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 March 31, 2016 and December 31, 2015 and

for the three months ended March 31, 2016 and 2015

1

Brookfield Property Partners L.P.

Condensed Consolidated Balance Sheets

Unaudited		As at
(US$ Millions)	Note	Mar. 31, 2016		Dec. 31, 2015
Assets
Non-current assets
Investment properties	4	$	43,199	$	41,599
Equity accounted investments	5	17,202		17,638
Participating loan interests	6	498		449
Hospitality assets	7	4,925		5,016
Other non-current assets	8	4,073		3,883
Loans and notes receivable	9	223		217
		70,120		68,802
Current assets
Loans and notes receivable	9	1		4
Accounts receivable and other	10	1,225		1,220
Cash and cash equivalents		1,237		1,035
		2,463		2,259
Assets held for sale	11	1,254		805
Total assets		$	73,837	$	71,866
Liabilities and equity
Non-current liabilities
Debt obligations	12	$	25,476	$	21,946
Capital securities	13	3,556		3,528
Other non-current liabilities		430		388
Deferred tax liabilities		3,277		3,107
		32,739		28,969
Current liabilities
Debt obligations	12	5,652		8,580
Capital securities	13	517		503
Accounts payable and other liabilities	15	3,152		2,639
		9,321		11,722
Liabilities associated with assets held for sale	11	478		242
Total liabilities		42,538		40,933
Equity
Limited partners	16	7,384		7,425
General partner	16	6		6
Non-controlling interests attributable to:
Redeemable/exchangeable and special limited partnership units	16,17	14,141		14,218
Limited partnership units of Brookfield Office Properties Exchange LP	16,17	298		309
Interests of others in operating subsidiaries and properties	17	9,470		8,975
Total equity		31,299		30,933
Total liabilities and equity		$	73,837	$	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 Mar. 31,
(US$ Millions, except per unit amounts)	Note	2016		2015
Commercial property revenue	18	$	820	$	810
Hospitality revenue		392		270
Investment and other revenue	19	35		69
Total revenue		1,247		1,149
Direct commercial property expense	20	311		327
Direct hospitality expense	21	265		206
Interest expense		416		374
Depreciation and amortization	22	64		36
General and administrative expense	23	131		110
Total expenses		1,187		1,053
Fair value gains, net	24	337		828
Share of net earnings from equity accounted investments	5	130		264
Income before income taxes		527		1,188
Income tax expense	14	87		179
Net income		$	440	$	1,009
Net income attributable to:
Limited partners		$	92	$	298
General partner		—		—
Non-controlling interests attributable to:
Redeemable/exchangeable and special limited partnership units		155		512
Limited partnership units of Brookfield Office Properties Exchange LP		4		23
Interests of others in operating subsidiaries and properties		189		176
Total		$	440	$	1,009
Net income per LP Unit:
Basic	16	$	0.32	$	1.06
Diluted	16	$	0.32	$	1.02

See accompanying notes to the condensed consolidated financial statements.

3

Brookfield Property Partners L.P.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Unaudited		Three months ended Mar. 31,
(US$ Millions)	Note	2016			2015
Net income		$	440		$	1,009
Other comprehensive (loss) income	26
Items that may be reclassified to net income:
Foreign currency translation		218			(493		)
Cash flow hedges		(108		)	(46		)
Available-for-sale securities		—			1
Equity accounted investments		(4		)	2
Items that will not be reclassified to net income:
Equity accounted investments - revaluation surplus		(12		)	—
Total other comprehensive (loss)income		94			(536		)
Total comprehensive (loss) income		$	534		$	473
Comprehensive income attributable to:
Limited partners
Net income		$	92		$	298
Other comprehensive (loss) income		10			(125		)
		102			173
Non-controlling interests
Redeemable/exchangeable and special limited partnership units
Net income		155			512
Other comprehensive (loss) income		18			(215		)
		173			297
Limited partnership units of Brookfield Office Properties Exchange LP
Net income		4			23
Other comprehensive (loss) income		—			(10		)
		4			13
Interests of others in operating subsidiaries and properties
Net income		189			176
Other comprehensive (loss) income		66			(186		)
		255			(10		)
Total comprehensive (loss) income		$	534		$	473

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			Limited partners equity			Capital		Retained earnings		Accumulated other comprehensive (loss) income		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	—		92			—						92			—		—		—		—		155			4			189			440
Other comprehensive (loss)	—		—			—			10			10			—		—		—		—		18			—			66			94
Total comprehensive income (loss)	—		92			—			10			102			—		—		—		—		173			4			255			534
Distributions	—		(73		)	—			—			(73		)	—		—		—		—		(123		)	(3		)	(272		)	(471		)
Issuance / repurchase of interests in operating subsidiaries	—		(77		)	—			—			(77		)	—		—		—		—		(128		)	(4		)	512			303
Exchange of exchangeable units	6		—			1			—			7			—		—		—		—		1			(8		)	—			—
Balance as at Mar. 31, 2016	$	5,821	$	1,733		$	127		$	(297	)	$	7,384		$	4	$	2	$	—	$	6	$	14,141		$	298		$	9,470		$	31,299
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	—		298			—			—			298			—		—		—		—		512			23			176			1,009
Other comprehensive (loss)	—		—			—			(125		)	(125		)	—		—		—		—		(215		)	(10		)	(186		)	(536		)
Total comprehensive income (loss)	—		298			—			(125		)	173			—		—		—		—		297			13			(10		)	473
Distributions	—		(68		)	—			—			(68		)	—		—		—		—		(116		)	(5		)	(203		)	(392		)
Issuance / repurchase of interest in operating subsidiaries	7		—			—			—			7			—		—		—		—		11			—			(6		)	12
Exchange of exchangeable units	41		—			(1		)	—			40			—		—		—		—		(3		)	(37		)	—			—
Balance as at Mar. 31, 2015	$	5,660	$	1,240		$	124		$	(286	)	$	6,738		$	4	$	1	$	—	$	5	$	13,336		$	441		$	7,872		$	28,392

See accompanying notes to the condensed consolidated financial statements.

5

Brookfield Property Partners L.P.

Condensed Consolidated Statements of Cash Flows

Unaudited		Three Months Ended Mar. 31,
(US$ Millions)	Note	2016			2015
Operating activities
Net income		$	440		$	1,009
Share of equity accounted earnings, net of distributions		(52		)	(186		)
Fair value (gains) losses, net	24	(337		)	(828		)
Deferred income tax (benefit) expense	14	49			165
Depreciation and amortization	22	64			36
Working capital and other		(94		)	(111		)
		70			85
Financing activities
Debt obligations, issuance		4,814			1,254
Debt obligations, repayments		(4,171		)	(1,493		)
Capital securities redeemed		(8		)	—
Non-controlling interests, issued		290			276
Non-controlling interests, purchased		—			(208		)
Repurchases of limited partnership units		(7		)	—
Distributions to non-controlling interests in operating subsidiaries		(234		)	(197		)
Distributions to limited partnership unitholders		(73		)	(68		)
Distributions to redeemable/exchangeable and special limited partnership unitholders		(123		)	(116		)
Distributions to holders of Brookfield Office Properties Exchange LP units		(3		)	(5		)
		485			(557		)
Investing activities
Investment properties and subsidiaries, proceeds of dispositions		542			415
Property acquisitions and capital expenditures		(985		)	(618		)
Investment in equity accounted investments		(111		)	(1,621		)
Proceeds from sale and distributions of equity accounted investments and participating loan interests		176			15
Financial assets, proceeds of dispositions		—			3
Foreign currency hedges of net investments		122			297
Other property, plant and equipment investments, net of dispositions		(29		)	(3		)
Cash acquired in business combinations		15			—
Restricted cash and deposits		(96		)	1,735
		(366		)	223
Cash and cash equivalents
Net change in cash and cash equivalents during the period		189			(249		)
Effect of exchange rate fluctuations on cash and cash equivalents held in foreign currencies		13			(26		)
Balance, beginning of period		1,035			1,282
Balance, end of period		$	1,237		$	1,007
Supplemental cash flow information
Cash paid for:
Income taxes		$	29		$	27
Interest (excluding dividends on capital securities)		$	373		$	311

See accompanying notes to the condensed consolidated financial statements.

6

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 March 31, 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 months ended March 31, 2016 were approved and authorized for issue by the Board of Directors of the partnership on May 5, 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. 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 months ended March 31, 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 March 31, 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, Business Combinations (“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 March 22, 2016, the partnership acquired a portfolio of self-storage properties for total consideration of $320 million. Simply Self Storage (“Simply Storage”) owns and operates 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 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 have been accounted for on a provisional basis and may be adjusted retrospectively in future periods in accordance with IFRS 3.

In December 2015, the partnership acquired a portfolio of office properties in Brazil. A fund sponsored by Brookfield Asset Management contributed $396 million of cash which was drawn on subscription facilities. 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 have been accounted for on a provisional basis and may be adjusted retrospectively in future periods in accordance with IFRS 3.

The following table summarizes the impact of significant business combinations during the three months ended March 31, 2016:

(US$ Millions)	Simply Storage			Other			Total
Investment properties	$	828		$	396		$	1,224
Accounts receivable and other	25			10			35
Cash and cash equivalents	15			—			15
Total assets	868			406			1,274
Less:
Debt obligations	(523		)	(73		)	(596		)
Accounts payable and other	(10		)	(8		)	(18		)
Non-controlling interests(1)	(15		)	—			(15		)
Net assets acquired	$	320		$	325		$	645
Consideration(2)	$	320		$	325		$	645
Transaction costs	$	9		$	2		$	11

⁽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

In the period from each acquisition date to March 31, 2016, the partnership recorded revenue and net income in connection with these acquisitions of approximately $8 million and $(5) million, respectively. If the acquisitions had occurred on January 1, 2016, the partnership’s total revenue and net income would have been $1,269 million and $451 million, respectively, for the three months ended March 31, 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.

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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 three months ended March 31, 2016 and the year ended December 31, 2015:

	Three months ended Mar. 31, 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	1,105			79			1,184			3,950			210			4,160
Capital expenditures	106			198			304			916			1,149			2,065
Property dispositions(1)	(28		)	(3		)	(31		)	(2,393		)	(1,517		)	(3,910		)
Fair value gains, net	133			7			140			1,583			430			2,013
Foreign currency translation	560			6			566			(1,746		)	(342		)	(2,088		)
Reclassifications to assets held for sale and other changes	(689		)	126			(563		)	(988		)	(794		)	(1,782		)
Balance, end of period	$	40,298		$	2,901		$	43,199		$	39,111		$	2,488		$	41,599

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

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.

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 recently acquired self-storage portfolio was valued by such external valuation professionals as of March 31, 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:

		Mar. 31, 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	6.8	%	5.6	%	12	6.9	%	5.7	%	12
Canada	Discounted cash flow	6.2	%	5.7	%	10	6.1	%	5.5	%	10
Australia	Discounted cash flow	7.8	%	6.2	%	10	7.6	%	6.2	%	10
United Kingdom	Discounted cash flow	5.9	%	5.1	%	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	11.2	%	8.3	%	6	11.5	%	8.3	%	6
Opportunistic Retail(1)	Direct capitalization	7.5	%	n/a		n/a	7.5	%	n/a		n/a
Industrial	Discounted cash flow	7.5	%	6.6	%	10	7.6	%	6.8	%	10
Multifamily(1)	Direct capitalization	5.0	%	n/a		n/a	5.1	%	n/a		n/a
Triple Net Lease(1)	Direct capitalization	6.4	%	n/a		n/a	6.3	%	n/a		n/a
Self-storage(1)	Direct capitalization	6.5	%	n/a		n/a	n/a		n/a		n/a

⁽¹⁾ The valuation method used to value opportunistic retail, multifamily, triple net lease, and self-storage 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.

9

		Mar. 31, 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	7.4	%	6.1	%	10	7.4	%	6.1	%	10
United Kingdom(2)	Discounted cash flow	5.1	%	5.1	%	10	4.9	%	5.2	%	10
Germany	Discounted cash flow	8.1	%	4.7	%	10	8.1	%	4.7	%	10
Core Retail
United States	Discounted cash flow	7.4	%	5.8	%	10	7.4	%	5.8	%	10
Opportunistic Office	Discounted cash flow	8.6	%	7.4	%	5	8.3	%	7.4	%	5
Opportunistic Retail(3)	Discounted cash flow	7.4	%	n/a		n/a	7.2	%	n/a		n/a
Industrial	Discounted cash flow	7.1	%	6.4	%	10	7.1	%	6.5	%	10
Multifamily(3)	Direct capitalization	5.5	%	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 the United Kingdom 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, 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 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	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2016		Dec. 31, 2015
Joint Ventures
Stork Holdco LP (“Stork”)(1)	Property holding company	United Kingdom	50%	50%	$	3,251	$	3,401
Manhattan West, New York	Property holding company	United States	56%	56%	1,115		1,073
245 Park Avenue, New York	Property holding company	United States	51%	51%	788		784
Grace Building, New York	Property holding company	United States	50%	50%	600		590
Southern Cross East, Melbourne(2)	Property holding company	Australia	50%	50%	355		334
Brookfield D.C. Office Partners LLC (“D.C. Fund”), Washington, D.C.	Property holding company	United States	51%	51%	321		316
EY Centre, Sydney(2)	Property holding company	Australia	50%	50%	217		203
75 State Street, Boston	Property holding company	United States	51%	51%	167		159
Potsdamer Platz, Berlin(3)	Holding company	Germany	50%	50%	166		316
Republic Plaza, Denver	Property holding company	United States	50%	50%	125		123
Other	Various	Various	12% - 83%	12% - 83%	1,375		1,484
					8,480		8,783
Associates
General Growth Properties, Inc. (“GGP”)	Real estate investment trust	United States	29%	29%	7,217		7,215
China Xintiandi (“CXTD”)(4)	Property holding company	China	22%	22%	464		589
Rouse Properties, Inc. (“Rouse”)	Real estate investment trust	United States	33%	34%	392		380
Diplomat Resort and Spa (“Diplomat”)	Property holding company	United States	90%	90%	334		322
Other	Various	Various	24% - 42%	23% - 49%	315		349
					8,722		8,855
Total					$	17,202	$	17,638

⁽¹⁾  Stork 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⁾  As of March 31, 2016, 50% of our investment in Potsdamer Platz, representing a 25% interest in the estate, was reclassified to assets held for sale.

⁽⁴⁾  The partnership’s interest in CXTD is held through BSREP CXTD Holdings L.P., in which it has an approximate 31% interest.

The fair value of the common shares of GGP held by the partnership based on the trading price of GGP common stock as of March 31, 2016 was $7,592 million (December 31, 2015 - $6,948 million). The fair value of the common shares of Rouse held by the partnership based on the trading price of Rouse common stock as of March 31, 2016 was $356 million (December 31, 2015 - $282 million).

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

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

	Three months ended			Year ended
(US$ Millions)	Mar. 31, 2016			Dec. 31, 2015
Equity accounted investments, beginning of period	$	17,638		$	10,356
Additions, net of disposals and return of capital distributions	(78		)	6,034
Share of net income	130			1,591
Distributions received	(78		)	(276		)
Foreign currency translation	(60		)	(59		)
Reclassification to assets held for sale	(363		)	—
Other	13			(8		)
Equity accounted investments, end of period	$	17,202		$	17,638

11

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

(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015
Non-current assets	$	79,571	$	85,187
Current assets	5,435		4,859
Total assets	85,006		90,046
Non-current liabilities	36,498		38,327
Current liabilities	4,946		4,472
Total liabilities	41,444		42,799
Net assets	43,562		47,247
Partnership’s share of net assets	$	17,202	$	17,638

	Three months ended Mar. 31,
(US$ Millions)	2016			2015
Revenue	$	1,906		$	1,234
Expenses	1,307			741
Income before fair value gains, net	599			493
Fair value gains, net	(77		)	128
Net income	522			621
Partnership’s share of net earnings	$	130		$	264

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	Mar. 31, 2016		Dec. 31, 2015		Mar. 31, 2016		Dec. 31, 2015
Darling Park Complex, Sydney	30	%	30	%	$	213	$	195
IAG House, Sydney	50	%	50	%	101		94
Jessie Street, Sydney	100	%	100	%	159		136
Infrastructure House, Canberra	100	%	100	%	25		24
Total participating loan interests					$	498	$	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 March 31, 2016, the carrying value of the embedded derivative is $101 million (December 31, 2015 - $118 million).

For the three months ended March 31, 2016, the partnership recognized interest income on the participating loan interests of $8 million (2015 - $11 million) and fair value gains of $16 million (2015 - $19 million).

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

(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015
Non-current assets	$	1,706	$	1,674
Current assets	117		35
Total assets	1,823		1,709
Non-current liabilities	122		483
Current liabilities	645		180
Total liabilities	767		663
Net assets	$	1,056	$	1,046

12

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Revenues	$	32	$	40
Expenses	15		18
Earnings before fair value gains, net	17		22
Fair value gains, net	27		57
Net earnings	$	44	$	79

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. 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)	Mar. 31, 2016			Dec. 31, 2015
Cost:
Balance, beginning of period	$	4,962		$	2,430
Acquisitions through business combinations	—			2,619
Additions	31			74
Disposals	—			(10		)
Foreign currency translation	(64		)	(151		)
	4,929			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	(58		)	(153		)
	(589		)	(531		)
Total hospitality assets	$	4,925		$	5,016

NOTE 8. OTHER NON-CURRENT ASSETS

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

(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015
Securities designated as FVTPL	$	54	$	37
Derivative assets	1,540		1,379
Securities designated as AFS	143		142
Goodwill	865		888
Intangible assets, net	1,295		1,321
Other	176		116
Total other non-current assets	$	4,073	$	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 $1,533 million as of March 31, 2016 (December 31, 2015 - $1,364 million). The fair value of the GGP warrants as of March 31, 2016 was determined using a Black-Scholes option pricing model, assuming a 1.6 year term (December 31, 2015 - 1.9 year term), 59% volatility (December 31, 2015 - 57% volatility), and a risk free interest rate of 0.67% (December 31, 2015 - 0.98%).

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b) Securities designated as AFS

Securities designated as AFS represent the partnership’s retained equity interests in 1625 Eye Street in Washington, D.C. and Heritage Plaza in Houston, both 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 March 31, 2016 are $107 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 $865 million at March 31, 2016 is primarily attributable to the acquisition of Center Parcs UK in the third quarter of 2015. As discussed in Note 3, the goodwill balance is still preliminary and subject to change. 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. As discussed in Note 3, Business Acquisitions and Combinations, the acquired assets of Center Parcs UK, including trademark assets, and assumed liabilities were still under evaluation by the partnership at the date the partnership’s financial statements were approved for issuance. Accordingly, they have been accounted for on a provisional basis and may be adjusted retrospectively in future reporting periods in accordance with IFRS 3.

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.

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.

The following table presents a roll forward of the partnership’s intangible assets:

	Three months ended			Year ended
(US$ Millions)	Mar. 31, 2016			Dec. 31, 2015
Balance, beginning of period	$	1,321		$	307
Acquisitions, net of disposals	2			1,083
Amortization	(1		)	(5		)
Foreign currency translation	(27		)	(64		)
Balance, end of period	$	1,295		$	1,321

NOTE 9. LOANS AND NOTES RECEIVABLE

Loans and notes receivable primarily represents investments in debt instruments secured by commercial and other income producing real property. Loans and notes receivable are financial assets that are carried at amortized cost on the consolidated balance sheets with interest income recognized following the effective interest method on the consolidated statements of income. A loan is considered impaired when, based upon current information and events, it is probable that the partnership will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan agreement. Loans are evaluated individually for impairment given the unique nature and size of each loan. On a quarterly basis, the partnership’s subsidiaries perform a quarterly review of all collateral properties underlying the loans receivable for each collateralized loan. There is no impairment of loans and notes receivable for the three months ended March 31, 2016.

14

NOTE 10. ACCOUNTS RECEIVABLE AND OTHER

The components of accounts receivable and other are as follows:

(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015
Accounts receivable(1)	$	347	$	422
Restricted cash and deposits	444		338
Other current assets	434		460
Total accounts receivable and other	$	1,225	$	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.

NOTE 11. 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 March 31, 2016 and December 31, 2015:

(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015
Investment properties	$	874	$	775
Equity accounted investments	374		—
Accounts receivables and other assets	6		30
Assets held for sale	1,254		805
Debt obligations	472		229
Accounts payable and other liabilities	6		13
Liabilities associated with assets held for sale	$	478	$	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 properties in the U.S. On February 2, 2016, and February 29, 2016, the partnership sold the office properties in Sydney and Vancouver for A$285 million and C$428 million, respectively.

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. On May 5, 2016, the partnership sold 50% of the partnership’s 50% interest in the Potsdamer Platz estate in Berlin for €146 million and on May 6, 2016, the partnership sold Two Ballston Plaza in Washington, D.C. for $79 million.

15

NOTE 12. DEBT OBLIGATIONS

The partnership’s debt obligations include the following:

	Mar. 31, 2016				Dec. 31, 2015
(US$ Millions)	Weighted-average rate		Debt balance		Weighted-average rate		Debt balance
Unsecured facilities:
Brookfield Property Partners’ credit facilities	2.16	%	$	1,142	3.16	%	$	1,632
Brookfield Office Properties’ revolving facility	2.17	%	889		2.15	%	884
Brookfield Office Properties’ senior unsecured notes	4.17	%	269		4.17	%	252
Brookfield Canada Office Properties revolving facility	—	%	—		2.29	%	140
Subsidiary borrowings	3.91	%	118		4.60	%	86
Secured debt obligations:
Funds subscription credit facilities	1.75	%	1,583		1.91	%	1,594
Fixed rate	5.32	%	14,632		5.36	%	13,709
Variable rate	4.07	%	12,967		3.87	%	12,458
Total debt obligations			$	31,600			$	30,755
Current			5,652				8,580
Non-current			25,476				21,946
Debt associated with assets held for sale			472				229
Total debt obligations			$	31,600			$	30,755

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

	Mar. 31, 2016				Dec. 31, 2015
(Millions)	U.S. Dollars		Local currency		U.S. Dollars		Local currency
U.S. Dollars	$	23,062	$	23,062	$	22,345	$	22,345
British Pounds	3,311		£	2,305	3,340		£	2,267
Canadian Dollars	2,335		C$	3,037	2,376		C$	3,287
Australian Dollars	1,591		A$	2,078	1,504		A$	2,064
Brazilian Reais	589		R$	2,096	535		R$	2,088
Euros	484		€	426	439		€	404
Indian Rupee	228		₨	15,073	216		₨	14,314
Total debt obligations	$	31,600			$	30,755

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NOTE 13. CAPITAL SECURITIES

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

(US$ Millions)	Shares outstanding	Cumulative dividend rate		Mar. 31, 2016		Dec. 31, 2015
Operating Partnership Class A Preferred Equity Units:
Series 1	24,000,000	6.25	%	$	534	$	532
Series 2	24,000,000	6.50	%	518		516
Series 3	24,000,000	6.75	%	507		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)	3,251,889	5.25	%	81		84
Series H(1)	6,994,244	5.75	%	134		128
Series J(1)	6,617,439	5.00	%	128		125
Series K(1)	4,995,414	5.20	%	96		90
BPO Class B Preferred Shares:
Series 1(2)	3,600,000	70% of bank prime		—		—
Series 2(2)	3,000,000	70% of bank prime		—		—
Brookfield Property Split Corp. (“BOP Split”) Senior Preferred Shares:
Series 1	925,390	5.25	%	22		23
Series 2	999,400	5.75	%	19		18
Series 3	917,903	5.00	%	18		17
Series 4	984,586	5.20	%	19		18
Capital Securities – Fund Subsidiaries				747		724
Total capital securities				$	4,073	$	4,031
Current				517		503
Non-current				3,556		3,528
Total capital securities				$	4,073	$	4,031

⁽¹⁾  BPY and its subsidiaries own 1,003,549, 1,000,000, 1,000,000, and 1,004,586 shares of Series G, Series H, Series J, and Series K Class AAA preferred shares of BPO as of March 31, 2016, respectively, which has been reflected as a reduction in outstanding shares of the BPO Class AAA Preferred Shares.

(2) Class B, 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. On May 9, 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.

The Capital Securities – Fund Subsidiaries includes $706 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 $41 million at March 31, 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.

At March 31, 2016, capital securities includes $414 million (December 31, 2015 - $394 million) repayable in Canadian Dollars of C$538 million (December 31, 2015 - C$545 million).

17

NOTE 14. 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 Mar. 31,
(US$ Millions)	2016		2015
Current income tax	$	38	$	14
Deferred income tax	49		165
Income tax expense	$	87	$	179

The partnership’s income tax expense decreased for the three months ended March 31, 2016 as compared to the same period in the prior year primarily due to lower before tax book income.

NOTE 15. ACCOUNTS PAYABLE AND OTHER LIABILITIES

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

(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015
Accounts payable and accrued liabilities(1)	$	1,948	$	2,123
Deferred revenue	163		114
Other liabilities(1)	1,041		402
Total accounts payable and other liabilities	$	3,152	$	2,639

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

Included in other liabilities are derivative liabilities with a carrying amount of $542 million at March 31, 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”), publicly traded limited partnership 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.

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)	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2016		Dec. 31, 2015
Outstanding, beginning of period	139	139	261,486		254,080
Exchange LP Units exchanged	—	—	281		8,736
Distribution Reinvestment Program	—	—	59		201
Issued under unit-based compensation plan	—	—	11		80
Repurchase of LP Units	—	—	(351	)	(1,611	)
Outstanding, end of period	139	139	261,486		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 March 31, 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 March 31, 2016 and December 31, 2015.

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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)	Mar. 31, 2016		Dec. 31, 2015
Outstanding, beginning of period	12,379		21,115
Exchange LP Units exchanged(1)	(281	)	(8,736	)
Outstanding, end of period	12,098		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 Mar. 31,
(US$ Millions, except per unit information)	2016		2015
General Partner	$	—	$	—
Limited Partners	73		68
Holders of:
Redeemable/exchangeable partnership units	122		115
Special limited partnership units	1		1
Limited partnership units of Exchange LP	3		5
Total	$	199	$	189
Per unit(1)	$	0.28	$	0.265

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

e) Earnings per unit

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

	Three months ended Mar. 31,
(US$ Millions, except unit information)	2016		2015
Net income attributable to limited partners	$	92	$	298
Income reallocation related to mandatorily convertibles preferred shares	15		48
Net income attributable to limited partners – basic	107		346
Dilutive effect of conversion of preferred shares and options	10		28
Net income attributable to limited partners – diluted	$	117	$	374
(in millions of units/shares)
Weighted average number of LP Units outstanding	261.5		255.2
Mandatorily convertible preferred shares	70.0		70.0
Weighted average number of LP Units - basic	331.5		325.2
Dilutive effect of the conversion of preferred shares and options	38.3		40.1
Weighted average number of LP units outstanding - diluted	369.8		365.3

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NOTE 17. NON-CONTROLLING INTERESTS

Non-controlling interests consists of the following:

(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015
Redeemable/Exchangeable and special limited partnership units	$	14,141	$	14,218
Limited partnership units of Brookfield Office Properties Exchange L.P.	298		309
Interests of others in operating subsidiaries and properties:
Preferred shares held by Brookfield Asset Management Inc.	25		25
Preferred equity of subsidiaries	1,654		1,650
Non-controlling interests in subsidiaries and properties	7,791		7,300
Total interests of others in operating subsidiaries and properties	9,470		8,975
Total non-controlling interests	$	23,909	$	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	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2016		Dec. 31, 2015
Brookfield Office Properties Inc.(1)	Canada	—	—	$	2,522	$	2,622
BSREP CARS Sub-Pooling LLC	United States	74%	74%	1,110		1,104
Center Parcs UK	United Kingdom	71%	68%	1,088		1,071
BSREP Industrial Pooling Subsidiary L.P.	United States	70%	70%	909		883
BSREP II Aries Pooling LLC	United States	72%	66%	707		645
Brookfield Brazil Retail Fundo de Investimento em Participações	Brazil	60%	60%	442		406
BREF ONE, LLC	United States	67%	67%	458		457
BSREP Europe Holdings L.P	Cayman Islands	66%	66%	421		386
BSREP UA Holdings LLC	Cayman Islands	70%	70%	398		333
BSREP India Office Holdings Pte. Ltd.	United States	67%	67%	294		284
Other	Various	18% - 88%	18% - 88%	1,121		784
Total				$	9,470	$	8,975

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

NOTE 18. COMMERCIAL PROPERTY REVENUE

The components of commercial property revenue are as follows:

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Base rent	$	736	$	714
Straight-line rent	32		30
Lease termination	6		3
Other	46		63
Total commercial property revenue	$	820	$	810

NOTE 19. INVESTMENT AND OTHER REVENUE

The components of investment and other revenue are as follows:

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Fee revenue	$	10	$	5
Dividend income	3		32
Interest income	8		17
Participating loan notes	8		11
Investment income	2		—
Other	4		4
Total investment and other revenue	$	35	$	69

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NOTE 20. DIRECT COMMERCIAL PROPERTY EXPENSE

The components of direct commercial property expense are as follows:

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Employee compensation and benefits	$	30	$	25
Property maintenance	154		175
Real estate taxes	101		104
Ground rents	10		9
Other	16		14
Total direct commercial property expense	$	311	$	327

NOTE 21. DIRECT HOSPITALITY EXPENSE

The components of direct hospitality expense are as follows:

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Employee compensation and benefits	$	75	$	69
Marketing and advertising	17		14
Cost of food, beverage, and retail goods sold	60		29
Maintenance and utilities	24		18
Other	89		76
Total direct hospitality expense	$	265	$	206

NOTE 22. DEPRECIATION AND AMORTIZATION

The components of depreciation and amortization expense are as follows:

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Depreciation and amortization of real estate assets	$	59	$	31
Depreciation and amortization of non-real estate assets	5		5
Total depreciation and amortization	$	64	$	36

NOTE 23. GENERAL AND ADMINISTRATIVE EXPENSE

The components of general and administrative expense are as follows:

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Employee compensation and benefits	$	37	$	41
Management fees	47		39
Transaction costs and other	47		30
Total general and administrative expense	$	131	$	110

NOTE 24. FAIR VALUE GAINS, NET

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

	Three months ended Mar. 31,
(US$ Millions)	2016		2015
Commercial properties	$	133	$	520
Commercial developments	7		126
Financial instruments and other	197		182
Total fair values gains, net	$	337	$	828

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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 months ended March 31, 2016, the partnership incurred $3 million (2015 - $10 million) of expense in connection with its unit-based compensation plans.

a) BPY Unit Option 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	Mar. 31, 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

i. Equity-settled BPY Awards

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

	Mar. 31, 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	(115,500	)	17.29		(745,392	)	19.92
Expired/forfeited	(2,701,287	)	19.99		(174,153	)	21.40
Reclassified(1)	—		—		15,726,834		19.75
Outstanding, end of period	17,553,773		$	20.35	17,349,629		$	20.53
Exercisable, end of period	5,100,583		$	19.33	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.

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

	Mar. 31, 2016			Dec. 31, 2015
Expiry date	Number of options	Weighted average exercise price		Number of options	Weighted average exercise price
2020	351,200	$	13.07	368,400	$	13.07
2021	393,100	17.44		421,300	17.44
2022	1,263,300	18.21		1,535,900	18.25
2023	1,119,080	16.80		1,247,680	16.80
2024	9,303,852	20.59		11,286,224	20.59
2025	2,201,277	25.18		2,490,125	25.18
2026	2,921,964	19.51		—	—
Total	17,553,773	$	20.35	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 March 31, 2016 and December 31, 2015 is as follows:

	Mar. 31, 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	(142,876)	18.56		(89,540)	17.40
Expired/forfeited	(213,997)	21.09		—	—
Reclassified(1)	—	—		(15,726,834)	19.75
Outstanding, end of period	7,395,025	$	20.29	6,904,986	$	20.37
Exercisable, end of period	2,086,027	$	19.50	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.

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

	Mar. 31, 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	551,200	16.80		604,200	16.80
2024	4,462,230	20.59		4,639,571	20.59
2025	724,083	25.18		775,215	25.18
2026	846,912	19.51		—	—
Total	7,395,025	$	20.29	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 March 31, 2016, the total number of Restricted Units outstanding was 417,816 (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.

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As of March 31, 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 March 31, 2016, BPO has 1,473,763 deferred share units (December 31, 2015 - 1,456,719) outstanding and vested.

NOTE 26. OTHER COMPREHENSIVE (LOSS) INCOME

Other comprehensive (loss) income consists of the following:

	Three months ended Mar. 31,
(US$ Millions)	2016			2015
Items that may be reclassified to net income:
Foreign currency translation
Net unrealized foreign currency translation (losses) in respect of foreign operations	$	226		$	(823	)
Gains on hedges of net investments in foreign operations, net of income taxes for the three months ended Mar. 31, 2016 of $4 million (2015 – ($32) million)(1)	(8		)	330
	218			(493		)
Cash flow hedges
(Losses) on derivatives designated as cash flow hedges, net of income taxes for the three months ended Mar. 31, 2016 of $27 million (2015 – $15 million)	(108		)	(46		)
	(108		)	(46		)
Available-for-sale securities
Net change in unrealized gains on available-for-sale securities, net of income taxes	—			1
	—			1
Equity accounted investments
Share of unrealized foreign currency translation (losses) gains in respect of foreign operations	(2		)	2
(Losses) on derivatives designated as cash flow hedges	(2		)	—
	(4		)	2
Items that will not be reclassified to net income:
Equity accounted investments
Share of revaluation surplus	(12		)	—
	(12		)	—
Total other comprehensive (loss)	$	94		$	(536	)

⁽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 March 31, 2016, the partnership has commitments totaling approximately $835 million for the development of Manhattan West in Midtown New York, approximately C$280 million for the development Brookfield Place East Tower in Calgary, approximately A$26 million for the completed development of Brookfield Place Perth Tower 2 and approximately £715 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 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 March 31, 2016, there remained approximately $200 million of uncontributed capital commitments.

As of March 31, 2016, the partnership had committed $2.0 billion as lead investor to the second estate opportunistic fund sponsored by Brookfield Asset Management. As of March 31, 2016, there remained approximately $1.9 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

24

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 and zero cost collars 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 March 31, 2016 and December 31, 2015:

(US$ Millions)	Hedging item	Notional		Rates	Maturity dates	Fair value
Mar. 31, 2016	Interest rate caps of US$ LIBOR debt	$	3,890	2.5% - 5.8%	Jun. 2016 - Oct. 2018	$	—
	Interest rate swaps of US$ LIBOR debt	1,193		1.3% - 2.2%	Jul. 2020 - Dec. 2020	(26		)
	Interest rate cap of £ LIBOR debt	241		2.5% - 3.0%	Dec. 2016 - Aug. 2017	—
	Interest rate swaps of £ LIBOR debt	75		1.5%	Apr. 2020	2
	Interest rate swaps of € EURIBOR debt	197		0.3% - 1.4%	Oct. 2017 - Apr. 2021	6
	Interest rate swaps of A$ BBSW/BBSY debt	401		3.5% - 5.9%	Jul. 2016 - Jul. 2017	(5		)
	Interest rate swaps on forecasted fixed rate debt	1,835		3.1% - 5.5%	Jun. 2026 - Jun. 2029	(438		)
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 on forecasted fixed rate debt	1,885		3.1% - 5.1%	Jan. 2026 - Jun. 2029	(332		)

For the three months ended March 31, 2016, the amount of hedge ineffectiveness recorded in earnings in connection with the partnership’s interest rate hedging activities was $5 million. For the three months ended March 31, 2015, the amount of hedge ineffectiveness recorded in earnings was not significant.

Foreign Currency Hedging

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

(US$ Millions)	Hedging item		Notional	Rates	Maturity dates	Fair value
Mar. 31, 2016	Net investment hedges	£	2,606	£0.64/$ - £0.72/$	Apr. 2016 - Oct. 2017	$	(34	)
	Net investment hedges	C¥	2,000	C¥6.66/$ - C¥6.90/$	Sep. 2016 - Feb. 2017	(9		)
	Net investment hedges	A$	1,409	A$1.34/$ - A$1.44/$	Apr. 2016 - May 2017	(39		)
	Net investment hedges	€	723	€0.80/$ - €0.94/$	May 2016 - Feb. 2018	(24		)
	Cash flow hedges	R$	500	R$3.72/$	Jun. 2016	1
	Net investment hedges	R$	386	R$3.84/$ - R$3.89/$	Oct. 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		)

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

For the three months ended March 31, 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 March 31, 2016 and December 31, 2015:

(US$ Millions)	Derivative type	Notional		Maturity dates	Rates	Fair value (gain)/loss		Classification of gain/loss
Mar. 31, 2016	Interest rate caps	$	350	Jul. 2017	3.25%	$	—	General and administrative expense
	Interest rate swap	115		Dec. 2016	4.09%	—		General and administrative expense
	Interest rate swap	37		Apr. 2018	1.44%	—		General and administrative expense
Dec. 31, 2015	Interest rate caps	$	381	Mar. 2016	3.65%	$	—	General and administrative expense
	Interest rate caps	350		Jul. 2017	3.25%	—		General and administrative expense
	Interest rate caps	34		Jan. 2016	3.00%	—		General and administrative expense
	Interest rate caps	75		Feb. 2016	2.93%	—		General and administrative expense

(US$ Millions)	Derivative type		Notional	Maturity dates	Strike prices	Fair value  (gain)/loss			Classification of (gain)/loss
Mar. 31, 2016	Foreign currency call	£	250	Jul. 2016	£0.67/$	$	(5	)	Fair value gains, net
	Foreign currency call	£	250	Jul. 2016	£0.67/$	(5		)	Fair value gains, net
	Foreign currency call	£	150	Jul. 2016	£0.67/$	(3		)	Fair value gains, net
	Foreign currency call	£	150	Jul. 2016	£0.67/$	(3		)	Fair value gains, net
	Foreign currency call	A$	275	Apr. 2016	A$1.25/$	—			Fair value gains, net
Dec. 31, 2015	Foreign currency call	A$	175	Mar. 2016	A$1.22/$	$	—		Fair value gains, net
	Foreign currency call	A$	275	Apr. 2016	A$1.25/$	—			Fair value gains, net
	Foreign currency put	£	370	Jan. 2016	£0.71/$	—			Fair value gains, net
	Foreign currency put	£	200	Mar. 2016	£0.71/$	(1		)	Fair value gains, net
	Foreign currency call	A$	150	Apr. 2016	A$1.22/$	—			Fair value gains, net
	Foreign currency call	A$	150	Apr. 2016	A$1.22/$	—			Fair value gains, net
	Foreign currency call	A$	250	Apr. 2016	A$1.22/$	—			Fair value gains, net

The 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:

			Mar. 31, 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	$	498	$	498	$	449	$	449
Loans and notes receivable	Loans and receivables	Amortized cost	224		224		221		221
Other non-current assets
Securities designated as FVTPL	FVTPL	Fair value	54		54		37		37
Derivative assets	FVTPL	Fair value	1,540		1,540		1,379		1,379
Securities designated as AFS	AFS	Fair value	143		143		142		142
Accounts receivable and other
Other receivables(1)	Loans and receivables	Amortized cost	1,231		1,231		1,250		1,250
Cash and cash equivalents	Loans and receivables	Amortized cost	1,237		1,237		1,035		1,035
Total financial assets			$	4,927	$	4,927	$	4,513	$	4,513
Financial liabilities
Debt obligations(2)	Other liabilities	Amortized cost	$	31,600	$	31,903	$	30,755	$	31,084
Capital securities	Other liabilities	Amortized cost	3,326		3,326		3,307		3,308
Capital securities - fund subsidiaries	Other liabilities	Amortized cost	747		747		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)	404		404		362		362
Accounts payable and other liabilities(4)	Other liabilities	Amortized cost(5)	3,158		3,158		2,652		2,652
Total financial liabilities			$	39,261	$	39,564	$	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 $6 million and $30 million as of March 31, 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 $472 million and $229 million as of March 31, 2016 and December 31, 2015, respectively.

⁽³⁾  Includes derivative liabilities measured at fair value of approximately $73 million and $45 million as of March 31, 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 $6 million and $13 million as of March 31, 2016 and December 31, 2015, respectively.

⁽⁵⁾  Includes derivative liabilities measured at fair value of approximately $542 million and $401 million as of March 31, 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.

27

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:

	Mar. 31, 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	$	—	$	—	$	101	$	101	$	—	$	—	$	118	$	118
Securities designated as FVTPL	—		—		54		54		—		—		37		37
Securities designated as AFS	4		—		139		143		4		—		138		142
Derivative assets(1)	—		72		1,540		1,612		—		99		1,371		1,470
Total financial assets	$	4	$	72	$	1,834	$	1,910	$	4	$	99	$	1,664	$	1,767
Financial liabilities
Accounts payable and other liabilities	$	—	$	615	$	—	$	615	$	—	$	446	$	—	$	446
Loan payable	—		—		26		26		—		—		26		26
Total financial liabilities	$	—	$	615	$	26	$	641	$	—	$	446	$	26	$	472

⁽¹⁾  Includes $64 million of derivative assets at March 31, 2016 classified in other receivables and loans and notes receivable on the condensed consolidated balance sheets.     

There were no transfers between levels during the three months ended March 31, 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 March 31, 2016 and December 31, 2015:

	Mar. 31, 2016				Dec. 31, 2015
(US$ Millions)	Financial assets		Financial liabilities		Financial assets			Financial liabilities
Balance, beginning of period	$	1,664	$	26	$	3,385		$	—
Acquisitions		16		—		1			26
Dispositions(1)		—		—		(2,052	)		—
Fair value gains, net and OCI		154		—		223			—
Other		—		—		107			—
Balance, end of period	$	1,834	$	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 months ended March 31, 2016 was $26 million (2015 - $13 million). The equity enhancement distribution for the three months ended March 31, 2016 was $8 million (2015 - $27 million).

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)	Mar. 31, 2016			Dec. 31, 2015
Balances outstanding with related parties:
Participating loan interests	$	498		$	449
Equity accounted investments	148			143
Loans and notes receivable(1)	66			63
Receivables and other assets	28			29
Deposit from Brookfield Asset Management	(500		)	—
Property-specific debt obligations	(379		)	(362		)
Corporate debt obligations	(12		)	(1,000		)
Other liabilities	(198		)	(373		)
Capital securities held by Brookfield Asset Management	(1,250		)	(1,250		)
Preferred shares held by Brookfield Asset Management	(25		)	(25		)

⁽¹⁾  At March 31, 2016, includes $66 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 Mar. 31,
(US$ Millions)	2016		2015
Transactions with related parties:
Commercial property revenue(1)	$	5	$	5
Management fee income	1		—
Interest and other income	1		—
Participating loan interests (including fair value gains, net)	25		30
Interest expense on debt obligations	30		13
Interest on capital securities held by Brookfield Asset Management	19		19
General and administrative expense(2)	57		51
Construction costs(3)	97		70

⁽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. Brookfield Office Properties 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., and Ssangyong Engineering & Construction Co. Ltd.

During the first quarter of 2016, Fairfield Residential Company LLC, which is approximately 65% owned by Brookfield Asset Management, sold a multifamily development site in Camarillo, CA to Brookfield Office Properties for consideration of $35 million.

NOTE 30. SUBSIDIARY PUBLIC ISSUERS

BOP Split was incorporated for the purpose of being an issuer of preferred shares and owning the partnership’s Purchasers’ additional investment in BPO common shares. Pursuant to the terms of a Plan of Arrangement, holders of outstanding BPO Convertible Preference 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.

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The following table provides consolidated summary financial information for the partnership, BOP Split, and the Holding Entities:

(US$ Millions) For the three months ended Mar. 31, 2016	Brookfield Property Partners L.P.		BOP Split Corp.		Holding entities(2)		Other subsidiaries		Consolidating adjustments(3)			Brookfield Property Partners L.P consolidated
Revenue	$	—	$	—	$	80	$	1,247	$	(80	)	$	1,247
Net income attributable to unitholders(1)	94		70		251		102		(266		)	251
For the three months ended Mar. 31, 2015
Revenue	—		—		82		1,149		(82		)	1,149
Net income attributable to unitholders(1)	$	307	$	283	$	833	$	468	$	(1,058	)	$	833

⁽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 1A Ltd., BPY Bermuda Holdings Limited, BPY Bermuda

IV Holdings LP, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings II Limited.

⁽³⁾ Includes elimination of intercompany transactions and balances necessary to present the partnership on a consolidated basis.

(US$ Millions) As of Mar. 31, 2016	Brookfield Property Partners L.P.		BOP Split Corp.			Holding entities		Other subsidiaries		Consolidating adjustments			Brookfield Property Partners L.P consolidated
Current assets	$	—	$	—		$	232	$	2,231	$	—		$	2,463
Non- current assets	8,170		2,396			28,274		70,120		(38,840		)	70,120
Assets held for sale	—		—			—		1,254		—			1,254
Current liabilities	—		—			107		9,214		—			9,321
Non current liabilities	—		3,079			6,570		23,090		—			32,739
Liabilities associated with assets held for sale	—		—			—		478		—			478
Equity attributable to interests of others in operating subsidiaries and properties	—		—			—		9,470		—			9,470
Equity attributable to unitholders(1)	8,170		(683		)	21,829		31,353		(38,840		)	21,829

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

(US$ Millions) As of Dec. 31, 2015	Brookfield Property Partners L.P.		BOP Split Corp.		Holding entities			Other subsidiaries		Consolidating adjustments			Brookfield Property Partners L.P consolidated
Current assets	$	—	$	—	$	1,771		$	488	$	—		$	2,259
Non- current assets	8,237		6,505		19,603			68,802		(34,345		)	68,802
Assets held for sale	—		—		—			805		—			805
Current liabilities	—		—		385			11,337		—			11,722
Non current liabilities	—		3,079		(968		)	26,858		—			28,969
Liabilities associated with assets held for sale	—		—		—			242		—			242
Equity attributable to interests of others in operating subsidiaries and properties	—		—		—			8,975		—			8,975
Equity attributable to unitholders(1)	8,237		3,426		21,957			22,683		(34,345		)	21,958

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

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 March 31, 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:

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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.

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.

c) Reportable segment measures

The following summaries present certain financial information regarding the partnership’s operating segments for the three months ended March 31, 2016 and 2015:

(US$ Millions)	Total revenue				FFO
Three months ended Mar. 31,	2016		2015		2016			2015
Core Office	$	534	$	609	$	144		$	140
Core Retail	—		—		103			88
Opportunistic	713		540		64			67
Corporate	—		—		(116		)	(119		)
Total	$	1,247	$	1,149	$	195		$	176

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

	Total assets				Total liabilities				Total equity attributable to unitholders
(US$ Millions)	Mar. 31, 2016		Dec. 31, 2015		Mar. 31, 2016		Dec. 31, 2015		Mar. 31, 2016			Dec. 31, 2015
Core Office	$	36,911	$	36,540	$	18,414	$	17,850	$	15,884		$	15,984
Core Retail	8,750		8,579		—		—		8,750			8,579
Opportunistic	28,021		26,521		16,077		15,257		4,233			4,251
Corporate	155		226		8,047		7,826		(7,038		)	(6,856		)
Total	$	73,837	$	71,866	$	42,538	$	40,933	$	21,829		$	21,958

The following summary presents a reconciliation of NOI and FFO to net income for the three months ended March 31, 2016 and 2015:

	Three months ended Mar. 31,
(US$ Millions)	2016			2015
Commercial property revenue	$	820		$	810
Hospitality revenue	392			270
Direct commercial property expense	(311		)	(327		)
Direct hospitality expense	(265		)	(206		)
NOI	636			547
Investment and other revenue	35			69
Share of equity accounted income - FFO	218			171
Interest expense	(416		)	(374		)
General and administrative expense	(131		)	(110		)
Depreciation and amortization of non-real estate assets	(5		)	(5		)
Non-controlling interests of others in operating subsidiaries and properties in FFO	(142		)	(122		)
FFO(1)	195			176
Depreciation and amortization of real estate assets	(59		)	(31		)
Fair value gains, net	337			828
Share of equity accounted income - non-FFO	(88		)	93
Income tax expense	(87		)	(179		)
Non-controlling interests of others in operating subsidiaries and properties – non-FFO	(47		)	(54		)
Net income attributable to unitholders(2)	251			833
Non-controlling interests of others in operating subsidiaries and properties	189			176
Net income	$	440		$	1,009

⁽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.

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NOTE 32. SUBSEQUENT EVENTS

On April 12, 2016, the partnership acquired a 50% interest in an office development at 655 New York Avenue in Washington, D.C. for a gross purchase price of $145 million.

On April 18, 2016, Brookfield Asset Management announced the final close on Brookfield Strategic Real Estate Partners II (“BSREP II”) with $9.0 billion of equity commitments. In connection with the close, the partnership increased its commitment to BSREP II from $2.0 billion to $2.3 billion.

On April 22, 2016, BPO provided notice of redemption of all of its outstanding Class AAA Preference Shares, Series H.

On April 27, 2016, BPO issued 8,000,000 Class AAA Series CC preferred shares for C$200 million or C$25.00 a share.

On April 29, 2016, the partnership closed on the acquisition of a portfolio of 13 student housing properties in the United Kingdom, and the associated management platform, for a purchase price of approximately £399 million.

On May 5, 2016, the partnership closed on the partial sale of its investment in Potsdamer Platz for consideration of €146 million. The partnership retains a 25% ownership in the Potsdamer Platz estate.

On May 6, 2016, the partnership disposed of Two Ballston Plaza in Washington, D.C. for $79 million.

On May 9, 2016, the partnership disposed of a 49% interest including the non-controlling interest of 15.7% in One New York Plaza in Downtown New York for $1,383 million.

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