			151			1,216			3,147
Consideration(2)	$	1,063		$	320		$	397		$	151		$	1,188		$	3,119
Transaction costs	$	—		$	(9	)	$	(4	)	$	(2	)	$	(7	)	$	(22	)

⁽¹⁾ Includes non-controlling interests recognized on business combinations measured as the proportionate share of the fair value of the assets, liabilities and contingent liabilities on the date of acquisition.

⁽²⁾ Includes consideration paid with funds received from issuance of non-controlling interests to certain institutional investors in funds sponsored by Brookfield Asset Management.

The difference between consideration and net assets acquired was attributable to the bargain purchase gain from the acquisition of six office properties in suburban Maryland in the second quarter of 2016. The bargain purchase gain reflected a purchase price discount as a result of a distressed sale process and a portfolio discount negotiated with the seller. At the date the partnership’s condensed consolidated financial statements were approved for issuance, the valuations of investment properties and the resulting bargain purchase gain were still under evaluation by the partnership.

In the period from each acquisition date to September 30, 2016, the partnership recorded revenue and net income in connection with these acquisitions of approximately $216 million and $103 million, respectively. If the acquisitions had occurred on January 1, 2016, the partnership’s total revenue and net income would have been $4,240 million and $2,606 million, respectively, for the nine months ended September 30, 2016.

Acquisition-related transaction costs, which primarily relate to legal and consulting fees, are expensed as incurred in accordance with IFRS 3 and included in general and administrative expense on the condensed consolidated statements of income.

NOTE 4. INVESTMENT PROPERTIES

The following table presents a roll forward of the partnership’s investment property balances, all of which are considered Level 3 within the fair value hierarchy, for the nine months ended September 30, 2016 and the year ended December 31, 2015:

	Nine months ended Sep. 30, 2016									Year ended Dec. 31, 2015
(US$ Millions)	Commercial properties			Commercial developments			Total			Commercial properties			Commercial developments			Total
Balance, beginning of period	$	39,111		$	2,488		$	41,599		$	37,789		$	3,352		$	41,141
Changes resulting from:
Property acquisitions	5,686			254			5,940			3,950			210			4,160
Capital expenditures	536			629			1,165			916			1,149			2,065
Property dispositions(1)	(230		)	(9		)	(239		)	(2,393		)	(1,517		)	(3,910		)
Fair value gains, net(2)	294			158			452			1,583			430			2,013
Foreign currency translation	501			(138		)	363			(1,746		)	(342		)	(2,088		)
Reclassifications to assets held for sale and other changes	(3,664		)	(389		)	(4,053		)	(988		)	(794		)	(1,782		)
Balance, end of period	$	42,234		$	2,993		$	45,227		$	39,111		$	2,488		$	41,599

⁽¹⁾  Property dispositions represent the carrying value on date of sale.

⁽²⁾ For the period ended September 30, 2016, fair value gains, net includes $28 million of bargain purchase gains. See Note 3 for further discussion.

The partnership determines the fair value of each commercial property based upon, among other things, rental income from current leases and assumptions about rental income from future leases reflecting market conditions at the applicable balance sheet dates, less future cash outflows in respect of such leases. Investment property valuations are completed by undertaking one of two accepted income approach methods, which include either: i) discounting the expected future cash flows, generally over a term of 10 years including a terminal value based on the application of a capitalization rate to estimated year 11 cash flows; or ii) undertaking a direct capitalization approach whereby a capitalization rate is applied to estimated current year cash flows. In determining the appropriateness of the methodology applied, the partnership considers the relative uncertainty of the timing and amount of expected cash flows and the impact such uncertainty would have in arriving at a reliable estimate of fair value. Refer to the table below for further information on what valuation method the partnership uses for its asset classes.

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Commercial developments are also measured using a discounted cash flow model, net of costs to complete, as of the balance sheet date. Development sites in the planning phases are measured using comparable market values for similar assets.

In accordance with its policy, the partnership generally measures and records its commercial properties and developments using valuations prepared by management. The partnership generally does not measure or record its properties based on valuations prepared by external valuation professionals. However, for certain recently acquired subsidiaries, the partnership has used valuations prepared by external valuation professionals. The incremental acquisition of Rouse was valued by such external valuation professionals as of September 30, 2016.

The key valuation metrics for the partnership’s consolidated commercial properties and equity accounted investments are presented in the following tables below on a weighted-average basis:

		Sep. 30, 2016					Dec. 31, 2015
Consolidated properties	Primary valuation method	Discount rate		Terminal capitalization rate		Investment horizon (yrs)	Discount rate		Terminal capitalization rate		Investment horizon (yrs)
Core Office
United States	Discounted cash flow	7.0	%	5.6	%	12	6.9	%	5.7	%	12
Canada	Discounted cash flow	6.2	%	5.6	%	10	6.1	%	5.5	%	10
Australia	Discounted cash flow	7.4	%	6.2	%	10	7.6	%	6.2	%	10
Europe	Discounted cash flow	6.0	%	5.0	%	12	6.0	%	5.1	%	12
Brazil	Discounted cash flow	9.3	%	7.5	%	10	9.3	%	7.5	%	10
Opportunistic Office	Discounted cash flow	10.8	%	8.3	%	6	11.5	%	8.3	%	6
Opportunistic Retail(1)	Direct capitalization	8.1	%	n/a		n/a	7.5	%	n/a		n/a
Industrial	Discounted cash flow	7.4	%	6.6	%	10	7.6	%	6.8	%	10
Multifamily(1)	Direct capitalization	4.8	%	n/a		n/a	5.1	%	n/a		n/a
Triple Net Lease(1)	Direct capitalization	6.2	%	n/a		n/a	6.3	%	n/a		n/a
Self-storage(1)	Direct capitalization	6.1	%	n/a		n/a	n/a		n/a		n/a
Student Housing(1)	Direct capitalization	6.0	%	n/a		n/a	n/a		n/a		n/a

⁽¹⁾ The valuation method used to value opportunistic retail, multifamily, triple net lease, self-storage, and student housing properties is the direct capitalization method. The rates presented as the discount rate relate to the overall implied capitalization rate. The terminal capitalization rate and investment horizon are not applicable.

		Sep. 30, 2016					Dec. 31, 2015
Equity accounted investments(1)	Primary valuation method	Discount rate		Terminal capitalization rate		Investment horizon (yrs)	Discount rate		Terminal capitalization rate		Investment horizon (yrs)
Core Office
United States	Discounted cash flow	6.5	%	5.4	%	11	6.3	%	5.3	%	11
Australia	Discounted cash flow	7.3	%	6.4	%	10	7.4	%	6.1	%	10
Europe(2)	Discounted cash flow	5.1	%	5.0	%	10	5.1	%	5.1	%	10
Core Retail
United States	Discounted cash flow	7.5	%	5.9	%	10	7.4	%	5.8	%	10
Opportunistic Office	Discounted cash flow	9.0	%	7.8	%	5	8.3	%	7.4	%	5
Opportunistic Retail(3)	Direct capitalization	7.0	%	n/a		n/a	7.2	%	n/a		n/a
Industrial	Discounted cash flow	7.0	%	6.2	%	10	7.1	%	6.5	%	10
Multifamily(3)	Direct capitalization	5.3	%	n/a		n/a	5.4	%	n/a		n/a

⁽¹⁾  See Note 5 for further discussion on the partnership’s equity accounted investments.

⁽²⁾  Certain properties in Europe accounted under the equity method are valued using both discounted cash flow and yield models. For comparative purposes, the discount and terminal capitalization rates and investment horizons calculated under the discounted cash flow method are presented in the table above.

⁽³⁾  The valuation method used to value opportunistic retail and multifamily investments is the direct capitalization method. The rates presented as the discount rate relate to the overall implied capitalization rate. The terminal capitalization rate and investment horizon are not applicable.

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NOTE 5. EQUITY ACCOUNTED INVESTMENTS

The partnership has investments in joint arrangements that are joint ventures, and also has investments in associates. Joint ventures hold individual properties and portfolios of commercial properties and developments that the partnership owns together with co-owners where decisions relating to the relevant activities of the joint venture require the unanimous consent of the co-owners. Details of the partnership’s investments in joint ventures and associates, which have been accounted for in accordance with the equity method of accounting, are as follows:

			Proportion of ownership interests/voting rights held by the partnership		Carrying value
(US$ Millions)	Principal activity	Principal place of business	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2016		Dec. 31, 2015
Joint Ventures
Canary Wharf Joint Venture(1)	Property holding company	United Kingdom	50%	50%	$	2,943	$	3,401
Manhattan West, New York	Property holding company	United States	56%	56%	1,239		1,073
245 Park Avenue, New York	Property holding company	United States	51%	51%	783		784
Grace Building, New York	Property holding company	United States	50%	50%	607		590
Southern Cross East, Melbourne(2)	Property holding company	Australia	50%	50%	362		334
Brookfield D.C. Office Partners LLC (“D.C. Fund”), Washington, D.C.	Property holding company	United States	51%	51%	333		316
Brookfield Fairfield U.S. Multifamily Value Add Fund II, L.P. ("VAMF II")	Property holding company	United States	37%	37%	287		274
EY Centre, Sydney(2)	Property holding company	Australia	50%	50%	234		203
Potsdamer Platz, Berlin	Holding company	Germany	25%	50%	176		316
75 State Street, Boston	Property holding company	United States	51%	51%	164		159
Republic Plaza, Denver	Property holding company	United States	50%	50%	132		123
Other	Various	Various	13%-83%	13%-83%	1,015		1,210
					8,275		8,783
Associates
General Growth Properties, Inc. (“GGP”)	Real estate investment trust	United States	29%	29%	7,455		7,215
China Xintiandi (“CXTD”)(3)	Property holding company	China	22%	22%	465		589
Rouse(4)	Real estate investment trust	United States	—%	34%	—		380
Diplomat Resort and Spa (“Diplomat”)	Property holding company	United States	90%	90%	324		322
Other	Various	Various	23%-49%	23%-49%	311		349
					8,555		8,855
Total					$	16,830	$	17,638

⁽¹⁾  Stork Holdco LP is the joint venture through which the partnership acquired Canary Wharf Group plc (“Canary Wharf”) in London.

⁽²⁾  The partnership exercises joint control over these jointly controlled assets through a participating loan agreement with Brookfield Asset Management that is convertible at any time into a direct equity interest in the entity.

⁽³⁾  The partnership’s interest in CXTD is held through a subsidiary, BSREP CXTD Holdings L.P., in which it has an approximate 31% interest.

⁽⁴⁾  The partnership obtained control of Rouse during the third quarter of 2016 following the acquisition of the common shares not held by the partnership by a fund sponsored by Brookfield Asset Management in which the partnership is an investor. Subsequent to this transaction, the partnership is consolidating the financial results of Rouse. Please see Note 3 for further information.

The fair value of the common shares of GGP held by the partnership based on the trading price of GGP common stock as of September 30, 2016 was $7,048 million (December 31, 2015 - $6,948 million).

There are no quoted market prices for the partnership’s other equity accounted investments.

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The following table presents the change in the balance of the partnership’s equity accounted investments as of September 30, 2016 and December 31, 2015:

	Nine months ended			Year ended
(US$ Millions)	Sep. 30, 2016			Dec. 31, 2015
Equity accounted investments, beginning of period	$	17,638		$	10,356
Additions	382			7,538
Disposals and return of capital distributions	(766		)	(1,504		)
Share of net income	836			1,591
Distributions received	(278		)	(276		)
Foreign currency translation	(410		)	(59		)
Reclassification to assets held for sale	(544		)	—
Other	(28		)	(8		)
Equity accounted investments, end of period	$	16,830		$	17,638

Summarized financial information in respect of the partnership’s equity accounted investments is presented below:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Non-current assets	$	78,007	$	85,187
Current assets	5,055		4,859
Total assets	83,062		90,046
Non-current liabilities	32,879		38,327
Current liabilities	4,715		4,472
Total liabilities	37,594		42,799
Net assets	45,468		47,247
Partnership’s share of net assets	$	16,830	$	17,638

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Revenue	$	1,667	$	1,428	$	4,655	$	3,925
Expenses	611		802		2,872		2,403
Income before fair value gains, net	1,056		626		1,783		1,522
Fair value gains, net	461		121		621		1,378
Net income	1,517		747		2,404		2,900
Partnership’s share of net earnings	$	420	$	238	$	836	$	1,051

NOTE 6. PARTICIPATING LOAN INTERESTS

Participating loan interests represent interests in certain properties in Australia that do not provide the partnership with control over the entity that owns the underlying property and are accounted for as loans and receivables and held at amortized cost on the consolidated balance sheets. The instruments, which are receivable from a wholly-owned subsidiary of Brookfield Asset Management, have contractual maturity dates of September 26, 2020 and February 1, 2023, subject to the partnership’s prior right to convert into direct ownership interests in the underlying commercial properties, and have contractual interest rates that vary with the results of operations of those properties.

The outstanding principal of the participating loan interests relates to the following properties:

(US$ Millions)	Participation interest				Carrying value
Name of property	Sep. 30, 2016		Dec. 31, 2015		Sep. 30, 2016		Dec. 31, 2015
Darling Park Complex, Sydney	30	%	30	%	$	222	$	195
IAG House, Sydney	50	%	50	%	105		94
Jessie Street, Sydney	100	%	100	%	159		136
Infrastructure House, Canberra	100	%	100	%	24		24
Total participating loan interests					$	510	$	449

Included in the balance of participating loan interests is an embedded derivative representing the partnership’s right to participate in the changes in the fair value of the referenced properties. The embedded derivative is measured at fair value with changes in fair value reported through earnings in fair value gains, net in the condensed consolidated statements of income. As of September 30, 2016, the carrying value of the embedded derivative is $104 million (December 31, 2015 - $118 million).

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For the three and nine months ended September 30, 2016, the partnership recognized interest income on the participating loan interests of $8 million (2015 - $10 million) and $24 million (2015 - $31 million), respectively, and fair value gains of $2 million (2015 - $21 million) and $21 million (2015 - $60 million), respectively.

Summarized financial information in respect of the properties underlying the partnership’s investment in participating loan interests is set out below:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Non-current assets	$	1,671	$	1,674
Current assets	198		35
Total assets	1,869		1,709
Non-current liabilities	124		483
Current liabilities	651		180
Total liabilities	775		663
Net assets	$	1,094	$	1,046

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Revenues	$	33	$	41	$	96	$	120
Expenses	15		20		46		55
Earnings before fair value gains, net	18		21		50		65
Fair value gains, net	8		69		41		195
Net earnings	$	26	$	90	$	91	$	260

NOTE 7. HOSPITALITY ASSETS

Consolidated hospitality assets primarily consist of Center Parcs UK, which was acquired during the third quarter of 2015, Paradise Island Holdings Limited (“Atlantis”) and BREF HR, LLC (“Hard Rock Hotel and Casino”). Hospitality assets are presented on a cost basis, net of accumulated fair value changes and accumulated depreciation. Accumulated fair value changes include unrealized revaluations of hospitality assets using the revaluation method, which are recorded in revaluation surplus as a component of equity, as well as impairment losses recorded in net income. The partnership depreciates these assets on a straight-basis over their relevant estimated useful lives.

The following table presents the useful lives of each hospitality asset by class:

Hospitality assets by class	Useful life (in years)
Building and building improvements	7 to 50+
Land improvements	14 to 30
Furniture, fixtures and equipment	3 to 20

The following table presents the change to the components of the partnership’s hotel assets from the beginning of the year:

(US$ Millions)	Sep. 30, 2016			Dec. 31, 2015
Cost:
Balance, beginning of period	$	4,962		$	2,430
Acquisitions through business combinations	197			2,619
Additions	143			74
Disposals	(11		)	(10		)
Foreign currency translation	(305		)	(151		)
	4,986			4,962
Accumulated fair value changes:
Balance, beginning of period	585			426
Increase from revaluation	—			163
Provision for impairment	—			(4		)
	585			585
Accumulated depreciation:
Balance, beginning of period	(531		)	(378		)
Depreciation	(168		)	(153		)
Foreign currency translation	8			—
	(691		)	(531		)
Total hospitality assets	$	4,880		$	5,016

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NOTE 8. OTHER NON-CURRENT ASSETS

The components of other non-current assets are as follows:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Securities designated as fair value through profit and loss (“FVTPL”)	$	35	$	37
Derivative assets	1,430		1,379
Securities designated as available for sale (“AFS”)	154		142
Goodwill	786		888
Intangible assets, net	1,183		1,321
Other	351		116
Total other non-current assets	$	3,939	$	3,883

a) Derivative assets

Derivative assets primarily include the carrying amount of warrants to purchase shares of common stock of GGP in the amount of $1,397 million as of September 30, 2016 (December 31, 2015 - $1,364 million). The fair value of the GGP warrants as of September 30, 2016 was determined using a Black-Scholes option pricing model, assuming a 1.1 year term (December 31, 2015 - 1.9 year term), 63% volatility (December 31, 2015 - 57% volatility), and a risk free interest rate of 0.60% (December 31, 2015 - 0.98%).

b) Securities designated as AFS

Securities designated as AFS represent the partnership’s retained equity interests in 1625 Eye Street in Washington, D.C., Heritage Plaza in Houston, and Aldgate Tower in London, all of which are property holding companies, that it previously controlled and in which it retained a non-controlling interest following disposition of these properties to third parties. The partnership continues to manage these properties on behalf of the acquirer but does not exercise significant influence over the relevant activities of the properties. Included in securities designated as AFS at September 30, 2016 are $106 million (December 31, 2015 - $106 million) of securities pledged as security for a loan payable to the issuer in the amount of $92 million (December 31, 2015 - $92 million) recognized in other non-current financial liabilities.

c) Goodwill

Goodwill of $786 million at September 30, 2016 (December 31, 2015 - $888 million) is primarily attributable to the acquisition of Center Parcs UK in the third quarter of 2015. The partnership performs a goodwill impairment test annually by assessing if the carrying value of the cash-generating unit, including the allocated goodwill, exceeds its recoverable amount determined as the greater of the estimated fair value less costs to sell or the value in use.

d) Intangible Assets

The partnership’s intangible assets are presented on a cost basis, net of accumulated amortization and accumulated impairment losses in the consolidated balance sheets. These intangible assets primarily represent the trademark assets acquired in connection with the acquisition of Center Parcs UK during the third quarter of 2015.

The trademark assets of Center Parcs UK had a carrying amount of $918 million as of September 30, 2016 (December 31, 2015 - $1,038 million). They have been determined to have an indefinite useful life as the partnership has the legal right to operate these trademarks exclusively in certain territories and in perpetuity. The business model of Center Parcs UK is not subject to technological obsolescence or commercial innovations in any material way.

In addition, intangible assets include the trademark and licensing assets acquired as part of the historical acquisitions of Atlantis and Hard Rock Hotel and Casino. At September 30, 2016, intangible assets with carrying values of $211 million (December 31, 2015 - $212 million) and $45 million (December 31, 2015 - $63 million), for Atlantis and Hard Rock Hotel and Casino respectively, were determined to have an indefinite useful life. These assets consisted primarily of trademark rights for these two properties granted under perpetual licenses. The business models of the Atlantis and Hard Rock Hotel and Casino are not subject to technological obsolescence or commercial innovations in any material way.

During the period ended September 30, 2016, the partnership sold a trademark license of the Hard Rock Hotel and Casino for $150 million to a third party. The trademark had a carrying value of $16 million, resulting in a gross gain of $132 million recorded in fair value gains, net. The partnership retains the right to use the trademark at the Las Vegas location royalty-free in perpetuity.

Intangible assets by class	Useful life (in years)
Trademarks	Indefinite
Gaming rights	Indefinite
Water/ electricity rights	Indefinite
Management contracts	40
Customer relationships	9 to 10
Other	6 to 10

Intangible assets with indefinite useful lives and intangible assets not yet available for use, are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Intangible assets with finite useful lives are amortized over their respective useful lives as listed above. Amortization expense is recorded as part of depreciation and amortization of non-real estate assets expense.

14

The following table presents the components of the partnership’s intangible assets as of September 30, 2016 and December 31, 2015:

(US$ Millions)	Sep. 30, 2016			Dec. 31, 2015
Cost	$	1,285		$	1,437
Accumulated amortization	(54		)	(68		)
Accumulated impairment losses	(48		)	(48		)
Balance, end of period	$	1,183		$	1,321

The following table presents a roll forward of the partnership’s intangible assets as of September 30, 2016 and December 31, 2015:

	Nine months ended			Year ended
(US$ Millions)	Sep. 30, 2016			Dec. 31, 2015
Balance, beginning of period	$	1,321		$	307
Acquisitions, net of disposals	(7		)	1,083
Amortization	(7		)	(5		)
Foreign currency translation	(124		)	(64		)
Balance, end of period	$	1,183		$	1,321

NOTE 9. ACCOUNTS RECEIVABLE AND OTHER

The components of accounts receivable and other are as follows:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Accounts receivable(1)	$	371	$	422
Restricted cash and deposits	466		338
Prepaid expenses	129		108
Other current assets	494		352
Total accounts receivable and other	$	1,460	$	1,220

⁽¹⁾  See Note 29, Related Parties, for further discussion.

Restricted cash and deposits are considered restricted when they are subject to contingent rights of third parties that prevent the assets’ use for current purposes.

Included in other current assets are derivative assets with a carrying amount of $60 million at September 30, 2016 (December 31, 2015 - $91 million).

NOTE 10. HELD FOR SALE

Non-current assets and groups of assets and liabilities which comprise disposal groups are presented as assets held for sale where the asset or disposal group isavailable for immediate sale in its present condition, and the sale is highly probable.

The following is a summary of the assets and liabilities that were classified as held for sale as of September 30, 2016 and December 31, 2015:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Investment properties	$	2,977	$	775
Accounts receivables and other assets	56		30
Assets held for sale	3,033		805
Debt obligations	1,667		229
Accounts payable and other liabilities	59		13
Liabilities associated with assets held for sale	$	1,726	$	242

At December 31, 2015, assets held for sale include two properties in the partnership’s Core Office segment, in Vancouver and Sydney, a portfolio of industrial assets near the U.S. - Mexico border and two multifamily assets in the U.S. In February 2016, the partnership sold the office properties in Sydney and Vancouver for A$285 million and C$428 million, respectively. The portfolio of industrial assets near the U.S. - Mexico border was subsequently reclassified back to operating assets.

During the first quarter of 2016, 50% of the partnership’s 50% interest in Potsdamer Platz in Berlin, Two Ballston Plaza in Washington, D.C., Jean Edmonds Towers in Ottawa, 14 industrial assets and 18 multifamily assets were reclassified to assets held for sale. In May 2016, the partnership sold 50% of the partnership’s 50% interest in the Potsdamer Platz estate in Berlin for €146 million and Two Ballston Plaza in Washington, D.C. for $79 million.

15

During the second quarter of 2016, One Shelley Street in Sydney, as well as a portfolio of hospitality assets in Germany, a portfolio of industrial assets and a portfolio of multifamily assets in the United States were reclassified to assets held for sale. In July 2016, the partnership sold One Shelley Street for A$525 million. In August 2016, the partnership sold its portfolio of hospitality assets in Germany for net proceeds of approximately €240 million.

At September 30, 2016, assets held for sale included three Core Office properties in New York, Washington, D.C., and London, as well a portfolio of industrial assets and a portfolio of multifamily assets in the United States, as the partnership intends to sell controlling interests in these properties to third parties in the next 12 months.

NOTE 11. DEBT OBLIGATIONS

The partnership’s debt obligations include the following:

	Sep. 30, 2016				Dec. 31, 2015
(US$ Millions)	Weighted-average rate		Debt balance		Weighted-average rate		Debt balance
Unsecured facilities:
Brookfield Property Partners’ credit facilities	2.23	%	$	1,830	3.16	%	$	1,632
Brookfield Office Properties’ revolving facility	1.63	%	912		2.15	%	884
Brookfield Office Properties’ senior unsecured notes	4.17	%	266		4.17	%	252
Brookfield Canada Office Properties revolving facility	2.34	%	34		2.29	%	140
Subsidiary borrowings	4.18	%	466		4.60	%	86
Secured debt obligations:
Funds subscription credit facilities	1.93	%	529		1.91	%	1,594
Fixed rate	5.13	%	15,635		5.36	%	13,709
Variable rate	3.98	%	13,785		3.87	%	12,458
Total debt obligations			$	33,457			$	30,755
Current			4,624				8,580
Non-current			27,166				21,946
Debt associated with assets held for sale			1,667				229
Total debt obligations			$	33,457			$	30,755

Debt obligations include foreign currency denominated debt in the functional currencies of the borrowing subsidiaries. Debt obligations by currency are as follows:

	Sep. 30, 2016				Dec. 31, 2015
(Millions)	U.S. Dollars		Local currency		U.S. Dollars		Local currency
U.S. Dollars	$	24,769	$	24,769	$	22,345	$	22,345
British Pounds	3,468		£	2,673	3,340		£	2,267
Canadian Dollars	2,400		C$	3,151	2,376		C$	3,287
Australian Dollars	1,439		A$	1,879	1,504		A$	2,064
Brazilian Reais	654		R$	2,124	535		R$	2,088
Euros	482		€	429	439		€	404
Indian Rupee	245		₨	16,311	216		₨	14,314
Total debt obligations	$	33,457			$	30,755

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NOTE 12. CAPITAL SECURITIES

The partnership has the following capital securities outstanding as of September 30, 2016 and December 31, 2015:

(US$ Millions)	Shares outstanding	Cumulative dividend rate		Sep. 30, 2016		Dec. 31, 2015
Operating Partnership Class A Preferred Equity Units:
Series 1	24,000,000	6.25	%	$	539	$	532
Series 2	24,000,000	6.50	%	521		516
Series 3	24,000,000	6.75	%	510		506
Brookfield BPY Holdings Inc. Junior Preferred Shares:
Class B Junior Preferred Shares	30,000,000	5.75	%	750		750
Class C Junior Preferred Shares	20,000,000	6.75	%	500		500
Brookfield Office Properties Inc. (“BPO”) Class AAA Preferred Shares:
Series G(1)	3,236,308	5.25	%	81		84
Series H(2)	—	5.75	%	—		128
Series J(1)	6,592,443	5.00	%	125		125
Series K(1)	4,995,414	5.20	%	95		90
BPO Class B Preferred Shares:
Series 1(3)	3,600,000	70% of bank prime		—		—
Series 2(3)	3,000,000	70% of bank prime		—		—
Brookfield Property Split Corp. (“BOP Split”) Senior Preferred Shares:
Series 1	924,390	5.25	%	23		23
Series 2	699,165	5.75	%	13		18
Series 3	913,194	5.00	%	17		17
Series 4	984,586	5.20	%	19		18
Rouse Series A Preferred Shares	5,600,000	5.00	%	143		—
BSREP II Vintage Estate Partners LLC (“Vintage Estates”) Preferred Shares	10,000	5.00	%	40		—
Capital Securities – Fund Subsidiaries				774		724
Total capital securities				$	4,150	$	4,031
Current				373		503
Non-current				3,777		3,528
Total capital securities				$	4,150	$	4,031

⁽¹⁾  BPY and its subsidiaries own 1,003,549, 1,000,000, and 1,004,586 shares of Series G, Series J, and Series K Class AAA preferred shares of BPO as of September 30, 2016, respectively, which has been reflected as a reduction in outstanding shares of the BPO Class AAA Preferred Shares.

⁽²⁾  The BPO Class AAA Series H Preferred Shares were redeemed on May 23, 2016 for cash of C$25.00 per share plus accrued and unpaid dividends thereon.

⁽³⁾ BPO Class B Preferred Shares, Series 1 and 2 capital securities - corporate are owned by Brookfield Asset Management. BPO has an offsetting loan receivable against these securities earning interest at 95% of bank prime.

Cumulative preferred dividends on the BPO Class AAA Preferred Shares and BOP Split Senior Preferred Shares are payable quarterly, as and when declared by the Board of Directors of BPO and BOP Split, respectively. On October 11, 2016, the Boards of Directors of BPO and BOP Split declared quarterly dividends payable for the BPO Class AAA Preferred Shares and BOP Split Senior Preferred Shares.

Capital securities also includes $143 million at September 30, 2016 (December 31, 2015 - nil) of preferred equity interests held by a third party investor in Rouse Properties, L.P. which have been classified as a liability, rather than as a non-controlling interest, due to the fact that the interests have no voting rights and are mandatorily redeemable on and after November 12, 2025 for a set price per unit plus any accrued but unpaid distributions; distributions are capped and accrue regardless of available cash generated. The capital securities were assumed on the privatization of Rouse.

Capital securities also includes $40 million at September 30, 2016 (December 31, 2015 - nil) of preferred equity interests held by the partnership’s co-investor in Vintage Estates which have been classified as a liability, rather than as non-controlling interest, due to the fact that the preferred equity interests are mandatorily redeemable on April 26, 2023 for cash at an amount equal to the outstanding principal balance of the preferred equity plus any accrued but unpaid dividend.

Capital Securities – Fund Subsidiaries includes $732 million (December 31, 2015 - $683 million) of equity interests in Brookfield DTLA Holdings LLC (“DTLA”) held by co-investors in the fund which have been classified as a liability, rather than as non-controlling interest, as holders of these interests can cause DTLA to redeem their interests in the fund for cash equivalent to the fair value of the interests on October 15, 2023, and on every fifth anniversary thereafter. Capital Securities – Fund Subsidiaries are measured at redemption amount.

Capital Securities – Fund Subsidiaries also includes $42 million at September 30, 2016 (December 31, 2015 - $41 million) which represents the equity interests held by the partnership’s co-investor in the D.C. Fund which have been classified as a liability, rather than as non-controlling interest, due to the fact that on June 18, 2023, and on every second anniversary thereafter, the holders of these interests can redeem their interests in the D.C. Fund for cash equivalent to the fair value of the interests.

17

At September 30, 2016, capital securities includes $270 million (December 31, 2015 - $394 million) repayable in Canadian Dollars of C$355 million (December 31, 2015 - C$545 million).

NOTE 13. INCOME TAXES

The partnership is a flow-through entity for tax purposes and as such is not subject to Bermudian taxation. However, income taxes are recognized for the amount of taxes payable by the primary holding subsidiaries of the partnership (“Holding Entities”), any direct or indirect corporate subsidiaries of the Holding Entities and for the impact of deferred tax assets and liabilities related to such entities.

The components of income tax expense include the following:

	Three months ended Sep. 30,					Nine months ended Sep. 30,
(US$ Millions)	2016			2015		2016			2015
Current income tax	$	53		$	17	$	99		$	45
Deferred income tax	(1,014		)	55		(832		)	(154		)
Income tax (benefit) expense	$	(961	)	$	72	$	(733	)	$	(109	)

The partnership’s income tax expense decreased for the three and nine months ended September 30, 2016 as compared to the same period in the prior year primarily due to a reorganization the partnership undertook during the quarter, to consolidate the ownership of certain subsidiaries holding its core retail and office assets. As a result of the reorganization, there was a change in the tax rate applicable to those subsidiaries, which resulted in a deferred tax recovery during the period, which reduced deferred tax liabilities

NOTE 14. OTHER NON-CURRENT LIABILITIES

The components of other non-current liabilities are as follows:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Accounts payable and accrued liabilities	$	438	$	282
Derivative liability	60		45
Provisions(1)	221		24
Loans and notes payables	—		30
Deferred revenue	7		7
Total other non-current liabilities	$	726	$	388

⁽¹⁾Please refer to Note 3, Business Acquisitions and Combinations, for further detail.

NOTE 15. ACCOUNTS PAYABLE AND OTHER LIABILITIES

The components of accounts payable and other liabilities are as follows:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Accounts payable and accrued liabilities(1)	$	1,729	$	2,123
Deferred revenue	207		114
Other liabilities(1)	521		402
Total accounts payable and other liabilities	$	2,457	$	2,639

⁽¹⁾  See Note 29, Related Parties, for further discussion.

Included in other liabilities are derivative liabilities with a carrying amount of $512 million at September 30, 2016 (December 31, 2015 - $401 million).

NOTE 16. EQUITY

The partnership’s capital structure is comprised of five classes of partnership units: general partnership units (“GP Units”), LP Units, redeemable/exchangeable partnership units of the Operating Partnership (“Redeemable/Exchangeable Partnership Units”), special limited partnership units of the Operating Partnership (“Special LP Units”) and limited partnership units of Brookfield Office Properties Exchange LP (“Exchange LP Units”).

a) General and limited partnership equity

GP Units entitle the holder to the right to govern the financial and operating policies of the partnership. The GP Units are entitled to a 1% general partnership interest.

LP Units entitle the holder to their proportionate share of distributions and are listed and publicly traded on the NYSE and the TSX. Each LP Unit entitles the holder thereof to one vote for the purposes of any approval at a meeting of limited partners, provided that holders of the Redeemable/Exchangeable Partnership Units that are exchanged for LP Units will only be entitled to a maximum number of votes in respect of the Redeemable/Exchangeable Partnership Units equal to 49% of the total voting power of all outstanding units.

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The following table presents changes to the GP Units and LP Units from the beginning of the year:

	General partnership units		Limited partnership units
(Thousands of units)	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2016		Dec. 31, 2015
Outstanding, beginning of period	139	139	261,486		254,080
Exchange LP Units exchanged	—	—	893		8,736
Distribution Reinvestment Program	—	—	141		201
Issued under unit-based compensation plan	—	—	278		80
Repurchase of LP Units	—	—	(1,162	)	(1,611	)
Outstanding, end of period	139	139	261,636		261,486

b) Units of the operating partnership held by Brookfield Asset Management

Redeemable/Exchangeable Partnership Units

There were 432,649,105 Redeemable/Exchangeable Partnership Units outstanding at September 30, 2016 and December 31, 2015.

Special limited partnership units

Brookfield Property Special L.P. (“Special L.P.”) is entitled to receive equity enhancement distributions and incentive distributions from the operating partnership as a result of its ownership of the Special LP Units.

There were 4,759,997 Special LP Units outstanding at September 30, 2016 and December 31, 2015.

c) Limited partnership units of Brookfield Office Properties Exchange LP

The Exchange LP Units are exchangeable at any time on a one-for-one basis, at the option of the holder, subject to their terms and applicable law, for LP Units. An Exchange LP Unit provides a holder thereof with economic terms that are substantially equivalent to those of a LP Unit. Subject to certain conditions and applicable law, Exchange LP will have the right, commencing on the seventh anniversary of the completion of the acquisition of the remaining common shares of BPO, to redeem all of the then outstanding Exchange LP Units at a price equal to the 20-day volume-weighted average trading price of an LP Unit plus all declared, payable, and unpaid distributions on such units.

The following table presents changes to the Exchange LP Units from the beginning of the year:

	Limited Partnership Units of Brookfield Office Properties Exchange LP
(Thousands of units)	Sep. 30, 2016		Dec. 31, 2015
Outstanding, beginning of period	12,379		21,115
Exchange LP Units exchanged(1)	(893	)	(8,736	)
Outstanding, end of period	11,486		12,379

⁽¹⁾  Exchange LP Units issued for the acquisition of incremental BPO shares that have been exchanged are held by an indirect subsidiary of the partnership. Refer to the Condensed Consolidated Statements of Changes in Equity for the impact of such exchanges on the carrying value of Exchange LP Units.

d) Distributions

Distributions made to each class of partnership units, including units of subsidiaries that are exchangeable into LP Units, are as follows:

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions, except per unit information)	2016		2015		2016		2015
General Partner	$	—	$	—	$	—	$	—
Limited Partners	74		70		220		207
Holders of:
Redeemable/exchangeable partnership units	121		115		364		344
Special limited partnership units	1		1		4		4
Limited partnership units of Exchange LP	3		3		10		12
Total	$	199	$	189	$	598	$	567
Per unit(1)	$	0.280	$	0.265	$	0.840	$	0.795

⁽¹⁾  Per unit outstanding on the distribution record date for each.

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e) Earnings per unit

The partnership’s net income per LP Unit and weighted average units outstanding are calculated as follows:

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions, except unit information)	2016		2015		2016		2015
Net income attributable to limited partners	$	462	$	75	$	683	$	747
Income reallocation related to mandatorily convertible preferred shares	71		7		105		117
Net income attributable to limited partners – basic	533		82		788		864
Dilutive effect of conversion of preferred shares and options	32		—		60		74
Net income attributable to limited partners – diluted	$	565	$	82	$	848	$	938
(in millions of units/shares)
Weighted average number of LP Units outstanding	261.8		262.6		261.7		259.4
Mandatorily convertible preferred shares	70.1		70.0		70.0		70.0
Weighted average number of LP Units - basic	331.9		332.6		331.7		329.4
Dilutive effect of the conversion of preferred shares and options	30.5		0.4		35.9		40.4
Weighted average number of LP units outstanding - diluted(1)	362.4		333.0		367.6		369.8

⁽¹⁾ For the three months ended September 30, 2015 , conversion of preferred shares, which would have resulted in 39.2 million potential LP Units, would have been anti-dilutive and is therefore excluded from the weighted average number of LP units outstanding for the purpose of diluted net income per LP Unit.

NOTE 17. NON-CONTROLLING INTERESTS

Non-controlling interests consists of the following:

(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015
Redeemable/Exchangeable and special limited partnership units	$	14,660	$	14,218
Exchange LP Units	300		309
Interests of others in operating subsidiaries and properties:
Preferred shares held by Brookfield Asset Management Inc.	15		25
Preferred equity of subsidiaries	1,811		1,650
Non-controlling interests in subsidiaries and properties	10,034		7,300
Total interests of others in operating subsidiaries and properties	11,860		8,975
Total non-controlling interests	$	26,820	$	23,502

Non-controlling interests of others in operating subsidiaries and properties consist of the following:

		Proportion of economic interests held by non-controlling interests
(US$ Millions)	Jurisdiction of formation	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2016		Dec. 31, 2015
BPO(1)	Canada	—%	—%	$	2,991	$	2,622
BSREP CARS Sub-Pooling LLC	United States	74%	74%	1,205		1,104
Center Parcs UK	United Kingdom	73%	68%	1,027		1,071
BSREP Industrial Pooling Subsidiary L.P.	United States	70%	70%	886		883
BSREP II Aries Pooling LLC	United States	74%	66%	671		645
Rouse Properties, L.P.(2)	United States	50%	—%	552		—
Brookfield Strategic Real Estate Partners II Storage REIT LLC	United States	74%	—%	539		—
BSREP Europe Holdings L.P	Cayman Islands	66%	66%	464		386
BREF ONE, LLC	United States	67%	67%	457		457
Brookfield Brazil Retail Fundo de Investimento em Participações	Brazil	54%	60%	426		406
BSREP UA Holdings LLC	Cayman Islands	70%	70%	418		333
BSREP II Brazil Pooling LLC	United States	68%	67%	401		277
BSREP India Office Holdings Pte. Ltd.	United States	67%	67%	339		284
Other	Various	18%-88%	18%-88%	1,484		507
Total				$	11,860	$	8,975

⁽¹⁾  Includes non-controlling interests in BPO subsidiaries which vary from 16% - 100%.

⁽²⁾  The partnership acquired a controlling interest in Rouse during the third quarter of 2016. Prior to this transaction, the partnership’s interest was accounted for under the equity method.

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NOTE 18. COMMERCIAL PROPERTY REVENUE

The components of commercial property revenue are as follows:

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Base rent	$	823	$	709	$	2,339	$	2,117
Straight-line rent	46		35		116		93
Lease termination	5		—		11		6
Other	72		61		166		180
Total commercial property revenue	$	946	$	805	$	2,632	$	2,396

NOTE 19. INVESTMENT AND OTHER REVENUE

The components of investment and other revenue are as follows:

	Three months ended Sep. 30,					Nine months ended Sep. 30,
(US$ Millions)	2016		2015			2016		2015
Fee revenue	$	15	$	5		$	36	$	21
Dividend income	2		3			10		49
Interest income	3		10			22		42
Participating loan notes	8		10			24		31
Investment income	21		72			26		139
Other	7		(1		)	24		11
Total investment and other revenue	$	56	$	99		$	142	$	293

NOTE 20. DIRECT COMMERCIAL PROPERTY EXPENSE

The components of direct commercial property expense are as follows:

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Employee compensation and benefits	$	32	$	26	$	98	$	75
Property maintenance	191		174		508		505
Real estate taxes	116		97		320		304
Ground rents	10		14		30		33
Other	18		22		52		51
Total direct commercial property expense	$	367	$	333	$	1,008	$	968

NOTE 21. DIRECT HOSPITALITY EXPENSE

The components of direct hospitality expense are as follows:

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Employee compensation and benefits	$	70	$	73	$	215	$	211
Marketing and advertising	11		10		43		32
Cost of food, beverage, and retail goods sold	59		56		182		117
Maintenance and utilities	29		22		78		59
Other	85		79		265		223
Total direct hospitality expense	$	254	$	240	$	783	$	642

NOTE 22. DEPRECIATION AND AMORTIZATION

The components of depreciation and amortization expense are as follows:

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Depreciation and amortization of real estate assets	$	55	$	39	$	170	$	104
Depreciation and amortization of non-real estate assets	8		6		18		18
Total depreciation and amortization	$	63	$	45	$	188	$	122

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NOTE 23. GENERAL AND ADMINISTRATIVE EXPENSE

The components of general and administrative expense are as follows:

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Employee compensation and benefits	$	47	$	40	$	127	$	112
Management fees	44		32		137		103
Transaction costs and other	55		102		151		191
Total general and administrative expense	$	146	$	174	$	415	$	406

NOTE 24. FAIR VALUE (LOSSES) GAINS, NET

The components of fair value gains, net, are as follows:

	Three months ended Sep. 30,					Nine months ended Sep. 30,
(US$ Millions)	2016		2015			2016		2015
Commercial properties	$	4	$	223		$	294	$	1,157
Commercial developments	25		33			158		204
Financial instruments and other	57		(11		)	257		(109		)
Total fair values (losses) gains, net	$	86	$	245		$	709	$	1,252

NOTE 25. UNIT-BASED COMPENSATION

On February 3, 2015, the BPY Unit Option Plan (“BPY Plan”) was amended and restated by the board of directors of the general partner of BPY, and approved by unitholders on March 26, 2015. The BPY Plan originally provided for a cash payment on the exercise of an option equal to the amount by which the fair market value of a LP Unit on the date of exercise exceeds the exercise price of the option. The amended BPY Plan allows for the settlement of the in-the-money amount of an option upon exercise in LP Units for certain qualifying employees. This amendment applies to all options granted under the BPY Plan, including those options currently outstanding. Consequently, as a result of this amendment, options granted to certain employees under the amended and restated BPY Plan are accounted for as an equity-based compensation agreement.

During the three and nine months ended September 30, 2016, the partnership incurred $6 million (2015 - $7 million) and $14 million (2015 - $19 million), respectively, of expense in connection with its unit-based compensation plans.

a) BPY Plan

Awards under the BPY Plan (“BPY Awards”) generally vest 20% per year over a period of five years and expire 10 years after the grant date, with the exercise price set at the time such options were granted and generally equal to the market price of an LP Unit on the NYSE on the last trading day preceding the grant date. Upon exercise of a vested BPY Award, the participant is entitled to receive LP Units or a cash payment equal to the amount by which the fair market value of an LP Unit at the date of exercise exceeds the exercise price of the BPY Award. Subject to a separate adjustment arising from forfeitures, the estimated expense is revalued every reporting period using the Black-Scholes model as a result of the cash settlement provisions of the plan for certain employees. In terms of measuring expected life of the BPY Awards with various term lengths and vesting periods, BPY will segregate each set of similar BPY Awards and, if different, exercise price, into subgroups and apply a weighted average within each group.

The partnership estimated the fair value of BPY Awards granted during the period using the Black-Scholes valuation model, with inputs to the model and resulting weighted average fair value per option as follows:

	Unit of measure	Sep. 30, 2016
Exercise price	US$	19.51
Average term to exercise	In Years	7.50
Unit price volatility	%	30
Liquidity discount	%	25
Weighted average of expected annual dividend yield	%	6.50
Risk-free rate	%	1.57
Weighted average fair value per option	US$	1.45

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i. Equity-settled BPY Awards

The change in the number of options outstanding under the equity-settled BPY Awards at September 30, 2016 and December 31, 2015 is as follows:

	Sep. 30, 2016				Dec. 31, 2015
	Number of options		Weighted average exercise price		Number of options		Weighted average exercise price
Outstanding, beginning of period	17,349,629		$	20.53	—		$	—
Granted	3,020,931		19.51		2,542,340		25.18
Exercised	(1,175,520	)	17.98		(745,392	)	19.92
Expired/forfeited	(2,766,042	)	19.88		(174,153	)	21.40
Reclassified(1)	—		—		15,726,834		19.75
Outstanding, end of period	16,428,998		$	20.50	17,349,629		$	20.53
Exercisable, end of period	5,511,984		$	19.90	4,795,099		$	19.03

⁽¹⁾  Relates to the reclassification of options for certain employees whose options are equity-settled subsequent to the amendment of the BPY Plan.

The following table sets out details of options issued and outstanding at September 30, 2016 and December 31, 2015 under the equity-settled BPY Awards by expiry date:

	Sep. 30, 2016			Dec. 31, 2015
Expiry date	Number of options	Weighted average exercise price		Number of options	Weighted average exercise price
2020	254,600	$	13.07	368,400	$	13.07
2021	316,100	17.44		421,300	17.44
2022	726,700	18.03		1,535,900	18.25
2023	959,120	16.80		1,247,680	16.80
2024	9,087,122	20.59		11,286,224	20.59
2025	2,182,755	25.18		2,490,125	25.18
2026	2,902,601	19.51		—	—
Total	16,428,998	$	20.50	17,349,629	$	20.53

ii. Cash-settled BPY Awards

The change in the number of options outstanding under the cash-settled BPY Awards at September 30, 2016 and December 31, 2015 is as follows:

	Sep. 30, 2016			Dec. 31, 2015
	Number of options	Weighted average exercise price		Number of options	Weighted average exercise price
Outstanding, beginning of period	6,904,986	$	20.37	21,946,145	$	19.75
Granted	846,912	19.51		775,215	25.18
Exercised	(148,076)	18.55		(89,540)	17.40
Expired/forfeited	(226,780)	21.32		—	—
Reclassified(1)	—	—		(15,726,834)	19.75
Outstanding, end of period	7,377,042	$	20.28	6,904,986	$	20.37
Exercisable, end of period	2,772,207	$	19.75	1,956,693	$	19.16

⁽¹⁾  Relates to the reclassification of options for certain employees whose options are equity-settled subsequent to the amendment of the BPY Plan.

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The following table sets out details of options issued and outstanding at September 30, 2016 and December 31, 2015 under the cash-settled BPY Awards by expiry date:

	Sep. 30, 2016			Dec. 31, 2015
Expiry date	Number of options	Weighted average exercise price		Number of options	Weighted average exercise price
2020	78,000	$	13.07	78,000	$	13.07
2021	186,800	17.44		226,800	17.44
2022	545,800	18.08		581,200	18.07
2023	549,000	16.80		604,200	16.80
2024	4,459,230	20.59		4,639,571	20.59
2025	711,300	25.18		775,215	25.18
2026	846,912	19.51		—	—
Total	7,377,042	$	20.28	6,904,986	$	20.37

b) Restricted BPY LP Unit Plan

The Restricted BPY LP Unit Plan provides for awards to participants of LP Units purchased on the NYSE (“Restricted Units”). Under the Restricted BPY LP Unit Plan, units awarded generally vest over a period of five years, except as otherwise determined or for Restricted Units awarded in lieu of a cash bonus as elected by the participant, which may vest immediately. The estimated total compensation cost measured at grant date is evenly recognized over the vesting period of five years.

As of September 30, 2016, the total number of Restricted Units outstanding was 382,287 (December 31, 2015 - 442,332) with a weighted average exercise price of $20.87 (December 31, 2015 - $20.87).

c) Restricted BPY LP Unit Plan (Canada)

The Restricted BPY LP Unit Plan (Canada) is substantially similar to the Restricted BPY LP Unit Plan described above, except that it is for Canadian employees, there is a five year hold period, and purchases of units are made on the TSX instead of the NYSE.

As of September 30, 2016, the total number of Canadian Restricted Units outstanding was 19,410 (December 31, 2015 - 19,410) with a weighted average exercise price of C$22.14 (December 31, 2015 - C$22.14).

d) Deferred Share Unit Plan

In addition to the above, BPO has a deferred share unit plan. At September 30, 2016, BPO has 1,384,080 deferred share units (December 31, 2015 - 1,456,719) outstanding and vested.

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NOTE 26. OTHER COMPREHENSIVE (LOSS) INCOME

Other comprehensive (loss) income consists of the following:

	Three months ended Sep. 30,						Nine months ended Sep. 30,
(US$ Millions)	2016			2015			2016			2015
Items that may be reclassified to net income:
Foreign currency translation
Net unrealized foreign currency translation (losses) gains in respect of foreign operations	$	(128	)	$	(714	)	$	(398	)	$	(1,325	)
Gains (losses) on hedges of net investments in foreign operations, net of income taxes for the three and nine months ended Sep. 30, 2016 of $3 million and ($2) million, respectively (2015 – ($28) million and ($34) million)(1)	111			309			330			428
	(17		)	(405		)	(68		)	(897		)
Cash flow hedges
Gains (losses) on derivatives designated as cash flow hedges, net of income taxes for the three and nine months ended Sep. 30, 2016 of ($17) million and $28 million, respectively (2015 – $28 million and $18 million)	(20		)	(74		)	(108		)	(55		)
	(20		)	(74		)	(108		)	(55		)
Available-for-sale securities
Net change in unrealized gains on available-for-sale securities, net of income taxes	(3		)	1			(3		)	4
	(3		)	1			(3		)	4
Equity accounted investments
Share of unrealized foreign currency translation gains in respect of foreign operations	2			(36		)	4			52
(Losses) on derivatives designated as cash flow hedges	—			—			(2		)	—
	2			(36		)	2			52
Items that will not be reclassified to net income:
Equity accounted investments
Share of revaluation surplus	(1		)	—			(11		)	2
	(1		)	—			(11		)	2
Total other comprehensive (loss) income	$	(39	)	$	(514	)	$	(188	)	$	(894	)

⁽¹⁾  Unrealized gains (losses) on a number of hedges of net investments in foreign operations are with a related party.

NOTE 27. OBLIGATIONS GUARANTEES, CONTINGENCIES AND OTHER

In the normal course of operations, the partnership and its consolidated entities execute agreements that provide for indemnification and guarantees to third parties in transactions such as business dispositions, business acquisitions, sales of assets and sales of services.

Certain of the partnership’s operating subsidiaries have also agreed to indemnify their directors and certain of their officers and employees. The nature of substantially all of the indemnification undertakings prevent the partnership from making a reasonable estimate of the maximum potential amount that it could be required to pay third parties as the agreements do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, neither the partnership nor its consolidated subsidiaries have made significant payments under such indemnification agreements.

The partnership and its operating subsidiaries may be contingently liable with respect to litigation and claims that arise from time to time in the normal course of business or otherwise.

At September 30, 2016, the partnership has commitments totaling approximately $1,518 million for the development of Manhattan West in Midtown New York, Greenpoint Landing in Brooklyn, Studio Plaza in Dallas and 655 New York Avenue in Washington, D.C. as well as the redevelopment of One Allen Center, Two Allen Center, and Three Allen Center in Houston, approximately C$133 million for Brookfield Place East Tower in Calgary and the completed development of Bay Adelaide East in Toronto, and approximately £601 million for the development of London Wall Place, 100 Bishopsgate, Principal Place Commercial and Principal Place Residential in London.

During 2013, Brookfield Asset Management announced the final close on the $4.4 billion Brookfield Strategic Real Estate Partners (“BSREP”) fund, a global private fund focused on making opportunistic investments in commercial property. The partnership, as lead investor, committed approximately $1.3 billion to the fund. As of September 30, 2016, there remained approximately $246 million of uncontributed capital commitments.

In April 2016, Brookfield Asset Management announced the final close on the $9.0 billion second BSREP fund to which the partnership had committed $2.3 billion as lead investor. As of September 30, 2016, there remained approximately $1.2 billion of uncontributed capital commitments.

The partnership maintains insurance on its properties in amounts and with deductibles that it believes are in line with what owners of similar properties carry. The partnership maintains all risk property insurance and rental value coverage (including coverage for the perils of flood, earthquake

25

and named windstorm). The partnership does not conduct its operations, other than those of equity accounted investments, through entities that are not fully or proportionately consolidated in these financial statements, and has not guaranteed or otherwise contractually committed to support any material financial obligations not reflected in these financial statements.

NOTE 28. FINANCIAL INSTRUMENTS

a) Derivatives and hedging activities

The partnership and its operating entities use derivative and non-derivative instruments to manage financial risks, including interest rate, commodity, equity price and foreign exchange risks. The use of derivative contracts is governed by documented risk management policies and approved limits. The partnership does not use derivatives for speculative purposes. The partnership and its operating entities use the following derivative instruments to manage these risks:

• foreign currency forward contracts to hedge exposures to Canadian Dollar, Australian Dollar, British Pound, Euro, Brazilian Real and Chinese Yuan denominated net investments in foreign subsidiaries and foreign currency denominated financial assets;

• interest rate swaps to manage interest rate risk associated with planned refinancings and existing variable rate debt; and

• interest rate caps to hedge interest rate risk on certain variable rate debt.

The partnership also designates Canadian Dollar financial liabilities of certain of its operating entities as hedges of its net investments in its Canadian operations.

Interest Rate Hedging

The following table provides the partnership’s outstanding derivatives that are designated as cash flow hedges of variability in interest rates associated with forecasted fixed rate financings and existing variable rate debt as of September 30, 2016 and December 31, 2015:

(US$ Millions)	Hedging item	Notional		Rates	Maturity dates	Fair value
Sep. 30, 2016	Interest rate caps of US$ LIBOR debt	$	4,390	2.5% - 5.8%	Dec. 2016 - Jun. 2020	$	—
	Interest rate swaps of US$ LIBOR debt	1,563		0.7% - 2.2%	Jun. 2018 - Dec. 2020	(30		)
	Interest rate cap of £ LIBOR debt	218		2.5% - 3.0%	Dec. 2016 - Aug. 2017	—
	Interest rate swaps of £ LIBOR debt	89		1.0% - 1.5%	Apr. 2020 - Jun. 2021	2
	Interest rate swaps of € EURIBOR debt	194		0.3% - 1.4%	Oct. 2017 - Apr. 2021	(6		)
	Interest rate swaps of A$ BBSW/BBSY debt	185		1.9% - 4.1%	Dec. 2016 - Jul. 2017	(2		)
	Interest rate swaps of forecasted fixed rate debt	1,760		1.9% - 5.5%	Nov. 2026 - Jun. 2029	(433		)
Dec. 31, 2015	Interest rate caps of US$ LIBOR debt	$	3,654	2.5% - 5.8%	Jan. 2016 - Oct. 2018	$	—
	Interest rate swaps of US$ LIBOR debt	285		2.1% - 2.2%	Oct. 2020 - Nov. 2020	(8		)
	Interest rate swaps of £ LIBOR debt	77		1.5%	Apr. 2020	1
	Interest rate swaps of € EURIBOR debt	187		0.02% - 1.4%	Oct. 2017 - Feb. 2021	5
	Interest rate swaps of A$ BBSW/BBSY debt	488		3.5% - 5.9%	Jan. 2016 - Jul. 2017	(9		)
	Interest rate swaps of forecasted fixed rate debt	1,885		3.1% - 5.1%	Jan. 2026 - Jun. 2029	(332		)

For the three and nine months ended September 30, 2016, the amount of hedge ineffectiveness recorded in earnings in connection with the partnership’s interest rate hedging activities was $35 million and $24 million, respectively. For the three and nine months ended September 30, 2015, the amount of hedge ineffectiveness recorded in earnings was not significant.

During the third quarter of 2016, the partnership recognized fair value losses, net of approximately $24 million related to the settlement of certain forward starting interest rate swaps that have not been designated as hedges.

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Foreign Currency Hedging

The following table provides the partnership’s outstanding derivatives that are designated as net investments of foreign subsidiaries or foreign currency cash flow hedges as of September 30, 2016 and December 31, 2015:

(US$ Millions)	Hedging item		Notional	Rates	Maturity dates	Fair value
Sep. 30, 2016	Net investment hedges	£	3,522	£0.68/$ - £0.77/$	Oct. 2016 - Dec. 2017	$	67
	Net investment hedges	C¥	1,750	C¥6.65/$ - C¥6.90/$	Oct. 2016 - Jun. 2017	(1		)
	Net investment hedges	A$	2,167	A$1.32/$ - A$1.41/$	Oct. 2016 - Sep. 2017	(61		)
	Cash flow hedges	A$	29	A$1.31/$ - A$1.31/$	Oct. 2016	—
	Net investment hedges	€	606	€0.86/$ - €0.91/$	Nov. 2016 - Feb. 2018	(5		)
	Cash flow hedges	R$	694	R$3.31/$ - R$3.35/$	Oct. 2016 - Dec. 2016	1
	Net investment hedges	R$	194	R$3.26/$ - R$3.89/$	Oct. 2016 - Feb. 2017	(26		)
	Net investment hedges	C$	34	C$1.29/$ - C$1.32/$	Aug. 2017	—
	Net investment hedges	Rs	13,900	Rs 67.93/$ - Rs 67.93/$	Dec. 2016	(2		)
Dec. 31, 2015	Net investment hedges	£	2,346	£0.64/$ - £0.68/$	Jan. 2016 - Mar. 2017	$	26
	Net investment hedges	C¥	2,000	C¥6.62/$ - C¥6.78/$	Feb. 2016 - Dec. 2016	3
	Net investment hedges	A$	811	A$1.29/$ - A$1.44/$	Jan. 2016 - Feb. 2017	2
	Net investment hedges	€	446	€0.80/$ - €0.94/$	May 2016 - Dec. 2016	1
	Cash flow hedges	R$	613	R$3.89/$ - R$3.96/$	Jan. 2016 - Mar. 2016	(8		)

In addition, as of September 30, 2016, the partnership had designated C$690 million (December 31, 2015 - C$900 million) of Canadian Dollar financial liabilities as hedges against the partnership’s net investment in Canadian operations.

For the three and nine months ended September 30, 2016 and 2015, the amount of hedge ineffectiveness recorded in earnings in connection with the partnership’s foreign currency hedging activities was not significant.

Other Derivatives

The following table presents details of the partnership’s other derivatives that have been entered into to manage financial risks as of September 30, 2016 and December 31, 2015:

(US$ Millions)	Derivative type	Notional		Maturity dates	Rates	Fair value
Sep. 30, 2016	Interest rate caps	$	350	Jul. 2017	3.25%	$	—
Dec. 31, 2015	Interest rate caps	$	381	Mar. 2016	3.65%	$	—
	Interest rate caps	350		Jul. 2017	3.25%	—
	Interest rate caps	34		Jan. 2016	3.00%	—
	Interest rate caps	75		Feb. 2016	2.93%	—

(US$ Millions)	Derivative type		Notional	Maturity dates	Strike prices	Fair value
Dec. 31, 2015	Foreign currency call	A$	175	Mar. 2016	A$1.22/$	$	—
	Foreign currency call	A$	275	Apr. 2016	A$1.25/$	—
	Foreign currency put	£	370	Jan. 2016	£0.71/$	—
	Foreign currency put	£	200	Mar. 2016	£0.71/$	(1		)
	Foreign currency call	A$	150	Apr. 2016	A$1.22/$	—
	Foreign currency call	A$	150	Apr. 2016	A$1.22/$	—
	Foreign currency call	A$	250	Apr. 2016	A$1.22/$	—

There were no outstanding foreign currency calls or puts as of September 30, 2016.

During the third quarter, the partnership entered into swaptions with a notional amount of totaling $1,160 million, with a 1.00% rate and maturity dates from June 2017 to November 2018. The fair value of these derivatives as of September 30, 2016 was $10 million. These other derivatives have not been designated as hedges for accounting purposes.

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b) Measurement and classification of financial instruments

Classification and Measurement

The following table outlines the classification and measurement basis, and related fair value for disclosures, of the financial assets and liabilities in the interim condensed consolidated financial statements:

			Sep. 30, 2016				Dec. 31, 2015
(US$ Millions)	Classification	Measurement basis	Carrying value		Fair value		Carrying value		Fair value
Financial assets
Participating loan interests	Loans and receivables	Amortized cost	$	510	$	510	$	449	$	449
Loans and notes receivable	Loans and receivables	Amortized cost	209		209		221		221
Other non-current assets
Securities designated as FVTPL	FVTPL	Fair value	35		35		37		37
Derivative assets	FVTPL	Fair value	1,430		1,430		1,379		1,379
Securities designated as AFS	AFS	Fair value	154		154		142		142
Current assets
Accounts receivable and other(1)	Loans and receivables	Amortized cost	1,516		1,516		1,250		1,250
Cash and cash equivalents	Loans and receivables	Amortized cost	1,562		1,562		1,035		1,035
Total financial assets			$	5,416	$	5,416	$	4,513	$	4,513
Financial liabilities
Debt obligations(2)	Other liabilities	Amortized cost	$	33,457	$	35,021	$	30,755	$	31,084
Capital securities	Other liabilities	Amortized cost	3,377		3,379		3,307		3,308
Capital securities - fund subsidiaries	Other liabilities	Amortized cost	773		773		724		724
Other non-current liabilities
Loan payable	FVTPL	Fair value	26		26		26		26
Other non-current financial liabilities	Other liabilities	Amortized cost(3)	700		700		362		362
Accounts payable and other liabilities(4)	Other liabilities	Amortized cost(5)	2,516		2,516		2,652		2,652
Total financial liabilities			$	40,849	$	42,415	$	37,826	$	38,156

⁽¹⁾  Includes other receivables associated with assets classified as held for sale on the condensed consolidated balance sheet in the amount of $56 million and $30 million as of September 30, 2016 and December 31, 2015, respectively.

⁽²⁾  Includes debt obligations associated with assets classified as held for sale on the condensed consolidated balance sheet in the amount of $1,667 million and $229 million as of September 30, 2016 and December 31, 2015, respectively.

⁽³⁾  Includes derivative liabilities measured at fair value of approximately $60 million and $45 million as of September 30, 2016 and December 31, 2015, respectively.

⁽⁴⁾  Includes accounts payable and other liabilities associated with assets classified as held for sale on the condensed consolidated balance sheet in the amount of $59 million and $13 million as of September 30, 2016 and December 31, 2015, respectively.

⁽⁵⁾  Includes derivative liabilities measured at fair value of approximately $512 million and $401 million as of September 30, 2016 and December 31, 2015, respectively.

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Fair value measurement establishes a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Quoted market prices (unadjusted) in active markets represent a Level 1 valuation. When quoted market prices in active markets are not available, the partnership maximizes the use of observable inputs within valuation models. When all significant inputs are observable, either directly or indirectly, the valuation is classified as Level 2. Valuations that require the significant use of unobservable inputs are considered Level 3, which reflect the partnership’s market assumptions and are noted below. This hierarchy requires the use of observable market data when available.

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The following table outlines financial assets and liabilities measured at fair value in the consolidated financial statements and the level of the inputs used to determine those fair values in the context of the hierarchy as defined above:

	Sep. 30, 2016								Dec. 31, 2015
(US$ Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets
Participating loan interests – embedded derivative	$	—	$	—	$	104	$	104	$	—	$	—	$	118	$	118
Securities designated as FVTPL	—		—		35		35		—		—		37		37
Securities designated as AFS	29		28		154		211		4		—		138		142
Derivative assets(1)	—		93		1,397		1,490		—		99		1,371		1,470
Total financial assets	$	29	$	121	$	1,690	$	1,840	$	4	$	99	$	1,664	$	1,767
Financial liabilities
Accounts payable and other liabilities	$	—	$	572	$	—	$	572	$	—	$	446	$	—	$	446
Loan payable	—		—		26		26		—		—		26		26
Total financial liabilities	$	—	$	572	$	26	$	598	$	—	$	446	$	26	$	472

⁽¹⁾  Includes $60 million of derivative assets at September 30, 2016 classified in accounts receivable and other on the condensed consolidated balance sheets.     

There were no transfers between levels during the three and nine months ended September 30, 2016 and the year ended December 31, 2015.

The following table presents the change in the balance of financial assets and financial liabilities accounted for at fair value categorized as Level 3 as of September 30, 2016 and December 31, 2015:

	Sep. 30, 2016					Dec. 31, 2015
(US$ Millions)	Financial assets			Financial liabilities		Financial assets			Financial liabilities
Balance, beginning of period	$	1,664		$	26	$	3,385		$	—
Acquisitions		34			—		1			26
Dispositions(1)		(4	)		—		(2,052	)		—
Fair value gains, net and OCI		(4	)		—		223			—
Other		—			—		107			—
Balance, end of period	$	1,690		$	26	$	1,664		$	26

⁽¹⁾  Includes the contribution of the partnership’s 22% interest in Canary Wharf to a 50/50 joint venture in the first quarter of 2015 and the conversion of the partnership’s convertible preferred interest to a 22% common equity interest in CXTD during the third quarter of 2015.

NOTE 29. RELATED PARTIES

In the normal course of operations, the partnership enters into transactions with related parties. These transactions have been measured at exchange value and are recognized in the consolidated financial statements. The immediate parent of the partnership is the BPY General Partner. The ultimate parent of the partnership is Brookfield Asset Management. Other related parties of the partnership include the partnership’s and Brookfield Asset Management’s subsidiaries and operating entities, certain joint ventures and associates accounted for under the equity method, as well as officers of such entities and their spouses.

The partnership has a management agreement with its service providers, wholly-owned subsidiaries of Brookfield Asset Management. Pursuant to a Master Services Agreement, prior to the third quarter of 2015, on a quarterly basis, the partnership paid a base management fee (“base management fee”), to the service providers equal to $12.5 million per quarter ($50.0 million annually).

Through the second quarter of 2015, the partnership also paid a quarterly equity enhancement distribution to Special L.P., a wholly-owned subsidiary of Brookfield Asset Management, of 0.3125% of the amount by which the operating partnership’s total capitalization value at the end of each quarter exceeded its total capitalization value that immediately followed the spin-off of Brookfield Asset Management’s commercial property operations on April 15, 2013, subject to certain adjustments. For purposes of calculating the equity enhancement distribution at each quarter-end, the capitalization of the partnership was equal to the volume-weighted average of the closing prices of the LP Units on the NYSE for each of the last five trading days of the applicable quarter multiplied by the number of issued and outstanding units of the partnership on the last of those days (assuming full conversion of Brookfield Asset Management’s interest in the partnership into LP Units of the partnership), plus the amount of third-party debt, net of cash, with recourse to the partnership and the operating partnership and certain holding entities held directly by the operating partnership.

On August 3, 2015, the board of directors of the partnership approved an amendment to the base management fee and equity enhancement distribution calculations, as of the beginning of the third quarter of 2015. Pursuant to this amendment, the annual base management fee paid by the partnership to Brookfield Asset Management was changed from $50.0 million, subject to annual inflation adjustments, to 0.5% of the total capitalization of the partnership, subject to an annual minimum of $50.0 million, plus annual inflation adjustments. The calculation of the equity enhancement distribution was amended to reduce the distribution by the amount by which the revised base management fee is greater than $50.0 million per annum, plus annual inflation adjustments, to maintain a fee level in aggregate that would be the same as prior to the amendment.

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The base management fee for the three and nine months ended September 30, 2016 was $27 million (2015 - $25 million) and $79 million (2015 - $50 million), respectively. The equity enhancement distribution for the three and nine months ended September 30, 2016 was $4 million (2015 - $6 million) and $20 million (2015 - $53 million), respectively.

In connection with the issuance of Preferred Equity Units to Qatar Investment Authority (“QIA”) in the fourth quarter of 2014, Brookfield Asset Management contingently agreed to acquire the seven-year and ten-year tranches of Preferred Equity Units from QIA for the initial issuance price plus accrued and unpaid distributions and to exchange such units for Preferred Equity Units with terms and conditions substantially similar to the twelve-year tranche to the extent that the market price of the LP Units is less than 80% of the exchange price at maturity.

The following table summarizes transactions with related parties:

(US$ Millions)	Sep. 30, 2016			Dec. 31, 2015
Balances outstanding with related parties:
Participating loan interests	$	510		$	449
Equity accounted investments	104			143
Loans and notes receivable(1)	49			63
Receivables and other assets	32			29
Property-specific debt obligations	(343		)	(362		)
Corporate debt obligations	—			(1,000		)
Other liabilities	(125		)	(373		)
Capital securities held by Brookfield Asset Management	(1,250		)	(1,250		)
Preferred shares held by Brookfield Asset Management	(15		)	(25		)

⁽¹⁾  At September 30, 2016, includes $49 million (December 31, 2015 - $63 million) receivable from Brookfield Asset Management upon the earlier of the partnership’s exercise of its option to convert its participating loan interests into direct ownership of the Australian portfolio or the maturity of the participating loan interests.

	Three months ended Sep. 30,				Nine months ended Sep. 30,
(US$ Millions)	2016		2015		2016		2015
Transactions with related parties:
Commercial property revenue(1)	$	5	$	6	$	14	$	14
Management fee income	1		—		3		—
Interest and other income	1		—		3		—
Participating loan interests (including fair value gains, net)	10		31		45		91
Interest expense on debt obligations	7		19		26		44
Interest on capital securities held by Brookfield Asset Management	19		19		57		58
General and administrative expense(2)	57		53		201		153
Construction costs(3)	60		78		198		216

⁽¹⁾  Amounts received from Brookfield Asset Management and its subsidiaries for the rental of office premises.

⁽²⁾  Includes amounts paid to Brookfield Asset Management and its subsidiaries for management fees, management fees associated with the partnership’s private funds, and administrative services.

⁽³⁾  Includes amounts paid to Brookfield Asset Management and its subsidiaries for construction costs of development properties.

During the first quarter of 2016, the partnership’s 50/50 joint venture with the Investment Corporation of Dubai (“ICD”) acquired land in Dubai on which ICD Brookfield Place Dubai will be erected. BPO serves as the development manager and, as such, earns a management fee during the construction period. In addition, the primary contractor for the construction of the property will be a joint venture of Brookfield Multiplex Pty. Ltd., which is indirectly owned by Brookfield Asset Management through Brookfield Business Partners L.P. (“Brookfield Business Partners”).

During the first quarter of 2016, Fairfield Residential Company LLC (“Fairfield”), which is approximately 65% owned by Brookfield Asset Management, sold a multifamily development site in Camarillo, CA to BPO for consideration of $35 million. During the second quarter of 2016, BPO sold a 1% interest in this investment back to Fairfield, which will receive fees for serving as developer, property manager and general contractor.

During the second quarter of 2016, in connection with the creation of Brookfield Business Partners, a subsidiary of the partnership sold its 80% interest in Brookfield Condominium Services Ltd. to a subsidiary of Brookfield Business Partners for $15 million in cash.

During the third quarter of 2016, BPO purchased an approximately 87% interest in a multifamily development in Silver Spring, MD. Fairfield, which is approximately 65% owned by Brookfield Asset Management, purchased an additional 1% interest in the development.

During the third quarter of 2016, a retail property held in a fund in which the partnership is an investor, assigned the management of the contract to Rouse.

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NOTE 30. SUBSIDIARY PUBLIC ISSUERS

BOP Split was incorporated for the purpose of being an issuer of preferred shares and owning a portion of the partnership’s investment in BPO common shares. Pursuant to the terms of a Plan of Arrangement, holders of outstanding BPO Class AAA Preferred Shares Series G, H, J and K, which were convertible into BPO common shares, were able to exchange their shares for BOP Split Senior Preferred Shares, subject to certain conditions. The BOP Split Senior Preferred shares are listed on the TSX and began trading on June 11, 2014. All shares issued by BOP Split are retractable by the holders at any time for cash.

In connection with an internal restructuring completed in July 2016, the partnership and certain of its related entities agreed to guarantee all of BPO’s Class AAA Preferred Shares and all of BPO’s debt securities issued pursuant to BPO’s indenture dated December 8, 2009.

The following table provides consolidated summary financial information for the partnership, BOP Split, BPO, and the holding entities:

(US$ Millions) For the three months ended Sep. 30, 2016	Brookfield Property Partners L.P.		BOP Split		BPO		Holding entities(2)		Additional holding entities and eliminations(3)		Consolidating adjustments(4)			Brookfield Property Partners L.P consolidated
Revenue	$	—	$	—	$	68	$	152	$	—	$	1,189		$	1,409
Net income attributable to unitholders(1)	470		25		62		1,255		—		(557		)	1,255
For the three months ended Sep. 30, 2015
Revenue	$	—	$	—	$	35	$	88	$	—	$	1,144		$	1,267
Net income attributable to unitholders(1)	72		69		171		193		—		(312		)	193

⁽¹⁾ Includes net income attributable to LP Units, GP Units, Redeemable/Exchangeable Partnership Units, Special LP Units and Exchange LP Units.

⁽²⁾ Includes the operating partnership, Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, and BPY Bermuda Holdings II Limited.

⁽³⁾ Includes BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited, which serve as guarantors for BPO but not BOP Split, net of intercompany balances and transactions with other holding entities.

⁽⁴⁾ Includes elimination of intercompany transactions and balances necessary to present the partnership on a consolidated basis.

(US$ Millions) For the nine months ended Sep. 30, 2016	Brookfield Property Partners L.P.		BOP Split		BPO		Holding entities(2)		Additional holding entities and eliminations(3)		Consolidating adjustments(4)			Brookfield Property Partners L.P consolidated
Revenue	$	—	$	—	$	131	$	312	$	—	$	3,546		$	3,989
Net income attributable to unitholders(1)	694		221		484		1,855		—		(1,399		)	1,855
For the nine months ended Sep. 30, 2015
Revenue	$	—	$	—	$	125	$	241	$	—	$	3,220		$	3,586
Net income attributable to unitholders(1)	761		753		1,661		2,052		—		(3,175		)	$	2,052

⁽¹⁾ Includes net income attributable to LP Units, GP Units, Redeemable/Exchangeable Partnership Units, Special LP Units and Exchange LP Units.

⁽²⁾ Includes the operating partnership, Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, and BPY Bermuda Holdings II Limited.

⁽³⁾ Includes BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited, which serve as guarantors for BPO but not BOP Split, net of intercompany balances and transactions with other holding entities.

⁽⁴⁾ Includes elimination of intercompany transactions and balances necessary to present the partnership on a consolidated basis.

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(US$ Millions) As of Sep. 30, 2016	Brookfield Property Partners L.P.		BOP Split		BPO		Holding entities(2)		Additional holding entities and eliminations(3)			Consolidating adjustments(4)			Brookfield Property Partners L.P consolidated
Current assets	$	—	$	—	$	41	$	127	$	5		$	2,851		$	3,024
Non-current assets	8,467		3,360		16,904		31,597		(553		)	11,818			71,593
Assets held for sale	—		—		—		—		—			3,033			3,033
Current liabilities	—		—		864		89		7			6,494			7,454
Non-current liabilities	—		2,992		7,838		9,019		605			13,540			33,994
Liabilities associated with assets held for sale	—		—		—		—		—			1,726			1,726
Equity attributable to interests of others in operating subsidiaries and properties	—		—		1,692		—		—			10,168			11,860
Equity attributable to unitholders(1)	8,467		368		6,551		22,616		(1,160		)	(14,226		)	22,616

⁽¹⁾Includes equity attributable to LP Units, GP Units, Redeemable/Exchangeable Partnership Units, Special LP Units and Exchange LP Units.

⁽²⁾ Includes the operating partnership, Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, and BPY Bermuda Holdings II Limited.

⁽³⁾ Includes BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited, which serve as guarantors for BPO but not BOP Split, net of intercompany balances and transactions with other holding entities.

⁽⁴⁾ Includes elimination of intercompany transactions and balances necessary to present the partnership on a consolidated basis.

(US$ Millions) As of Dec. 31, 2015	Brookfield Property Partners L.P.		BOP Split		BPO		Holding entities(2)		Additional holding entities and eliminations(3)			Consolidating adjustments(4)			Brookfield Property Partners L.P consolidated
Current assets	$	—	$	—	$	38	$	284	$	15		$	1,922		$	2,259
Non-current assets	8,237		6,505		18,604		27,214		(327		)	8,569			68,802
Assets held for sale	—		—		—		—		—			805			805
Current liabilities	—		—		1,190		1,069		48			9,415			11,722
Non-current liabilities	—		3,079		2,689		4,466		198			18,537			28,969
Liabilities associated with assets held for sale	—		—		—		—		—			242			242
Equity attributable to interests of others in operating subsidiaries and properties	—		—		1,543		5		—			7,427			8,975
Equity attributable to unitholders(1)	8,237		3,426		13,220		21,958		(558		)	(24,325		)	21,958

⁽¹⁾Includes equity attributable to LP Units, GP Units, Redeemable/Exchangeable Partnership Units, Special LP Units and Exchange LP Units.

⁽²⁾ Includes the operating partnership, Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, and BPY Bermuda Holdings II Limited.

⁽³⁾ Includes BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited, which serve as guarantors for BPO but not BOP Split, net of intercompany balances and transactions with other holding entities.

⁽⁴⁾ Includes elimination of intercompany transactions and balances necessary to present the partnership on a consolidated basis.

NOTE 31. SEGMENT INFORMATION

a) Operating segments

IFRS 8, Operating Segments, requires operating segments to be determined based on internal reports that are regularly reviewed by the chief operating decision maker (“CODM”) for the purpose of allocating resources to the segment and to assessing its performance. In the first quarter, the partnership realigned the organizational and governance structures of its businesses to align them more closely with the nature of the partnership’s investments. Such realignment gave rise to changes in how the partnership presents information for financial reporting and management decision-making purposes and resulted in a change in the partnership’s reporting segments. Consequently, as of January 1, 2016, the partnership’s operating segments are organized into four reportable segments: i) Core Office, ii) Core Retail, iii) Opportunistic and iv) Corporate. All prior period segment disclosures have been recast to reflect the changes in the partnership’s operating segments. These segments are independently and regularly reviewed and managed by the Chief Executive Officer, who is considered the CODM.

b) Basis of measurement

The CODM measures and evaluates the performance of the partnership’s operating segments based on funds from operations (“FFO”), and equity attributable to unitholders. These performance metrics do not have standardized meanings prescribed by IFRS and therefore may differ from similar metrics used by other companies and organizations. Management believes that while not an IFRS measure, FFO is the most consistent metric to measure the partnership’s financial statements and for the purpose of allocating resources and assessing its performance. The partnership defines these measures as follows:

i. FFO: net income, prior to fair value gains, net, depreciation and amortization of real estate assets, and income taxes less non-controlling interests of others in operating subsidiaries and properties share of these items. When determining FFO, the partnership also includes its proportionate share of the FFO of unconsolidated partnerships and joint ventures and associates, as well as gains (or losses) related to properties developed for sale.

ii. Equity attributable to unitholders: equity attributable to holders of GP Units, LP Units, Redeemable/Exchangeable Partnership Units, Special LP Units and Exchange LP Units.

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c) Reportable segment measures

The following summaries present certain financial information regarding the partnership’s operating segments for the three and nine months ended September 30, 2016 and 2015:

(US$ Millions)	Total revenue				FFO
Three months ended Sep. 30,	2016		2015		2016			2015
Core Office	$	555	$	559	$	142		$	155
Core Retail	—		—		95			96
Opportunistic	854		708		97			38
Corporate	—		—		(125		)	(124		)
Total	$	1,409	$	1,267	$	209		$	165

(US$ Millions)	Total revenue				FFO
Nine months ended Sep. 30,	2016		2015		2016			2015
Core Office	$	1,651	$	1,750	$	445		$	422
Core Retail	—		—		297			280
Opportunistic	2,338		1,836		262			162
Corporate	—		—		(361		)	(365		)
Total	$	3,989	$	3,586	$	643		$	499

The following summary presents information about certain consolidated balance sheet items of the partnership, on a segmented basis, as of September 30, 2016 and December 31, 2015:

	Total assets				Total liabilities				Total equity attributable to unitholders
(US$ Millions)	Sep. 30, 2016		Dec. 31, 2015		Sep. 30, 2016		Dec. 31, 2015		Sep. 30, 2016			Dec. 31, 2015
Core Office	$	36,541	$	36,540	$	18,256	$	17,850	$	15,196		$	15,984
Core Retail	8,852		8,579		—		—		8,852			8,579
Opportunistic	31,787		26,521		18,555		15,257		4,429			4,251
Corporate	470		226		6,363		7,826		(5,861		)	(6,856		)
Total	$	77,650	$	71,866	$	43,174	$	40,933	$	22,616		$	21,958

The following summary presents a reconciliation of FFO to net income for the three and nine months ended September 30, 2016 and 2015:

	Three months ended Sep. 30,						Nine months ended Sep. 30,
(US$ Millions)	2016			2015			2016			2015
FFO(1)	209			165			643			499
Depreciation and amortization of real estate assets	(55		)	(39		)	(170		)	(104		)
Fair value gains, net	86			245			709			1,252
Share of equity accounted income - non-FFO	230			59			208			542
Income tax expense	961			(72		)	733			109
Non-controlling interests of others in operating subsidiaries and properties in the above items	185			77			502			311
Net income	$	1,616		$	435		$	2,625		$	2,609

⁽¹⁾   FFO represents interests attributable to GP Units, LP Units, Exchange LP Units, Redeemable/Exchangeable Partnership Units and Special LP Units. The interests attributable to Exchange LP Units, Redeemable/Exchangeable Partnership Units and Special LP Units are presented as non-controlling interests in the consolidated statements of income.

⁽²⁾   Includes net income attributable to GP Units, LP Units, Exchange LP Units, Redeemable/Exchangeable Partnership Units and Special LP Units. The interests attributable to Exchange LP Units, Redeemable/Exchangeable Partnership Units and Special LP Units are presented as non-controlling interests in the consolidated statements of income.

NOTE 32. SUBSEQUENT EVENTS

A fund sponsored by Brookfield Asset Management, in which the partnership is a limited partner, agreed to acquire the International Financial Center in Seoul, South Korea, a premier, mixed-use 5.4-million-square-foot complex. On October 18, 2016, the fund made a $260 million deposit. 

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