UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION



WASHINGTON, D.C. 20549



FORM 20-F





(Mark One)



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------
|  |                                                                                     
|  | For the fiscal year ended December 31, 2013                                         



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------



Commission file number: 001-35505



Brookfield Property Partners L.P.

|                                                      
|------------------------------------------------------
|(Exact name of Registrant as specified in its charter)



|N/A                                            
|-----------------------------------------------
|                                               
|(Translation of Registrant’s name into English)



|Bermuda                                        
|-----------------------------------------------
|                                               
|(Jurisdiction of incorporation or organization)



|73 Front Street Hamilton, HM 12 Bermuda
|---------------------------------------
|                                       

(Address of principal executive office)



John Stinebaugh

Brookfield Property Partners L.P.

73 Front Street

Hamilton, HM 12

Bermuda

Tel: +441-294-3309



|                                                                                      
|--------------------------------------------------------------------------------------
|(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)



Securities registered or to be registered pursuant to Section 12(b)
of the Act.

|                                                            |  |  |  |                                                                       
|----------------------------------------------------------- |  |  |  | ----------------------------------------------------------------------
|Title
of each class                                         |  |  |  | Name of each exchange on which registered                             
|Limited Partnership Units
        Limited Partnership Units |  |  |  | New
        York Stock Exchange
        Toronto
        Stock Exchange



Securities registered or to be registered pursuant to Section 12(g)
of the Act.



None



Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.



None



Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the annual report: 102,522,251 Limited Partnership
Units as of December 31, 2013.



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.

|      |  |     
|----- |  | ----
|Yes  ̈ |  | No x



If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.

|      |  |     
|----- |  | ----
|Yes  ̈ |  | No x



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.



|      |  |     
|----- |  | ----
|Yes x |  | No  ̈



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).

|      |  |     
|----- |  | ----
|Yes  ̈ |  | No  ̈



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer”
in Rule 12b-2 of the Exchange Act. (Check one):

|                          |  |                     |  |                        
|------------------------- |  | ------------------- |  | -----------------------
|Large accelerated filer  ̈ |  | Accelerated filer  ̈ |  | Non-accelerated filer x



Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|            |  |                                                                                                       |  |   |  |        
|----------- |  | ----------------------------------------------------------------------------------------------------- |  | - |  | -------
|U.S. GAAP  ̈ |  | International Financial Reporting Standards as
issued by the International Accounting Standards Board |  | x |  | Other  ̈



If “Other” has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.

|          |  |          
|--------- |  | ---------
|Item 17  ̈ |  | Item 18  ̈



If this is an annual report, indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



|      |  |     
|----- |  | ----
|Yes  ̈ |  | No x











Table
of Contents



|                                                  |                                                         | Page
|------------------------------------------------- | ------------------------------------------------------- | ----
|                                                  |                                                         |     
|INTRODUCTION AND USE OF CERTAIN TERMS             | 1                                                      
|                                                  |                                                        
|SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | 3                                                      
|                                                  |                                                         |     
|PART I                                            |                                                         | 4   
|                                                  |                                                         |     
|ITEM 1.                                           | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS   | 4   
|                                                  |                                                         |     
|ITEM 2.                                           | OFFER STATISTICS AND EXPECTED TIMETABLE                 | 4   
|                                                  |                                                         |     
|ITEM 3.                                           | KEY INFORMATION                                         | 5   
|                                                  |                                                         |     
|3.A.                                              | SELECTED FINANCIAL DATA                                 | 5   
|                                                  |                                                         |     
|3.B.                                              | CAPITALIZATION AND INDEBTEDNESS                         | 5   
|                                                  |                                                         |     
|3.C.                                              | REASONS FOR THE OFFER AND USE OF PROCEEDS               | 5   
|                                                  |                                                         |     
|3.D.                                              | RISK FACTORS                                            | 5   
|                                                  |                                                         |     
|ITEM  4.                                          | INFORMATION ON THE COMPANY                              | 30  
|                                                  |                                                         |     
|4.A.                                              | HISTORY AND DEVELOPMENT OF THE COMPANY                  | 30  
|                                                  |                                                         |     
|4.B.                                              | BUSINESS OVERVIEW                                       | 31  
|                                                  |                                                         |     
|4.C.                                              | ORGANIZATIONAL STRUCTURE                                | 48  
|                                                  |                                                         |     
|4.D.                                              | PROPERTY, PLANTS AND EQUIPMENT                          | 53  
|                                                  |                                                         |     
|ITEM 4A.                                          | UNRESOLVED STAFF COMMENTS                               | 54  
|                                                  |                                                         |     
|ITEM 5.                                           | OPERATING AND FINANCIAL REVIEW AND PROSPECTS            | 54  
|                                                  |                                                         |     
|5.A.                                              | OPERATING RESULTS                                       | 54  
|                                                  |                                                         |     
|5.B.                                              | LIQUIDITY AND CAPITAL RESOURCES                         | 85  
|                                                  |                                                         |     
|5.C.                                              | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.    | 86  
|                                                  |                                                         |     
|5.D.                                              | TREND INFORMATION                                       | 86  
|                                                  |                                                         |     
|5.E.                                              | OFF-BALANCE SHEET ARRANGEMENTS                          | 86  
|                                                  |                                                         |     
|5.F.                                              | TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS           | 87  
|                                                  |                                                         |     
|ITEM 6.                                           | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES              | 87  
|                                                  |                                                         |     
|6.A.                                              | DIRECTORS AND SENIOR MANAGEMENT                         | 87  
|                                                  |                                                         |     
|6.B.                                              | COMPENSATION                                            | 90  
|                                                  |                                                         |     
|6.C.                                              | BOARD PRACTICES                                         | 90  
|                                                  |                                                         |     
|6.D.                                              | EMPLOYEES                                               | 93  
|                                                  |                                                         |     
|6.E.                                              | SHARE OWNERSHIP                                         | 93  
|                                                  |                                                         |     
|ITEM 7.                                           | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS       | 93  
|                                                  |                                                         |     
|7.A.                                              | MAJOR SHAREHOLDERS                                      | 93  
|                                                  |                                                         |     
|7.B.                                              | RELATED PARTY TRANSACTIONS                              | 94  
|                                                  |                                                         |     
|7.C.                                              | INTERESTS OF EXPERTS AND COUNSEL                        | 104 
|                                                  |                                                         |     
|ITEM 8.                                           | FINANCIAL INFORMATION                                   | 105 
|                                                  |                                                         |     
|8.A.                                              | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION | 105 



-i-







Table
of Contents

(continued)



|         |                                                                              | Page
|-------- | ---------------------------------------------------------------------------- | ----
|         |                                                                              |     
|8.B.     | SIGNIFICANT CHANGES                                                          | 105 
|         |                                                                              |     
|ITEM 9.  | THE OFFER AND LISTING                                                        | 105 
|         |                                                                              |     
|9.A.     | OFFER AND LISTING DETAILS                                                    | 105 
|         |                                                                              |     
|9.B.     | PLAN OF DISTRIBUTION                                                         | 107 
|         |                                                                              |     
|9.C.     | MARKETS                                                                      | 107 
|         |                                                                              |     
|9.D.     | SELLING SHAREHOLDERS                                                         | 107 
|         |                                                                              |     
|9.E.     | DILUTION                                                                     | 107 
|         |                                                                              |     
|9.F.     | EXPENSES OF THE ISSUE                                                        | 107 
|         |                                                                              |     
|ITEM 10. | ADDITIONAL INFORMATION                                                       | 107 
|         |                                                                              |     
|10.A.    | SHARE CAPITAL                                                                | 107 
|         |                                                                              |     
|10.B.    | MEMORANDUM AND ARTICLES OF ASSOCIATION                                       | 107 
|         |                                                                              |     
|10.C.    | MATERIAL CONTRACTS                                                           | 131 
|         |                                                                              |     
|10.D.    | EXCHANGE CONTROLS                                                            | 132 
|         |                                                                              |     
|10.E.    | TAXATION                                                                     | 132 
|         |                                                                              |     
|10.F.    | DIVIDENDS AND PAYING AGENTS                                                  | 152 
|         |                                                                              |     
|10.G.    | STATEMENT BY EXPERTS                                                         | 152 
|         |                                                                              |     
|10.H     | DOCUMENTS ON DISPLAY                                                         | 152 
|         |                                                                              |     
|10.I.    | SUBSIDIARY INFORMATION                                                       | 152 
|         |                                                                              |     
|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 152 
|         |                                                                              |     
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 152 
|         |                                                                              |     
|PART II  |                                                                              | 152 
|         |                                                                              |     
|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 152 
|         |                                                                              |     
|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 152 
|         |                                                                              |     
|ITEM 15. | CONTROLS AND PROCEDURES                                                      | 153 
|         |                                                                              |     
|ITEM 16. | [RESERVED]                                                                   | 153 
|         |                                                                              |     
|16.A.    | AUDIT COMMITTEE FINANCIAL EXPERTS                                            | 153 
|         |                                                                              |     
|16.B.    | CODE OF ETHICS                                                               | 153 
|         |                                                                              |     
|16.C.    | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       | 153 
|         |                                                                              |     
|16.D.    | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   | 154 
|         |                                                                              |     
|16.E.    | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 154 
|         |                                                                              |     
|16.F.    | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                                 | 154 
|         |                                                                              |     
|16.G.    | CORPORATE GOVERNANCE                                                         | 154 
|         |                                                                              |     
|16.H.    | MINING SAFETY DISCLOSURE                                                     | 154 
|         |                                                                              |     
|PART III |                                                                              | 155 
|         |                                                                              |     
|ITEM 17. | FINANCIAL STATEMENTS                                                         | 155 





-ii-







Table
of Contents

(continued)



|                              |                      | Page
|----------------------------- | -------------------- | ----
|                              |                      |     
|ITEM 18.                      | FINANCIAL STATEMENTS | 155 
|                              |                      |     
|ITEM 19.                      | EXHIBITS             | 156 
|                              |                      |     
|SIGNATURES                    | 158                 
|                              |                     
|INDEX TO FINANCIAL STATEMENTS | F-1                 



-iii-







INTRODUCTION
AND USE OF CERTAIN TERMS



We have prepared this Form 20-F using a
number of conventions, which you should consider when reading the information contained herein. Unless otherwise indicated or the
context otherwise requires, in this Form 20-F:



| | · | all operating and other statistical information is presented as if we own 100% of each property in our portfolio, regardless
of whether we own all of the interests in each property; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | all financial information is presented in accordance with International Financial Reporting Standards, or IFRS, as issued by
the International Accounting Standards Board, or IASB, other than certain non-IFRS financial measures which are defined under “Use
of Non-IFRS Measures”.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In this Form 20-F, unless the context suggests
otherwise, references to “we”, “us” and “our” are to Brookfield Property Partners L.P., the
Property Partnership, the Holding Entities and the operating entities, each as defined below, taken together. Unless the context
suggests otherwise, in this Form 20-F references to:



| | · | an “affiliate” of any person are to any other person that, directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such person;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “assets under management” are to assets managed by us or by Brookfield on behalf of our third party investors,
as well as our own assets, and also include capital commitments that have not yet been drawn. Our calculation of assets under management
may differ from that employed by other asset managers and, as a result, this measure may not be comparable to similar measures
presented by other asset managers;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “Australia” are to Australia and New Zealand;
| | - | ---------------------------------------------



| | · | the “BPY General Partner” are to the general partner of our company, which is Brookfield Property Partners Limited,
a wholly-owned subsidiary of Brookfield Asset Management;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “Brookfield” are to Brookfield Asset Management and any subsidiary of Brookfield Asset Management, other than us;
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | “Brookfield Asset Management” are to Brookfield Asset Management Inc.;
| | - | ----------------------------------------------------------------------



| | · | “our business” are to our business of owning, operating and investing in commercial property, both directly and
through our operating entities;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | · | “our company” or “our partnership” are to Brookfield Property Partners L.P., a Bermuda exempted limited
partnership;
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | “commercial property” or “commercial properties” are to commercial and other real property which generates
or has the potential to generate income, including office, retail, multi-family and industrial assets, but does not include, among
other things, residential land development, home building, construction, real estate advisory and other similar operations or services;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “Holding Entities” are to the primary holding subsidiaries of the Property Partnership, from time to time, through
which it indirectly holds all of our interests in our operating entities;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “our limited partnership agreement” are to the second amended and restated limited partnership agreement of our
company entered into on August 8, 2013;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the “Service Providers” are to the affiliates of Brookfield that provide services to us pursuant to our Master
Services Agreement, which are currently Brookfield Global Property Advisor Limited and Brookfield Property Group LLC, subsidiaries
of Brookfield Asset Management, and unless the context otherwise requires, any other affiliate of Brookfield that is appointed
by Brookfield Global Property Advisor Limited, Brookfield Property Group LLC or any such affiliate from time to time to act as
a service provider pursuant to our Master Services Agreement or to whom any service provider has subcontracted for the provision
of such services;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



1







| | · | “Master Services Agreement” are to the amended and restated master services agreement among the Service Recipients,
the Service Providers, and certain other subsidiaries of Brookfield Asset Management who are parties thereto;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “operating entities” are to the entities in which the Holding Entities hold interests and that directly or indirectly
hold our real estate assets other than entities in which the Holding Entities hold interests for investment purposes only of less
than 5% of the equity securities;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “our portfolio” are to the commercial property assets in our office, retail, multi-family, industrial and other
platforms, as applicable;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | · | the “Property Partnership” are to Brookfield Property L.P.;
| | - | -----------------------------------------------------------



| | · | “Property Special LP” are to Brookfield Property Special L.P., a wholly-owned subsidiary of Brookfield Asset Management,
which is a special limited partner of the Property Partnership;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the “Redemption-Exchange Mechanism” are to the mechanism by which Brookfield may request redemption of its Redemption-Exchange
Units in whole or in part in exchange for cash, subject to the right of our company to acquire such interests (in lieu of such
redemption) in exchange for units of our company, as more fully described in Item 10.B. “Additional Information —
Memorandum and Articles of Association — Description of the Property Partnership Limited Partnership Agreement — Redemption-Exchange
Mechanism”;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the “Redemption-Exchange Units” are to the non-voting limited partnership interests in the Property Partnership
that are redeemable for cash, subject to the right of our company to acquire such interests (in lieu of such redemption) in exchange
for units of our company, pursuant to the Redemption-Exchange Mechanism;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “Service Recipients” are to our company, the Property Partnership, the Holding Entities and, at the option of the
Holding Entities, any wholly-owned subsidiary of a Holding Entity excluding any operating entity;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “spin-off” are to the special dividend of our units by Brookfield Asset Management on April 15, 2013 as described
under Item 4.A. “Information on the Company — History and Development of the Company”; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “our units” and “units of our company” are to the non-voting limited partnership units in our company
and references to “our unitholders” and “our limited partners” are to the holders of our units.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Historical Performance and Market Data



This Form 20-F contains information relating
to our business as well as historical performance and market data for Brookfield Asset Management and certain of its operating
platforms. When considering this data, you should bear in mind that historical results and market data may not be indicative of
the future results that you should expect from us.



Financial Information



The financial information contained in this
Form 20-F is presented in U.S. Dollars and, unless otherwise indicated, has been prepared in accordance with IFRS. In this Form
20-F, all references to “$” are to U.S. Dollars. Canadian Dollars, Australian Dollars, New Zealand Dollars,
British Pounds, Euros and Brazilian Reais are identified as “C$”, “A$”, “NZ$”, “£”,
“€” and “R$”, respectively.



Use of Non-IFRS Measures



To measure our performance, we focus on
equity, net operating income, or NOI, and funds from operations, or FFO. NOI and FFO do not have standardized meanings prescribed
by IFRS and therefore may differ from similar metrics used by other companies. We define each of these measures as follows:



| | · | NOI: means revenues from commercial and hospitality operations of consolidated properties less direct commercial property and
hospitality expenses, with the exception of depreciation and amortization of real estate assets.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2







| | · | FFO: means income, including equity accounted income, before realized gains (losses) on real estate property, fair value gains
(losses) (including equity accounted fair value gains (losses)), depreciation and amortization of real estate assets, income tax
expense (benefit), and less non-controlling interests.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOI is used as a key indicator of performance
as it represents a measure over which management has a certain degree of control. We evaluate the performance of our office segment
by evaluating NOI from “Existing properties”, or on a “same-store” basis, and NOI from “Acquisitions,
dispositions and other.” NOI from existing properties compares the performance of the property portfolio by excluding the
effect of current and prior period dispositions and acquisitions, including developments and “one-time items”, which
for the historical periods presented consists primarily of lease termination income. NOI presented within “Acquisitions,
dispositions and other” includes the results of current and prior period acquired, developed and sold properties, as well
as the one-time items excluded from the “Existing properties” portion of NOI. We do not evaluate the performance of
the operating results of the retail segment on a similar basis as the majority of our investments in the retail segment are accounted
for under the equity method and, as a result, are not included in NOI. Similarly, we do not evaluate the operating results of our
other segments on a same-store basis based on the nature of the investments.



We also consider FFO an important measure
of our operating performance. FFO is a widely recognized measure that is frequently used by securities analysts, investors and
other interested parties in the evaluation of real estate entities, particularly those that own and operate income producing properties.
Our definition of FFO includes all of the adjustments that are outlined in the National Association of Real Estate Investment Trusts,
or NAREIT, definition of funds from operations, including the exclusion of gains (or losses) from the sale of real estate property,
the add back of any depreciation and amortization related to real estate assets and the adjustment for unconsolidated partnerships
and joint ventures. In addition to the adjustments prescribed by NAREIT, we also make adjustments to exclude any unrealized fair
value gains (or losses) that arise as a result of reporting under IFRS and income taxes that arise as certain of our subsidiaries
are structured as corporations as opposed to real estate investment trusts, or REITs. These additional adjustments result in an
FFO measure that is similar to that which would result if our partnership was organized as a REIT that determined net income in
accordance with U.S. GAAP, which is the type of organization on which the NAREIT definition is premised. Our FFO measure will differ
from other organizations applying the NAREIT definition to the extent of certain differences between the IFRS and U.S. GAAP reporting
frameworks, principally related to the recognition of lease termination income. Because FFO excludes fair value gains (losses),
including equity accounted fair value gains (losses), realized gains (losses) on real estate property, depreciation and amortization
of real estate assets and income taxes, it provides a performance measure that, when compared year-over-year, reflects the impact
on operations from trends in occupancy rates, rental rates, operating costs and interest costs, providing perspective not immediately
apparent from net income. We reconcile FFO to net income rather than cash flow from operating activities as we believe net income
is the most comparable measure.



On page 71 of this Form 20-F, we provide
reconciliation of NOI and FFO to net income (loss) for the period presented. We urge you to review the IFRS financial measures
in this Form 20-F, including the financial statements, the notes thereto and the other financial information contained herein,
and not to rely on any single financial measure to evaluate our company.



SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS



This Form 20-F contains certain forward-looking
statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events
or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements in this Form 20-F
include statements regarding the quality of our assets, our anticipated financial performance, our company’s future growth
prospects, our ability to make distributions and the amount of such distributions and our company’s access to capital. In
some cases, you can identify forward-looking statements by terms such as “anticipate”, “believe”, “could”,
“estimate”, “expect”, “intend”, “may”, “plan”, “potential”,
“should”, “will” and “would” or the negative of those terms or other comparable terminology.



The forward-looking statements are based
on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available
to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which
are known to us or within our control. If a change occurs, our business, financial condition, liquidity and results of operations
may vary materially from those expressed in our forward-looking statements. The following factors, among others, could cause our
actual results to vary from our forward-looking statements:



| | · | changes in the general economy;
| | - | -------------------------------



3







| | · | the cyclical nature of the real estate industry;
| | - | ------------------------------------------------



| | · | actions of competitors;
| | - | -----------------------



| | · | failure to attract new tenants and enter into renewal or new leases with tenants on favorable terms;
| | - | ----------------------------------------------------------------------------------------------------



| | · | our ability to derive fully anticipated benefits from future or existing acquisitions, joint ventures, investments or dispositions;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | · | actions or potential actions that could be taken by our co-venturers, partners, fund investors or co-tenants;
| | - | -------------------------------------------------------------------------------------------------------------



| | · | the bankruptcy, insolvency, credit deterioration or other default of our tenants;
| | - | ---------------------------------------------------------------------------------



| | · | actions or potential actions that could be taken by Brookfield;
| | - | ---------------------------------------------------------------



| | · | the departure of some or all of Brookfield’s key professionals;
| | - | ---------------------------------------------------------------



| | · | the threat of litigation;
| | - | -------------------------



| | · | changes to legislation and regulations;
| | - | ---------------------------------------



| | · | possible environmental liabilities and other possible liabilities;
| | - | ------------------------------------------------------------------



| | · | our ability to obtain adequate insurance at commercially reasonable rates;
| | - | --------------------------------------------------------------------------



| | · | our financial condition and liquidity;
| | - | --------------------------------------



| | · | downgrading of credit ratings and adverse conditions in the credit markets;
| | - | ---------------------------------------------------------------------------



| | · | changes in financial markets, foreign currency exchange rates, interest rates or political conditions;
| | - | ------------------------------------------------------------------------------------------------------



| | · | the general volatility of the capital markets and the market price of our units; and
| | - | ------------------------------------------------------------------------------------



| | · | other factors described in this Form 20-F, including those set forth under Item 3.D. “Key Information — Risk
Factors”, Item 5. “Operating and Financial Review and Prospects” and Item 4.B. “Information on
the Company — Business Overview”.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Except as required by applicable law, we
undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future
events or otherwise. We qualify any and all of our forward-looking statements by these cautionary factors. Please keep this cautionary
note in mind as you read this Form 20-F.



PART
I



| | ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
| | ------- | -----------------------------------------------------



Not applicable.



| | ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
| | ------- | ---------------------------------------



Not applicable.



4







| | ITEM 3. | KEY INFORMATION
| | ------- | ---------------



| | 3.A. | SELECTED FINANCIAL DATA
| | ---- | -----------------------



The following tables present selected financial
data for our company as of and for the periods indicated:





|(US$ Millions) Year ended Dec. 31,                   |  | 2013 |       |  | 2012 |   |       | 2011 | 
|---------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|Total revenue                                        |  | $    | 4,287 |  |      | $ | 3,768 |      | 
|Net income                                           |  |      | 1,763 |  |      |   | 2,640 |      | 
|Net income attributable to limited partnership units |  |      | 118   |  |      |   | -     |      | 
|Net income attributable to general partnership units |  |      | -     |  |      |   | -     |      | 
|Net income attributable to parent company            |  |      | 232   |  |      |   | 1,476 |      | 
|FFO(1)                                               |  |      | 582   |  |      |   | 631   |      | 










|(1) | FFO is a non-IFRS measure. See page 71 of this Form 20-F for a reconciliation of FFO to net income.
|--- | ---------------------------------------------------------------------------------------------------



|(US$ Millions)                                                                         |  | Dec. 31, 2013 |        |  | Dec. 31, 2012 |  
|-------------------------------------------------------------------------------------- |  | ------------- | ------ |  | ------------- | -
|Investment properties                                                                  |  | $             | 34,153 |  |               | $
|Equity accounted investments                                                           |  |               | 9,281  |  |               |  
|Total assets                                                                           |  |               | 52,446 |  |               |  
|Property debt                                                                          |  |               | 21,640 |  |               |  
|Total equity                                                                           |  |               | 24,990 |  |               |  
|Equity after subtracting non-controlling interests of others in operating subsidiaries |  |               | 13,624 |  |               |  



| | 3.B. | CAPITALIZATION AND INDEBTEDNESS
| | ---- | -------------------------------



Not applicable.



| | 3.C. | REASONS FOR THE OFFER AND USE OF PROCEEDS
| | ---- | -----------------------------------------



Not applicable.



| | 3.D. | RISK FACTORS
| | ---- | ------------



Your holding of units of our company
will involve substantial risks. You should carefully consider the following factors in addition to the other information set forth
in this Form 20-F. If any of the following risks actually occur, our business, financial condition and results of operations and
the value of your units would likely suffer.



Risks Relating to Us and Our Company



Our company is a recently formed
partnership with limited separate operating history and the historical financial information included herein does not reflect the
financial condition or operating results we would have achieved during certain of the periods presented, and therefore may not
be a reliable indicator of our future financial performance.



Our company was formed on January 3,
2013. Our limited operating history will make it difficult to assess our ability to operate profitably and make distributions to
unitholders. Although most of our assets and operations have been under Brookfield’s control prior to our acquisition of
such assets and operations, the historical financial statements included in this Form 20-F covering the periods prior to our formation
may not be indicative of our future financial condition or operating results. We urge you to carefully consider the basis on which
the historical financial information included herein for such periods was prepared and presented.



Our company relies on the Property
Partnership and, indirectly, the Holding Entities and our operating entities to provide us with the funds necessary to pay distributions
and meet our financial obligations.



Our company’s sole direct investment
is its managing general partnership interest in the Property Partnership, which owns all of the common shares or equity interests,
as applicable, of the Holding Entities, through which we hold all of our interests in the operating entities. Our company has no
independent means of generating revenue. As a result, we depend on distributions and other payments from the Property Partnership
and, indirectly, the Holding Entities and our operating entities to provide us with the funds necessary to pay distributions on
our units and to meet our financial obligations. The Property Partnership, the Holding Entities and our operating entities are
legally distinct from our company and they will generally be required to service their debt obligations before making distributions
to us or their parent entity, as applicable, thereby reducing the amount of our cash flow available to pay distributions on our
units, fund working capital and satisfy other needs. Any other entities through which we may conduct operations in the future will
also be legally distinct from our company and may be restricted in their ability to pay dividends and distributions or otherwise
make funds available to our company under certain conditions.



5







We anticipate that the only distributions
our company will receive in respect of our managing general partnership interests in the Property Partnership will consist of amounts
that are intended to assist our company in making distributions to our unitholders in accordance with our company’s distribution
policy and to allow our company to pay expenses as they become due.



We may not be able to make distributions
to holders of our units in amounts intended or at all.



Our company intends to make quarterly cash
distributions in an amount currently anticipated to be approximately $1.00 per unit on an annualized basis. However, despite our
projections, there can be no assurance that we will be able to make such distributions or meet our target growth rate range of
3% to 5% annually. Based on amounts received in distributions from our operating entities and our projected operating cash flow
from our direct investments, our proposed distributions would be significantly greater than such amounts.



Although we may use distributions from our
operating entities, the proceeds of sales of certain of our direct investments and/or borrowings to fund any shortfall in distributions,
we may not be able to do so on a consistent and sustainable basis. Our ability to make distributions will depend on several other
factors, some of which are out of our control, including, among other things, general economic conditions, our results of operations
and financial condition, the amount of cash that is generated by our operations and investments, restrictions imposed by the terms
of any indebtedness that is incurred to finance our operations and investments or to fund liquidity needs, levels of operating
and other expenses, and contingent liabilities, any or all of which could prevent us from meeting our anticipated distribution
levels. Finally, the BPY General Partner has sole authority to determine when and if our distributions will be made in respect
of our units, and there can be no assurance that the BPY General Partner will declare and pay the distributions on our units as
intended or at all.



We are subject to foreign currency
risk and our risk management activities may adversely affect the performance of our operations.



Some of our assets and operations are in
countries where the U.S. Dollar is not the functional currency. These operations pay distributions in currencies other than
the U.S. Dollar which we must convert to U.S. Dollars prior to making distributions on our units. A significant depreciation
in the value of such foreign currencies may have a material adverse effect on our business, financial condition and results of
operations.



When managing our exposure to such market
risks, we may use forward contracts, options, swaps, caps, collars and floors or pursue other strategies or use other forms of
derivative instruments. The success of any hedging or other derivative transactions that we enter into generally will depend on
our ability to structure contracts that appropriately offset our risk position. As a result, while we may enter into such transactions
in order to reduce our exposure to market risks, unanticipated market changes may result in poorer overall investment performance
than if the transaction had not been executed. Such transactions may also limit the opportunity for gain if the value of a hedged
position increases.



6







We are subject to interest rate
risk and a rise in interest rates may adversely affect us and the value of an investment in our units.



A
number of our assets are interest rate sensitive: increases in long-term interest rates will, absent all else, decrease the value
of these assets by reducing the present value of the cash flows expected to be produced by the asset. If interest rates were to
rise, it may affect the market perceived or actual value of our assets and/or distributions and consequently the market price of
our units may decline in value. Additionally, an increase in interest rates could decrease the amount buyers may be willing to
pay for our properties, thereby reducing the market value of our properties and limiting our ability to sell properties or to obtain
mortgage financing secured by our properties. Further, increased interest rates may effectively increase the cost of properties
we acquire to the extent we utilize leverage for those acquisitions and may result in a reduction in our acquisitions to the extent
we reduce the amount we offer to pay for properties, due to the effect of increased interest rates, to a price that sellers may
not accept.



Our company is not, and does not
intend to become, regulated as an investment company under the U.S. Investment Company Act of 1940, or the Investment Company Act,
(and similar legislation in other jurisdictions) and if our company were deemed an “investment company” under the Investment
Company Act applicable restrictions would make it impractical for us to operate as contemplated.



The Investment Company Act and the rules
thereunder (and similar legislation in other jurisdictions) provide certain protections to investors and impose certain restrictions
on companies that are registered as investment companies. Among other things, such rules limit or prohibit transactions with affiliates,
impose limitations on the issuance of debt and equity securities and impose certain governance requirements. Our company has not
been and does not intend to become regulated as an investment company and our company intends to conduct its activities so it will
not be deemed to be an investment company under the Investment Company Act (and similar legislation in other jurisdictions). In
order to ensure that our company is not deemed to be an investment company, we may be required to materially restrict or limit
the scope of our operations or plans, we will be limited in the types of acquisitions that we may make and we may need to modify
our organizational structure or dispose of assets that we would not otherwise dispose of. Moreover, if anything were to happen
which would potentially cause our company to be deemed an investment company under the Investment Company Act, it would be impractical
for us to operate as intended, agreements and arrangements between and among us and Brookfield would be impaired and our business,
financial condition and results of operations would be materially adversely affected. Accordingly, we would be required to take
extraordinary steps to address the situation, such as the amendment or termination of our Master Services Agreement, the restructuring
of our company and the Holding Entities, the amendment of our limited partnership agreement or the termination of our company,
any of which would materially adversely affect the value of our units. In addition, if our company were deemed to be an investment
company under the Investment Company Act, it would be taxable as a corporation for U.S. federal income tax purposes, and such treatment
would materially adversely affect the value of our units. See Item 10.E. “Additional Information — Taxation —
U.S. Tax Considerations — Partnership Status of Our Company and the Property Partnership”.



Our company is a “foreign
private issuer” under U.S. securities laws and as a result is subject to disclosure obligations different from requirements
applicable to U.S. domestic registrants listed on the New York Stock Exchange, or NYSE.



Although our company is subject to the periodic
reporting requirement of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, the periodic disclosure required
of foreign private issuers under the Exchange Act is different from periodic disclosure required of U.S. domestic registrants.
Therefore, there may be less publicly available information about us than is regularly published by or about other public companies
in the United States and our company is exempt from certain other sections of the Exchange Act that U.S. domestic registrants would
otherwise be subject to, including the requirement to provide our unitholders with information statements or proxy statements that
comply with the Exchange Act. In addition, insiders and large unitholders of our company will not be obligated to file reports
under Section 16 of the Exchange Act and certain of the governance rules imposed by the NYSE will be inapplicable to our company.



Our company is a “SEC foreign
issuer” under Canadian securities regulations and is exempt from certain requirements of Canadian securities laws.



Although our company is a reporting issuer
in Canada, we are a “SEC foreign issuer” and exempt from certain Canadian securities laws relating to continuous disclosure
obligations and proxy solicitation as long as we comply with certain reporting requirements applicable in the United States, provided
that the relevant documents filed with the U.S. Securities and Exchange Commission, or the SEC, are filed in Canada and sent to
our company’s unitholders in Canada to the extent and in the manner and within the time required by applicable U.S. requirements.
Therefore, there may be less publicly available information in Canada about us than is regularly published by or about other reporting
issuers in Canada.



7







We may be subject to the risks
commonly associated with a separation of economic interest from control or the incurrence of debt at multiple levels within an
organizational structure.



Our ownership and
organizational structure is similar to structures whereby one company controls another company which in turn holds
controlling interests in other companies; thereby, the company at the top of the chain may control the company at the bottom
of the chain even if its effective equity position in the bottom company is less than a controlling interest. Brookfield is
the sole shareholder of the BPY General Partner and, as a result of such ownership of the BPY General Partner, Brookfield
controls the appointment and removal of the BPY General Partner’s directors and, accordingly, exercises substantial
influence over us. In turn, we often have a majority controlling interest or a significant influence in our investments. Even
though Brookfield has an effective economic interest in our business of approximately 72% as of the date of this Form 20-F as
a result of its ownership of our units and the Redemption-Exchange Units, over time Brookfield may reduce this economic
interest while still maintaining its controlling interest, and therefore Brookfield may use its control rights in a manner
that conflicts with the economic interests of our other unitholders. For example, despite the fact that our company has a
conflicts policy in place which addresses the requirement for independent approval and other requirements for transactions in
which there is greater potential for a conflict of interest to arise, including transactions with affiliates of Brookfield,
because Brookfield exerts substantial influence over us, and, in turn, over our investments, there is a greater risk of
transfer of assets of our investments at non-arm’s length values to Brookfield and its affiliates. In addition, debt
incurred at multiple levels within the chain of control could exacerbate the separation of economic interest from controlling
interest at such levels, thereby creating an incentive to leverage our company and our investments. Any such increase in debt
would also make us more sensitive to declines in revenues, increases in expenses and interest rates, and adverse market
conditions. The servicing of any such debt would also reduce the amount of funds available to pay distributions to our
company and ultimately to our unitholders.



Risks Relating to Our Business



Our economic performance and the
value of our assets are subject to the risks incidental to the ownership and operation of real estate assets.



Our economic performance, the value of our
assets and, therefore, the value of our units are subject to the risks normally associated with the ownership and operation of
real estate assets, including but not limited to:



| | · | downturns and trends in the national, regional and local economic conditions where our properties and other assets are located;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | the cyclical nature of the real estate industry;
| | - | ------------------------------------------------



| | · | local real estate market conditions, such as an oversupply of commercial properties, including space available by sublease,
or a reduction in demand for such properties;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | changes in interest rates and the availability of financing;
| | - | ------------------------------------------------------------



| | · | competition from other properties;
| | - | ----------------------------------



| | · | changes in market rental rates and our ability to rent space on favorable terms;
| | - | --------------------------------------------------------------------------------



| | · | the bankruptcy, insolvency, credit deterioration or other default of our tenants;
| | - | ---------------------------------------------------------------------------------



| | · | the need to periodically renovate, repair and re-lease space and the costs thereof;
| | - | -----------------------------------------------------------------------------------



| | · | increases in maintenance, insurance and operating costs;
| | - | --------------------------------------------------------



| | · | civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war which may result in uninsured
or underinsured losses;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the decrease in the attractiveness of our properties to tenants;
| | - | ----------------------------------------------------------------



| | · | the decrease in the underlying value of our properties; and
| | - | -----------------------------------------------------------



8







| | · | certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related
charges that must be made regardless of whether a property is producing sufficient income to service these expenses.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We are dependent upon the economic
conditions of the markets where our assets are located.



We are affected by local, regional, national
and international economic conditions and other events and occurrences that affect the markets in which we own assets. A protracted
decline in economic conditions will cause downward pressure on our operating margins and asset values as a result of lower demand
for space.



Substantially all of our properties are
located in North America, Europe, Australia and Brazil. A prolonged downturn in one or more of these economies or the economy of
any other country where we own property would result in reduced demand for space and number of prospective tenants and will affect
the ability of our properties to generate significant revenue. If there is an increase in operating costs resulting from inflation
and other factors, we may not be able to offset such increases by increasing rents.



Additionally, as part of our strategy
for our office property platform is to focus on markets underpinned by major financial, energy, technology, and professional
services businesses, a significant downturn in one or more of the industries in which these businesses operate would also
adversely affect our results of operations.



We face risks associated with
the use of debt to finance our business, including refinancing risk.



We incur debt in the ordinary course of
our business and therefore are subject to the risks associated with debt financing. In addition, our debt will increase substantially
as a result of our offer to purchase common shares, or the Offer, of Brookfield Office Properties Inc., or Brookfield Office Properties,
as we have entered into a credit facility, or the BPY Credit Facility, to finance the cash consideration and expenses of the Offer.
The BPY Credit Facility has a term of two years, with a one year extension option for up to $1.5 billion of commitments subject
to the satisfaction of certain conditions. The risks associated with our debt financing, including the following, may adversely
affect our financial condition and results of operations:



| | · | cash flows may be insufficient to meet required payments of principal and interest;
| | - | -----------------------------------------------------------------------------------



| | · | payments of principal and interest on borrowings may leave insufficient cash resources to pay operating expenses;
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | we may not be able to extend the BPY Credit Facility for an additional year upon its two-year expiry date if we have not been
successful in prepaying such debt and reducing the commitments to $1.5 billion or less through our intended repayment plan;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | we may not be able to refinance indebtedness on our properties at maturity due to business and market factors, including: disruptions
in the capital and credit markets; the estimated cash flows of our properties and other assets; the value of our properties and
other assets; and financial, competitive, business and other factors, including factors beyond our control; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | if refinanced, the terms of a refinancing may not be as favorable as the original terms of the related indebtedness.
| | - | --------------------------------------------------------------------------------------------------------------------



Our operating entities have a significant
degree of leverage on their assets, which will increase upon entering into the BPY Credit Facility. Highly leveraged assets are
inherently more sensitive to declines in revenues, increases in expenses and interest rates, and adverse market conditions. A leveraged
company’s income and net assets also tend to increase or decrease at a greater rate than would otherwise be the case if money
had not been borrowed. As a result, the risk of loss associated with a leveraged company, all other things being equal, is generally
greater than for companies with comparatively less debt.



We rely on our operating entities to provide
our company with the funds necessary to make distributions on our units and meet our financial obligations. The leverage on our
assets may affect the funds available to our company if the terms of the debt impose restrictions on the ability of our operating
entities to make distributions to our company. In addition, our operating entities will generally have to service their debt obligations
before making distributions to our company or their parent entity.



Leverage may also result in a requirement
for liquidity, which may force the sale of assets at times of low demand and/or prices for such assets.



9







In addition to the BPY Credit Facility which
provides for an aggregate of $2.5 billion in committed credit availability, we have a $700 million subordinated credit facility
with Brookfield to supplement our liquidity. We may also incur indebtedness under future credit facilities or other debt-like instruments,
in addition to any asset-level indebtedness. We may also issue debt or debt-like instruments in the market in the future, which
may or may not be rated. Should such debt or debt-like instruments be rated, a credit downgrade will have an adverse impact on
the cost of such debt.



In addition, Brookfield holds $1.25 billion
of redeemable preferred shares of one of our Holding Entities. We have agreed to use our commercially reasonable efforts to, as
soon as reasonably practical, subject to any restrictions in the BPY Credit Facility, issue debt or equity securities or borrow
money from one or more financial institutions or other lenders, on terms reasonably acceptable to us, in an aggregate amount sufficient
to fund the redemption of $500 million of the preferred shares. The terms of any such financing may be less favorable to us than
the terms of the preferred shares.



If we are unable to refinance our indebtedness
on acceptable terms, or at all, we may need to dispose of one or more of our properties or other assets upon disadvantageous terms.
In addition, prevailing interest rates or other factors at the time of refinancing could increase our interest expense, and if
we mortgage property to secure payment of indebtedness and are unable to make mortgage payments, the mortgagee could foreclose
upon such property or appoint a receiver to receive an assignment of our rents and leases. This may adversely affect our ability
to make distributions or payments to our unitholders and lenders.



Restrictive covenants in our indebtedness
may limit management’s discretion with respect to certain business matters.



Instruments governing any of our indebtedness
or indebtedness of our operating entities or their subsidiaries may contain restrictive covenants limiting our discretion with
respect to certain business matters. These covenants could place significant restrictions on, among other things, our ability to
create liens or other encumbrances, to make distributions to our unitholders or make certain other payments, investments, loans
and guarantees and to sell or otherwise dispose of assets and merge or consolidate with another entity. These covenants could also
require us to meet certain financial ratios and financial condition tests. A failure to comply with any such covenants could result
in a default which, if not cured or waived, could permit acceleration of the relevant indebtedness.



If we are unable to manage our
interest rate risk effectively, our cash flows and operating results may suffer.



Advances under credit facilities and certain
property-level mortgage debt bear interest at a variable rate. We may incur further indebtedness in the future that also bears
interest at a variable rate or we may be required to refinance our debt at higher rates. In addition, though we attempt to manage
interest rate risk, there can be no assurance that we will hedge such exposure effectively or at all in the future. Accordingly,
increases in interest rates above that which we anticipate based upon historical trends would adversely affect our cash flows.



We face potential adverse effects
from tenant defaults, bankruptcies or insolvencies.



A commercial tenant may experience a downturn
in its business, which could cause the loss of that tenant or weaken its financial condition and result in the tenant’s inability
to make rental payments when due or, for retail tenants, a reduction in percentage rent payable. If a tenant defaults, we may experience
delays and incur costs in enforcing our rights as landlord and protecting our investments.



We cannot evict a tenant solely because
of its bankruptcy. In addition, in certain jurisdictions where we own properties, a court may authorize a tenant to reject and
terminate its lease. In such a case, our claim against the tenant for unpaid, future rent would be subject to a statutory cap that
might be substantially less than the remaining rent owed under the lease. In any event, it is unlikely that a bankrupt or insolvent
tenant will pay the full amount it owes under a lease. The loss of rental payments from tenants and costs of re-leasing would adversely
affect our cash flows and results of operations. In the case of our retail properties, the bankruptcy or insolvency of an anchor
tenant or tenant with stores at many of our properties would cause us to suffer lower revenues and operational difficulties, including
difficulties leasing the remainder of the property. Significant expenses associated with each property, such as mortgage payments,
real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the property.
In the event of a significant number of lease defaults and/or tenant bankruptcies, our cash flows may not be sufficient to pay
cash distributions to our unitholders and repay maturing debt or other obligations.



Reliance on significant tenants
could adversely affect our results of operations.



Many of our properties are occupied by one
or more significant tenants and, therefore, our revenues from those properties are materially dependent on the creditworthiness
and financial stability of those tenants. Our business would be adversely affected if any of those tenants failed to renew certain
of their significant leases, became insolvent, declared bankruptcy or otherwise refused to pay rent in a timely fashion or at all.
In the event of a default by one or more significant tenants, we may experience delays in enforcing our rights as landlord and
may incur substantial costs in protecting our investment and re-leasing the property. If a lease of a significant tenant is terminated,
it may be difficult, costly and time consuming to attract new tenants and lease the property for the rent previously received.



10







Our inability to enter into renewal
or new leases with tenants on favorable terms or at all for all or a substantial portion of space that is subject to expiring leases
would adversely affect our cash flows and operating results.



Our properties generate revenue through
rental payments made by tenants of the properties. Upon the expiry of any lease, there can be no assurance that the lease will
be renewed or the tenant replaced. The terms of any renewal or replacement lease may be less favorable to us than the existing
lease. We would be adversely affected, in particular, if any major tenant ceases to be a tenant and cannot be replaced on similar
or better terms or at all. Additionally, we may not be able to lease our properties to an appropriate mix of tenants. Retail tenants
may negotiate leases containing exclusive rights to sell particular types of merchandise or services within a particular retail
property. When leasing other space after the vacancy of a retail tenant, these provisions may limit the number and types of prospective
tenants for the vacant space.



Our competitors may adversely
affect our ability to lease our properties which may cause our cash flows and operating results to suffer.



Each segment of the real estate industry
is competitive. Numerous other developers, managers and owners of commercial properties compete with us in seeking tenants and,
in the case of our multi-family properties, there are numerous housing alternatives which compete with our properties in attracting
residents. Some of the properties of our competitors may be newer, better located or better capitalized. These competing properties
may have vacancy rates higher than our properties, which may result in their owners being willing to make space available at lower
prices than the space in our properties, particularly if there is an oversupply of space available in the market. Competition for
tenants could have an adverse effect on our ability to lease our properties and on the rents that we may charge or concessions
that we must grant. If our competitors adversely impact our ability to lease our properties, our cash flows and operating results
may suffer.



Our ability to realize our strategies and
capitalize on our competitive strengths are dependent on the ability of our operating entities to effectively operate our large
group of commercial properties, maintain good relationships with tenants, and remain well-capitalized, and our failure to do any
of the foregoing would affect our ability to compete effectively in the markets in which we do business.



Our insurance may not cover some
potential losses or may not be obtainable at commercially reasonable rates, which could adversely affect our financial condition
and results of operations.



We maintain insurance on our properties
in amounts and with deductibles that we believe are in line with what owners of similar properties carry; however, our insurance
may not cover some potential losses or may not be obtainable at commercially reasonable rates in the future.



There also are certain types of risks (such
as war, environmental contamination such as toxic mold, and lease and other contract claims) which are either uninsurable or not
economically insurable. Should any uninsured or underinsured loss occur, we could lose our investment in, and anticipated profits
and cash flows from, one or more properties, and we would continue to be obligated to repay any recourse mortgage indebtedness
on such properties.



Possible terrorist activity could
adversely affect our financial condition and results of operations and our insurance may not cover some losses due to terrorism
or may not be obtainable at commercially reasonable rates.



Possible terrorist attacks in the markets
where our properties are located may result in declining economic activity, which could reduce the demand for space at our properties,
reduce the value of our properties and could harm the demand for goods and services offered by our tenants.



Additionally, terrorist activities could
directly affect the value of our properties through damage, destruction or loss. Our office portfolio is concentrated in large
metropolitan areas, some of which have been or may be perceived to be subject to terrorist attacks. Many of our office properties
consist of high-rise buildings, which may also be subject to this actual or perceived threat. Our insurance may not cover some
losses due to terrorism or may not be obtainable at commercially reasonable rates.



11







We are subject to risks relating
to development and redevelopment projects.



On a strategic and selective basis, we may
develop and redevelop properties. The real estate development and redevelopment business involves significant risks that could
adversely affect our business, financial condition and results of operations, including the following:



| | · | we may not be able to complete construction on schedule or within budget, resulting in increased debt service expense and construction
costs and delays in leasing the properties;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | we may not have sufficient capital to proceed with planned redevelopment or expansion activities;
| | - | -------------------------------------------------------------------------------------------------



| | · | we may abandon redevelopment or expansion activities already under way, which may result in additional cost recognition;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | we may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and
other governmental permits and authorizations;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | we may not be able to lease properties at all or on favorable terms, or occupancy rates and rents at a completed project might
not meet projections and, therefore, the project might not be profitable;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | construction costs, total investment amounts and our share of remaining funding may exceed our estimates and projects may not
be completed and delivered as planned; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | upon completion of construction, we may not be able to obtain, or obtain on advantageous terms, permanent financing for activities
that we have financed through construction loans.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We are subject to risks that affect
the retail environment.



We are subject to risks that affect the
retail environment, including unemployment, weak income growth, lack of available consumer credit, industry slowdowns and plant
closures, low consumer confidence, increased consumer debt, poor housing market conditions, adverse weather conditions, natural
disasters and the need to pay down existing obligations. All of these factors could negatively affect consumer spending and adversely
affect the sales of our retail tenants. This could have an unfavorable effect on our operations and our ability to attract new
retail tenants.



In addition, our retail tenants face competition
from retailers at other regional malls, outlet malls and other discount shopping centers, discount shopping clubs, catalogue companies,
and through internet sales and telemarketing. Competition of these types could reduce the percentage rent payable by certain retail
tenants and adversely affect our revenues and cash flows. Additionally, our retail tenants are dependent on perceptions by retailers
and shoppers of the safety, convenience and attractiveness of our retail properties. If retailers and shoppers perceive competing
properties and other retailing options such as the internet to be more convenient or of a higher quality, our revenues may be adversely
affected.



Some of our retail lease agreements include
a co-tenancy provision which allows the mall tenant to pay a reduced rent amount and, in certain instances, terminate the lease,
if we fail to maintain certain occupancy levels at the mall. In addition, certain of our tenants have the ability to terminate
their leases prior to the lease expiration date if their sales do not meet agreed upon thresholds. Therefore, if occupancy, tenancy
or sales fall below certain thresholds, rents we are entitled to receive from our retail tenants would be reduced and our ability
to attract new tenants may be limited.



The computation of cost reimbursements from
our retail tenants for common area maintenance, insurance and real estate taxes is complex and involves numerous judgments including
interpretation of lease terms and other tenant lease provisions. Most tenants make monthly fixed payments of common area maintenance,
insurance, real estate taxes and other cost reimbursements and, after the end of the calendar year, we compute each tenant’s
final cost reimbursements and issue a bill or credit for the full amount, after considering amounts paid by the tenant during the
year. The billed amounts could be disputed by the tenant or become the subject of a tenant audit or even litigation. There can
be no assurance that we will collect all or any portion of these amounts.



12







We are subject to risks associated
with the multi-family residential industry.



We are subject to risks associated with
the multi-family residential industry, including the level of mortgage interest rates which may encourage tenants to purchase rather
than lease and housing and governmental programs that provide assistance and rent subsidies to tenants. If the demand for multi-family
properties is reduced, income generated from our multi-family residential properties and the underlying value of such properties
may be adversely affected.



In addition, certain jurisdictions regulate
the relationship of an owner and its residential tenants. Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while prohibiting unreasonable rules, retaliatory evictions,
and restrictions on a resident’s choice of landlords. Apartment building owners have been the subject of lawsuits under various
“Landlord and Tenant Acts” and other general consumer protection statutes for coercive, abusive or unconscionable leasing
and sales practices. If we become subject to litigation, the outcome of any such proceedings may materially adversely affect us
and may continue for long periods of time. A few jurisdictions may offer more significant protection to residential tenants. In
addition to state or provincial regulation of the landlord-tenant relationship, numerous towns and municipalities impose rent control
on apartment buildings. The imposition of rent control on our multi-family residential units could have a materially adverse effect
on our results of operations.



If we are unable to recover from
a business disruption on a timely basis our financial condition and results of operations could be adversely affected.



Our business is vulnerable to damages from
any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and
telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material
disruption to our business. If we are unable to recover from a business disruption on a timely basis, our financial condition and
results of operations would be adversely affected. We may also incur additional costs to remedy damages caused by such disruptions.



Because certain of our assets
are illiquid, we may not be able to sell these assets when appropriate or when desired.



Large commercial properties like the ones
that we own can be hard to sell, especially if local market conditions are poor. Such illiquidity could limit our ability to diversify
our assets promptly in response to changing economic or investment conditions.



Additionally, financial difficulties of
other property owners resulting in distressed sales could depress real estate values in the markets in which we operate in times
of illiquidity. These restrictions reduce our ability to respond to changes in the performance of our assets and could adversely
affect our financial condition and results of operations.



We face risks associated with
property acquisitions.



Competition from other well-capitalized
real estate investors, including both publicly traded real estate investment trusts and institutional investment funds, may significantly
increase the purchase price of, or prevent us from acquiring, a desired property. Acquisition agreements will typically contain
conditions to closing, including completion of due diligence to our satisfaction or other conditions that are not within our control,
which may not be satisfied. Acquired properties may be located in new markets where we may have limited knowledge and understanding
of the local economy, an absence of business relationships in the area or unfamiliarity with local government and applicable laws
and regulations. We may be unable to finance acquisitions on favorable terms or newly acquired properties may fail to perform as
expected. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market
position or we may be unable to quickly and efficiently integrate new acquisitions into our existing operations. We may also acquire
properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities.
Each of these factors could have an adverse effect on our results of operations and financial condition.



We do not control certain of our
operating entities, including General Growth Properties, Inc., or GGP, and Canary Wharf Group plc, or Canary Wharf, and therefore
we may not be able to realize some or all of the benefits that we expect to realize from those entities.



We do not have control of certain of our
operating entities, including GGP and Canary Wharf. Our interests in those entities subject us to the operating and financial risks
of their businesses, the risk that the relevant company may make business, financial or management decisions that we do not agree
with, and the risk that we may have differing objectives than the entities in which we have interests. Because we do not have the
ability to exercise control over those entities, we may not be able to realize some or all of the benefits that we expect to realize
from those entities. For example, we may not be able to cause such operating entities to make distributions to us in the amount
or at the time that we need or want such distributions. In addition, we rely on the internal controls and financial reporting controls
of the public companies in which we invest and the failure of such companies to maintain effective controls or comply with applicable
standards may adversely affect us.



13







We do not have sole control over
the properties that we own with co-venturers, partners, fund investors or co-tenants or over the revenues and certain decisions
associated with those properties, which may limit our flexibility with respect to these investments.



We participate in joint ventures, partnerships,
funds and co-tenancies affecting many of our properties. Such investments involve risks not present were a third party not involved,
including the possibility that our co-venturers, partners, fund investors or co-tenants might become bankrupt or otherwise fail
to fund their share of required capital contributions. The bankruptcy of one of our co-venturers, partners, fund investors or co-tenants
could materially and adversely affect the relevant property or properties. Pursuant to bankruptcy laws, we could be precluded from
taking some actions affecting the estate of the other investor without prior court approval which would, in most cases, entail
prior notice to other parties and a hearing. At a minimum, the requirement to obtain court approval may delay the actions we would
or might want to take. If the relevant joint venture or other investment entity has incurred recourse obligations, the discharge
in bankruptcy of one of the other investors might result in our ultimate liability for a greater portion of those obligations than
would otherwise be required.



Additionally, our co-venturers, partners,
fund investors or co-tenants might at any time have economic or other business interests or goals which are inconsistent with those
of our company, and we could become engaged in a dispute with any of them that might affect our ability to develop or operate a
property. In addition, we do not have sole control of certain major decisions relating to these properties, including decisions
relating to: the sale of the properties; refinancing; timing and amount of distributions of cash from such properties; and capital
improvements.



In some instances where we are the property
manager for a joint venture, the joint venture retains joint approval rights over various material matters such as the budget for
the property, specific leases and our leasing plan. Moreover, in certain property management arrangements the other venturer can
terminate the property management agreement in limited circumstances relating to enforcement of the property managers’ obligations.
In addition, the sale or transfer of interests in some of our joint ventures and partnerships is subject to rights of first refusal
or first offer and some joint venture and partnership agreements provide for buy-sell or similar arrangements. Such rights may
be triggered at a time when we may not want to sell but we may be forced to do so because we may not have the financial resources
at that time to purchase the other party’s interest. Such rights may also inhibit our ability to sell an interest in a property
or a joint venture or partnership within our desired time frame or on any other desired basis.



We are subject to risks associated
with commercial property loans.



We have interests in loans or participations
in loans, or securities whose underlying performance depends on loans made with respect to a variety of commercial real estate.
Such interests are subject to normal credit risks as well as those generally not associated with traditional debt securities. The
ability of the borrowers to repay the loans will typically depend upon the successful operation of the related real estate project
and the availability of financing. Any factors which affect the ability of the project to generate sufficient cash flow could have
a material effect on the value of these interests. Such factors include, but are not limited to: the uncertainty of cash flow to
meet fixed obligations; adverse changes in general and local economic conditions, including interest rates and local market conditions;
tenant credit risks; the unavailability of financing, which may make the operation, sale, or refinancing of a property difficult
or unattractive; vacancy and occupancy rates; construction and operating costs; regulatory requirements, including zoning, rent
control and real and personal property tax laws, rates and assessments; environmental concerns; project and borrower diversification;
and uninsured losses. Security underlying such interests will generally be in a junior or subordinate position to senior financing.
In certain circumstances, in order to protect our interest, we may decide to repay all or a portion of the senior indebtedness
relating to the particular interests or to cure defaults with respect to such senior indebtedness.



We invest in mezzanine debt, which
can rank below other senior lenders.



We invest in mezzanine debt interests in
real estate companies and properties whose capital structures have significant debt ranking ahead of our investments. Our investments
will not always benefit from the same or similar financial and other covenants as those enjoyed by the debt ranking ahead of our
investments or benefit from cross-default provisions. Moreover, it is likely that we will be restricted in the exercise of our
rights in respect of our investments by the terms of subordination agreements with the debt ranking ahead of the mezzanine capital.
Accordingly, we may not be able to take the steps necessary to protect our investments in a timely manner or at all and there can
be no assurance that the rate of return objectives of any particular investment will be achieved. To protect our original investment
and to gain greater control over the underlying assets, we may elect to purchase the interest of a senior creditor or take an equity
interest in the underlying assets, which may require additional investment requiring us to expend additional capital.



14







We are subject to risks related
to syndicating or selling participations in our interests.



The strategy of the finance funds in which
we have interests depends, in part, upon syndicating or selling participations in senior interests, either through capital markets
collateralized debt obligation transactions or otherwise. If the finance funds cannot do so on terms that are favorable to us,
we may not generate the returns we anticipate.



We face risks relating to the
legal aspects of mortgage loans and may be subject to liability as a lender.



Certain interests acquired by us are subject
to risks relating to the legal aspects of mortgage loans. Depending upon the applicable law governing mortgage loans (which laws
may differ substantially), we may be adversely affected by the operation of law (including state or provincial law) with respect
to our ability to foreclose mortgage loans, the borrower’s right of redemption, the enforceability of assignments of rents,
due on sale and acceleration clauses in loan instruments, as well as other creditors’ rights provided in such documents.
In addition, we may be subject to liability as a lender with respect to our negotiation, administration, collection and/or foreclosure
of mortgage loans. As a lender, we may also be subject to penalties for violation of usury limitations, which penalties may be
triggered by contracting for, charging or receiving usurious interest. Bankruptcy laws may delay our ability to realize on our
collateral or may adversely affect the priority thereof through doctrines such as equitable subordination or may result in a restructuring
of the debt through principles such as the “cramdown” provisions of applicable bankruptcy laws.



We have significant interests
in public companies, and changes in the market prices of the stock of such public companies, particularly during times of increased
market volatility, could have a negative impact on our financial condition and results of operations.



We hold significant interests in public
companies, and changes in the market prices of the stock of such public companies could have a material impact on our financial
condition and results of operations. Global securities markets have been highly volatile, and continued volatility may have a material
negative impact on our consolidated financial position and results of operations.



We have significant interests
in Brookfield-sponsored real estate  funds, and poor investment returns in these funds could have a negative
impact on our financial condition and results of operations.



We have, and expect to continue to have
in the future, significant interests in Brookfield-sponsored real estate funds, and poor investment returns
in these funds, due to either market conditions or underperformance (relative to their competitors or to benchmarks), would negatively
affect our financial condition and results of operations. In addition, interests in such funds are subject to the risks inherent
in the ownership and operation of real estate and real estate-related businesses and assets generally.



Our ownership of underperforming
real estate properties involves significant risks and potential additional liabilities.



We hold interests in certain real estate
properties with weak financial conditions, poor operating results, substantial financial needs, negative net worth or special competitive
problems, or that are over-leveraged. Our ownership of underperforming real estate properties involves significant risks and potential
additional liabilities. Our exposure to such underperforming properties may be substantial in relation to the market for those
interests and distressed assets may be illiquid and difficult to sell or transfer. As a result, it may take a number of years for
the fair value of such interests to ultimately reflect their intrinsic value as perceived by us.



We face risks relating to the
jurisdictions of our operations.



We own and operate commercial properties
in a number of jurisdictions, including but not limited to North America, Europe, Australia and Brazil. Our operations are subject
to significant political, economic and financial risks, which vary by jurisdiction, and may include:



| | · | changes in government policies or personnel;
| | - | --------------------------------------------



| | · | restrictions on currency transfer or convertibility;
| | - | ----------------------------------------------------



| | · | changes in labor relations;
| | - | ---------------------------



15







| | · | political instability and civil unrest;
| | - | ---------------------------------------



| | · | fluctuations in foreign exchange rates;
| | - | ---------------------------------------



| | · | challenges of complying with a wide variety of foreign laws including corporate governance, operations, taxes and litigation;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | · | differing lending practices;
| | - | ----------------------------



| | · | differences in cultures;
| | - | ------------------------



| | · | changes in applicable laws and regulations that affect foreign operations;
| | - | --------------------------------------------------------------------------



| | · | difficulties in managing international operations;
| | - | --------------------------------------------------



| | · | obstacles to the repatriation of earnings and cash; and
| | - | -------------------------------------------------------



| | · | breach or repudiation of important contractual undertakings by governmental entities and expropriation and confiscation of
assets and facilities for less than fair market value.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We are subject to possible environmental
liabilities and other possible liabilities.



As an owner and manager of real property,
we are subject to various laws relating to environmental matters. These laws could hold us liable for the costs of removal and
remediation of certain hazardous substances or wastes released or deposited on or in our properties or disposed of at other locations.
These costs could be significant and would reduce cash available for our business. The failure to remove or remediate such substances
could adversely affect our ability to sell our properties or our ability to borrow using real estate as collateral, and could potentially
result in claims or other proceedings against us. Environmental laws and regulations can change rapidly and we may become subject
to more stringent environmental laws and regulations in the future. Compliance with more stringent environmental laws and regulations
could have an adverse effect on our business, financial condition or results of operations.



Regulations under building codes and human
rights codes generally require that public buildings be made accessible to disabled persons. Non-compliance could result in the
imposition of fines by the government or the award of damages to private litigants. If we are required to make substantial alterations
or capital expenditures to one or more of our properties, it could adversely affect our financial condition and results of operations.



We may also incur significant costs complying
with other regulations. Our properties are subject to various federal, state, provincial and local regulatory requirements, such
as state, provincial and local fire and life safety requirements. If we fail to comply with these requirements, we could incur
fines or be subject to private damage awards. Existing requirements may change and compliance with future requirements may require
significant unanticipated expenditures that may affect our cash flows and results from operations.



We may suffer a significant loss
resulting from fraud, other illegal acts and inadequate or failed internal processes or systems.



We may suffer a significant loss resulting
from fraud, other illegal acts and inadequate or failed internal processes or systems. We operate in different markets and rely
on our employees to follow our policies and processes as well as applicable laws in their activities. Risk of illegal acts or failed
systems is managed through our infrastructure, controls, systems, policies and people, complemented by central groups focusing
on enterprise-wide management of specific operational risks such as fraud, trading, outsourcing, and business disruption, as well
as people and systems risks. Failure to manage these risks could result in direct or indirect financial loss, reputational impact,
regulatory censure or failure in the management of other risks such as credit or market risk.



We may be subject to litigation.



In the ordinary course of our business,
we may be subject to litigation from time to time. The outcome of any such proceedings may materially adversely affect us and may
continue without resolution for long periods of time. Any litigation may consume substantial amounts of our management’s
time and attention, and that time and the devotion of these resources to litigation may, at times, be disproportionate to the amounts
at stake in the litigation.



16







The acquisition, ownership and disposition
of real property expose us to certain litigation risks which could result in losses, some of which may be material. Litigation
may be commenced with respect to a property we have acquired in relation to activities that took place prior to our acquisition
of such property. In addition, at the time of disposition of an individual property, a potential buyer may claim that it should
have been afforded the opportunity to purchase the asset or alternatively that such buyer should be awarded due diligence expenses
incurred or statutory damages for misrepresentation relating to disclosures made, if such buyer is passed over in favor of another
as part of our efforts to maximize sale proceeds. Similarly, successful buyers may later sue us under various damage theories,
including those sounding in tort, for losses associated with latent defects or other problems not uncovered in due diligence. We
may also be exposed to litigation resulting from the activities of our tenants or their customers.



We participate in transactions
and make tax calculations for which the ultimate tax determination may be uncertain.



We participate in many transactions and
make tax calculations during the course of our business for which the ultimate tax determination is uncertain. While we believe
we maintain provisions for uncertain tax positions that appropriately reflect our risk, these provisions are made using estimates
of the amounts expected to be paid based on a qualitative assessment of several factors. It is possible that liabilities associated
with one or more transactions may exceed our provisions due to audits by, or litigation with, relevant taxing authorities which
may materially affect our financial condition and results of operations.



Risks Relating to Our Relationship with
Brookfield



Brookfield exercises substantial
influence over us and we are highly dependent on the Service Providers.



Brookfield is the sole shareholder of the
BPY General Partner. As a result of its ownership of the BPY General Partner, Brookfield is able to control the appointment and
removal of the BPY General Partner’s directors and, accordingly, exercise substantial influence over us. In addition, the
Service Providers, wholly-owned subsidiaries of Brookfield Asset Management, provide management services to us pursuant to our
Master Services Agreement. Our company and the Property Partnership do not currently have any senior management and will depend
on the management and administration services provided by the Service Providers. Brookfield personnel and support staff who provide
services to us are not required to have as their primary responsibility the management and administration of our company or the
Property Partnership or to work exclusively for either our company or the Property Partnership. Any failure to effectively manage
our business or to implement our strategy could have a material adverse effect on our business, financial condition and results
of operations.



Brookfield has no obligation to
source acquisition opportunities for us and we may not have access to all acquisitions of commercial properties that Brookfield
identifies.



Our ability to grow will depend in part
on Brookfield identifying and presenting us with acquisition opportunities. Pursuant to the Relationship Agreement, Brookfield
Asset Management has identified our company as the primary entity through which Brookfield Asset Management will own and operate
its commercial property businesses on a global basis. However, Brookfield has no obligation to source acquisition opportunities
specifically for us. In addition, Brookfield has not agreed to commit to us any minimum level of dedicated resources for the pursuit
of acquisitions of commercial property other than as contemplated by our Master Services Agreement. There are a number of factors
which could materially and adversely impact the extent to which acquisition opportunities are made available to us by Brookfield.



For example:



| | · | Brookfield will only recommend acquisition opportunities that it believes are suitable for us;
| | - | ----------------------------------------------------------------------------------------------



| | · | the same professionals within Brookfield’s organization who are involved in acquisitions of commercial property have
other responsibilities within Brookfield’s broader asset management business. Limits on the availability of such individuals
will likewise result in a limitation on the availability of acquisition opportunities for us;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Brookfield may consider certain assets or operations that have both infrastructure related characteristics and commercial property
related characteristics to be infrastructure and not commercial property;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Brookfield may not consider an acquisition of commercial property that comprises part of a broader enterprise to be suitable
for us, unless the primary purpose of such acquisition, as determined by Brookfield acting in good faith, is to acquire the underlying
commercial property;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17







| | · | legal, regulatory, tax and other commercial considerations will be an important factor in determining whether an opportunity
is suitable for us; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | · | in addition to structural limitations, the determination of whether a particular acquisition is suitable for us is highly subjective
and is dependent on a number of factors including our liquidity position at the time, the risk profile of the opportunity, its
fit with the balance of our business and other factors.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The departure of some or all of
Brookfield’s professionals could prevent us from achieving our objectives.



We depend on the diligence, skill and business
contacts of Brookfield’s professionals and the information and opportunities they generate during the normal course of their
activities. Our success will depend on the continued service of these individuals, who are not obligated to remain employed with
Brookfield. Brookfield has experienced departures of key professionals in the past and may do so in the future, and we cannot predict
the impact that any such departures will have on our ability to achieve our objectives. The departure of a significant number of
Brookfield’s professionals for any reason, or the failure to appoint qualified or effective successors in the event of such
departures, could have a material adverse effect on our ability to achieve our objectives. Our limited partnership agreement and
our Master Services Agreement do not require Brookfield to maintain the employment of any of its professionals or to cause any
particular professionals to provide services to us or on our behalf.



The control of the BPY General
Partner may be transferred to a third party without unitholder consent.



The BPY General Partner may transfer its
general partnership interest in our company to a third party, including in a merger or consolidation or in a transfer of all or
substantially all of its assets, without the consent of our unitholders. Furthermore, at any time, the sole shareholder of the
BPY General Partner may sell or transfer all or part of its shares in the BPY General Partner without the approval of our unitholders.
If a new owner were to acquire ownership of the BPY General Partner and to appoint new directors or officers of its own choosing,
it would be able to exercise substantial influence over our policies and procedures and exercise substantial influence over our
management, our distributions and the types of acquisitions that we make. Such changes could result in our company’s capital
being used to make acquisitions in which Brookfield has no involvement or which are substantially different from our targeted acquisitions.
Additionally, we cannot predict with any certainty the effect that any transfer in the ownership of the BPY General Partner would
have on the trading price of our units or our ability to raise capital or make investments in the future, because such matters
would depend to a large extent on the identity of the new owner and the new owner’s intentions with regards to us. As a result,
the future of our company would be uncertain and our financial condition and results of operations may suffer.



Our Master Services Agreement
and our other arrangements with Brookfield do not impose on Brookfield any fiduciary duties to act in the best interests of our
unitholders.



Our Master Services Agreement and our other
arrangements with Brookfield do not impose on Brookfield any duty (statutory or otherwise) to act in the best interests of the
Service Recipients, nor do they impose other duties that are fiduciary in nature. As a result, the BPY General Partner, a wholly-owned
subsidiary of Brookfield Asset Management, in its capacity as our general partner, has the sole authority to enforce the terms
of such agreements and to consent to any waiver, modification or amendment of their provisions, subject to approval by the independent
directors in accordance with our conflicts policy.



The Bermuda Limited Partnership Act 1883,
under which our company and the Property Partnership were established, does not impose statutory fiduciary duties on a general
partner of a limited partnership in the same manner that corporate statutes, such as the Canada Business Corporations
Act, impose fiduciary duties on directors of a corporation. In general, under applicable Bermudian legislation, a general partner
has certain limited duties to its limited partners, such as the duty to render accounts, account for private profits and not compete
with the partnership in business. In addition, Bermuda common law recognizes that a general partner owes a duty of utmost good
faith to its limited partners. These duties are, in most respects, similar to duties imposed on a general partner of a limited
partnership under U.S. and Canadian law. However, to the extent that the BPY General Partner owes any fiduciary duties to our company
and our unitholders, these duties have been modified pursuant to our limited partnership agreement as a matter of contract law.
We have been advised by counsel that such modifications are not prohibited under Bermuda law, subject to typical qualifications
as to enforceability of contractual provisions, such as the application of general equitable principles. This is similar to Delaware
law which expressly permits modifications to the fiduciary duties owed to partners, other than an implied contractual covenant
of good faith and fair dealing.



18







Our limited partnership agreement contains
various provisions that modify the fiduciary duties that might otherwise be owed to our company and our unitholders, including
when conflicts of interest arise. For example, the agreement provides that the BPY General Partner and its affiliates do not have
any obligation under our limited partnership agreement, or as a result of any duties stated or implied by law or equity, including
fiduciary duties, to present business or investment opportunities to our company, the Property Partnership, any Holding Entity
or any other holding entity established by us. It also allows affiliates of the BPY General Partner to engage in activities that
may compete with us or our activities. In addition, the agreement permits the BPY General Partner to take into account the interests
of third parties, including Brookfield, when resolving conflicts of interest. The agreement prohibits our limited partners from
advancing claims that otherwise might raise issues as to compliance with fiduciary duties or applicable law. These modifications
to the fiduciary duties are detrimental to our unitholders because they restrict the remedies available for actions that might
otherwise constitute a breach of fiduciary duty and permit conflicts of interest to be resolved in a manner that is not in the
best interests of our company or the best interests of our unitholders. See Item 7.B. “Major Shareholders and Related
Party Transactions — Related Party Transactions — Relationship with Brookfield — Conflicts of Interest and Fiduciary
Duties”.



Our organizational and ownership
structure, as well as our contractual arrangements with Brookfield, may create significant conflicts of interest that may be resolved
in a manner that is not in the best interests of our company or the best interests of our unitholders.



Our organizational and ownership structure
involves a number of relationships that may give rise to conflicts of interest between us and our unitholders, on the one hand,
and Brookfield, on the other hand. In certain instances, the interests of Brookfield may differ from the interests of our company
and our unitholders, including with respect to the types of acquisitions made, the timing and amount of distributions by us, the
reinvestment of returns generated by our operations, the use of leverage when making acquisitions and the appointment of outside
advisors and Service Providers, including as a result of the reasons described under Item 7.B. “Major Shareholders and
Related Party Transactions — Related Party Transactions — Relationship with Brookfield”.



In addition, the Service Providers, affiliates
of Brookfield, provide management services to us pursuant to our Master Services Agreement. Pursuant to our Master Services Agreement,
we pay a base management fee to the Service Providers equal to $12.5 million per quarter (subject to an annual escalation
by a specified inflation factor beginning on January 1, 2014). Additionally, the Property Partnership pays a quarterly equity
enhancement distribution to Property Special LP of 0.3125% of the amount by which the company’s total capitalization value
at the end of each quarter exceeds its total capitalization value determined immediately following the spin-off, subject to certain
adjustments. Property Special LP also receives incentive distributions based on an amount by which quarterly distributions on the
limited partnership units of the Property Partnership exceed specified target levels as set forth in the Property Partnership’s
limited partnership agreement. For a further explanation of the equity enhancement and incentive distributions, together with examples
of how such amounts are calculated, see Item 10.B. “Additional Information — Memorandum and Articles of Association
— Description of the Property Partnership Limited Partnership Agreement — Distributions”. This relationship may
give rise to conflicts of interest between us and our unitholders, on the one hand, and Brookfield, on the other, as Brookfield’s
interests may differ from the interests of our company and our unitholders.



The BPY General Partner, the
sole shareholder of which is Brookfield, has sole authority to determine whether our company will make distributions and
the amount and timing of these distributions. The arrangements we have with Brookfield may create an incentive for Brookfield
to take actions which would have the effect of increasing distributions and fees payable to it, which may be to the detriment
of our company and our unitholders. For example, because the equity enhancement distribution is calculated based on
our company’s total capitalization, it may create an incentive for Brookfield to increase or maintain our
company’s total capitalization over the near-term when other actions may be more favorable to our company or our
unitholders. Similarly, Brookfield may take actions to increase our distributions in order to ensure Brookfield is paid
incentive distributions in the near-term when other investments or actions may be more favorable to our company or our
unitholders. Also, through Brookfield’s ownership of our units and the Redemption-Exchange Units of the Property
Partnership, it has an effective economic interest in our business of approximately 72% as of the date of this Form 20-F and
therefore may be incented to increase distributions payable to unitholders and thereby to Brookfield. Finally, the management
fee is payable to the Service Providers, which are controlled by Brookfield, irrespective of our actual performance.



Our arrangements with Brookfield
were effectively determined by Brookfield in the context of the spin-off and may contain terms that are less favorable than those
which otherwise might have been obtained from unrelated parties.



The terms of our arrangements with Brookfield
were effectively determined by Brookfield in the context of the spin-off. These terms, including terms relating to compensation,
contractual or fiduciary duties, conflicts of interest and Brookfield’s ability to engage in outside activities, including
activities that compete with us, our activities and limitations on liability and indemnification, may be less favorable than those
which otherwise might have resulted if the negotiations had involved unrelated parties. The transfer agreements under which our
assets and operations were acquired from Brookfield do not contain representations and warranties or indemnities relating to the
underlying assets and operations. Under our limited partnership agreement, persons who acquire our units and their transferees
will be deemed to have agreed that none of those arrangements constitutes a breach of any duty that may be owed to them under our
limited partnership agreement or any duty stated or implied by law or equity.



19







The BPY General Partner may be
unable or unwilling to terminate our Master Services Agreement.



Our Master Services Agreement provides that
the Service Recipients may terminate the agreement only if: (i) any of the Service Providers defaults in the performance or
observance of any material term, condition or covenant contained in the agreement in a manner that results in material harm to
the Service Recipients and the default continues unremedied for a period of 60 days after written notice of the breach is given
to such Service Provider; (ii) any of the Service Providers engages in any act of fraud, misappropriation of funds or embezzlement
against any Service Recipient that results in material harm to the Service Recipients; (iii) any of the Service Providers is grossly
negligent in the performance of its obligations under the Master Services Agreement and such gross negligence results in material
harm to the Service Recipients; or (iv) upon the happening of certain events relating to the bankruptcy or insolvency of each
of the Service Providers. The BPY General Partner cannot terminate the agreement for any other reason, including if any of the
Service Providers or Brookfield experiences a change of control, and there is no fixed term to the agreement. In addition, because
the BPY General Partner is a wholly-owned subsidiary of Brookfield Asset Management, it may be unwilling to terminate our Master
Services Agreement, even in the case of a default. If the Service Providers’ performance does not meet the expectations of
investors, and the BPY General Partner is unable or unwilling to terminate our Master Services Agreement, the market price of our
units could suffer. Furthermore, the termination of our Master Services Agreement would terminate our company’s rights under
the Relationship Agreement and the licensing agreement. See “Relationship Agreement” and “Licensing Agreement”
under Item 7.B. “Major Shareholders and Related Party Transactions — Related Party Transactions — Relationship
with Brookfield”.



The liability of the Service Providers
is limited under our arrangements with them and we have agreed to indemnify the Service Providers against claims that they may
face in connection with such arrangements, which may lead them to assume greater risks when making decisions relating to us than
they otherwise would if acting solely for their own account.



Under our Master Services Agreement, the
Service Providers have not assumed any responsibility other than to provide or arrange for the provision of the services described
in our Master Services Agreement in good faith and will not be responsible for any action that the BPY General Partner takes in
following or declining to follow their advice or recommendations. In addition, under our limited partnership agreement, the liability
of the BPY General Partner and its affiliates, including the Service Providers, is limited to the fullest extent permitted by law
to conduct involving bad faith, fraud, gross negligence or willful misconduct or, in the case of a criminal matter, action that
was known to have been unlawful. The liability of the Service Providers under our Master Services Agreement is similarly limited.
In addition, we have agreed to indemnify the Service Providers to the fullest extent permitted by law from and against any claims,
liabilities, losses, damages, costs or expenses incurred by an indemnified person or threatened in connection with our operations,
investments and activities or in respect of or arising from our Master Services Agreement or the services provided by the Service
Providers, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted
from the conduct in respect of which such persons have liability as described above. These protections may result in the Service
Providers tolerating greater risks when making decisions than otherwise would be the case, including when determining whether to
use leverage in connection with acquisitions. The indemnification arrangements to which the Service Providers are parties may also
give rise to legal claims for indemnification that are adverse to our company and our unitholders.



Risks Relating to our Units



The price of our units may fluctuate
significantly and you could lose all or part of the value of your units.



The market price of our units may fluctuate
significantly and you could lose all or part of the value of your units. Factors that may cause the price of our units to vary
include:



| | · | changes in our financial performance and prospects and Brookfield’s financial performance and prospects, or in the financial
performance and prospects of companies engaged in businesses that are similar to us or Brookfield;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the termination of our Master Services Agreement or the departure of some or all of Brookfield’s professionals;
| | - | ---------------------------------------------------------------------------------------------------------------



| | · | changes in laws or regulations, or new interpretations or applications of laws and regulations, that are applicable to us;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | · | sales of our units by our unitholders, including by Brookfield and/or other significant holders of our units;
| | - | -------------------------------------------------------------------------------------------------------------



| | · | general economic trends and other external factors, including those resulting from war, incidents of terrorism or responses
to such events;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



20







| | · | speculation in the press or investment community regarding us or Brookfield or factors or events that may directly or indirectly
affect us or Brookfield;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our ability to raise capital on favorable terms; and
| | - | ----------------------------------------------------



| | · | a loss of any major funding source.
| | - | -----------------------------------



Securities markets in general have experienced
extreme volatility that has often been unrelated to the operating performance of particular companies or partnerships. Any broad
market fluctuations may adversely affect the trading price of our units.



Our company may issue additional
units in the future in lieu of incurring indebtedness which may dilute existing holders of our units or our company may issue securities
that have rights and privileges that are more favorable than the rights and privileges accorded to holders of our units.



Our company may issue additional securities,
including units and options, rights, warrants and appreciation rights relating to partnership securities for any purpose and for
such consideration and on such terms and conditions as the BPY General Partner may determine. The BPY General Partner’s board
of directors will be able to determine the class, designations, preferences, rights, powers and duties of any additional partnership
securities, including any rights to share in our company’s profits, losses and distributions, any rights to receive partnership
assets upon a dissolution or liquidation of our company and any redemption, conversion and exchange rights. The BPY General Partner
may use such authority to issue additional units, which would dilute existing holders of our units, or to issue securities with
rights and privileges that are more favorable than those of our units. You will not have any right to consent to or otherwise approve
the issuance of any such securities or the terms on which any such securities may be issued.



Future sales or issuances of our
units in the public markets, or the perception of such sales, could depress the market price of our units.



The sale or issuance of a substantial number
of our units or other equity-related securities in the public markets, or the perception that such sales could occur, could depress
the market price of our units and impair our ability to raise capital through the sale of additional equity securities. Although
Brookfield intends to maintain a significant interest in our company, Brookfield expects its interests in the Property Partnership
to be reduced over time through mergers, treasury issuances or secondary sales which could also depress the market price of our
units. We cannot predict the effect that future sales or issuances of units, other equity-related securities, or the limited partnership
units of the Property Partnership would have on the market price of our units.



Our unitholders do not have a
right to vote on partnership matters or to take part in the management of our company.



Under our limited partnership agreement,
our unitholders are not entitled to vote on matters relating to our company, such as acquisitions, dispositions or financing, or
to participate in the management or control of our company. In particular, our unitholders do not have the right to remove the
BPY General Partner, to cause the BPY General Partner to withdraw from our company, to cause a new general partner to be admitted
to our partnership, to appoint new directors to the BPY General Partner’s board of directors, to remove existing directors
from the BPY General Partner’s board of directors or to prevent a change of control of the BPY General Partner. In addition,
except as prescribed by applicable laws, our unitholders’ consent rights apply only with respect to certain amendments to
our limited partnership agreement. As a result, unlike holders of common stock of a corporation, our unitholders will not be able
to influence the direction of our company, including its policies and procedures, or to cause a change in its management, even
if they are dissatisfied with our performance. Consequently, our unitholders may be deprived of an opportunity to receive a premium
for their units in the future through a sale of our company and the trading price of our units may be adversely affected by the
absence or a reduction of a takeover premium in the trading price.



21







Our company is a Bermuda exempted
limited partnership and it may not be possible for our investors to serve process on or enforce U.S. or Canadian judgments against
us.



Our company
is a Bermuda exempted limited partnership and a substantial portion of our assets are located outside the United States and Canada.
In addition, certain of the directors of the BPY General Partner and certain members of the senior management team who will be
principally responsible for providing us with management services reside outside of the United States and Canada. As a result,
it may be difficult or impossible for U.S. or Canadian investors to effect service of process within the United States or Canada
upon us or our directors and executive officers, or to enforce, against us or these persons, judgments obtained in the U.S. or
Canadian courts predicated upon the civil liability provisions of U.S. federal securities laws or Canadian securities laws. We
believe that there is doubt as to the enforceability in Bermuda, in original actions or in actions to enforce judgments of U.S.
or Canadian courts, of claims predicated solely upon U.S. federal securities laws or Canadian securities laws. See Item 10.B.
“Additional Information — Memorandum and Articles of Association — Description of Our Units and Our Limited Partnership
Agreement — Our Units”.



Risks Relating to Taxation



General



Changes in tax law and practice
may have a material adverse effect on the operations of our company, the Holding Entities, and our operating entities and, as a
consequence, the value of our assets and the net amount of distributions payable to our unitholders.



Our structure, including the structure of
the Holding Entities and our operating entities, is based on prevailing taxation law and practice in the local jurisdictions in
which we operate. Any change in tax legislation (including in relation to taxation rates) and practice in these jurisdictions could
adversely affect these entities, as well as the net amount of distributions payable to our unitholders. Taxes and other constraints
that would apply to our operating entities in such jurisdictions may not apply to local institutions or other parties, and such
parties may therefore have a significantly lower effective cost of capital and a corresponding competitive advantage in pursuing
acquisitions.



Our company’s ability to
make distributions depends on it receiving sufficient cash distributions from its underlying operations, and we cannot assure unitholders
that we will be able to make cash distributions in amounts that are sufficient to fund their tax liabilities.



Our Holding Entities and operating entities
may be subject to local taxes in each of the relevant territories and jurisdictions in which they operate, including taxes on income,
profits or gains and withholding taxes. As a result, our company’s cash available for distribution is indirectly reduced
by such taxes, and the post-tax return to our unitholders is similarly reduced by such taxes. We intend for future acquisitions
to be assessed on a case-by-case basis and, where possible and commercially viable, structured so as to minimize any adverse tax
consequences to our unitholders as a result of making such acquisitions.



In general, a unitholder that is subject
to income tax in the United States or Canada must include in income its allocable share of our company’s items of income,
gain, loss, and deduction (including, so long as it is treated as a partnership for tax purposes, our company’s allocable
share of those items of the Property Partnership) for each of our company’s fiscal years ending with or within such unitholder’s
tax year. See Item 10.E. “Additional Information — Taxation”. However, the cash distributed to a unitholder
may not be sufficient to pay the full amount of such unitholder’s tax liability in respect of its investment in our company,
because each unitholder’s tax liability depends on such unitholder’s particular tax situation. If our company is unable
to distribute cash in amounts that are sufficient to fund our unitholders’ tax liabilities, each of our unitholders will
still be required to pay income taxes on its share of our company’s taxable income.



Our unitholders may be subject
to non-U.S., state and local taxes and return filing requirements as a result of owning our units.



Based on our expected method of operation
and the ownership of our operating entities indirectly through corporate Holding Entities, we do not expect any unitholder, solely
as a result of owning our units, to be subject to any additional income taxes imposed on a net basis or additional tax return filing
requirements in any jurisdiction in which we conduct activities or own property. However, there can be no assurance that our unitholders,
solely as a result of owning our units, will not be subject to certain taxes, including non-U.S., state and local income taxes,
unincorporated business taxes and estate, inheritance or intangible taxes imposed by the various jurisdictions in which we do business
or own property now or in the future, even if our unitholders do not reside in any of these jurisdictions. Consequently, our unitholders
may also be required to file non-U.S., state and local income tax returns in some or all of these jurisdictions. Further, our unitholders
may be subject to penalties for failure to comply with these requirements. It is the responsibility of each unitholder to file
all U.S. federal, non-U.S., state and local tax returns that may be required of such unitholder.



22







Our unitholders may be exposed
to transfer pricing risks.



To the extent that our company, the Property
Partnership, the Holding Entities or our operating entities enter into transactions or arrangements with parties with whom they
do not deal at arm’s length, including Brookfield, the relevant tax authorities may seek to adjust the quantum or nature
of the amounts received or paid by such entities if they consider that the terms and conditions of such transactions or arrangements
differ from those that would have been made between persons dealing at arm’s length. This could result in more tax (and penalties
and interest) being paid by such entities, and therefore the return to investors could be reduced.



The BPY General Partner believes that the
base management fee and any other amount that is paid to the Service Providers will be commensurate with the value of the services
being provided by the Service Providers and comparable to the fees or other amounts that would be agreed to in an arm’s length
arrangement. However, no assurance can be given in this regard.



If the relevant tax authority were to assert
that an adjustment should be made under the transfer pricing rules to an amount that is relevant to the computation of the income
of the Property Partnership or our company, such assertion could result in adjustments to amounts of income (or loss) allocated
to our unitholders by our company for tax purposes. In addition, our company might also be liable for transfer pricing penalties
in respect of transfer pricing adjustments unless reasonable efforts were made to determine, and use, arm’s length transfer
prices. Generally, reasonable efforts in this regard are only considered to be made if contemporaneous documentation has been prepared
in respect of such transactions or arrangements that support the transfer pricing methodology. For Canadian tax purposes, a transfer
pricing adjustment may result in a dividend being deemed to be paid by a Canadian resident to a non-arm’s length non-resident,
which deemed dividend is subject to Canadian withholding tax.



The U.S. Internal Revenue Service,
or IRS, or Canada Revenue Agency, or CRA, may not agree with certain assumptions and conventions that our company uses in order
to comply with applicable U.S. and Canadian federal income tax laws or that our company uses to report income, gain, loss, deduction,
and credit to our unitholders.



Our company will apply certain assumptions
and conventions in order to comply with applicable tax laws and to report income, gain, deduction, loss, and credit to a unitholder
in a manner that reflects such unitholder’s beneficial ownership of partnership items, taking into account variation in ownership
interests during each taxable year because of trading activity. A successful IRS or CRA challenge to such assumptions or conventions
could adversely affect the amount of tax benefits available to our unitholders and could require that items of income, gain, deduction,
loss, or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects our unitholders.
See Item 10.E. “Additional Information — Taxation”.



United States



If either our company or the Property
Partnership were to be treated as a corporation for U.S. federal income tax purposes, the value of our units might be adversely
affected.



The value of our units to our unitholders
will depend in part on the treatment of our company and the Property Partnership as partnerships for U.S. federal income tax purposes.
In order for our company to be treated as a partnership for U.S. federal income tax purposes, under present law, 90% or more of
our company’s gross income for every taxable year must consist of qualifying income, as defined in Section 7704 of the
U.S. Internal Revenue Code of 1986, as amended, or the U.S. Internal Revenue Code, and the partnership must not be required to
register, if it were a U.S. corporation, as an investment company under the Investment Company Act and related rules. Although
the BPY General Partner intends to manage our affairs so that our company will not need to be registered as an investment company
if it were a U.S. corporation and so that it will meet the 90% test described above in each taxable year, our company may not meet
these requirements, or current law may change so as to cause, in either event, our company to be treated as a corporation for U.S.
federal income tax purposes. If our company (or the Property Partnership) were treated as a corporation for U.S. federal income
tax purposes, adverse U.S. federal income tax consequences could result for our unitholders and our company (or the Property Partnership,
as applicable), as described in greater detail in Item 10.E. “Additional Information — Taxation — U.S. Tax
Considerations — Partnership Status of Our Company and the Property Partnership”.



23







The failure of certain of our
operating entities (or certain of their subsidiaries) to qualify as real estate investment trusts under U.S. federal income tax
rules generally would have adverse tax consequences which could result in a material reduction in cash flow and after-tax return
for our unitholders and thus could result in a reduction of the value of our units.



Certain of our operating entities (and certain
of their subsidiaries), including operating entities in which we do not have a controlling interest, intend to qualify for taxation
as REITs for U.S. federal income tax purposes. However, no assurance can be provided that any such entity will qualify as a REIT.
An entity’s ability to qualify as a REIT depends on its satisfaction of certain asset, income, organizational, distribution,
shareholder ownership, and other requirements on a continuing basis. No assurance can be provided that the actual results of operations
for any particular entity in a given taxable year will satisfy such requirements. If any such entity were to fail to qualify as
a REIT in any taxable year, it would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on
its net taxable income at regular corporate rates, and distributions would not be deductible by it in computing its taxable income.
Any such corporate tax liability could be substantial and could materially reduce the amount of cash available for distribution
to our company, which in turn would materially reduce the amount of cash available for distribution to our unitholders or investment
in our business and could have an adverse impact on the value of our units. Unless entitled to relief under certain U.S. federal
income tax rules, any entity which so failed to qualify as a REIT would also be disqualified from taxation as a REIT for the four
taxable years following the year during which it ceased to qualify as a REIT.



We may be subject to U.S. “backup”
withholding tax or other U.S. withholding taxes if any unitholder fails to comply with U.S. tax reporting rules or if the IRS or
other applicable state or local taxing authority does not accept our withholding methodology, and such excess withholding tax cost
will be an expense borne by our company and, therefore, all of our unitholders on a pro rata basis.



We may become subject to U.S. backup withholding
tax or other U.S. withholding taxes with respect to any U.S. or non-U.S. unitholder who fails to timely provide us (or the applicable
intermediary) with an IRS Form W-9 or IRS Form W-8, as the case may be, or if the withholding methodology we use is not accepted
by the IRS or applicable state or local taxing authorities. Accordingly, it is important that each of our unitholders timely provides
us (or the relevant intermediary) with an IRS Form W-9 or IRS Form W-8, as applicable. In addition, under certain circumstances,
our company may treat such U.S. backup withholding taxes or other U.S. withholding taxes as an expense, which will be borne indirectly
by all unitholders on a pro rata basis. See Item 10.E. “Additional Information — Taxation — U.S. Tax Considerations
— Administrative Matters — Withholding and Backup Withholding”.



Tax-exempt organizations may face
certain adverse U.S. tax consequences from owning our units.



The BPY General Partner intends to use commercially
reasonable efforts to structure the activities of our company and the Property Partnership to avoid generating income connected
with the conduct of a trade or business (which income generally would constitute “unrelated business taxable income”,
or UBTI, to the extent allocated to a tax-exempt organization). However, no assurance can be provided that neither our company
nor the Property Partnership will generate UBTI in the future. In particular, UBTI includes income attributable to debt-financed
property, and neither our company nor the Property Partnership is prohibited from financing the acquisition of property with debt.
The potential for income to be characterized as UBTI could make our units an unsuitable investment for a tax-exempt organization,
as addressed in greater detail in Item 10.E. “Additional Information — Taxation — U.S. Tax Considerations
— Consequences to U.S. Holders — U.S. Taxation of Tax-Exempt U.S. Holders of Our Units”.



If our company were engaged in
a U.S. trade or business, non-U.S. persons would face certain adverse U.S. tax consequences from owning our units.



Based on our organizational structure, as
well as our expected income and assets, the BPY General Partner currently believes that our company is unlikely to earn income
treated as effectively connected with a U.S. trade or business, including income attributable to the sale of a “U.S. real
property interest”, as defined in the U.S. Internal Revenue Code. If our company were deemed to be engaged in a U.S. trade
or business or to realize gain from the sale or other disposition of a U.S. real property interest, unitholders that are not U.S.
persons would be required to file U.S. federal income tax returns and could be subject to U.S. federal withholding tax at the highest
marginal U.S. federal income tax rates applicable to ordinary income. See Item 10.E. “Additional Information —
Taxation — U.S. Tax Considerations — Consequences to Non-U.S. Holders”.



24







To meet U.S. federal income tax
and other objectives, our company and the Property Partnership may invest through U.S. and non-U.S. Holding Entities that are treated
as corporations for U.S. federal income tax purposes, and such Holding Entities may be subject to corporate income tax.



To meet U.S. federal income tax and other
objectives, our company and the Property Partnership may invest through U.S. and non-U.S. Holding Entities that are treated as
corporations for U.S. federal income tax purposes, and such Holding Entities may be subject to corporate income tax. Consequently,
items of income, gain, loss, deduction, or credit realized in the first instance by our operating entities will not flow, for U.S.
federal income tax purposes, directly to the Property Partnership, our company, or our unitholders, and any such income or gain
may be subject to a corporate income tax, in the U.S. or other jurisdictions, at the level of the Holding Entity. Any such additional
taxes may adversely affect our company’s ability to maximize its cash flow.



Our unitholders taxable in the
United States may be viewed as holding an indirect interest in an entity classified as a “passive foreign investment company”
for U.S. federal income tax purposes.



U.S. holders may face adverse U.S. tax consequences
arising from the ownership of a direct or indirect interest in a “passive foreign investment company”, or PFIC. Based
on our organizational structure, as well as our expected income and assets, the BPY General Partner currently believes that one
or more of our current Holding Entities and operating entities are likely to be classified as PFICs. In addition, we may in the
future acquire certain investments or operating entities through one or more Holding Entities treated as corporations for U.S.
federal income tax purposes, and such future Holding Entities or other companies in which we acquire an interest may be treated
as PFICs. In general, gain realized by a U.S. taxpayer from the sale of stock of a PFIC is subject to tax at ordinary income rates,
and an interest charge generally applies. Alternatively, a U.S. taxpayer making certain tax elections with respect to a direct
or indirect interest in a PFIC may be required to recognize taxable income prior to the receipt of cash relating to such income.
The adverse consequences of owning an interest in a PFIC, as well as the availability of certain tax elections for mitigating these
adverse consequences, are described in greater detail in Item 10.E. “Additional Information — Taxation —
U.S. Tax Considerations — Consequences to U.S. Holders — Passive Foreign Investment Companies”. You should consult
an independent tax adviser regarding the implication of the PFIC rules for an investment in our units.



Tax gain or loss from the disposition
of our units could be more or less than expected.



If you sell your units and are taxable in
the United States, then you will recognize gain or loss for U.S. federal income tax purposes equal to the difference between the
amount realized and your adjusted tax basis in your units. Prior distributions to you in excess of the total net taxable income
allocated to you will have decreased your tax basis in your units. Therefore, such excess distributions will increase your taxable
gain or decrease your taxable loss when you sell your units, and may result in a taxable gain even if the sale price is less than
the original cost. A portion of the amount realized, whether or not representing gain, could be ordinary income to you.



Our partnership structure involves
complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. The tax characterization
of our partnership structure is also subject to potential legislative, judicial, or administrative change and differing interpretations,
possibly on a retroactive basis.



The U.S. federal income tax treatment of
our unitholders depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income
tax law for which no clear precedent or authority may be available. Holders should be aware that the U.S. federal income tax rules,
particularly those applicable to partnerships, are constantly under review by the Congressional tax-writing committees and other
persons involved in the legislative process, the IRS, the U.S. Treasury Department and the courts, frequently resulting in changes
which could adversely affect the value of our units or cause our company to change the way it conducts its activities. In addition,
our company’s organizational documents and agreements permit the BPY General Partner to modify our limited partnership agreement,
without the consent of our unitholders, to address such changes. These modifications could have a material adverse impact on our
unitholders. See Item 10.E. “Additional Information — Taxation — U.S. Tax Considerations — New Legislation
or Administrative or Judicial Action”.



Our company’s delivery of
required tax information for a taxable year may be subject to delay, which could require a unitholder to request an extension of
the due date for such unitholder’s income tax return.



It may require longer than 90 days after
the end of our company’s fiscal year to obtain the requisite information from all lower-tier entities so that IRS Schedule
K-1s may be prepared for our company. For this reason, holders of our units who are U.S. taxpayers should anticipate the need to
file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicable due date
of their income tax return for the taxable year. See Item 10.E. “Additional Information — Taxation — U.S.
Tax Considerations — Administrative Matters — Information Returns”.



25







The sale or exchange of 50% or
more of our units will result in the constructive termination of our partnership for U.S. federal income tax purposes.



Our partnership will be considered to have
been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of our units within a 12-month
period. A constructive termination of our partnership would, among other things, result in the closing of its taxable year for
U.S. federal income tax purposes for all unitholders and could result in the possible acceleration of income to certain unitholders
and certain other consequences that could adversely affect the value of our units. However, the BPY General Partner does not expect
a constructive termination, should it occur, to have a material impact on the computation of the future taxable income generated
by our company for U.S. income tax purposes. See Item 10.E. “Additional Information — Taxation — U.S. Tax
Considerations — Administrative Matters — Constructive Termination”.



The U.S. Congress has considered
legislation that could, if enacted, adversely affect our company’s qualification as a partnership for U.S. federal tax purposes
under the publicly traded partnership rules and subject certain income and gains to tax at increased rates. If this or similar
legislation were to be enacted and to apply to our company, then the after-tax income of our company, as well as the market price
of our units, could be reduced.



Over the past several years, a number of
legislative proposals have been introduced in the U.S. Congress which could have had adverse tax consequences for our company or
the Property Partnership, including the recharacterization of certain items of capital gain income as ordinary income for U.S.
federal income tax purposes. However, such legislation was not enacted into law. The Obama administration has indicated it supports
such legislation and has proposed that the current law regarding the treatment of such items of capital gain income be changed
to subject such income to ordinary income tax. For further detail on such proposed legislation, see Item 10.E. “Additional
Information — Taxation — U.S. Tax Considerations — Proposed Legislation”.



Under the Foreign Account Tax Compliance
provisions of the Hiring Incentives to Restore Employment Act of 2010, commonly known as “FATCA”, certain payments
made or received by our company on or after July 1, 2014 may be subject to a 30% federal withholding tax, unless certain requirements
are met.



Under FATCA, a 30% withholding tax may apply
to certain payments of U.S.-source income made on or after July 1, 2014 to our company, the Property Partnership, the Holding Entities,
or the operating entities, or by our company to certain unitholders that fail to comply with FATCA, unless certain requirements
are met, as described in greater detail in Item 10.E “Additional Information — Taxation — U.S. Tax Considerations
— Administrative Matters — Foreign Account Tax Compliance”. The 30% withholding tax may also apply to certain
payments made on or after January 1, 2017 that are attributable to U.S.-source income or that constitute gross proceeds from the
disposition of property that could produce U.S.-source dividends or interest.



The BPY General Partner intends to ensure
that our company complies with FATCA, including by entering into an agreement with the IRS if necessary, so as to ensure that the
30% withholding tax under FATCA does not apply to such payments received by our company, the Property Partnership, the Holding
Entities, or the operating entities. If our organizational structure or the manner in which we hold our investments is modified
in the future, including for the purpose of facilitating future acquisitions, then our unitholders may be required to properly
certify their FATCA status (generally on IRS Form W-8 or IRS Form W-9, as applicable) and satisfy any other applicable requirements
under FATCA to ensure that the 30% withholding tax does not apply to their allocable share of any such payments made by our company.
Unitholders should consult their own tax advisers regarding the consequences under FATCA of owning our units.



Canada



If any of the non-Canadian subsidiaries
in which the Property Partnership directly invests earns income that is characterized as “foreign accrual property income”,
or FAPI, as defined in the Income Tax Act (Canada), or, together with the regulations thereunder, the Tax Act, our unitholders
may be required to include amounts allocated from our company in computing their income for Canadian federal income tax purposes
even though there may be no corresponding cash distribution.



Any non-resident subsidiaries in which the
Property Partnership directly invests are expected to be “foreign affiliates” and “controlled foreign affiliates”,
each as defined in the Tax Act, collectively referred to herein as CFAs, of the Property Partnership. If any CFA of the Property
Partnership or any direct or indirect subsidiary thereof that is itself a CFA of the Property Partnership, or an Indirect CFA,
earns income that is characterized as FAPI in a particular taxation year of the CFA or Indirect CFA, the FAPI allocable to the
Property Partnership must be included in computing the income of the Property Partnership for Canadian federal income tax purposes
for the fiscal period of the Property Partnership in which the taxation year of that CFA or Indirect CFA that earned the FAPI ends,
whether or not the Property Partnership actually receives a distribution of that FAPI. Our company will include its share of such
FAPI of the Property Partnership in computing its income for Canadian federal income tax purposes and our unitholders will be required
to include their proportionate share of such FAPI allocated from our company in computing their income for Canadian federal income
tax purposes. As a result, our unitholders may be required to include amounts in their income for Canadian federal income tax purposes
even though they have not and may not receive an actual cash distribution of such amounts. The Tax Act contains anti-avoidance
rules to address certain foreign tax credit generator transactions, or the Foreign Tax Credit Generator Rules. Under the Foreign
Tax Credit Generator Rules, the “foreign accrual tax,” as defined in the Tax Act, applicable to a particular amount
of FAPI included in the Property Partnership’s income in respect of a particular CFA of the Property Partnership may be limited
in certain specified circumstances.



26







The Canadian federal income tax
consequences to you could be materially different in certain respects from those described in this Form 20-F if our company or
the Property Partnership is a “SIFT partnership” as defined in the Tax Act.



Under the rules in the Tax Act applicable
to a “SIFT partnership”, or the SIFT Rules, certain income and gains earned by a “SIFT partnership” will
be subject to income tax at the partnership level at a rate similar to a corporation and allocations of such income and gains to
its partners will be taxed as a dividend from a taxable Canadian corporation. In particular, a “SIFT partnership” will
be required to pay a tax on the total of its income from businesses carried on in Canada, income from “non-portfolio properties”
as defined in the Tax Act (other than taxable dividends), and taxable capital gains from dispositions of “non-portfolio properties.”
“Non-portfolio properties” include, among other things, equity interests or debt of corporations, trusts or partnerships
that are resident in Canada, and of non-resident persons or partnerships the principal source of income of which is one or any
combination of sources in Canada (other than an “excluded subsidiary entity” as defined in the Tax Act), that are held
by the “SIFT partnership” and have a fair market value that is greater than 10% of the equity value of such entity,
or that have, together with debt or equity that the “SIFT partnership” holds of entities affiliated (within the meaning
of the Tax Act) with such entity, an aggregate fair market value that is greater than 50% of the equity value of the “SIFT
partnership”. The tax rate that is applied to the above mentioned sources of income and gains is set at a rate equal to the
“net corporate income tax rate”, plus the “provincial SIFT tax rate”, each as defined in the Tax Act.



A partnership will be a “SIFT partnership”
throughout a taxation year if at any time in the taxation year (i) it is a “Canadian resident partnership,” as defined
in the Tax Act, (ii) “investments,” as defined in the Tax Act, in the partnership are listed or traded on a stock exchange
or other public market, and (iii) it holds one or more “non-portfolio properties”. For these purposes, a partnership
will be a “Canadian resident partnership” at a particular time if (a) it is a “Canadian partnership,” as
defined in the Tax Act, at that time, (b) it would, if it were a corporation be resident in Canada (including, for greater certainty,
a partnership that has its central management and control located in Canada), or (c) it was formed under the laws of a province.
A “Canadian partnership” for these purposes is a partnership all of whose members are resident in Canada or are partnerships
that are “Canadian partnerships”.



Under the SIFT Rules, our partnership and
the Property Partnership could each be a “SIFT partnership” if it is a “Canadian resident partnership”.
However, the Property Partnership would not be a “SIFT partnership” if our partnership is a “SIFT partnership”
regardless of whether the Property Partnership is a “Canadian resident partnership” on the basis that the Property
Partnership would be an “excluded subsidiary entity,” as defined in the Tax Act.



Our company and the Property Partnership
will be a “Canadian resident partnership” if the central management and control of these partnerships is located in
Canada. This determination is a question of fact and is expected to depend on where the BPY General Partner is located and exercises
central management and control of the partnerships. The BPY General Partner will take appropriate steps so that the central management
and control of these entities is not located in Canada such that the SIFT Rules should not apply to our company or to the Property
Partnership at any relevant time. However, no assurance can be given in this regard. If our company or the Property Partnership
is a “SIFT partnership”, the Canadian federal income tax consequences to our unitholders could be materially different
in certain respects from those described in Item 10.E. “Additional Information — Taxation — Canadian Federal
Income Tax Considerations”. In addition, there can be no assurance that the SIFT Rules will not be revised or amended in
the future such that the SIFT Rules will apply to our company or to the Property Partnership.



Our unitholders may be required
to include imputed amounts in their income for Canadian federal income tax purposes in accordance with section 94.1 of the Tax
Act.



Section 94.1 of the Tax Act contains rules
relating to investments in entities that are not resident or deemed to be resident in Canada for purposes of the Tax Act or not
situated in Canada, other than a CFA of the taxpayer, or “Non-Resident Entities”, that could in certain circumstances
cause income to be imputed to our unitholders for Canadian federal income tax purposes, either directly or by way of allocation
of such income imputed to our company or to the Property Partnership. See Item 10.E. “Additional Information —
Taxation — Canadian Federal Income Tax Considerations”.



27







Our units may or may not continue
to be “qualified investments” under the Tax Act for registered plans.



Provided that our units are listed on a
“designated stock exchange” as defined in the Tax Act (which currently includes the NYSE and the Toronto Stock Exchange,
or the TSX), our units will be “qualified investments” under the Tax Act for a trust governed by a registered retirement
savings plan, or RRSP, deferred profit sharing plan, registered retirement income fund, or RRIF, registered education savings plan,
registered disability savings plan, and a tax-free savings account, or TFSA. However, there can be no assurance that our units
will be listed or continue to be listed on a “designated stock exchange.” There can also be no assurance that tax laws
relating to qualified investments will not be changed. Taxes may be imposed in respect of the acquisition or holding of non-qualified
investments by such registered plans and certain other taxpayers and with respect to the acquisition or holding of “prohibited
investments” as defined in the Tax Act by a RRSP, RRIF or TFSA.



Our units will not be a “prohibited
investment” for a trust governed by a RRSP, RRIF or TFSA, provided that the holder of the TFSA or the annuitant of the RRSP
or RRIF, as the case may be, deals at arm’s length with our company for purposes of the Tax Act and does not have a “significant
interest”, as defined in the Tax Act for purposes of the prohibited investment rules, in our company. Unitholders who intend
to hold our units in a TFSA, RRSP, or RRIF should consult with their own tax advisors regarding the application of the foregoing
prohibited investment rules having regard to their particular circumstances.



Our unitholders’ foreign tax credits
for Canadian federal income tax purposes will be limited if the Foreign Tax Credit Generator Rules apply in respect of the foreign
“business income tax” or “non-business income tax”, each as defined in the Tax Act, paid by our company
or the Property Partnership to a foreign country.



Under the Foreign Tax Credit Generator Rules,
the foreign “business income tax” or “non-business income tax” for Canadian federal income tax purposes
for any taxation year may be limited in certain circumstances. If the Foreign Tax Credit Generator Rules apply, the allocation
to a unitholder of foreign “business income tax” or “non-business income tax” paid by our company or the
Property Partnership, and therefore, such unitholder’s foreign tax credits for Canadian federal income tax purposes, will
be limited. See Item 10.E “Taxation—Certain Material Canadian Federal Income Tax Considerations”.



Unitholders who are not resident
in Canada or deemed to be resident in Canada for purposes of the Tax Act and who do not use or hold and are not deemed to use or
hold our units in connection with a business carried on in Canada, or non-Canadian limited partners, may be subject to Canadian
federal income tax with respect to any Canadian source business income earned by our company or the Property Partnership if our
company or the Property Partnership were considered to carry on business in Canada.



If our company or the Property Partnership
were considered to carry on a business in Canada for purposes of the Tax Act, non-Canadian limited partners would be subject to
Canadian federal income tax on their proportionate share of any Canadian source business income earned or considered to be earned
by our company, subject to the potential application of the safe harbour rule in section 115.2 of the Tax Act and any relief that
may be provided by any relevant income tax treaty or convention.



The BPY General Partner intends to manage
the affairs of our company and the Property Partnership, to the extent possible, so that they do not carry on business in Canada
and are not considered or deemed to carry on business in Canada for purposes of the Tax Act. Nevertheless, because the determination
of whether our company or the Property Partnership is carrying on business and, if so, whether that business is carried on in Canada,
is a question of fact that is dependent upon the surrounding circumstances, the CRA might contend successfully that either or both
of our company and the Property Partnership carries on business in Canada for purposes of the Tax Act.



If our company or the Property Partnership
is considered to carry on business in Canada or is deemed to carry on business in Canada for the purposes of the Tax Act, non-Canadian
limited partners that are corporations would be required to file a Canadian federal income tax return for each taxation year in
which they are a non-Canadian limited partner regardless of whether relief from Canadian taxation is available under an applicable
income tax treaty or convention. Non-Canadian limited partners who are individuals would only be required to file a Canadian federal
income tax return for any taxation year in which they are allocated income from our company from carrying on business in Canada
that is not exempt from Canadian taxation under the terms of an applicable income tax treaty or convention.



28







Non-Canadian limited partners
may be subject to Canadian federal income tax on capital gains realized by our company or the Property Partnership on dispositions
of “taxable Canadian property” as defined in the Tax Act.



A non-Canadian limited partner will be subject
to Canadian federal income tax on its proportionate share of capital gains realized by our company or the Property Partnership
on the disposition of “taxable Canadian property”, other than “treaty protected property”, as defined in
the Tax Act. “Taxable Canadian property” includes, but is not limited to, property that is used or held in a business
carried on in Canada and shares of corporations resident in Canada that are not listed on a “designated stock exchange”
if more than 50% of the fair market value of the shares is derived from certain Canadian properties during the 60-month period
immediately preceding the disposition. Property of our company and the Property Partnership generally will be “treaty-protected
property” to a non-Canadian limited partner if the gain from the disposition of the property would, because of an applicable
income tax treaty or convention, be exempt from tax under the Tax Act. Our company and the Property Partnership are not expected
to realize capital gains or losses from dispositions of “taxable Canadian property”. However, no assurance can be given
in this regard. Non-Canadian limited partners will be required to file a Canadian federal income tax return in respect of a disposition
of “taxable Canadian property” by our company or the Property Partnership unless the disposition is an “excluded
disposition” for the purposes of section 150 of the Tax Act. However, non-Canadian limited partners that are corporations
will still be required to file a Canadian federal income tax return in respect of a disposition of “taxable Canadian property”
that is an “excluded disposition” for the purposes of section 150 of the Tax Act if tax would otherwise be payable
under Part I of the Tax Act by such non-Canadian limited partners in respect of the disposition but is not because of an applicable
income tax treaty or convention (otherwise than in respect of a disposition of “taxable Canadian property” that is
“treaty-protected property” of the corporation). In general, an “excluded disposition” is a disposition
of property by a taxpayer in a taxation year where: (i) the taxpayer is a non-resident of Canada at the time of the disposition;
(ii) no tax is payable by the taxpayer under Part I of the Tax Act for the taxation year; (iii) the taxpayer is not liable
to pay any amounts under the Tax Act in respect of any previous taxation year (other than certain amounts for which the CRA holds
adequate security); and (iv) each “taxable Canadian property” disposed of by the taxpayer in the taxation year
is either: (i) “excluded property” (as defined in subsection 116(6) of the Tax Act); or (ii) is property
in respect of the disposition of which a certificate under subsection 116(2), (4) or (5.2) has been issued by the CRA.
Non-Canadian limited partners should consult their own tax advisors with respect to the requirements to file a Canadian federal
income tax return in respect of a disposition of “taxable Canadian property” by our company or the Property Partnership.



Non-Canadian limited partners
may be subject to Canadian federal income tax on capital gains realized on the disposition of our units if our units are “taxable
Canadian property”.



Any capital gain arising from the disposition
or deemed disposition of our units by a non-Canadian limited partner will be subject to taxation in Canada, if, at the time of
the disposition or deemed disposition, our units are “taxable Canadian property” of the non-Canadian limited partner,
unless our units are “treaty-protected property” to such non-Canadian limited partner. In general, our units will not
constitute “taxable Canadian property” of any non-Canadian limited partner at the time of disposition or deemed disposition,
unless (a) at any time in the 60-month period immediately preceding the disposition or deemed disposition, more than 50% of
the fair market value of our units was derived, directly or indirectly (excluding through a corporation, partnership or trust,
the shares or interests in which were not themselves “taxable Canadian property”), from one or any combination of:
(i) real or immovable property situated in Canada; (ii) “Canadian resource property” as defined in the Tax
Act; (iii) “timber resource property” as defined in the Tax Act; and (iv) options in respect of or interests
in, or for civil law rights in, such property, whether or not such property exists, or (b) our units are otherwise deemed
to be “taxable Canadian property”. Since our company’s assets will consist principally of units of the Property
Partnership, our units would generally be “taxable Canadian property” at a particular time if the units of the Property
Partnership held by our company derived, directly or indirectly (excluding through a corporation, partnership or trust, the shares
or interests in which were not themselves “taxable Canadian property”) more than 50% of their fair market value from
properties described in (i) to (iv) above, at any time in the 60-month period preceding the particular time. Even if our units
constitute “taxable Canadian property,” units of our company will be “treaty protected property” if the
gain on the disposition of our units is exempt from tax under the Tax Act under the terms of an applicable income tax treaty or
convention. It is not expected that our units will constitute “taxable Canadian property” of any non-Canadian limited
partner at any time but no assurance can be given in this regard. If our units constitute “taxable Canadian property”,
non-Canadian limited partners will be required to file a Canadian federal income tax return in respect of a disposition of our
units unless the disposition is an “excluded disposition” (as discussed above). If our units constitute “taxable
Canadian property”, non-Canadian limited partners should consult their own tax advisors with respect to the requirement to
file a Canadian federal income tax return in respect of a disposition of our units.



29







Non-Canadian limited partners
may be subject to Canadian federal income tax reporting and withholding tax requirements on the disposition of “taxable Canadian
property”.



Non-Canadian limited partners who dispose
of “taxable Canadian property”, other than “excluded property”, as defined in subsection 116(6) of the
Tax Act, and certain other property described in subsection 116(5.2) of the Tax Act, (or who are considered to have disposed of
such property on the disposition of such property by our company or the Property Partnership), are obligated to comply with the
procedures set out in section 116 of the Tax Act and obtain a certificate pursuant to the Tax Act. In order to obtain such certificate,
the non-Canadian limited partner is required to report certain particulars relating to the transaction to the CRA not later than
10 days after the disposition occurs. Our units are not expected to be “taxable Canadian property” and neither our
company nor the Property Partnership is expected to dispose of property that is “taxable Canadian property” but no
assurance can be given in these regards.



Payments of dividends or interest
(other than interest exempt from Canadian federal withholding tax) by residents of Canada to the Property Partnership will be subject
to Canadian federal withholding tax and we may be unable to apply a reduced rate taking into account the residency or entitlement
to relief under an applicable income tax treaty or convention of our unitholders.



Our company and the Property Partnership
will be deemed to be a non-resident person in respect of certain amounts paid or credited or deemed to be paid or credited to them
by a person resident or deemed to be resident in Canada, including dividends or interest. Dividends or interest (other than interest
exempt from Canadian federal withholding tax) paid or deemed to be paid by a person resident or deemed to be resident in Canada
to the Property Partnership will be subject to withholding tax under Part XIII of the Tax Act at the rate of 25%. However, the
CRA’s administrative practice in similar circumstances is to permit the rate of Canadian federal withholding tax applicable
to such payments to be computed by looking through the partnership and taking into account the residency of the partners (including
partners who are resident in Canada) and any reduced rates of Canadian federal withholding tax that any non-Canadian limited partners
may be entitled to under an applicable income tax treaty or convention, provided that the residency status and entitlement to treaty
benefits can be established. In determining the rate of Canadian federal withholding tax applicable to amounts paid by the Holding
Entities to the Property Partnership, we expect the Holding Entities to look-through the Property Partnership and our company to
the residency of the partners of our company (including partners who are residents of Canada) and to take into account any reduced
rates of Canadian federal withholding tax that non-Canadian limited partners may be entitled to under an applicable income tax
treaty or convention in order to determine the appropriate amount of Canadian federal withholding tax to withhold from dividends
or interest paid to the Property Partnership. However, there can be no assurance that the CRA will apply its administrative practice
in this context. If the CRA’s administrative practice is not applied and the Holding Entities withhold Canadian federal withholding
tax from applicable payments on a look-through basis, the Holding Entities may be liable for additional amounts of Canadian federal
withholding tax plus any associated interest and penalties. Under the Canada-United States Tax Convention (1980), or the Treaty,
in certain circumstances a Canadian resident payer is required to look-through fiscally transparent partnerships, such as our company
and the Property Partnership, to the residency and Treaty entitlements of their partners and take into account the reduced rates
of Canadian federal withholding tax that such partners may be entitled to under the Treaty.



While the BPY General Partner expects the
Holding Entities to look-through our company and the Property Partnership in determining the rate of Canadian federal withholding
tax applicable to amounts paid or deemed to be paid by the Holding Entities to the Property Partnership, we may be unable to accurately
or timely determine the residency of our unitholders for purposes of establishing the extent to which Canadian federal withholding
taxes apply or whether reduced rates of withholding tax apply to some or all of our unitholders. In such a case, the Holding Entities
will withhold Canadian federal withholding tax from all payments made to the Property Partnership that are subject to Canadian
federal withholding tax at the rate of 25%. Canadian resident unitholders will be entitled to claim a credit for such taxes against
their Canadian federal income tax liability but non-Canadian limited partners will need to take certain steps to receive a refund
or credit in respect of any such Canadian federal withholding taxes withheld equal to the difference between the withholding tax
at a rate of 25% and the withholding tax at the reduced rate they are entitled to under an applicable income tax treaty or convention.
See Item 10.E. “Additional Information — Taxation — Canadian Federal Income Tax Considerations” for
further detail. Investors should consult their own tax advisors concerning all aspects of Canadian federal withholding taxes.



| | ITEM 4. | INFORMATION ON THE COMPANY
| | ------- | --------------------------



| | 4.A. | HISTORY AND DEVELOPMENT OF THE COMPANY
| | ---- | --------------------------------------



Our company was established on January 3,
2013 as a Bermuda exempted limited partnership registered under the Bermuda Limited Partnership Act 1883, as amended, and the Bermuda
Exempted Partnerships Act 1992, as amended. Our company’s head and registered office is 73 Front Street, 5th Floor, Hamilton
HM 12, Bermuda, and our company’s telephone number is +441 294 3309.



30







Our company was established by Brookfield
Asset Management as its primary vehicle to own and operate certain commercial property operations, including office, retail, multi-family,
industrial and other assets, on a global basis. Our partnership’s limited partnership units are listed on the NYSE and the
TSX under the symbols “BPY” and “BPY.UN”, respectively.



On April 15, 2013, Brookfield Asset Management
completed a spin-off of its commercial property operations to our partnership which was effected by way of a special dividend of
units of our partnership to holders of Brookfield Asset Management’s Class A and B limited voting shares. Each holder of
the shares received one partnership unit for approximately every 17.42 shares, representing 44.7% of the limited partnership interest
in our partnership, with Brookfield Asset Management retaining units of our partnership, redeemable/exchangeable units of the Property
Partnership, and a 1% general partner interest in the Property Partnership through Brookfield Property GP L.P., an indirect wholly
owned subsidiary of Brookfield Asset Management.



On August 8, 2013, we effected a restructuring
pursuant to which the Property Partnership’s limited partnership agreement was amended to make our company the managing general
partner of the Property Partnership and to make Property Special LP, the former general partner of the Property Partnership, a
special limited partner of the Property Partnership. This change was made in order to simplify our governance structure and to
more clearly delineate our company’s governance rights in respect of the Property Partnership. As a result, the voting agreement
between our company and Brookfield, which required Brookfield to exercise certain of its voting rights in respect of the Property
Partnership’s former general partner as directed by our company, was terminated and related changes were made to our limited
partnership agreement and the Master Services Agreement. Because Brookfield is a party to these agreements, all of the amendments
were approved by a special committee of independent directors of the BPY General Partner and the former general partner of the
Property Partnership. The economic interests of our company and Brookfield in the Property Partnership were not affected by these
changes. See Item 10.B “Memorandum and Articles of Association — Description of Our Units and Our Limited Partnership
Agreement” and “Memorandum and Articles of Association — Description of the Property Partnership Limited Partnership
Agreement”.



In November 2013, we acquired additional
shares and warrants of GGP for total consideration of $1.4 billion. As a result of the acquisition, we increased our fully-diluted
ownership interest in GGP to 32%, assuming the exercise of all of the outstanding warrants, or approximately 28% on an undiluted
basis. Prior to this transaction, Brookfield Asset Management managed a 43% fully-diluted interest in GGP on behalf of a consortium
that was formed to invest in the recapitalization of GGP in March 2010. As part of the consortium, our fully-diluted interest in
GGP was 25%. In November 2013, we acquired interests in GGP from certain consortium members, as well as all of the interests in
GGP that were distributed to Brookfield in payment of its carried interest entitlement of approximately $529 million, as manager
of the consortium. In total, our company acquired 53 million shares of GGP and warrants to acquire an additional 26 million shares,
as well as 1.1 million common shares of Rouse Properties, Inc., or Rouse. The acquisition was funded through the issuance of $435
million of our units to institutional investors and $996 million of Redemption Exchange Units to Brookfield. Following the equity
issuances, Brookfield’s interest in our company (on a fully exchanged basis) decreased from approximately 92% to approximately
89%. See Item 7.B. “Major Shareholders and Related Party Transactions — Related Party Transactions — GGP Liquidity
Transaction”.



On February 12, 2014, we announced
the commencement of our offer to acquire any or all of the common shares of Brookfield Office Properties that we do not
currently own, which we refer to herein as the Offer. Under the Offer, Brookfield Office Properties shareholders were able to
elect to receive one BPY limited partnership unit or $20.34 in cash for each Brookfield Office Properties common share,
subject to pro-ration.  As of March 31, 2014, Brookfield Office Properties shareholders tendered 220 million common shares
pursuant to the Offer. On March 20, 2014, we announced that we acquired greater than a majority of unaffiliated common shares
under the Offer and that we intend to acquire the remainder of the Brookfield Office Properties common shares in a second
stage transaction, which we expect to close by June 2014.



Although Brookfield intends to maintain
a significant interest in our company, Brookfield expects its interest to be reduced from its current level over time through mergers,
treasury issuances or secondary sales.



Our general partner is a wholly owned subsidiary
of Brookfield Asset Management. In addition, wholly owned subsidiaries of Brookfield Asset Management provide management services
to us pursuant to our Master Services Agreement.



| | 4.B. | BUSINESS OVERVIEW
| | ---- | -----------------



Overview of our Business



Our company is Brookfield Asset Management’s
primary, public entity to make investments in the real estate industry. We are a globally-diversified owner and operator of high-quality
properties that typically generate stable and sustainable cash flows over the long term. With over 15,000 employees involved in
Brookfield Asset Management’s real estate businesses around the globe, we have built operating platforms in the office, retail,
industrial and multi-family sectors. We leverage these operating platforms to enhance the cash flow and value of these assets,
including through active asset management and by executing development and redevelopment projects.



31







Our portfolio is comprised of high-quality
properties, including:



| | · | Interests in 163 office properties totaling 93 million square feet
in the world’s leading commercial markets such as New York, London, Los Angeles, Washington, D.C., Sydney, Toronto, Houston,
Calgary and Perth;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interests in 163 retail properties containing approximately 153 million
square feet in the United States, Brazil and Australia, including 73 Class A malls with average sales per square foot in excess
of $660;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interests in approximately 68 million square feet of industrial space,
primarily consisting of modern logistics assets in the United States and Europe; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interests in over 25,500 multi-family units as well as eight hotel
assets with approximately 7,500 rooms.
| | - | ---------------------------------------------------------------------------------------------------------



In addition, we have a 19 million square
foot office development pipeline, a $600 million retail mall redevelopment pipeline (on a proportionate basis) and a land portfolio
with the potential to build 79 million square feet of industrial properties.



Our portfolio totals $52 billion of assets,
supported by $14 billion of partnership capital. The charts below present a breakdown of our equity capital before corporate obligations
by operating platform and geography as at December 31, 2013:







Information regarding the revenues attributable
to each of our operating platforms and the geographic locations in which we operate is presented as at December 31, 2013 and December
31, 2012 and for the years ended December 31, 2013, 2012 and 2011 in Note 33 to the audited consolidated financial statements included
elsewhere in this Form 20-F.



Our diversified portfolio of high-quality
assets has a stable cash flow profile with growth potential. As a result of marking-to-market of rents upon lease expiry, escalation
provisions in leases and increases in occupancy, our existing assets should generate strong same-store growth without significant
capital investment. Furthermore, we expect to earn between 8% to 11% unlevered pre-tax returns on construction costs for our development
and redevelopment projects. With this cash flow profile, our goal is to pay an attractive annual distribution to our unitholders
and to grow our distribution by 3% to 5% per annum.



32







Overall, we seek to earn leveraged after-tax
returns of 12% to 15% on our invested capital. These returns will be comprised of current cash flow that is generated by our assets
and capital appreciation. Some of the capital appreciation will be reflected in the fair value gains that flow through our income
statement as a result of our revaluation of investment properties in accordance with IFRS. The remainder of the capital appreciation
will be realized in future periods to the extent we are able to successfully execute development and redevelopment projects as
well as other value creation strategies. From time to time, we will convert some or all of these unrealized gains to cash through
asset sales, joint ventures or refinancings.



Our Business Strategy



Our strategy is to be the leading globally-diversified
owner and operator of commercial properties. Due to the cyclical nature of the real estate industry, we believe that a real estate
portfolio diversified by property type and geography will generate more stable cash flow and will perform more consistently over
time. Furthermore, since property valuations fluctuate considerably based on market sentiment and other factors, we believe that
the flexibility to shift capital to sectors and geographies that are out of favor will enable us to earn premium returns on the
capital that we invest.







We are currently targeting
investments in the office, retail, industrial and multi-family sectors. In summary, our strategy is to acquire high-quality assets
on a value basis, utilize our operating platforms to add value through pro-active management and recycle capital for re-investment
in new opportunities.



Acquire assets on a value basis



| | · | Through our operating platforms around the globe, we receive real-time
information regarding market conditions and opportunities, which helps us identify the investments that offer the best risk-adjusted
returns.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our teams in each of the regions that we target have developed strong
local relationships and partnerships. Through these local networks, we originate proprietary transactions that are generally priced
at more favorable valuations than competitive processes.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



33







| | · | Brookfield has a long history of leading multi-faceted transactions
such as recapitalizations. We utilize our structuring expertise to execute these types of transactions, whereby we can acquire
high quality assets at a discount to their intrinsic value.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Leverage our operating platforms to enhance value



| | · | Within our operating platforms, we pursue opportunities to maximize
revenues in each market, such as optimizing tenant relationships to increase occupancy and raise rents.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We also identify opportunities to redevelop our existing assets that
offer premium risk-adjusted returns.
| | - | ---------------------------------------------------------------------------------------------------------



| | · | Finally, we make add-on acquisitions that can be integrated into our
operating platforms.
| | - | -----------------------------------------------------------------------------------------



Develop “best-in-class” properties at a discount
to asset valuations



| | · | In markets where asset valuations are at a premium to development
cost, we selectively pursue development projects that offer attractive risk-adjusted returns.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our development strategy is relatively low risk. Before investing
a material amount of capital, we generally meet prudent pre-leasing hurdles. We bring in capital partners on a project-specific
basis in order to mitigate risk and manage our cash flow profile. Finally, we monetize land parcels in order to reduce our investment
in land.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Recycle capital from stabilized properties for re-investment



| | · | Once we have stabilized an asset, we will consider a full or partial
sale in order to recycle capital from these assets, which effectively have low costs of capital, for re-investment in new opportunities
with higher rates of return.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | For core assets, our preference is to sell down interests in assets
to institutional investors, which enables us to preserve our operating platforms and earn incremental fee income.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Finance on a non-recourse basis with investment grade
metrics



| | · | Similar to other Brookfield Asset Management-sponsored entities, we
predominantly utilize asset-level debt. We size the non-recourse debt with investment grade metrics in order to provide broad access
to capital throughout market cycles and optimize our cost of capital.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In order to mitigate risk, we generally raise debt financing in local
currency, and our debt portfolio is largely fixed rate through issuance of fixed coupon debt or use of interest rate derivatives.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We seek to ladder maturities in order to reduce refinancing risk.
| | - | -----------------------------------------------------------------



For opportunistic transactions, our strategy
is to pursue acquisitions through private funds and/or consortium arrangements with institutional investors in order to manage
our level of exposure to these higher risk investments. Brookfield Asset Management has a strong track record of leading such consortiums
and partnerships.



Competitive Strengths



We believe that a number of competitive
strengths differentiate us from other commercial real estate companies.



| | · | Global Scale. With over 15,000 employees involved in
Brookfield Asset Management’s real estate business globally, we have operating platforms with scale in each of our targeted
sectors and geographies. With the real-time information that we receive regarding market conditions and opportunities, we are well-positioned
to opportunistically originate transactions that offer the highest risk-adjusted returns.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



34







| | · | Sector and Geographic Diversification. With a portfolio
of assets in the office, retail, industrial and multi-family sectors located primarily in North America, Europe and Australia,
we have diversified cash flow that increases its stability and overtime should lower our cost of capital. As a result of this diversity,
combined with Brookfield Asset Management’s sponsorship and its strong institutional relationships, we believe that we should
have access to capital across market cycles. This should enable us to take advantage of attractive opportunities as they arise.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Superior Record of Executing Transactions. Brookfield
Asset Management has a long track record of leading multi- faceted transactions, such as the recapitalization of GGP, whereby it
utilized its structuring capabilities to invest in high-quality assets on a value basis. Additionally, Brookfield Asset Management
has demonstrated an ability to develop “best-in-class” assets in markets where asset valuations are in excess of development
costs, earning attractive returns on equity. In total, Brookfield Asset Management has invested over $18 billion of equity in the
real estate sector since 1989, generating compounded annual returns on equity of approximately 16%.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Strong Organic Cash Flow Growth. As a result of escalation
provisions in a majority of our leases, the marking-to-market of rents as long-term leases expire and our ability to increase occupancy/permanent
occupancy primarily in our office and retail sectors, we have a strong foundation for organic cash flow growth. We will have flexibility
to utilize this incremental cash flow to increase our distribution to unitholders or fund other growth initiatives.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Attractive Portfolio of Development/Redevelopment Opportunities.
Within our office, retail and industrial platforms we have a portfolio of development and redevelopment opportunities that offer
premium returns on invested capital. In total, we have a pipeline of active development projects totaling $3.1 billion of capital
costs, on a proportionate basis. We will seek to capture the value of this pipeline through a combination of investment of capital
to build-out such projects and sell-downs to partners at values that reflect the development value that has been created.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Relationship with Brookfield Asset Management. As Brookfield
Asset Management's flagship public commercial property entity, we are the primary vehicle through which it invests in real estate
on a global basis. As a result, our unitholders benefit from Brookfield Asset Management’s global presence, operating experience,
execution capabilities and relationships. Furthermore, with Brookfield Asset Management’s substantial liquidity and strong
relationships with banks and institutional investors, we may be able to participate in attractive investments that we could not
have executed on a stand-alone basis.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Development of our Business



Brookfield Asset Management and its predecessor
companies have been active in various facets of the real estate business since the 1920s. Canadian Arena Corporation, the predecessor
company to Brookfield Office Properties, built the Montreal Forum in 1924 to provide facilities for hockey and other sporting and
cultural events and its earnings were derived principally from the ownership of the Montreal Forum and the Montreal Canadiens of
the National Hockey League until the sale of the hockey franchise in 1978.



In 1976, Brookfield expanded its real estate
interests by acquiring a controlling interest in one of Canada's largest public real estate companies. The steady escalation in
commercial property values over the next ten years enabled the capital base to expand. Brookfield took advantage of falling real
estate values during the recession of the early 1990s to upgrade and expand its directly owned commercial property portfolio. In
2003, Brookfield made its first investment outside of North America in the United Kingdom. Brookfield further expanded outside
of North America in 2007 by making property investments in Australia.



35







The accumulation of our portfolio of assets
was completed through various corporate and property purchases, including the following acquisitions:



| | · | BCE Developments — 7 million square feet. In 1990,
Brookfield acquired a 50% interest in a portfolio of office properties in Toronto, Denver and Minneapolis from BCE Developments.
In 1994, this interest was increased to 100%. Brookfield Place, Brookfield’s flagship office complex in Toronto, was acquired
in this transaction.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Olympia & York U.S.A. — 14.7 million square
feet. In 1996, Brookfield acquired a 46% interest in World Financial Properties LP, the corporation formed from the bankruptcy
of Olympia & York, USA which included three of the four towers of Brookfield Place New York (formerly, World Financial Center),
One Liberty Plaza and 245 Park Avenue in Manhattan. Brookfield subsequently increased its interest to 99.4%.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Trizec Western Canada — 3.5 million square feet.
In 2000, Brookfield acquired a portfolio of Calgary properties, including the Bankers Hall complex.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | · | United Kingdom — 8.8 million square feet. In 2003,
Brookfield acquired a 9% interest in Canary Wharf, marking its entry into the United Kingdom real estate market. Canary Wharf owned
and operated 8.8 million square feet of office and retail properties at that time and had 1 million square feet of office space
under construction. Brookfield’s interest in Canary Wharf was increased to 22% in 2010. In 2005, Brookfield also purchased
an 80% interest in a 555,000 square foot office property at 20 Canada Square, Canary Wharf, London, which was subsequently increased
to 100%. In addition, in 2010, Brookfield acquired a 50% stake in 100 Bishopsgate, a development site in the City of London and
increased its stake to 87.5% in 2012.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | O&Y Properties/O&Y REIT — 11.6 million
square feet. In 2005, Brookfield acquired O&Y Properties Corporation and the assets and liabilities of O&Y Real Estate
Investment Trust with other partners and continues to own a direct 25% interest in a portfolio of high-quality office properties
in Toronto, Ottawa, Calgary with a consortium of investors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Trizec Properties/Trizec Canada — 26 million square
feet. In 2006, Brookfield acquired Trizec Properties, Inc. and Trizec Canada Inc.’s portfolio of 58 office properties in
New York, Washington, D.C., Los Angeles and Houston in a joint venture with a partner.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Brazil — 2.5 million square feet. In 2007, Brookfield’s
retail property fund in Brazil acquired five high-quality shopping centers in São Paulo and Rio de Janeiro. This acquisition
expanded Brookfield’s portfolio to approximately 2.5 million square feet of retail centers in south-central Brazil.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Australia Portfolio — 6.2 million square feet.
In 2007, Brookfield acquired Multiplex Limited and Multiplex Property Trust, or Multiplex, an Australian commercial property owner
and developer. Multiplex's assets included approximately $3.6 billion of core office and retail properties within nine funds and
a $3 billion high-quality office portfolio.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | General Growth Properties, Inc. — 160 million
square feet. In 2009, Brookfield led the recapitalization of GGP, the second largest mall owner in the United States with 166 malls.
In 2011, Brookfield acquired an additional 113.3 million common shares of GGP, giving Brookfield and its consortium partners an
approximately 38% equity interest in GGP. In January 2012, GGP spun-off Rouse, which at the time of the spin-off held a portfolio
of 30 malls. In November 2013, we acquired 53 million shares of GGP and warrants to acquire an additional 26 million shares, as
well as 1.1 million common shares of Rouse for $1.4 billion. As of December 31, 2013, our company owned approximately 28% of the
common shares of GGP plus warrants that increase our ownership to 32%, assuming they are fully-exercised, and approximately 39%
of the common shares of Rouse.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36







| | · | Hammerson Portfolio — 0.9 million square feet.
In 2012, Brookfield Office Properties acquired the Hammerson portfolio in the City of London for $871 million. The portfolio includes
four operating assets totaling 884,000 square feet and two development sites which can accommodate approximately 1.4 million square
feet of density.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Industrial Portfolio — In partnership with institutional
investors, we recently made three major industrial acquisitions that have created a leading international industrial property platform.
In North America, we acquired Verde Realty in December 2012 and Industrial Developments International Inc., or IDI, in October
2013. In Europe, we acquired Gazeley Limited (formerly EZW Gazeley Limited), or Gazeley, in June 2013. Combined, our industrial
portfolio comprises approximately 68 million square feet of operating and 79 million square feet of development assets.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | China — In October 2013, we announced an agreement
to invest, along with our institutional partners, up to $750 million in China Xintiandi, or CXTD, a wholly-owned entity of Hong
Kong-listed developer Shui On Land. CXTD owns a world class portfolio of retail and office properties in Shanghai.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Downtown Los Angeles Portfolio — 8.6 million square
feet. During the fourth quarter of 2013, we completed the acquisition of MPG Office Trust, Inc. in Los Angeles with institutional
partners and created a $1.1 billion fund. Brookfield Office Properties and its institutional partners now own seven Class A office
properties totaling 8.6 million square feet in the downtown Los Angeles market.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Brookfield Office Properties — On February
                                                                                                               12, 2014, we announced the commencement of our Offer to acquire any or all of the common shares of Brookfield Office
                                                                                                               Properties that we do not currently own. As of March 31, 2014, Brookfield Office Properties shareholders tendered 220
                                                                                                               million
                                                                                                               common                                                                                                                shares
                                                                                                               pursuant to the Offer, which is greater than a majority of unaffiliated common shares subject to the Offer. We will
                                                                                                               now                                                                                                                own,
                                                                                                               directly                                                                                                                or
                                                                                                               indirectly, 89% of the issued and outstanding common shares of Brookfield Office Properties on a fully-diluted
                                                                                                               basis. On March 20, 2014, we announced that we intend to acquire the remainder of the Brookfield Office Properties common
                                                                                                               shares in                                                                                                                a
                                                                                                               second stage
                                                                                                               transaction, which we expect to close by June 2014.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37







Operating Platforms



Our business is organized in three operating
platforms, with assets as of December 31, 2013 as set forth in the diagram below. The capital invested in these operating platforms
is through a combination of: direct investment; investments in asset level partnerships or joint venture arrangements; participation
in private equity funds and consortiums; and the ownership of shares in other public companies. Combining both publicly-listed
and private institutional capital provides a competitive advantage in flexibility and access to capital to fund growth.







38







Office Platform



Brookfield Property Partners is a global
leader in the development, ownership and management of premier office properties. Our office holdings primarily consist of Brookfield
Office Properties, of which we will own 100% of its common equity following completion of the Offer and the subsequent second stage
transaction in mid-2014. Additionally, we own an approximate 22% interest in Canary Wharf, which includes 18 properties and a 9
million square feet development pipeline in London. Our office portfolio consists of 163 properties comprising 93 million square
feet under management and a total of 19 million square feet of development potential. Our properties are primarily located in commercial
business districts in some of the world's leading cities, including New York, London, Los Angeles, Washington D.C., Sydney, Toronto,
Houston, Calgary and Perth, serving tenants in the financial, energy and government sectors.



Within our office platform, we remain focused
on the following strategic priorities:



| | · | Realizing value from our properties through proactive leasing and
select redevelopment and repositioning initiatives to convert assets to higher yielding (or cash flowing) properties;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Managing capital prudently, by utilizing conservative financing structures,
including the disposition of select mature or non-core assets; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | · | Advancing development projects to create “best-in-class”
new stock in premium locations.
| | - | ----------------------------------------------------------------------------------------



Our combined office portfolio occupancy
stands at 88.0% leased at December 31, 2013 and reflects average in-place net rent of $30.15 compared to average market net rent
of $34.77, allowing for 15% potential to capture on higher rents on the upcoming expiration of leases.



39







|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     | Proportionate to |  |  |        |  |  |          |       
|--------------------------------- |  | ---------- | --- |  | ------------ |  | ----- | --------------------------- |  |  | ---------------------------------------- |  |  | -------------- | ----- |  | ---------------- |  | ------ | ----- |  |  | ----------- |  |  | -------- | ------ |  | ----- |  | --- | ---------------- |  |  | ------ |  |  | -------- | ------
|Office Property Portfolio(1)      |  |            |     |  |              |  |       | Assets
    Under Management |  |  | Proportionate
    at subsidiary-level(2) |  |  | unitholders(3) |       |  | Proportionate(4) | 
|                                  |  | Number of  |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|(Sq.ft. in 000's)                 |  | properties |     |  | Leased
    % |  |       | Office                      |  |  | Retail                                   |  |  | Leasable       |       |  | Parking          |  |        | Total |  |  | Owned
    % |  |  | Leasable |        |  | Total |  |     | Leasable         |  |  | Total  |  |  | Leasable |       
|CONSOLIDATED PROPERTIES           |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|U.S. Properties                   |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|New York                          |  |            | 8   |  |              |  | 80.5  | %                           |  |  | 13,577                                   |  |  |                | 371   |  |                  |  | 13,948 |       |  |  | 555         |  |  |          | 14,503 |  |       |  | 97  | %                |  |  | 13,480 |  |  |          | 14,021
|Boston                            |  |            | 1   |  |              |  | 77.2  | %                           |  |  | 771                                      |  |  |                | 25    |  |                  |  | 796    |       |  |  | 236         |  |  |          | 1,032  |  |       |  | 99  | %                |  |  | 791    |  |  |          | 1,025 
|Washington, D.C.                  |  |            | 30  |  |              |  | 90.1  | %                           |  |  | 5,952                                    |  |  |                | 264   |  |                  |  | 6,216  |       |  |  | 3,447       |  |  |          | 9,663  |  |       |  | 86  | %                |  |  | 5,319  |  |  |          | 8,324 
|Los Angeles                       |  |            | 22  |  |              |  | 80.6  | %                           |  |  | 9,668                                    |  |  |                | 455   |  |                  |  | 10,123 |       |  |  | 2,011       |  |  |          | 12,134 |  |       |  | 54  | %                |  |  | 5,604  |  |  |          | 6,556 
|San Diego                         |  |            | 2   |  |              |  | 61.8  | %                           |  |  | 338                                      |  |  |                | -     |  |                  |  | 338    |       |  |  | -           |  |  |          | 338    |  |       |  | 100 | %                |  |  | 338    |  |  |          | 338   
|Houston                           |  |            | 7   |  |              |  | 91.7  | %                           |  |  | 6,484                                    |  |  |                | 117   |  |                  |  | 6,601  |       |  |  | 2,084       |  |  |          | 8,685  |  |       |  | 79  | %                |  |  | 5,316  |  |  |          | 6,850 
|Denver                            |  |            | 2   |  |              |  | 77.5  | %                           |  |  | 2,595                                    |  |  |                | 48    |  |                  |  | 2,643  |       |  |  | 1,092       |  |  |          | 3,735  |  |       |  | 75  | %                |  |  | 1,998  |  |  |          | 2,806 
|Seattle                           |  |            | 2   |  |              |  | 89.4  | %                           |  |  | 696                                      |  |  |                | 3     |  |                  |  | 699    |       |  |  | 157         |  |  |          | 856    |  |       |  | 50  | %                |  |  | 349    |  |  |          | 428   
|San Francisco/San Jose            |  |            | 9   |  |              |  | 71.7  | %                           |  |  | 647                                      |  |  |                | 12    |  |                  |  | 659    |       |  |  | 6           |  |  |          | 665    |  |       |  | 100 | %                |  |  | 659    |  |  |          | 665   
|                                  |  |            | 83  |  |              |  | 83.3  | %                           |  |  | 40,728                                   |  |  |                | 1,295 |  |                  |  | 42,023 |       |  |  | 9,588       |  |  |          | 51,611 |  |       |  | 80  | %                |  |  | 33,854 |  |  |          | 41,013
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Canadian Properties               |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Toronto                           |  |            | 12  |  |              |  | 94.2  | %                           |  |  | 8,002                                    |  |  |                | 748   |  |                  |  | 8,750  |       |  |  | 1,851       |  |  |          | 10,601 |  |       |  | 54  | %                |  |  | 4,720  |  |  |          | 5,746 
|Calgary                           |  |            | 8   |  |              |  | 99.7  | %                           |  |  | 5,330                                    |  |  |                | 305   |  |                  |  | 5,635  |       |  |  | 1,194       |  |  |          | 6,829  |  |       |  | 42  | %                |  |  | 2,366  |  |  |          | 2,869 
|Ottawa                            |  |            | 6   |  |              |  | 96.4  | %                           |  |  | 1,711                                    |  |  |                | 33    |  |                  |  | 1,744  |       |  |  | 804         |  |  |          | 2,548  |  |       |  | 21  | %                |  |  | 366    |  |  |          | 535   
|Vancouver                         |  |            | 1   |  |              |  | 87.8  | %                           |  |  | 488                                      |  |  |                | 94    |  |                  |  | 582    |       |  |  | 258         |  |  |          | 840    |  |       |  | 83  | %                |  |  | 483    |  |  |          | 697   
|Other                             |  |            | 1   |  |              |  | 100.0 | %                           |  |  | -                                        |  |  |                | 3     |  |                  |  | 3      |       |  |  | -           |  |  |          | 3      |  |       |  | 83  | %                |  |  | 2      |  |  |          | 2     
|                                  |  |            | 28  |  |              |  | 96.0  | %                           |  |  | 15,531                                   |  |  |                | 1,183 |  |                  |  | 16,714 |       |  |  | 4,107       |  |  |          | 20,821 |  |       |  | 47  | %                |  |  | 7,937  |  |  |          | 9,849 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Australian Properties             |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Sydney                            |  |            | 7   |  |              |  | 99.2  | %                           |  |  | 1,032                                    |  |  |                | 271   |  |                  |  | 1,303  |       |  |  | 168         |  |  |          | 1,471  |  |       |  | 69  | %                |  |  | 908    |  |  |          | 1,014 
|Melbourne                         |  |            | 2   |  |              |  | 100.0 | %                           |  |  | 1,334                                    |  |  |                | 33    |  |                  |  | 1,367  |       |  |  | 133         |  |  |          | 1,500  |  |       |  | 93  | %                |  |  | 1,275  |  |  |          | 1,401 
|Brisbane                          |  |            | 2   |  |              |  | 89.3  | %                           |  |  | 480                                      |  |  |                | 40    |  |                  |  | 520    |       |  |  | 28          |  |  |          | 548    |  |       |  | 79  | %                |  |  | 412    |  |  |          | 433   
|Perth                             |  |            | 3   |  |              |  | 99.6  | %                           |  |  | 1,431                                    |  |  |                | 105   |  |                  |  | 1,536  |       |  |  | 60          |  |  |          | 1,596  |  |       |  | 77  | %                |  |  | 1,188  |  |  |          | 1,231 
|New Zealand                       |  |            | 6   |  |              |  | 96.7  | %                           |  |  | 707                                      |  |  |                | 29    |  |                  |  | 736    |       |  |  | 105         |  |  |          | 841    |  |       |  | 100 | %                |  |  | 736    |  |  |          | 841   
|                                  |  |            | 20  |  |              |  | 98.2  | %                           |  |  | 4,984                                    |  |  |                | 478   |  |                  |  | 5,462  |       |  |  | 494         |  |  |          | 5,956  |  |       |  | 82  | %                |  |  | 4,519  |  |  |          | 4,920 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|European Properties               |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|London                            |  |            | 5   |  |              |  | 94.9  | %                           |  |  | 1,312                                    |  |  |                | 32    |  |                  |  | 1,344  |       |  |  | 34          |  |  |          | 1,378  |  |       |  | 100 | %                |  |  | 1,344  |  |  |          | 1,378 
|                                  |  |            | 5   |  |              |  | 94.9  | %                           |  |  | 1,312                                    |  |  |                | 32    |  |                  |  | 1,344  |       |  |  | 34          |  |  |          | 1,378  |  |       |  | 100 | %                |  |  | 1,344  |  |  |          | 1,378 
|Total Consolidated Properties     |  |            | 136 |  |              |  | 88.0  | %                           |  |  | 62,555                                   |  |  |                | 2,988 |  |                  |  | 65,543 |       |  |  | 14,223      |  |  |          | 79,766 |  |       |  | 72  | %                |  |  | 47,654 |  |  |          | 57,160
|EQUITY ACCOUNTED PROPERTIES       |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|U.S. Properties                   |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|New York                          |  |            | 3   |  |              |  | 87.1  | %                           |  |  | 4,934                                    |  |  |                | 175   |  |                  |  | 5,109  |       |  |  | 92          |  |  |          | 5,201  |  |       |  | 56  | %                |  |  | 2,886  |  |  |          | 2,934 
|Los Angeles                       |  |            | 6   |  |              |  | 81.4  | %                           |  |  | 1,869                                    |  |  |                | 15    |  |                  |  | 1,884  |       |  |  | 389         |  |  |          | 2,273  |  |       |  | 72  | %                |  |  | 1,473  |  |  |          | 1,637 
|San Diego                         |  |            | 1   |  |              |  | 84.0  | %                           |  |  | 123                                      |  |  |                | -     |  |                  |  | 123    |       |  |  | -           |  |  |          | 123    |  |       |  | 100 | %                |  |  | 123    |  |  |          | 123   
|San Francisco/San Jose            |  |            | 1   |  |              |  | 63.2  | %                           |  |  | 289                                      |  |  |                | -     |  |                  |  | 289    |       |  |  | -           |  |  |          | 289    |  |       |  | 100 | %                |  |  | 289    |  |  |          | 289   
|Denver                            |  |            | 2   |  |              |  | 79.6  | %                           |  |  | 582                                      |  |  |                | -     |  |                  |  | 582    |       |  |  | -           |  |  |          | 582    |  |       |  | 100 | %                |  |  | 582    |  |  |          | 582   
|Seattle                           |  |            | 4   |  |              |  | 58.0  | %                           |  |  | 364                                      |  |  |                | -     |  |                  |  | 364    |       |  |  | -           |  |  |          | 364    |  |       |  | 100 | %                |  |  | 364    |  |  |          | 364   
|                                  |  |            | 17  |  |              |  | 83.2  | %                           |  |  | 8,161                                    |  |  |                | 190   |  |                  |  | 8,351  |       |  |  | 481         |  |  |          | 8,832  |  |       |  | 67  | %                |  |  | 5,717  |  |  |          | 5,929 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Australian Properties             |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Sydney                            |  |            | 8   |  |              |  | 96.2  | %                           |  |  | 3,375                                    |  |  |                | 165   |  |                  |  | 3,540  |       |  |  | 288         |  |  |          | 3,828  |  |       |  | 49  | %                |  |  | 1,723  |  |  |          | 1,866 
|Melbourne                         |  |            | 1   |  |              |  | 98.2  | %                           |  |  | 679                                      |  |  |                | 26    |  |                  |  | 705    |       |  |  | 106         |  |  |          | 811    |  |       |  | 43  | %                |  |  | 303    |  |  |          | 349   
|Canberra                          |  |            | 1   |  |              |  | 100.0 | %                           |  |  | 176                                      |  |  |                | -     |  |                  |  | 176    |       |  |  | 28          |  |  |          | 204    |  |       |  | 100 | %                |  |  | 176    |  |  |          | 204   
|                                  |  |            | 10  |  |              |  | 96.7  | %                           |  |  | 4,230                                    |  |  |                | 191   |  |                  |  | 4,421  |       |  |  | 422         |  |  |          | 4,843  |  |       |  | 52  | %                |  |  | 2,202  |  |  |          | 2,419 
|Total Equity Accounted Properties |  |            | 27  |  |              |  | 87.9  | %                           |  |  | 12,391                                   |  |  |                | 381   |  |                  |  | 12,772 |       |  |  | 903         |  |  |          | 13,675 |  |       |  | 62  | %                |  |  | 7,919  |  |  |          | 8,348 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Total Office Properties           |  |            | 163 |  |              |  | 88.0  | %                           |  |  | 74,946                                   |  |  |                | 3,369 |  |                  |  | 78,315 |       |  |  | 15,126      |  |  |          | 93,441 |  |       |  | 71  | %                |  |  | 55,573 |  |  |          | 65,508



(1) Does not include office assets held through
our approximate 22% interest in Canary Wharf.

(2) Reflects our partnership's interest before
considering non-controlling interests, such as minority interests in Brookfield Office Properties and Multiplex New Zealand Property
Fund.

(3) Reflects our partnership's interest net of
non-controlling interests described in note (2) above and attributable to limited partner units and Redeemable/Exchangeable and
special limited partner units of the operating partnership held by Brookfield.

(4) Reflects our partnership's proportionate interest
net of non-controlling interests described in note (3) above and the Redeemable/Exchangeable and special limited partner units
of the operating partnership held by Brookfield.



40







Another important characteristic of our
office portfolio is the strong credit quality of our tenants. We focus on tenant credit quality in order to ensure the long-term
sustainability of rental revenues through economic cycles. The following list shows major tenants in our office portfolio by leased
area and their respective credit ratings and lease commitments as at December 31, 2013:



|Tenant                             |  | Primary Location                                                       |  | Credit Rating(1) |  | Year of Expiry(2) |         |  | Total (000's
    Sq. Ft.) |  |        | Sq. Ft. (%)(3) | 
|---------------------------------- |  | ---------------------------------------------------------------------- |  | ---------------- |  | ----------------- | ------- |  | ------------------------- |  | ------ | -------------- | 
|Government and Government Agencies |  | Various                                                                |  | AAA/AA+          |  |                   | Various |  |                           |  | 5,468  |                | 
|CIBC World Markets(4)              |  | Calgary/Houston/New York/Toronto                                       |  | A+               |  |                   | 2034    |  |                           |  | 1,429  |                | 
|Suncor Energy Inc.                 |  | Calgary                                                                |  | BBB+             |  |                   | 2028    |  |                           |  | 1,295  |                | 
|Bank of America/Merrill Lynch      |  | Denver/New York/Los Angeles/Toronto/Washington, D.C.                   |  | A-               |  |                   | 2022    |  |                           |  | 1,263  |                | 
|Morgan Stanley                     |  | Denver/New York/Toronto                                                |  | A-               |  |                   | 2030    |  |                           |  | 1,196  |                | 
|Bank of Montreal                   |  | Calgary/Toronto                                                        |  | A+               |  |                   | 2023    |  |                           |  | 1,143  |                | 
|Royal Bank of Canada               |  | Boston/Calgary/New York/Los Angeles/Toronto/Vancouver/Washington, D.C. |  | AA-              |  |                   | 2026    |  |                           |  | 984    |                | 
|PricewaterhouseCoopers             |  | Calgary/Houston/Los Angeles/Perth/Sydney                               |  | Not Rated        |  |                   | 2026    |  |                           |  | 896    |                | 
|JPMorgan Chase & Co.               |  | Denver/New York/Houston/Los Angeles                                    |  | A                |  |                   | 2022    |  |                           |  | 889    |                | 
|KPMG                               |  | Perth/Sydney/Toronto                                                   |  | Not Rated        |  |                   | 2025    |  |                           |  | 853    |                | 
|Total                              |  |                                                                        |  |                  |  |                   |         |  |                           |  | 15,416 |                | 



|(1) | From Standard & Poor's Rating Services, Moody's Investment Services, Inc. or DBRS Limited.                                                                                                                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Reflects the year of maturity related to lease(s) and is calculated for multiple leases on a weighted average basis based on square feet where practicable.                                                                            
|(3) | Prior to considering partnership interests in partially-owned properties.                                                                                                                                                              
|(4) | CIBC World Markets leases 1.1 million square feet at 300 Madison Avenue in New York, of which they sublease 925,000 square feet to PricewaterhouseCoopers LLP and approximately 100,000 square feet to Sumitomo Corporation of America.



Another important strategy for our office
platform is to sign long-term leases in order to mitigate risk, reduce our overall re-tenanting costs and ensure stable and sustainable
cash flows. As at December 31, 2013, the average lease term of our office platform was 7.3 years, compared to 7.1 years at December
31, 2012. We typically commence discussions with tenants regarding their space requirements well in advance of the contractual
expiration.



A portion of our office platform is owned
through joint venture, partnership and/or consortium arrangements with institutional partners. Prospectively, as we recycle capital,
our preference is to sell down interests in assets to institutional partners and to continue to manage the assets on behalf of
the consortium. We believe that this strategy enables us to enhance returns on our capital through associated fees, which represent
an important area of growth. These types of transactions allow us to earn the following categories of fees:



| | · | Asset Management. Stable base fee for providing regular,
ongoing services.
| | - | --------------------------------------------------------------------------



| | · | Transaction. Development, redevelopment and leasing
activities conducted on behalf of these funds.
| | - | --------------------------------------------------------------------------------------------------



| | · | Performance. Earned when certain predetermined benchmarks
are exceeded. Performance fees, which can add considerably to fee revenue, typically arise later in a partnership’s life
cycle and are therefore not fully reflected in current results.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During 2013, our office portfolio earned
fee income totaling $50 million.



Our development pipeline is a significant
component of value of our office platform, and we expect this pipeline to contribute significantly to earnings and provide attractive
returns on capital upon stabilization. As at December 31, 2013, we held interests in centrally located office development sites
with total development potential of approximately 19 million square feet in the United States, Canada, Australia and Europe.



41







The following table summarizes all office
development projects in our portfolio by geographic location as at December 31, 2013:



|              |  |                  |    |  |                    |  |     | (000's Sq. Ft.) | 
|------------- |  | ---------------- | -- |  | ------------------ |  | --- | --------------- | 
|              |  | Number  of Sites |    |  | Owned Interest (%) |  |     | Total           | 
|United States |  |                  | 8  |  |                    |  | 91  | %               | 
|Canada        |  |                  | 7  |  |                    |  | 80  | %               | 
|Australia     |  |                  | 1  |  |                    |  | 100 | %               | 
|Europe        |  |                  | 4  |  |                    |  | 79  | %               | 
|Brazil        |  |                  | 1  |  |                    |  | 100 | %               | 
|Total/Avg     |  |                  | 21 |  |                    |  | 87  | %               | 



| | (1) | Reflects interest net of non-controlling interests
of others in operating subsidiaries attributable to limited partner units and Redeemable/Exchangeable and special limited partner
units of the operating partnership held by Brookfield.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Reflects our partnership's proportionate interest
net of non-controlling interests described in note (1) above and the Redeemable/Exchangeable and special limited partner units
of the operating partnership held by Brookfield.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We classify our office development sites
into three categories: (i) active development, (ii) active planning and (iii) held for development. Of the approximately 18.9 million
square feet in our office development pipeline, 8.4 million square feet are in the active development stage, 2.3 million square
feet are in the active planning stage and 8.2 million square feet are held for future development.



Our active developments include the five
million square foot Manhattan West project in New York, the 1.4 million square foot Brookfield Place East Tower in Calgary, the
980,000 square foot Bay Adelaide Centre East in Toronto, the 681,000 square foot Giroflex towers in São Paulo, and the 366,000
square foot Brookfield Place Tower 2 in Perth. As of December 31, 2013 on a proportionate basis, these five sites had incurred
a cost of $524 million and had a total planned development cost of $3.1 billion, or $732 per square foot, with a weighted average
planned construction period of 83 months.



Of the remaining approximately 10.4 million
square feet in our office development pipeline as at December 31, 2013, 2.3 million square feet were in the active planning stage
comprising four development projects, including 100 Bishopsgate in London. As at December 31, 2013 on a proportionate basis, those
four developments had incurred a cost of $209 million and had a total planned development cost of $1.1 billion, or $942 per square
foot with a weighted average planned construction period of 37 months.



The following table provides additional
detail on our active development pipeline and certain projects in the active planning stage.



|                         |  | Sq. ft. in |       |  |          |  |     |      |  |   |       |  |  | Equity |        |   | Stabilized Return
|------------------------ |  | ---------- | ----- |  | -------- |  | --- | ---- |  | - | ----- |  |  | ------ | ------ | - | -----------------
|(US$ Millions)           |  | 000's      |       |  | % Leased |  |     | Cost |  |   | Debt  |  |  | Total  |        |   | Future           
|Bay Adelaide East        |  |            | 980   |  |          |  | 60  | %    |  | $ | 442   |  |  | $      | (316   | ) |                  
|Brookfield Place Calgary |  |            | 1,400 |  |          |  | 71  | %    |  |   | 768   |  |  |        | (519   | ) |                  
|Brookfield Place Perth   |  |            | 366   |  |          |  | 40  | %    |  |   | 271   |  |  |        | (163   | ) |                  
|London Wall (1)          |  |            | 310   |  |          |  | 100 | %    |  |   | 183   |  |  |        | (110   | ) |                  
|Giroflex                 |  |            | 680   |  |          |  | -   |      |  |   | 239   |  |  |        | (116   | ) |                  
|Subtotal                 |  |            | 3,736 |  |          |  | 55  | %    |  | $ | 1,903 |  |  | $      | (1,224 | ) |                  
|                         |  |            |       |  |          |  |     |      |  |   |       |  |  |        |        |   |                  
|Manhattan West (2)       |  |            |       |  |          |  |     |      |  | $ | 680   |  |  | $      | (340   | ) |                  
|Total                    |  |            |       |  |          |  |     |      |  | $ | 2,583 |  |  | $      | (1,564 | ) |                  

| | (1) | Construction cost is at 50% proportionate share
| | --- | -----------------------------------------------

| | (2) | Only includes cost of platform
| | --- | ------------------------------



The remaining approximately 8.1 million
square feet of our office development pipeline as of December 31, 2013 is being held for development and is not in the active planning
stage. With all of our development sites, we proceed with construction when our risk adjusted return hurdles and preleasing targets
have been met.



42







Retail Platform



As at December 31, 2013, our retail platform
is primarily comprised of our 32% ownership interest in GGP on a fully-diluted basis, our 39% ownership interest in Rouse, and
interests in retail assets in Brazil and Australia. As at December 31, 2013, our retail portfolio consisted of interests in 163
well-located, high-quality retail properties encompassing approximately 153 million square feet of retail space in the United States,
Brazil and Australia.



Our primary objective is to be an owner
and operator of best-in-class malls that provide an outstanding environment and experience for our communities, retailers, employees
and consumers. The strategy for our retail platform includes:



| | · | Increasing the permanent occupancy of our regional mall portfolio
by converting temporary leases to permanent leases and leasing vacant space;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | · | Renewing or replacing expiring leases at greater rental rates;
| | - | --------------------------------------------------------------



| | · | Actively recycling capital through the disposition of strip centers
and lower quality regional malls and investing in whole or partial interests in high-quality regional malls and anchor pads; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Continuing to execute on our existing redevelopment projects and seeking
additional opportunities within our portfolio for redevelopment.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



Our retail portfolio is one of the highest
quality and fastest growing platforms in North America. In 2013 our properties reported a combined average of $525 in tenant sales
per square foot. At our retail properties, occupancy levels as at December 31, 2013 increased by 0.8% to 95.9% compared to a year
ago. During this same period, the spread between the rent paid on expiring leases and the rent commencing under new leases on a
suite-to-suite basis in the United States increased by 10%, demonstrating our strong same-store growth potential.



As at December 31, 2013, our retail portfolio
consisted of interests in 154 regional malls totaling approximately 149 million square feet throughout the United States with total
regional mall gross leasable area allocated as follows: southwest and southeast region (28%), pacific and mountain region (28%),
northeast and mideast region (23%) and east and west north central region (21%). Our U.S. retail portfolio is highly concentrated
with 73 Class A regional malls, which produce approximately $660 in average annual tenant sales per square foot. Regional malls
in our portfolio include Ala Moana in Honolulu, Fashion Show in Las Vegas, the Natick Collection in Natick, Massachusetts (Boston),
Tysons Galleria in Washington, D.C., Park Meadows in Lone Tree (Denver) and Water Tower Place in Chicago. A significant number
of these regional malls are either the only mall in their market or a part of a cluster of malls that receive high consumer traffic.



Our portfolio also includes 8 malls totaling
approximately 2.9 million square feet in Brazil, 59% of which are located in São Paolo, 33% of which are located in Rio
de Janeiro and 8% of which are located in Belo Horizonte. These properties are mostly concentrated in premier locations in highly
dense urban areas and thereby have leading positions in their respective markets. These properties include the Rio Sul Shopping
Center in Rio de Janeiro and the Shopping Pátio Paulista and Shopping Pátio Higienópolis in São Paulo.



Competition within the retail sector is
strong. We compete for tenants and visitors to our malls with other malls in close proximity. In order to maintain and increase
our malls’ competitive position within its marketplace we focus on the following:



| | · | Strategically arrange the physical location of the merchants within
each mall to enforce a merchandising strategy that promotes cross-shopping and maximizes sales;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Introduce new concepts to the mall which may include restaurants,
theaters, new retailers;
| | - | ------------------------------------------------------------------------------------------



43







| | · | Implement marketing campaigns to attract people to the mall; and
| | - | ----------------------------------------------------------------



| | · | Invest capital to maintain and improve the malls’ aesthetics
and infrastructure, including major redevelopments to further establish the malls as a destination.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe the high quality of our regional
malls enable us to compete effectively for retailers and consumers.



The following list reflects the ten largest
tenants in our retail portfolio as at December 31, 2013. The largest tenant in our portfolio accounted for approximately 2.9% of
minimum rents, tenant recoveries and other.



|Top Ten Largest Tenants          |  | Primary DBA                                              |  | Percent of Minimum Rents, Tenant Recoveries and Other (%) |     
|-------------------------------- |  | -------------------------------------------------------- |  | --------------------------------------------------------- | ----
|L Brands Inc.                    |  | Victoria's Secret, Bath & Body Works, PINK               |  |                                                           | 2.9 
|The Gap, Inc.                    |  | Gap, Banana Republic, Old Navy                           |  |                                                           | 2.4 
|Foot Locker, Inc.                |  | Footlocker, Champs Sports, Footaction USA                |  |                                                           | 2.2 
|Abercrombie & Fitch Stores, Inc. |  | Abercrombie, Abercrombie & Fitch, Hollister, Gilly Hicks |  |                                                           | 1.9 
|Forever 21, Inc.                 |  | Forever 21                                               |  |                                                           | 1.7 
|Express, Inc.                    |  | Express, Express Men                                     |  |                                                           | 1.3 
|Luxottica Group S.p.A.           |  | Lenscrafters, Sunglass Hut, Pearle Vision                |  |                                                           | 1.3 
|American Eagle Outfitters, Inc.  |  | American Eagle, Aerie                                    |  |                                                           | 1.3 
|Genesco Inc.                     |  | Journeys, Lids, Underground Station, Johnston & Murphy   |  |                                                           | 1.2 
|LVMH                             |  | Louis Vuitton, Sephora                                   |  |                                                           | 1.0 
|Total                            |  |                                                          |  |                                                           | 17.2



We develop and redevelop retail properties
on a selective basis to enhance the quality of our portfolio, when we believe attractive risk-adjusted returns can be earned. Our
strategy is to identify opportunities to invest capital to expand our Class A malls, which are often irreplaceable due to urban
density and permitting challenges. We seek to acquire big boxes that are contiguous to our malls and divide them into in-line space
on which we earn significantly greater rent. We will invest capital in Class B malls when we believe that we can upgrade these
malls to Class B+ or Class A. As of December 31, 2013, we are progressing 31 redevelopment projects in the United States, including
the 300,000 square foot expansion of Ala Moana Center in Hawaii. The total anticipated cost of these redevelopment projects is
approximately $311 million on a proportionate basis. As of December 31, 2013, we had incurred costs of approximately $121 million
in connection with these redevelopment projects on a proportionate basis. We anticipate generating pretax unlevered returns of
9% to 11% on these projects.



Multi-family, Industrial and Other Platform



In the last year, we built one of the largest
industrial real estate platforms in the United States and Europe by acquiring three companies with high-quality assets. Our recent
acquisitions include Gazeley, a best-in-class, U.K. based operator acquired in June 2013, and IDI, an owner-operator and developer
of premier industrial assets in U.S. markets acquired in October 2013. We are in the process of integrating these companies into
one global industrial platform. Our industrial platform is currently comprised of 68 million square feet of premier modern logistics
assets and 79 million square feet of development potential. Our industrial strategy is to acquire older generation logistics properties
that we can redevelop into state-of-the-art product. We also seek to selectively develop projects in supply constrained markets
that are critical to the global supply chain. We leverage our long track record of successfully entitling land in these markets
and our global relationships with retailers and other logistics companies to negotiate anchor leases to support such projects.
Our land bank is comprised of well-located sites near major markets and transport routes in North America, Europe, the Middle East
and China.



At December 31, 2013, we owned over 25,500
residential apartments throughout North America. The majority of these apartments are managed by Fairfield Residential Company
LLC, or Fairfield, which is 65% owned by Brookfield Asset Management. Fairfield is one of the largest vertically-integrated multi-family
real estate companies in the United States and is a leading provider of acquisition, development, construction, renovation and
property-management services. As we build our portfolio, we aim to selectively develop Class A properties in high growth, supply-constrained
markets. Due to institutional demand for these types of properties, acquisition opportunities are scarce. We leverage our long
track record of successfully entitling land for development of multi-family properties and managing construction in order to maximize
returns. We also seek opportunities to redevelop well-located, older assets. We target Class B assets that we can acquire at a
significant discount to replacement cost. We typically invest $6,000 to $10,000 per door to upgrade apartments and common areas
with amenities that are in demand in today's market. We seek to earn an attractive return on this capital by raising rents, which
are still a significant discount to new product.



44







With respect to the hospitality sector,
we have ownership interests in eight hotels with 7,500 rooms including the Atlantis resort complex in the Bahamas and the Hard
Rock Hotel and Casino in Las Vegas.



Distribution
Policy



Our
distribution policy is to retain sufficient cash flow within our operations to cover tenant improvements, leasing costs and other
sustaining capital expenditures and to pay out substantially all remaining cash flow. In order to finance development projects,
acquisitions and other investments, we plan to raise external capital. We believe that a payout ratio of 80% of our FFO should
accomplish this objective. We are currently leasing a significant amount of space in lower Manhattan following the expiration of
a major lease, and we have invested a substantial amount of capital in development and redevelopment projects primarily in our
office and retail platforms. Once we realize stabilized cash flow from these initiatives, we expect the growth in our payout to
meet its target range of 3% to 5% per annum.



We
established our initial distribution level and our targeted distribution growth rate based on projections of the amount of FFO
that we will generate in the short to medium term. These projections reflected the in-place cash flow of all of our investments
and our capital investment plans. In a number of our operating entities, we are retaining operating cashflow for reinvestment.
As a result, we are required to finance, in the short term, payment of our distributions to our unitholders. To maintain our distributions
at its current level, we have a number of alternatives available to us, including (a) using borrowings under our committed revolving
credit facilities; (b) electing to accrue and/or waive distributions to be made in respect of the Redemption-Exchange Units that
are held by Brookfield Asset Management in accordance with the Property Partnership’s limited partnership agreement; (c)
paying off all or a portion of the fees owed to the Service Providers pursuant to the Master Services Agreement through the issuance
of our units and/or Redemption-Exchange Units; (d) paying of any equity enhancement distributions to Property Special LP through
the issuance of Redemption-Exchange Units; and (e) utilizing distributions from other operating entities from cash flow from operations,
asset sales and/or refinancings. We are not a passive investor and we typically hold positions of control or significant influence
over assets in which we invest, enabling us to influence distributions from those assets.



Despite
our projections and the alternative methods available to maintain our distribution level, there can be no assurance that we will
be able to maintain our annual distribution of $1.00 per unit or meet our target growth rate. Based on amounts received in distributions
from our operating entities and our projected operating cash flow from our direct investments, our proposed distributions are significantly
greater than such amounts. Following the purchase of the remaining common shares of Brookfield Office Properties that we do not
own, a significant portion of these amounts will be needed to repay amounts borrowed under our credit facility.



Additionally,
our ability to make distributions will depend on a number of factors, some of which are out of our control, including, among other
things, general economic conditions, our results of operations and financial condition, the amount of cash that is generated by
our operations and investments, restrictions imposed by the terms of any indebtedness that is incurred to finance our operations
and investments or to fund liquidity needs, levels of operating and other expenses, and contingent liabilities.



Competition and Marketing



The nature and extent of competition we
face varies from property to property and platform to platform. Our direct competitors include other publicly-traded office, retail,
multi-family and industrial development and operating companies; private real estate companies and funds; commercial property developers
and other owners of real estate that engage in similar businesses.



We believe the principal factors that our
tenants consider in making their leasing decisions include: rental rates; quality, design and location of properties; total number
and geographic distribution of properties; management and operational expertise; and financial position of the landlord. Based
on these criteria, we believe that the size and scope of our operating platforms, as well as the overall quality and attractiveness
of our individual properties, enable us to compete effectively for tenants in our local markets. Our marketing efforts focus on
emphasizing these competitive advantages and leveraging our relationship with Brookfield. We benefit from using the “Brookfield”
name and the Brookfield logo in connection with our marketing activities as Brookfield has a strong reputation throughout the global
real estate industry.



45









Intellectual Property



Our company and the Property Partnership
have each entered into a licensing agreement with Brookfield pursuant to which Brookfield has granted a non-exclusive, royalty-free
license to use the name “Brookfield” and the Brookfield logo. Other than under this limited license, we do not have
a legal right to the “Brookfield” name and the Brookfield logo.



Brookfield may terminate the licensing agreement
effective immediately upon termination of our Master Services Agreement or with respect to any licensee upon 30 days’ prior
written notice of termination if any of the following occurs:



| | · | the licensee defaults in the performance of any material term, condition or agreement contained in the agreement and the default
continues for a period of 30 days after written notice of the breach is given to the licensee;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the licensee assigns, sublicenses, pledges, mortgages or otherwise encumbers the intellectual property rights granted to it
pursuant to the licensing agreement;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | certain events relating to a bankruptcy or insolvency of the licensee; or
| | - | -------------------------------------------------------------------------



| | · | the licensee ceases to be an affiliate of Brookfield.
| | - | -----------------------------------------------------



A termination of the licensing agreement
with respect to one or more licensees will not affect the validity or enforceability of the agreement with respect to any other
licensees.



Governmental, Legal and Arbitration Proceedings



Our company has not been since its formation
and is not currently subject to any material governmental, legal or arbitration proceedings which may have or have had a significant
impact on our company’s financial position or profitability nor is our company aware of any such proceedings that are pending
or threatened.



We are occasionally named as a party in
various claims and legal proceedings which arise during the normal course of our business. We review each of these claims, including
the nature of the claim, the amount in dispute or claimed and the availability of insurance coverage. Although there can be no
assurance as to the resolution of any particular claim, we do not believe that the outcome of any claims or potential claims of
which we are currently aware will have a material adverse effect on us.



Regulation



Our business is subject to a variety of
federal, state, provincial and local laws and regulations relating to the ownership and operation of real property, including the
following:



| | · | We are subject to various laws relating to environmental matters. These laws could hold us liable for the costs of removal
and remediation of certain hazardous substances or wastes existing in, or released or deposited on or in our properties or disposed
of at other locations.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We must comply with regulations under building codes and human rights codes that generally require that public buildings be
made accessible to disabled persons.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We must comply with laws and regulations concerning zoning, design, construction and similar matters, including regulations
which impose restrictive zoning and density requirements.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We are also subject to state, provincial and local fire and life safety requirements.
| | - | -------------------------------------------------------------------------------------



These laws and regulations may change and
we may become subject to more stringent laws and regulations in the future. Compliance with more stringent laws and regulations
could have an adverse effect on our business, financial condition or results of operations. We have established policies and procedures
for environmental management and compliance, and we have incurred and will continue to incur significant capital and operating
expenditures to comply with health, safety and environmental laws and to obtain and comply with licenses, permits and other approvals
and to assess and manage potential liability exposure.



46









Environmental Protection



We are committed to continuous improvement
of our environmental performance. Sustainability is a priority for our tenants, and, as landlords, our goal is to exceed their
expectations. We know that shrinking the environmental footprint in our buildings, and cutting back on energy, water and waste
will have a positive effect on the financial performance of our assets.



Our company intends to build all future
office developments to a LEED Gold standard or local equivalent. The LEED Green Building Rating System is an internationally accepted
scorecard for sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental quality.
Within our 93 million square foot global office portfolio, we have 37 LEED certifications.



We continue to expand and enhance the features,
systems and programs that foster energy efficiency in our existing office buildings, as well as the health and safety of all of
our tenants, employees and the community. We perform regular, comprehensive environmental reviews and upgrades at our office properties
and endeavor to maximize energy efficiency at every office building.



Our goal is to be responsible stewards of
our resources, and good citizens in all that we do. We are an active contributor in the communities where we conduct business.
We are proud of the commitment we have made to corporate social responsibility. The initiatives we undertake and the investments
we make in building our company are guided by our core set of values around sustainable development, as we create a culture and
organization that can be successful today and in the future.



47







| | 4.C. | ORGANIZATIONAL STRUCTURE
| | ---- | ------------------------



Organizational Chart







The chart below represents a simplified
summary of our organizational structure as of December 31, 2013. “GP Interest” denotes a general partnership interest
and “LP Interest” denotes a limited partnership interest. Certain subsidiaries through which Brookfield Asset Management
holds units of our company and the Redemption-Exchange Units have been omitted. This chart should be read in conjunction with the
explanation of our ownership and organizational structure below.







| | (1) | As of the date of this
Form 20-F, public holders own units of our company representing a 81% limited partnership interest in our company, and Brookfield
owns the remaining units of our company, representing a 19% limited partnership interest in our company. Our company’s sole
direct investment is a 19% managing general partnership interest in the Property Partnership through our company’s ownership
of managing general partnership interests in the Property Partnership. Brookfield also owns an 80.1% limited partnership interest
in the Property Partnership through Brookfield’s ownership of Redemption-Exchange Units. The Redemption-Exchange Units are
redeemable for cash or exchangeable for our units in accordance with the Redemption-Exchange Mechanism. On a fully-exchanged basis,
public holders would own units of our company, representing an 28% limited partnership interest in our company, and Brookfield
would own the remaining units of our company, representing a 72% limited partnership interest in our company, and our company
would own 99% of the limited partnership interests in the Property Partnership. Brookfield’s interest in our company consists
of a combination of our units, Redemption-Exchange Units, special limited partnership interests in the Property Partnership and
a general partnership interest in our company, together representing and effective economic interest in our business of 72%.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





48









|(2)  | The Property Partnership owns, directly or indirectly, all of the common shares or equity interests, as applicable, of the Holding Entities. Brookfield holds $1.25 billion of redeemable preferred shares of Brookfield BPY Holdings Inc., or CanHoldco, which it received as partial consideration for causing the Property Partnership to directly acquire substantially all of Brookfield Asset Management’s commercial property operations. In addition, Brookfield has subscribed for $5 million of preferred shares of each of CanHoldco and four wholly-owned subsidiaries of other Holding Entities, which preferred shares will be entitled to vote with the common shares of the applicable entity. Brookfield will have an aggregate of 3% of the votes to be cast in respect of CanHoldco and 1% of the votes to be cast in respect of any of the other applicable entities. See Item 7.B. “Major Shareholders and Related Party Transactions — Related Party Transactions — Relationship with Brookfield — Preferred Shares of Certain Holding Entities”.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(3)  | Certain of the operating entities and intermediate holding companies that are directly or indirectly owned by the Holding Entities and that directly or indirectly hold our real estate assets are not shown on the chart. All percentages listed represent our economic interest in the applicable entity or group of assets, which may not be the same as our voting interest in those entities and groups of assets. All interests are rounded to the nearest one percent and are calculated as at December 31, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(4)  | Our interest in Brookfield Office Properties Inc. consists of 49.2% of its     outstanding common shares and 97.2%
    of its outstanding voting preferred shares. Brookfield Office Properties owns an     approximately 83.3% aggregate equity
    interest in Brookfield Canada Office Properties, a Canadian real estate investment      trust     that is listed on the TSX
    and the NYSE, and an approximately 84.3% interest in the U.S. Office Fund, which     consists of a     consortium of
    institutional investors and which is led and managed by Brookfield Office Properties. On     February 12, 2014, we
    announced the commencement of our Offer to acquire any or all of the common shares of Brookfield     Office Properties that
    we do     not currently own. As of March 31, 2014, Brookfield Office Properties shareholders tendered     220     million
    common     shares pursuant     to the     Offer, which     is greater     than     a     majority of     unaffiliated
    common     shares subject to the Offer. We will now     own,     directly or indirectly,     89% of the
    issued     and     outstanding common     shares of Brookfield Office     Properties     on a fully-diluted basis.     On
    March 20, 2014 we     announced         that     we     intend to     acquire the remainder of the     Brookfield
    Office      Properties     common     shares in     a second     stage     transaction,       which we expect to     close by
    June     2014.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(5)  | Our Australian office platform consists of our economic interest in certain of our Australian office properties not held through Brookfield Office Properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(6)  | Our European office platform includes our interest in 20 Canada Square in London, which is not held through Brookfield Office Properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(7)  | Other, as it relates to the Office segment, includes 100% ownership of an office development in São Paulo, Brazil, as well as office assets held in Brookfield-sponsored private funds in which we hold varying interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(8)  | As at December 31, 2013, our interest in GGP consists of an interest in approximately 28% (34% with our consortium partners) of the outstanding shares of common stock. We, and our consortium partners, also own warrants to acquire additional shares of common stock, which warrants were “in-the-money” as at December 31, 2013. Assuming the exercise of these warrants, we and our consortium partners would hold an aggregate of approximately 396 million shares of GGP, representing approximately 40% of the outstanding shares of common stock of GGP. Of the 396 million shares that would be held by our company and our consortium partners, 323 million common shares of GGP would be owned by our company, representing approximately 32% of the outstanding shares of common stock of GGP (and 33% assuming that only our company, and none of our consortium partners, exercised the warrants).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(9)  | Rouse is a NYSE-listed company that GGP spun-out to its shareholders on January 12, 2012. As at December 31, 2013, we had interests of approximately 39% of the outstanding shares of common stock of Rouse. On January 13, 2014, Rouse completed an underwritten public offering of 8,050,000 shares of its common stock, which decreased our ownership interest in Rouse to 34%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(10) | Our economic interest set forth above is reflected as a range because our multi-family, industrial and other portfolios are held through Brookfield-sponsored private funds in which we hold varying interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(11) | Other, as it relates to the Multi-family, Industrial and Other segment, primarily includes our interests in various hospitality assets, as well as commercial real estate mortgages and mezzanine loans, in which we hold varying interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



49







The following table provides the percentage
of voting securities owned, or controlled or directed, directly or indirectly, by us, and our economic interest in our operating
entities included in our organizational chart set out above under “— Organizational Chart”.



|Name                              |  | Economic Interest(1) |        |      | Voting Interest(1) | 
|--------------------------------- |  | -------------------- | ------ | ---- | ------------------ | 
|Office                            |  |                      |        |      |                    | 
|Brookfield Office Properties Inc. |  |                      | 49     | %    |                    | 
|Pro forma for BPO merger          |  |                      | 100    | %    |                    | 
|Australia                         |  |                      | 100    | %    |                    | 
|Europe                            |  |                      | 100    | %    |                    | 
|Canary Wharf Group plc            |  |                      | 22     | %    |                    | 
|Brazil                            |  |                      | 100    | %    |                    | 
|Other                             |  |                      | 30%-83 | %    |                    | 
|Retail                            |  |                      |        |      |                    | 
|General Growth Properties, Inc.   |  |                      | 28     | %(5) |                    | 
|Rouse Properties, Inc.            |  |                      | 39     | %(6) |                    | 
|Brazil Retail Fund                |  |                      | 35     | %    |                    | 
|Australia                         |  |                      | 100    | %    |                    | 
|Multi-Family, Industrial & Other  |  |                      |        |      |                    | 
|Multi-Family(8)                   |  |                      | 13%-52 | %    |                    | 
|Industrial(8)                     |  |                      | 28%-40 | %    |                    | 
|Other(8)                          |  |                      | 12%-82 | %    |                    | 



| | (1) | All interests are rounded to the nearest one percent and are calculated as at December 31, 2013.
| | --- | ------------------------------------------------------------------------------------------------



| | (2) | Our interest in Brookfield Office Properties Inc. consists
                                                           of 49.2% of its outstanding common shares and 97.2% of its outstanding voting preferred shares. Brookfield Office Properties
                                                           owns an approximate 83.3% aggregate equity interest in Brookfield Canada Office Properties, a Canadian real estate
                                                           investment                                                            trust that is listed on the TSX and the NYSE, and an
                                                           approximate 84.3% interest in the U.S. Office Fund, which consists of a
                                                           consortium of institutional investors and which is led and managed by Brookfield Office Properties. On February 12, 2014, we
                                                           announced the commencement of our Offer to acquire any or all of the common shares of Brookfield Office Properties that we
                                                           do                                                            not own. As of March 31, 2014, Brookfield Office Properties
                                                           shareholders tendered 220 million                                                            common shares
                                                           pursuant                                                                                                      to the
                                                           Offer,                                                               which
                                                           is                                                                                                            greater than a
                                                           majority of unaffiliated common shares subject to the
                                                           Offer. We will now own, directly or indirectly, 89% of the
                                                           issued                                                             and
                                                           outstanding common shares of Brookfield Office Properties on                                                             a
                                                           fully-diluted basis.  On March 20, 2014, we                                                                        announced
                                                           that                                                                                                              we
                                                           intend to                                                                                                        acquire the
                                                           remainder of the Brookfield Office                                                            Properties common
                                                           shares in a second stage transaction, which we
                                                           expect to close by June 2014.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Our Australian office platform consists of our economic interest
in certain of our Australian office properties not held through Brookfield Office Properties. This economic interest is held in
the form of participating loan agreements with Brookfield, which are hybrid instruments comprising
an interest bearing note, a total return swap, and an option to acquire direct or indirect legal ownership in the properties. The
participating loan interests provide the holding entities (or their wholly owned subsidiaries) with an economic interest in the
results of operations and changes in fair value of the properties. Brookfield retains the legal title to the properties through
a wholly-owned subsidiary that is not part of the business in order to preserve existing financing arrangements. We have control
or significant influence over the properties via the participating loan interests. Accordingly, the assets, liabilities and results
of the entities that have direct ownership of such properties are consolidated or accounted for under the equity method by the
holding entities (or their wholly owned subsidiaries).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | We hold our economic interest in these assets primarily through limited partnership interests in
Brookfield-sponsored private funds. By their nature, limited partnership interests do not have any voting rights.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | We, together with our consortium partners, control approximately 34% of the outstanding shares
of common stock of GGP. In addition, we are entitled to appoint three directors to GGP’s board of directors. We, and our
consortium partners, also own warrants to acquire additional shares of common stock of GGP, which warrants were “in-the-money”
as at December 31, 2013. Assuming the exercise of these warrants, we and our consortium partners would hold an aggregate of approximately
396 million shares of GGP, representing approximately 40% of the outstanding shares of common stock of GGP. Of the 396 million
shares that would be held by our company and our consortium partners, 323 million common shares of GGP would be owned by our
company, representing approximately 32% of the outstanding shares of common stock of GGP (and 33% assuming that only our company,
and none of our consortium partners, exercised the warrants).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



50







| | (6) | As at December 31, 2013, we had interests of approximately 39% of the outstanding shares of common
stock of Rouse. On January 13, 2014, Rouse completed an underwritten public offering of 8,050,000 shares of its common stock,
which decreased our ownership interest in Rouse to 34%.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Our economic interest in our Australian retail properties is held
in the form of participating loan agreements with Brookfield, which are hybrid instruments
comprising an interest bearing note, a total return swap, and an option to acquire direct or indirect legal ownership in the properties.
The participating loan interests provide the holding entities (or their wholly owned subsidiaries) with an economic interest in
the results of operations and changes in fair value of the properties. Brookfield retains the legal title to the properties through
a wholly-owned subsidiary that is not part of the business in order to preserve existing financing arrangements. We have control
or significant influence over the properties via the participating loan interests. Accordingly, the assets, liabilities and results
of the entities that have direct ownership of such properties are consolidated or accounted for under the equity method by the
holding entities (or their wholly owned subsidiaries).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) | Our economic interest set forth above is reflected as a range because our multi-family, industrial
and other portfolios are primarily held through Brookfield-sponsored private funds in which we hold varying interests.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Company



Our company was established on January 3,
2013 as a Bermuda exempted limited partnership registered under the Bermuda Limited Partnership Act 1883, as amended, and the Bermuda
Exempted Partnerships Act of 1992, as amended. Our company’s head and registered office is 73 Front Street, 5th Floor, Hamilton
HM 12, Bermuda, and our company’s telephone number is +441 294 3309.



In connection with the spin-off, we acquired
from Brookfield Asset Management substantially all of its commercial property operations, including its office, retail, multi-family
and industrial assets. We are Brookfield’s flagship public commercial property entity and the primary entity through which
Brookfield Asset Management owns and operates these businesses on a global basis. We are positioned to take advantage of Brookfield’s
global presence, providing unitholders with the opportunity to benefit from Brookfield’s operating experience, execution
abilities and global relationships.



Property Partnership



Our company’s sole direct investment
is a managing general partnership interest in the Property Partnership. Our company serves as the managing general partner of the
Property Partnership and has sole authority for the management and control of the Property Partnership.



Our company owns a direct 19%
managing general partnership interest in the Property Partnership and Brookfield owns a combination of our units,
Redemption-Exchange Units, a special limited partner interest and a general partner interest, together representing an
effective economic interest in the Property Partnership of 72% as of the date of this Form 20-F. Holders of our units other than
Brookfield hold the remaining economic interest in the Property Partnership. Brookfield’s interest in the Property
Partnership includes a special limited partnership interest held by Property Special LP, a wholly-owned subsidiary of
Brookfield Asset Management, which entitles it to receive equity enhancement distributions and incentive distributions from
the Property Partnership. See Item 7.B. “Major Shareholders and Related Party Transactions — Related
Party Transactions — Relationship with Brookfield — Equity Enhancement and Incentive Distributions”.



Our Service Providers



The Service Providers, wholly-owned subsidiaries
of Brookfield Asset Management, provide management services to us pursuant to our Master Services Agreement. The senior management
team that is principally responsible for providing us with management services include many of the same executives that have successfully
overseen and grown Brookfield’s global real estate business, including Richard B. Clark who is Senior Managing Partner and
Chief Executive Officer of Brookfield Asset Management’s global real estate group.



The BPY General Partner



The BPY General Partner, a wholly-owned
subsidiary of Brookfield Asset Management, has sole authority for the management and control of our company. Holders of our units,
in their capacities as such, may not take part in the management or control of the activities and affairs of our company and do
not have any right or authority to act for or to bind our company or to take part or interfere in the conduct or management of
our company. See Item 10.B. “Additional Information — Memorandum and Articles of Association — Description of
Our Units and Our Limited Partnership Agreement”.



51







Property Special LP



Property Special LP is a special limited
partner of the Property Partnership. The general partner of Property Special LP is Brookfield Asset Management. Property Special
LP is entitled to receive equity enhancement distributions and incentive distributions from the Property Partnership as a result
of its ownership of the special limited partnership interests of the Property Partnership. See Item 7.B. “Major Shareholders
and Related Party Transactions — Related Party Transactions”.



Holding Entities



Our company indirectly holds its interests
in our operating entities through the Holding Entities, which were formed in connection with the spin-off. The Property Partnership
owns, directly or indirectly, all of the common shares or equity interests, as applicable, of the Holding Entities. Brookfield
holds $1.25 billion of redeemable preferred shares of one of our Holdings Entities, which it received as partial consideration
for causing the Property Partnership to directly acquire substantially all of Brookfield Asset Management’s commercial property
operations. In addition, Brookfield has subscribed for $5 million of preferred shares of each of CanHoldco and four wholly-owned
subsidiaries of other Holding Entities. See Item 7.B. “Major Shareholders and Related Party Transactions — Related
Party Transactions — Relationship with Brookfield — Preferred Shares of Certain Holding Entities”.



Operating Entities



Our business is organized in three operating
platforms: office, retail and multi-family, industrial and other. The capital invested in these operating platforms is through
a combination of: direct investment; investments in asset level partnerships or joint venture arrangements; sponsorship and participation
in private equity funds; and the ownership of shares in other public companies. Combining both publicly-listed and private institutional
capital provides a competitive advantage in flexibility and access to capital to fund growth.



Office Platform



Brookfield Office Properties
Inc.: Our U.S. and Canadian office properties and our economic interests in most of our Australian office properties are
held through our approximately 51% voting interest in Brookfield Office Properties, a global pure-play office company that is
incorporated under the laws of Canada and is listed on the NYSE and the TSX. Brookfield Office Properties owns all of its
Canadian office properties through its approximately 83.3% aggregate equity interest in Brookfield Canada Office Properties,
a real estate investment trust formed under the laws of Canada and listed on the TSX and the NYSE. Brookfield Office
Properties also owns a portion of its U.S. office properties through its approximately 84.3% interest in the U.S. Office
Fund, which consists of a consortium of institutional investors and which is led and managed by Brookfield Office Properties.
As at December 31, 2013, Brookfield Office Properties’ portfolio consisted of interests in 114 properties totaling
85 million square feet and interests in 18 million square feet of high quality, centrally-located development sites.
Brookfield has held an interest in Brookfield Office Properties and its predecessors for over 20 years. On February 12, 2014,
we announced the commencement of our Offer to acquire any or all of the common shares of Brookfield Office Properties that we
do not currently own. As of March 31, 2014, Brookfield Office Properties shareholders tendered 220 million common shares
pursuant to the Offer, which is greater than a majority of unaffiliated common shares under the Offer. We will now own,
directly or indirectly, 89% of the issued and outstanding common shares of Brookfield Office Properties on a fully-diluted
basis. On March 20, 2014, we announced that we intend to acquire the remainder of the Brookfield Office Properties common
shares in a second stage transaction, which we expect to close by June 2014.



Australia: In addition to the office
properties in Australia in which Brookfield Office Properties has an economic interest, we hold an economic interest in office
properties in Sydney, Canberra, Brisbane and New Zealand. As at December 31, 2013, this portfolio consisted of 11 office properties
totaling approximately 2.4 million square feet. Brookfield acquired these office properties in 2007.



Europe: In addition to the office
properties in Europe in which Brookfield Office Properties has an interest, we own 100% of a 576,000 square foot office property
at 20 Canada Square, Canary Wharf, London. Brookfield acquired an interest in this office property in 2005.



Canary Wharf: The remainder of our
European office property operations consists of our approximately 22% interest in Canary Wharf, a company incorporated under the
laws of England and Wales which, as at December 31, 2013, owned and operated 18 office and retail properties (not including
our interest in the office property at 20 Canada Square) totaling more than 7 million square feet. Brookfield acquired an
initial interest in Canary Wharf in 2003 and an additional interest in 2010.



52







Brazil: We are currently actively
developing an office tower and open-air mall situated in the Marginal district of São Paulo in Brazil. Brookfield acquired
an 80% interest in the development in September 2011 and in May 2013, we acquired the remaining 20% stake.



Other: Other investments include
office assets in the United States held in our real estate opportunity funds.



Retail Platform



GGP: A substantial
portion of the properties in our retail platform are held through our approximately 28% interest in GGP, a NYSE-listed company
that is incorporated under the laws of Delaware. GGP is the second largest mall owner in the United States. The majority of
GGP’s properties rank among the highest quality U.S. retail assets. In late 2010, Brookfield successfully led GGP out
of Chapter 11 with a cornerstone investment. Brookfield and our company acquired a further interest in GGP in January 2011,
December 2012 and April and November 2013. We and the other members of the consortium hold an aggregate of approximately
311 million shares of GGP, representing approximately 34% of the outstanding shares of common stock of GGP. We, and our consortium
partners, also own warrants to acquire additional shares of common stock, which warrants were “in-the-money” as at
December 31, 2013. Assuming the exercise of these warrants, we and our consortium partners would hold an aggregate of approximately
396 million shares of GGP, representing approximately 40% of the outstanding shares of common stock of GGP. Of the 396 million
shares, 323 million common shares of GGP would be owned by our company, representing approximately 32% of the outstanding
shares of common stock of GGP.



Rouse: On January 12,
2012, we and other members of Brookfield’s consortium acquired an approximately 37% interest in Rouse, a NYSE-listed company
that is incorporated under the laws of Delaware, that GGP spun-out to its shareholders. After giving effect to Rouse’s rights
offering in March 2012, we increased our holdings to approximately 36% of the outstanding shares of Rouse common stock and
further increased this position in April 2013 and November 2013. On January 13, 2014, Rouse completed an underwritten
public offering of 8,050,000 shares of its common stock, which decreased our ownership interest in Rouse. We currently hold approximately
34% of the outstanding shares of Rouse common stock. Rouse is one of the largest publicly-traded regional mall owner in the United States
based on square footage and owns and manages Class B regional malls in secondary and tertiary markets. As at December
31, 2013, Rouse owned and operated 34 retail properties totaling approximately 23 million square feet.



Brazil Retail Fund:
We hold an approximately 35% interest in the Brazil Retail Fund, a Brookfield-sponsored retail fund in Brazil. As at December 31,
2013, the Brazil Retail Fund’s portfolio consisted of eight malls totaling approximately 2.9 million square feet
in Brazil, 59% of which is located in São Paolo, 33% of which is located in Rio de Janeiro and 8% of which is located in
Belo Horizonte. Brookfield acquired an interest in the Brazil Retail Fund in 2006.



Australia: We
hold an economic interest in Brookfield’s retail property portfolio in Australia. As at December 31, 2013, this portfolio
consisted of one property in Sydney totaling approximately 900,000 square feet and one property that is currently being
de-leased in preparation for redevelopment. Brookfield acquired these retail properties in 2007.



Multi-Family, Industrial and Other
Platform



Multi-Family:
As at December 31, 2013, our multi-family portfolio consisted of interests in over 25,500 multi-family units, which were held
primarily through a number of Brookfield-sponsored private funds.



Industrial:
As at December 31, 2013, our industrial portfolio consisted of interests in approximately
68 million square feet of industrial space through our interests in 236 industrial properties in North America
and Europe. We hold these interests through private funds.



Other: Other
assets primarily include interests in eight hotel properties with approximately 7,500 rooms in North America and Australia,
as well as commercial real estate mortgages and mezzanine loans.



| | 4.D. | PROPERTY, PLANTS AND EQUIPMENT
| | ---- | ------------------------------



See Item 4.B. “Information on
the Company — Business Overview” and Item 4.C. “Information on the Company — Organizational Structure
— Operating Entities”.



53









| | ITEM 4A. | UNRESOLVED STAFF COMMENTS
| | -------- | -------------------------



Not applicable.



| | ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
| | ------- | --------------------------------------------



| | 5.A. | OPERATING RESULTS
| | ---- | -----------------



Introduction



This management's discussion and analysis
(“MD&A”) of Brookfield Property Partners L.P. (the “partnership” or “BPY”), covers the
financial position as at December 31, 2013 and December 31, 2012 and results of operations for years ended December 31, 2013, 2012
and 2011 of the business (the “business”) comprising Brookfield Asset Management Inc.’s (“Brookfield Asset
Management” or “BAM”) commercial property operations prior to the spin-off presented on a continuity of interests
basis and our partnership’s actual results from April 15, 2013 through December 31, 2013. The information in this MD&A
should be read in conjunction with the audited consolidated financial statements as at December 31, 2013 and December 31, 2012
and each of the years in the three year period ended December 31, 2013 (the “Financial Statements”) contained elsewhere
in this Form 20-F.



In addition to historical information, this
MD&A contains forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.
See “Special Note Regarding Forward-Looking Statements”.



Basis of Presentation



Our sole material asset is our 19% interest
in Brookfield Property L.P. (the “Property Partnership”). As we have the ability to direct its activities pursuant
to the rights as owners of the general partner units, we consolidate the Property Partnership. Accordingly, our Financial Statements
reflect 100% of its assets, liabilities, revenues, expenses and cash flows, including non-controlling interests therein, which
capture the ownership interests of other third parties. We also discuss the results of operations on a segment basis, consistent
with how we manage and view our business. Our operating segments are (i) office, including our office development projects, (ii)
retail, and (iii) multi-family, industrial and other.



Financial data provided has been prepared
using accounting policies in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”). Non-IFRS measures used in this MD&A are reconciled to or calculated
from such financial information. Unless otherwise specified, all operating and other statistical information is presented as if
we own 100% of each property in our portfolio, regardless of whether we own all of the interests in each property, excluding information
relating to our interest in Canary Wharf Group plc (“Canary Wharf”). We believe this is the most appropriate basis
on which to evaluate the performance of properties in the portfolio relative to each other and others in the market. All dollar
references, unless otherwise stated, are in millions of U.S. Dollars. Canadian Dollars, Australian Dollars, British Pounds, Euros,
and Brazilian Reais are identified as “C$”, “A$”, “£”, “€” and “R$”,
respectively.



Continuity of Interest



Our partnership was established on January
3, 2013 by Brookfield Asset Management, and on April 15, 2013, Brookfield Asset Management completed the spin-off of the business
to our partnership. Brookfield Asset Management directly and indirectly controlled the business prior to the spin-off and continues
to control our partnership subsequent to the spin-off through its interests in our partnership. As a result of this continuity
of interests, there is insufficient substance to justify a change in the measurement of the business. Accordingly, our partnership
has reflected the business in its financial position and results of operations using Brookfield Asset Management’s carrying
values prior to the spin-off, excluding certain interests in Brookfield Asset Management’s Australian assets and a 2% investment
in The Howard Hughes Corporation, which were previously reported by Brookfield Asset Management for the same periods presented
herein and which were not contributed to the partnership as part of the spin-off (the “non-contributed operations”).



To reflect this continuity of interests,
the consolidated Financial Statements provide comparative information of the business, as previously reported by Brookfield Asset
Management exclusive of the non-contributed operations for all periods prior to the spin-off. The consolidated Financial Statements
utilize the accounting policies that were used to prepare the partnership’s first consolidated financial statements subsequent
to the spin-off, based on the historical financial information for the contributed operations of the business as reported by Brookfield
Asset Management, as if our partnership was a legal entity for the periods presented. The economic and accounting impact of contractual
relationships created or modified in conjunction with the spin-off are reflected prospectively from the date of the spin-off and
accordingly have not been reflected in the results of operations or financial position of our partnership, as such items were in
fact not created or modified prior thereto. Accordingly, the financial information included herein for periods prior to April 15,
2013 is presented based on the historical financial information as previously reported by Brookfield Asset Management but excluding
the non-contributed operations.



54







Performance Measures



To measure our performance, we focus on:
equity, net operating income (“NOI”) and funds from operations (“FFO”). NOI and FFO do not have standardized
meanings prescribed by IFRS and therefore may differ from similar metrics used by other companies. We define each of these measures
as follows:



| | · | NOI: means revenues from commercial and hospitality operations of
consolidated properties less direct commercial property and hospitality expenses, with the exception of depreciation and amortization
of real estate assets.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | FFO: means income, including equity accounted income, before realized
gains (losses) on real estate property, fair value gains (losses) (including equity accounted fair value gains (losses)), depreciation
and amortization of real estate assets, income tax expense (benefit), and less non-controlling interests.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOI is used as a key indicator of performance
as it represents a measure over which management has a certain degree of control. We evaluate the performance of our office segment
by evaluating NOI from “Existing properties”, or on a “same-store” basis, and NOI from “Acquisitions,
dispositions and other.” NOI from existing properties compares the performance of the property portfolio by excluding the
effect of current and prior period dispositions and acquisitions, including developments and “one-time items”, which
for the historical periods presented consists primarily of lease termination income. NOI presented within “Acquisitions,
dispositions and other” includes the results of current and prior period acquired, developed and sold properties, as well
as the one-time items excluded from the “Existing properties” portion of NOI. We do not evaluate the performance of
the operating results of the retail segment on a similar basis as the majority of our investments in the retail segment are accounted
for under the equity method and, as a result, are not included in NOI. Similarly, we do not evaluate the operating results of our
other segments on a same-store basis based on the nature of the investments.



We also consider FFO an important measure
of our operating performance. FFO is a widely recognized measure that is frequently used by securities analysts, investors and
other interested parties in the evaluation of real estate entities, particularly those that own and operate income producing properties.
Our definition of FFO includes all of the adjustments that are outlined in the National Association of Real Estate Investment Trusts
(“NAREIT”) definition of funds from operations, including the exclusion of gains (or losses) from the sale of real
estate property, the add back of any depreciation and amortization related to real estate assets and the adjustment for unconsolidated
partnerships and joint ventures. In addition to the adjustments prescribed by NAREIT, we also make adjustments to exclude any unrealized
fair value gains (or losses) that arise as a result of reporting under IFRS and income taxes that arise as certain of our subsidiaries
are structured as corporations as opposed to real estate investment trusts (“REITs”). These additional adjustments
result in an FFO measure that is similar to that which would result if our partnership was organized as a REIT that determined
net income in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), which is
the type of organization on which the NAREIT definition is premised. Our FFO measure will differ from other organizations applying
the NAREIT definition to the extent of certain differences between the IFRS and U.S. GAAP reporting frameworks, principally related
to the recognition of lease termination income. Because FFO excludes fair value gains (losses), including equity accounted fair
value gains (losses), realized gains (losses) on real estate property, depreciation and amortization of real estate assets and
income taxes, it provides a performance measure that, when compared year-over-year, reflects the impact on operations from trends
in occupancy rates, rental rates, operating costs and interest costs, providing perspective not immediately apparent from net income.
We reconcile FFO to net income rather than cash flow from operating activities as we believe net income is the most comparable
measure.



We do not utilize net income on its own
as a key metric in assessing the performance of our business because, in our view, it does not provide a consistent or complete
measure of the ongoing performance of the underlying operations. Nevertheless, we recognize that others may wish to utilize net
income as a key measure and therefore provide a reconciliation of net income to NOI and FFO on page 71 in this Form 20-F.



55







Overview of our Business



Our company is Brookfield Asset Management’s
primary, public entity to make investments in the real estate industry. We are a globally-diversified owner and operator of high-quality
properties that typically generate stable and sustainable cash flows over the long term. With over 15,000 employees involved in
Brookfield Asset Management’s real estate businesses around the globe, we have built operating platforms in the office, retail,
industrial and multi-family sectors. We leverage these operating platforms to enhance the cash flow and value of these assets,
including through active asset management and by executing development and redevelopment projects.



Our portfolio is comprised of high-quality
properties, including:



| | · | Interests in 163 office properties totaling 93 million square feet
in the world’s leading commercial markets such as New York, London, Los Angeles, Washington, D.C., Sydney, Toronto, Houston,
Calgary and Perth;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interests in 163 retail properties containing approximately 153 million
square feet in the United States, Brazil and Australia, including 73 Class A malls with average sales per square foot in excess
of $660; a substantial portion of our retail properties are held through our 32% fully-diluted interest in General Growth Properties,
Inc. (“GGP”) and our 39% interest in Rouse Properties, Inc. (“Rouse”);
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interests in approximately 68 million square feet of industrial space,
primarily consisting of modern logistics assets in North America and Europe; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interests in over 25,500 multi-family units as well as eight hotel
assets with approximately 7,500 rooms.
| | - | ---------------------------------------------------------------------------------------------------------



In addition, we have a 19 million square
foot office development pipeline, a $600 million retail mall redevelopment pipeline (on a proportionate basis) and a land portfolio
with the potential to build 79 million square feet of industrial properties.



Our strategy is to be the leading globally-diversified
owner and operator of commercial properties. Due to the cyclical nature of the real estate industry, we believe that a real estate
portfolio diversified by property type and geography will perform consistently over time. Furthermore, since property valuations
fluctuate considerably based on market sentiment and other factors, we believe that the flexibility to shift capital to sectors
and geographies that are out of favor will enable us to earn premium returns on the capital that we invest. As we grow our business,
we will seek to acquire high-quality assets on a value basis, utilize our operating platforms to add value through pro-active management
and recycle capital for re-investment in new opportunities.



Our diversified portfolio of high-quality
assets has a stable cash flow profile with growth potential. As a result of marking-to-market of rents upon lease expiry, escalation
provisions in leases and increases in occupancy, our existing assets should generate strong same-store growth without significant
capital investment. Furthermore, expect to earn between 8% and 11% unlevered, pre-tax returns on construction costs for our development
and redevelopment projects. With this cash flow profile, our goal is to pay an attractive annual distribution to our unitholders
and to grow our distribution by 3% to 5% per annum.



Overall, we seek to earn leveraged after-tax
returns of 12% to 15% on our invested capital. These returns will be comprised of current cash flow that is generated by our assets
and capital appreciation. Some of the capital appreciation will be reflected in the fair value gains that flow through our income
statement as a result of our revaluation of investment properties in accordance with IFRS. The remainder of the capital appreciation
will be realized in future periods to the extent we are able to successfully execute development and redevelopment projects as
well as other value creation strategies. From time to time, we will convert some or all of these unrealized gains to cash through
asset sales, joint ventures or refinancings.



56







Financial Performance and Analysis as at December 31, 2013
and 2012 and the years ended December 31, 2013, 2012 and 2011



Consolidated Results of Operations



The following tables set forth the results
for our business for each of the years ended December 31, 2013, 2012 and 2011 and as at December 31, 2013 and 2012. Further details
on our operations and financial position are contained within the review of our business segments below.



|(US$ Millions, except per unit amounts) Year ended Dec. 31,                                                                        |  | 2013 |       |  | 2012 |   |       | 2011 | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|Commercial property revenue                                                                                                        |  | $    | 2,910 |  |      | $ | 2,858 |      | 
|Hospitality revenue                                                                                                                |  |      | 1,168 |  |      |   | 743   |      | 
|Investment and other revenue                                                                                                       |  |      | 209   |  |      |   | 167   |      | 
|Total revenue                                                                                                                      |  |      | 4,287 |  |      |   | 3,768 |      | 
|Direct commercial property expense                                                                                                 |  |      | 1,204 |  |      |   | 1,189 |      | 
|Direct hospitality expense                                                                                                         |  |      | 1,081 |  |      |   | 687   |      | 
|Interest expense                                                                                                                   |  |      | 1,088 |  |      |   | 1,020 |      | 
|Administration and other expense                                                                                                   |  |      | 355   |  |      |   | 205   |      | 
|Total expenses                                                                                                                     |  |      | 3,728 |  |      |   | 3,101 |      | 
|Fair value gains, net                                                                                                              |  |      | 870   |  |      |   | 1,227 |      | 
|Share of net earnings from equity accounted investments                                                                            |  |      | 835   |  |      |   | 1,235 |      | 
|Income before income taxes                                                                                                         |  |      | 2,264 |  |      |   | 3,129 |      | 
|Income tax expense                                                                                                                 |  |      | 501   |  |      |   | 489   |      | 
|Net income                                                                                                                         |  | $    | 1,763 |  |      | $ | 2,640 |      | 
|Net income attributable to:                                                                                                        |  |      |       |  |      |   |       |      | 
|Limited partners(1)                                                                                                                |  | $    | 118   |  |      | $ | -     |      | 
|General partner(1)                                                                                                                 |  |      | -     |  |      |   | -     |      | 
|Brookfield Asset Management Inc.(2)                                                                                                |  |      | 232   |  |      |   | 1,476 |      | 
|Non-controlling interests attributable to:                                                                                         |  |      |       |  |      |   |       |      | 
|Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.(1) |  |      | 557   |  |      |   | -     |      | 
|Interests of others in operating subsidiaries                                                                                      |  |      | 856   |  |      |   | 1,164 |      | 
|                                                                                                                                   |  | $    | 1,763 |  |      | $ | 2,640 |      | 
|Basic and diluted earnings per LP Unit(3)                                                                                          |  | $    | 1.41  |  |      |   |       |      | 



|(1) | For the period from April 15, 2013 to December 31, 2013.                                                                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | For the periods prior to April 15, 2013.                                                                                                                                                                    
|(3) | Earnings per unit have been presented effective for the period from the date of the spin-off on April 15, 2013, as this is the date of legal entitlement of earnings to the limited partnership unitholders.



|(US$ Millions)                                                                             |  | Dec. 31, 2013 |        |  | Dec. 31, 2012 |  
|------------------------------------------------------------------------------------------ |  | ------------- | ------ |  | ------------- | -
|Investment properties                                                                      |  | $             | 34,153 |  |               | $
|Equity accounted investments                                                               |  |               | 9,281  |  |               |  
|Total assets                                                                               |  |               | 52,446 |  |               |  
|Property debt(1)                                                                           |  |               | 21,640 |  |               |  
|Total equity                                                                               |  |               | 24,990 |  |               |  
|Equity after subtracting non-controlling interests of others in operating
    subsidiaries |  |               | 13,624 |  |               |  

(1) Includes corporate-level debt of $2,092 million
at December 31, 2013 and $963 million at December 31, 2012.



Consolidated Performance and Analysis



2013 compared to 2012



Commercial property revenue increased by
$52 million in 2013 compared to 2012. This increase was due to acquisitions in our multi-family, industrial and other segment which
contributed $51 million of incremental revenue during 2013. In addition, our retail segment saw a $3 million increase, as a result
of favorable spreads on lease renewals in Brazil, partially offset by the dispositions of retail assets in Australia. Revenue in
our office segment declined by $2 million as a result of a major expiry at Brookfield Place New York in the fourth quarter of 2013
and the reclassification of certain Australian assets to participating loan interests following our spin-off in April 2013, which
was offset by property acquisitions in the United States and the United Kingdom. Hospitality revenue in 2013 increased by $425
million compared to 2012 as a result of the inclusion of a full year of operating results of the Atlantis in the Bahamas, which
was acquired in April 2012.



Compared to 2012, investment and other revenue
increased by $42 million in 2013, driven by a $29 million development fee upon the completion of an industrial asset. In addition,
in our office segment, we recorded a $14 million dividend from our investment in Canary Wharf during the fourth quarter, which
was offset by lower interest income in the current period, as a result of the pay-off on a note receivable from Brookfield Residential
Properties Inc. (“BRPI”) in the fourth quarter of 2012.



57







Direct commercial property expense increased
by $15 million in 2013 compared to 2012. The increase was primarily due to operating expenses associated with property acquisitions
within our office sector during the year, as well as a full year of operating results of Brookfield Place Perth.



Direct hospitality expense increased by
$394 million in 2013 compared to 2012 as a result of the inclusion of a full year of operating results following the acquisition
of the Atlantis in April 2012.



Interest expense increased by $68 million
in 2013 compared to 2012 primarily due to acquisitions in our multi-family, industrial and other segment which accounted for $85
million of interest expense on asset level debt. Our office segment recorded a decrease in interest expense of $64 million primarily
related to refinancing activity and lower interest rates on asset-level debt of assets acquired compared to assets sold, which
was offset by property acquisitions in the United States and the United Kingdom. Our retail segment also saw a decline of $16 million
as a result of asset dispositions and lower interest rates on our Brazilian mall portfolio. In addition, we recorded $63 million
of corporate-level interest expense on our credit facilities, capital securities and preferred shares subsequent to the spin-off.



Administration and other expense increased
by $150 million in 2013 compared to 2012 primarily as a result of incremental expense associated with the spin-off of BPY, including
management fees, which contributed $97 million of the total increase. We recorded an increase in administration and other expense
of approximately $20 million in our office segment, primarily related to a contingent payment due to a litigation against one of
our subsidiaries associated with a defaulted loan, as well as transaction costs incurred as a result of property acquisitions.
Finally, our administrative and other expense increased by $33 million, primarily as a result of acquisitions completed during
the year in the industrial sector.



We recorded $870 million of fair value gains
in 2013 compared to $1.2 billion in the prior year. This was primarily driven by our office segment which recorded $720 million
of fair value gains of which 50% related to discount and terminal capitalization rate compression, and 50% related to leasing rates,
timing and other assumptions. In addition, we recorded $65 million of fair value gains in our Brazilian retail malls as a result
of changes to leasing assumptions and the impact of capital expenditures. In our multi-family, industrial and other segment, we
recorded gains of $85 million, primarily related to the recognition of the favorable purchase price of our U.S. industrial portfolio.



Our share of net earnings from equity accounted
investments was $835 million in 2013 compared to $1.2 billion in 2012. Our retail segment recorded $488 million of net earnings
from equity accounted investments, which was driven by operating income and fair valuation gains on our interest in GGP. These
gains were largely attributable to an increase in the valuation of Ala Moana Center and other redevelopment projects, which was
partially offset by an impairment of embedded goodwill. Specifically, Ala Moana Center is undergoing a significant redevelopment
and has made considerable progress in leasing up the additional space at rents higher than budgeted. In the fourth quarter of 2013,
management reviewed the operating performance and financial condition of GGP, including the status of the redevelopment projects,
to which a portion of the embedded goodwill was ascribed on BPY’s initial investment in GGP. Management determined that,
based on the fair value gains recorded during 2013, a portion of the carrying value of the embedded goodwill ascribed to these
redevelopment properties was realized and management accordingly recognized an impairment loss of $249 million. Our office segment
recorded $294 million of net earnings from equity accounted investments during the period which was primarily attributable to operating
income from our equity accounted investments in the U.S. and Australia, as well as from 125 Old Broad Street in London prior to
its consolidation in the fourth quarter of 2013 upon our acquisition of the remaining 50% stake in the asset. We also recorded
$53 million of net earnings from equity accounted investments in our multi-family, industrial and other segment, which was primarily
driven by increased values on our equity accounted industrial portfolio.



Income tax expense increased by $12 million
in 2013 compared to 2012 as a result of approximately $218 million of income tax expense at the corporate-level following the spin-off,
which was largely offset by reduced income tax expense across all of our segments as a result of lower income before income taxes.



Net income attributable to interests of
others in operating subsidiaries decreased by $308 million in 2013 compared to 2012 as a result of higher net income in the prior
year for the reasons noted above.



58







2012 compared to 2011



Commercial property revenue increased by
$473 million in 2012 compared to 2011. This increase was primarily due to acquisitions, the consolidation of 250 Vesey Street in
New York City, following the acquisition of the remaining 49% of the property we did not own, in the second half of 2011 and the
practical completion of Brookfield Place Perth in May 2012, in our office sector. In addition, we began consolidating the U.S.
Office Fund, our interest in which is held through an indirect interest in TRZ Holdings LLC (“TRZ Holdings”), an entity
originally established by us and The Blackstone Group (“Blackstone”). On August 9, 2011, Blackstone exercised its option
to call certain Blackstone sub-managed properties in exchange for its equity interest in TRZ Holdings. Following the exercise of
this option, we held an 82.7% equity interest in TRZ Holdings and obtained control over the strategic financial and operating policy
decisions of the entity. Accordingly, we consolidated our interest in TRZ Holdings effective August 9, 2011. In 2011, we also
acquired the interests of two co-investors in the U.S. Office Fund, bringing our ownership interest to 84.3% at December 31, 2011.
These transactions accounted for an increase of $508 million. This increase was offset by decreases in our retail and multi-family,
industrial and other segments, primarily as a result of asset sales. In 2012, hospitality revenue increased by $579 million compared
to 2011 as a result of the acquisition of the Atlantis in April 2012 and the inclusion of a full-year's operating results for the
Hard Rock Hotel and Casino in Las Vegas which was acquired in March 2011.



Investment and other revenue in 2012 decreased
by $65 million compared to 2011 primarily as a result of the settlement of loans receivable from Brookfield and the recognition
of a condemnation award of $11 million in our office segment, both in the prior year. This decrease was partially offset by an
increase in dividend income from our investment in Canary Wharf.



In 2012, direct commercial property expense
increased by $258 million compared to 2011, primarily attributable to acquisitions of office properties, the practical completion
of Brookfield Place Perth in May 2012 and the consolidation of the U.S. Office Fund and 250 Vesey Street in the second half of
2011 in our office segment, which accounted for $170 million of the increase. In addition, direct commercial property expense in
our multi-family, industrial and other segment increased by $94 million as a result of acquisitions made in 2012, offset by divestment
of certain assets.



Direct hospitality expense increased by
$549 million in 2012 compared to 2011 as a result of the acquisition of the Atlantis in April 2012 and the inclusion of a full-year’s
operating results for the Hard Rock Hotel and Casino in Las Vegas.



In 2012, interest expense increased by $58
million compared to 2011 primarily due to an increase in interest expense in our office segment of $86 million as a result of the
consolidation of U.S. Office Fund and the acquisition of office assets during the year. In addition, an increase in interest expense
of $35 million in our multi-family, industrial and other segment was due to the acquisition of hospitality assets, i.e., the Hard
Rock Hotel and Casino and Atlantis, in March 2011 and April 2012, respectively, partially offset by lower interest expense as a
result of an attractive refinancing in our multi-family portfolio in 2012. In addition, interest expense in our retail segment
declined by $63 million primarily related to the debt restructuring in our Brazil retail fund at the end of 2011.



Administration and other expense increased
by $47 million in 2012 compared to 2011 primarily as a result of an increase in employee compensation and benefits of $18 million
and an increase of $35 million relating to depreciation and amortization of non-real estate assets from the acquisition of hospitality
assets.



We recorded $1.2 billion of fair value gains
in 2012 which was a decrease of $282 million compared to the prior year. This was primarily driven by our office segment where
we recorded $1.0 billion of fair value gains of which 70% was related to discount and terminal capitalization rate compression,
and 30% was related to leasing rates, timing and other assumptions. In addition, we recorded $275 million of fair value gains in
our retail segment as a result of discount rate compression on our Brazilian retail malls. In our multi-family, industrial and
other segment, we recorded a loss of $55 million.



Our share of net earnings from equity accounted
investments was $1.2 billion in 2012, including $1.0 billion from our retail segment, which was driven by operating income and
fair valuation gains on our interest in GGP due to improved leasing rates, higher permanent occupancy levels and greater management
fee income. Our office segment recorded $178 million of net earnings from equity accounted investments during the period, primarily
attributable to operating income from our equity accounted investments in the U.S. and Australia. We also recorded $45 million
of net earnings from equity accounted investments in our multi-family, industrial and other segment, mainly due to fair value gains.
In 2012, net earnings from equity accounted investment decreased by $869 million when compared to 2011, primarily as a result of
significant valuation gains on our GGP investment and net earnings in 2011 from the U.S. Office Fund, which was equity accounted
until August 2011, in the prior year.



Income tax expense increased by $50 million
in 2012 compared to 2011 primarily due to a greater portion of the prior period’s earnings before taxes in jurisdictions
with lower income tax rates and a tax asset recognized in the prior year. This increase was partially offset by a decline in income
tax expense of $60 million in our office segment as a result of a decrease in net income before taxes and a larger release of tax
reserves in the current year.



59







Net income attributable to interests of
others in operating subsidiaries decreased by $258 million in 2012 compared to 2011 primarily as a result of higher net income
in the prior year. This was offset by the consolidation of the U.S. Office Fund, which did not report net income attributable to
non-controlling interests until it was consolidated in August 2011.



Segment Performance and Analysis



Office



Operating Results — Office



The following table presents the NOI and
FFO of our office properties by region for the years ended December 31, 2013, 2012 and 2011:



|(US$ Millions)      |  | NOI(1) |       |  | FFO(1) |  
|------------------- |  | ------ | ----- |  | ------ | -
|Year ended Dec. 31, |  | 2013   |       |  | 2012   |  
|United States       |  | $      | 796   |  |        | $
|Canada              |  |        | 280   |  |        |  
|Australia           |  |        | 273   |  |        |  
|Europe              |  |        | 50    |  |        |  
|Unallocated         |  |        | -     |  |        |  
|                    |  | $      | 1,399 |  |        | $

| | (1) | See “— Performance Measures” above
in this MD&A for an explanation of components of NOI and FFO.
| | --- | ------------------------------------------------------------------------------------------------



The decrease in NOI in 2013, when compared
to 2012, was primarily related to the expiry of a major lease at Brookfield Place New York, as well as a change in the accounting
treatment of certain Australian assets following the spin-off, after which these assets were reclassified as participating loan
interests. In addition, the decrease in NOI also reflects a weakening of foreign currencies against the U.S. dollar between December
31, 2012 and December 31, 2013. These decreases were partially offset by property acquisitions in the United States and the United
Kingdom.



In 2012, the increase in NOI compared to
2011, was primarily attributable to the consolidation of the U.S. Office Fund in the second half of 2011 as well as acquisitions
in Seattle, Washington, D.C., Denver, London, Melbourne and Perth, and the practical completion of Brookfield Place Perth. These
increases were partially offset by the sale of properties in Calgary, Melbourne, Boston and New Jersey. This resulted in commercial
property revenue increasing by $508 million and direct commercial property expense increasing by $170 million.



FFO for the year ended December 31, 2013
decreased by $25 million to $339 million compared to $364 million in the prior year. The decrease is primarily attributable to
the impact of a lease expiry in New York on October 1, 2013, which reduced FFO by $21 million during the remainder of the year,
and lower dividends from Canary Wharf. In the prior year, we received $40 million of dividends from Canary Wharf, compared to $14
million received during 2013. This was partially offset by the FFO contribution of assets acquired during the year.



FFO for the year ended December 31, 2012
increased by $57 million to $364 million compared to $307 million in the prior year. The increase is primarily attributable to
the acquisitions of properties discussed above and the refinancing of Australian debt, which resulted in a decrease in interest
expense. In addition, we received $40 million of dividends from Canary Wharf in 2012 compared to $16 million in 2011. This increase
in FFO was partially offset by a condemnation award of $11 million in the United States in the prior year.



60







In order to demonstrate the stability of
our cash flow that arises from our high occupancy levels and long-term lease profile, we analyze NOI on a “same-store”
basis. The following table presents NOI from existing office properties since the beginning of 2011 (i.e., those held throughout
both the current and prior periods) on a constant exchange rate basis.



|(US$ Millions)  Year ended Dec. 31,                                              |  | 2013 |       |  | 2012 |   |       | 2011 | 
|-------------------------------------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|United States                                                                    |  | $    | 388   |  |      | $ | 386   |      | 
|Canada                                                                           |  |      | 261   |  |      |   | 257   |      | 
|Australia                                                                        |  |      | 135   |  |      |   | 135   |      | 
|Europe                                                                           |  |      | 31    |  |      |   | 31    |      | 
|NOI relating to existing properties using normalized foreign exchange (“FX”) (1) |  |      | 815   |  |      |   | 809   |      | 
|Currency variance                                                                |  |      | -     |  |      |   | 18    |      | 
|NOI relating to existing properties                                              |  | $    | 815   |  |      | $ | 827   |      | 
|NOI relating to acquisitions, dispositions and other                             |  |      | 584   |  |      |   | 613   |      | 
|Total NOI                                                                        |  | $    | 1,399 |  |      | $ | 1,440 |      | 
|Average rent per square foot                                                     |  | $    | 30.15 |  |      | $ | 29.40 |      | 

| | (1) | Using the year ended December 31, 2013 average FX
rates for properties held since January 1, 2011.
| | --- | --------------------------------------------------------------------------------------------------



NOI from existing properties with normalized
FX for the year ended December 31, 2013 compared with the prior year increased by $6 million to $815 million. This increase was
primarily the result of higher same property occupancy. This increase was offset by the weakening of the Canadian and Australian
dollars during 2013 compared to the U.S. dollar. In addition, we earned approximately $55 million of NOI relating to acquisitions,
dispositions and other during 2013 driven by the NOI from assets acquired in Los Angeles and London.



NOI relating to existing properties using
normalized FX for the year ended December 31, 2012 compared with the prior year increased by $20 million to $809 million. This
increase was primarily the result of higher same property occupancy. Accounting for fluctuations in foreign exchange rates, the
increase was 2.4%. Approximately $92 million of NOI relating to acquisitions, dispositions and other primarily reflect the impact
of the practical completion of Brookfield Place Perth and disposition of certain assets in Minneapolis and New Zealand.



The following table presents key metrics
relating to in-place leases of our office property portfolio:



|              |  | Dec. 31, 2013 |      |   | Dec. 31, 2012                | 
|------------- |  | ------------- | ---- | - | ---------------------------- | 
|              |  | Occupancy (%) |      |   | Same-store
    Occupancy (%) | 
|United States |  |               | 83.3 | % |                              | 
|Canada        |  |               | 96.0 | % |                              | 
|Australia     |  |               | 97.6 | % |                              | 
|Europe(1)     |  |               | 94.9 | % |                              | 
|Average       |  |               | 88.0 | % |                              | 

| | (1) | Does not include office assets held through our approximately
22% interest in Canary Wharf.
| | --- | -------------------------------------------------------------------------------------------



The worldwide portfolio occupancy rate in
our office properties at December 31, 2013 was 88.0%, down from 91.1% at December 31, 2012. The decrease in occupancy levels from
prior period is primarily due to a decline in the United States to 83.3% from 87.7% at December 31, 2012. The decline is due to
acquisitions of under-leased properties at attractive values and increased vacancies in New York (mainly Brookfield Place New York
following the expiration of a major lease on October 1, 2013), Denver and Washington, D.C. In 2013, we leased approximately 8.9
million square feet.



We use in-place net rents for our office
segment, as a measure of leasing performance, and calculate this as the annualized amount of cash rent receivable from leases on
a per square foot basis including tenant expense reimbursements, less operating expenses being incurred for that space, but excluding
the impact of straight-lining rent escalations or amortization of free rent periods. This measure represents the amount of cash
generated from leases in a given period.



| | · | In North America, at December 31, 2013, average in-place net rents
in our portfolio increased approximately 1.0% and 2.5% in the United States and Canada, respectively, compared to the prior year.
Net rents across our U.S. office portfolio were at a discount of approximately 15.3% to the average market rent of $31.21 per square
foot. In Canada, the net rents were at a discount of approximately 16.8% to the average market rent of $30.84 per square foot.
This gives us confidence that we will be able to maintain or increase our net rental income in the coming years and, due to our
high overall occupancy, the flexibility to exercise patience in signing new leases.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



61







| | · | In Australia, at December 31, 2013, average in-place net rent in our
portfolio was approximately $47.73 per square foot, which represented a 5.7% discount to market rents and an approximately 3.0%
increase compared to average in-place net rent at December 31, 2012. Leases in Australia typically include annual escalations,
with the result that in-place lease rates tend to increase along with long-term increases in market rents.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In Europe, at December 31, 2013, average in-place net rent in our
portfolio increased approximately 7.6% compared to the prior year. The increase is primarily related to the acquisition of the
London office portfolio during 2012.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table presents our leasing
activity from December 31, 2012 to December 31, 2013:



|                  |  | Dec. 31, 2012  |        |  |                |  |        |                     |  |  |                |   |  |                     |       |  |                         |  |       |                |  |   | Dec. 31, 2013       | 
|----------------- |  | -------------- | ------ |  | -------------- |  | ------ | ------------------- |  |  | -------------- | - |  | ------------------- | ----- |  | ----------------------- |  | ----- | -------------- |  | - | ------------------- | 
|                  |  |                |        |  |                |  |        |                     |  |  |                |   |  |                     |       |  |                         |  |       | Average        |  |   | Acq.                | 
|                  |  | Leasable       |        |  |                |  |        | Total               |  |  | Expiring       |   |  |                     |       |  | Year One                |  |       | Leasing        |  |   | (Disp.)             | 
|                  |  | Area(1)        |        |  | Leased(1)      |  |        | Expiries            |  |  | Net Rent       |   |  | Leasing             |       |  | Leasing                 |  |       | Net Rent       |  |   | Additions           | 
|(US $)            |  | (000's Sq.Ft.) |        |  | (000's Sq.Ft.) |  |        | (000's Sq.
    Ft.) |  |  | ($ per Sq.Ft.) |   |  | (000's Sq.
    Ft.) |       |  | Net Rent
($ per Sq.Ft.) |  |       | ($ per Sq.Ft.) |  |   | (000's Sq.
    Ft.) | 
|United
    States |  |                | 45,694 |  |                |  | 40,106 |                     |  |  | (7,461         | ) |  | $                   | 28.93 |  |                         |  | 6,033 |                |  | $ | 26.40               | 
|Canada            |  |                | 16,714 |  |                |  | 16,187 |                     |  |  | (2,347         | ) |  |                     | 20.98 |  |                         |  | 2,209 |                |  |   | 26.61               | 
|Australia         |  |                | 10,134 |  |                |  | 9,916  |                     |  |  | (561           | ) |  |                     | 42.29 |  |                         |  | 539   |                |  |   | 38.66               | 
|Europe (2)        |  |                | 916    |  |                |  | 774    |                     |  |  | (16            | ) |  |                     | 56.65 |  |                         |  | 90    |                |  |   | 63.34               | 
|Total             |  |                | 73,458 |  |                |  | 66,983 |                     |  |  | (10,385        | ) |  | $                   | 27.90 |  |                         |  | 8,871 |                |  | $ | 27.57               | 

| | (1) | Has been restated to reflect the impact of remeasurements
which are performed annually in the first quarter.
| | --- | ------------------------------------------------------------------------------------------------------------

| | (2) | Does not include office assets held through our approximate
22% interest in Canary Wharf.
| | --- | -----------------------------------------------------------------------------------------



Additionally, for the year ended December
31, 2013, tenant improvements and leasing costs related to leasing activity was $381 million, or an average of $42.99 per square
foot, compared to $310 million, or an average of $42.68 per square foot in 2012.



The following table presents the lease expiry
profile of our office properties with the associated expiring average in-place net rents by region at December 31, 2013:



|                                  |  |                     |        |   |                         |  |       | Expiring Leases | 
|--------------------------------- |  | ------------------- | ------ | - | ----------------------- |  | ----- | --------------- | 
|                                  |  |                     |        |   |                         |  |       | 2014            | 
|(US$)                             |  | Net Rental
    Area |        |   | Currently
    Available |  |       | (000's sq.ft.)  | 
|Consolidated Properties           |  |                     |        |   |                         |  |       |                 | 
|United States                     |  |                     | 42,023 |   |                         |  | 7,013 |                 | 
|Canada                            |  |                     | 16,714 |   |                         |  | 665   |                 | 
|Australia                         |  |                     | 5,462  |   |                         |  | 96    |                 | 
|Europe(1)                         |  |                     | 1,344  |   |                         |  | 68    |                 | 
|Total Consolidated Properties     |  |                     | 65,543 |   |                         |  | 7,842 |                 | 
|Equity Accounted Properties       |  |                     |        |   |                         |  |       |                 | 
|United States                     |  |                     | 8,351  |   |                         |  | 1,406 |                 | 
|Australia                         |  |                     | 4,421  |   |                         |  | 144   |                 | 
|Total Equity Accounted Properties |  |                     | 12,772 |   |                         |  | 1,550 |                 | 
|Total                             |  |                     | 78,315 |   |                         |  | 9,392 |                 | 
|Percentage of Total               |  |                     | 100.0  | % |                         |  | 12.0  | %               | 

| | (1) | Does not include office assets held through our approximately
22% interest in Canary Wharf.
| | --- | -------------------------------------------------------------------------------------------



62







Balance Sheet – Office



The following table presents the equity
after subtracting non-controlling interests of others in operating subsidiaries of our office portfolio by region as at December
31, 2013 and 2012:



|(US$ Millions)                                                                            |  | United States     |        |   | Canada        |   |        | Australia         |       |   | Europe        |  |  | Total             |      
|----------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ------------- | - | ------ | ----------------- | ----- | - | ------------- |  |  | ----------------- | -----
|                                                                                          |  | Dec.
    31,
2013 |        |   | Dec. 31,
2012 |   |        | Dec.
    31,
2013 |       |   | Dec. 31,
2012 |  |  | Dec.
    31,
2013 |      
|Office properties                                                                         |  | $                 | 16,651 |   |               | $ | 13,887 |                   |       | $ | 4,856         |  |  | $                 | 5,132
|Equity accounted investments                                                              |  |                   | 1,749  |   |               |   | 1,637  |                   |       |   | 53            |  |  |                   | 17   
|Participating loan interests                                                              |  |                   | -      |   |               |   | -      |                   |       |   | -             |  |  |                   | -    
|Accounts receivable and other                                                             |  |                   | 973    |   |               |   | 723    |                   |       |   | 235           |  |  |                   | 113  
|                                                                                          |  |                   | 19,373 |   |               |   | 16,247 |                   |       |   | 5,144         |  |  |                   | 5,262
|                                                                                          |  |                   |        |   |               |   |        |                   |       |   |               |  |  |                   |      
|Property debt                                                                             |  |                   | 8,701  |   |               |   | 7,129  |                   |       |   | 2,214         |  |  |                   | 1,958
|Accounts payable and other                                                                |  |                   | 1,026  |   |               |   | 1,064  |                   |       |   | 646           |  |  |                   | 568  
|Non-controlling interests                                                                 |  |                   | 1,134  |   |               |   | 705    |                   |       |   | 488           |  |  |                   | 512  
|                                                                                          |  | $                 | 8,512  |   |               | $ | 7,349  |                   |       | $ | 1,796         |  |  | $                 | 2,224
|Unallocated                                                                               |  |                   |        |   |               |   |        |                   |       |   |               |  |  |                   |      
|Unsecured facilities                                                                      |  |                   |        |   |               |   |        |                   |       |   |               |  |  |                   |      
|Capital securities                                                                        |  |                   |        |   |               |   |        |                   |       |   |               |  |  |                   |      
|Non-controlling interests                                                                 |  |                   |        |   |               |   |        |                   |       |   |               |  |  |                   |      
|Equity after subtracting non-controlling interests of others in operating subsidiaries(1) |  |                   |        | $ | 6,452         |   |        | $                 | 6,466 |  

| | (1) | Does not include office developments which are described
in the table below on a geographic basis.
| | --- | --------------------------------------------------------------------------------------------------



Equity after subtracting non-controlling
interests of others in operating subsidiaries remained relatively flat at December 31, 2013 compared to December 31, 2012, excluding
office development activities. Gains in the fair values of properties, primarily in North America and Australia, as well as acquisitions
of additional office properties increased equity after subtracting non-controlling interests of others in operating subsidiaries.
These increases were offset by additional property-specific borrowing on the newly acquired assets as well as opportunistic up-financings
at certain existing properties. Unallocated non-controlling interests relate primarily to the interests of other shareholders in
Brookfield Office Properties, whereas the non-controlling interests in each region relate to funds and joint ventures in those
regions.



Specific 2013 major variances included the
following:



| | · | The total fair value of commercial properties increased by $1.9 billion
to $26.5 billion, primarily as a result of the acquisition of the MPG Office Trust, Inc. assets in Los Angeles, the remaining 50%
of the Victor Building and 125 Old Broad Street in Washington, D.C. and London, respectively, as well as office portfolios in Los
Angeles and San Jose in California. In addition to the acquisitions, the recognition of fair value gains contributed to the increase,
which was partially offset by foreign exchange rate fluctuations and the deconsolidation of certain Australian assets following
the spin-off.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The decrease in equity accounted investments of $514 million is primarily
a result of Australian assets reclassified to participating loan note assets following the spin-off, as well as the Victor Building
in Washington, D.C., which is consolidated at December 31, 2013, following the acquisition of the 50% we did not previously own,
offset by fair values gains in the United States.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Equity accounted investments as at December
31, 2013 primarily include: in the United States, 245 Park Avenue ($0.7 billion) and Grace Building ($0.7 billion); and in Australia,
a variety of property funds and joint ventures interests. Our interest in Canary Wharf ($1.0 billion) is classified as a financial
asset and is included in accounts receivable and other in the table above.



63









The following table presents the equity
after subtracting non-controlling interests of others in operating subsidiaries of our office development activities by region:



|                            |  | Dec. 31, 2013             |       |  | Dec. 31, 2012                  |  
|--------------------------- |  | ------------------------- | ----- |  | ------------------------------ | -
|(US$ Millions)              |  | Consoli-
    dated assets |       |  | Consoli-
    dated
liabilities |  
|North America               |  |                           |       |  |                                |  
|Manhattan West, New York(1) |  | $                         | 627   |  |                                | $
|Other                       |  |                           | 547   |  |                                |  
|Australia                   |  |                           | 55    |  |                                |  
|Europe                      |  |                           | 541   |  |                                |  
|Brazil                      |  |                           | 253   |  |                                |  
|                            |  | $                         | 2,023 |  |                                | $



| | (1) | At December 31, 2013 consolidated liabilities include
$122 million of non-recourse fixed rate debt, bearing interest at 5.9% and maturing in 2018, and $201 million of non-recourse
floating rate debt bearing interest at 2.7% and maturing in 2016.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Of the 18.9 million square feet in our office
development pipeline, 8.4 million square feet are in the active development stage, 2.3 million square feet are in the active planning
stage and 8.2 million square feet are held for future development.



Our active developments include the five
million square foot Manhattan West project in New York, the 1.4 million square foot Brookfield Place East Tower in Calgary, the
980,000 square foot Bay Adelaide Centre East in Toronto, the 681,000 square foot Giroflex towers in São Paulo, and the 366,000
square foot Brookfield Place Tower 2 in Perth. As of December 31, 2013 on a proportionate basis, these five sites had incurred
a cost of $524 million and had a total planned development cost of $3.1 billion, or $732 per square foot, with a weighted average
planned construction period of 83 months.



Of the remaining approximately 10.4 million
square feet in our office development pipeline as at December 31, 2013, 2.3 million square feet were in the active planning stage
comprising four development projects, including 100 Bishopsgate in London. As at December 31, 2013 on a proportionate basis, those
four developments had incurred a cost of $209 million and had a total planned development cost of $1.1 billion, or $942 per square
foot, with a weighted average planned construction period of 37 months.



The remaining approximately 8.2 million
square feet of our office development pipeline as of December 31, 2013 were being held for development and were not in the active
planning stage. With all our development sites, we proceed with developing the sites when our risk adjusted return hurdles and
preleasing targets are met.



The key valuation metrics of our commercial
office properties are presented in the following table. The valuations are most sensitive to changes in the discount rate and timing
or variability of cash flows.



|                           |  | United States     |     |   | Canada         |  |     | Australia     |  |  | Europe(1)         |  
|-------------------------- |  | ----------------- | --- | - | -------------- |  | --- | ------------- |  |  | ----------------- | -
|                           |  | Dec.
    31, 2013 |     |   | Dec. 31,  2012 |  |     | Dec. 31,
2011 |  |  | Dec.
    31, 2013 |  
|Discount rate              |  |                   | 7.4 | % |                |  | 7.3 | %             |  |  | 7.5               | %
|Terminal cap rate          |  |                   | 6.2 | % |                |  | 6.3 | %             |  |  | 6.3               | %
|Investment horizon (years) |  |                   | 11  |   |                |  | 11  |               |  |  | 12                |  





| | (1) | Certain properties in Europe used the direct capitalization
method for valuation as of December 31, 2011. The amounts presented as the discount rate relate to the implied capitalization
rate. The terminal capitalization rate and investment horizon are not applicable.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



64





As of December 31, 2013, we had a level
of indebtedness of approximately 52% of our consolidated office properties. We attempt to match the maturity of our office property
debt with the average lease term of our properties. At December 31, 2013, the average term to maturity of our property debt was
5 years, compared to our average lease term of 7 years. The details of our property debt for our consolidated office properties
at December 31, 2013 are as follows:



|(US$ Millions)                                         |  | Weighted Average Rate |     |   | Debt Balance |  
|------------------------------------------------------ |  | --------------------- | --- | - | ------------ | -
|Unsecured Facilities                                   |  |                       |     |   |              |  
|Brookfield Canada Office Properties revolving facility |  |                       | 3.5 | % |              | $
|Brookfield Office Properties senior notes              |  |                       | 4.2 | % |              |  
|Funds subscription credit facility                     |  |                       | 1.8 | % |              |  
|                                                       |  |                       |     |   |              |  
|Secured Property Debt                                  |  |                       |     |   |              |  
|Fixed rate                                             |  |                       | 5.1 | % |              |  
|Variable rate                                          |  |                       | 3.8 | % |              |  
|                                                       |  |                       |     |   |              | $
|                                                       |  |                       |     |   |              |  
|Current                                                |  |                       |     |   |              | $
|Non-current                                            |  |                       |     |   |              |  
|                                                       |  |                       |     |   |              | $



As at December 31, 2013, we had $883 million
of committed corporate credit facilities in Brookfield Office Properties Inc. (“Brookfield Office Properties”) consisting
of a $695 million revolving credit facility from a syndicate of banks and bilateral agreements between its subsidiary, Brookfield
Canada Office Properties, and a number of Canadian chartered banks for an aggregate revolving credit facility of C$200 million.
The balance drawn on these facilities was $336 million (2012 — $68 million).



Brookfield Office Properties had the following
capital securities outstanding as at the dates indicated:





|(US$ Millions)           |  | Shares Outstanding |           |  | Cumulative Dividend Rate |  |                   | Dec. 31, 2013 |  |   | Dec. 31, 2012 | 
|------------------------ |  | ------------------ | --------- |  | ------------------------ |  | ----------------- | ------------- |  | - | ------------- | 
|Class AAA Series E(1)    |  |                    | 8,000,000 |  |                          |  | 70% of bank prime |               |  | $ | -             | 
|Class AAA Series F       |  |                    | -         |  |                          |  | 6.00              | %             |  |   | -             | 
|Class AAA Series G       |  |                    | 4,400,000 |  |                          |  | 5.25              | %             |  |   | 110           | 
|Class AAA Series H       |  |                    | 8,000,000 |  |                          |  | 5.75              | %             |  |   | 188           | 
|Class AAA Series J       |  |                    | 8,000,000 |  |                          |  | 5.00              | %             |  |   | 188           | 
|Class AAA Series K       |  |                    | 6,000,000 |  |                          |  | 5.20              | %             |  |   | 142           | 
|Total capital securities |  |                    |           |  |                          |  |                   |               |  | $ | 628           | 
|Current                  |  |                    |           |  |                          |  |                   |               |  | $ | 188           | 
|Non-current              |  |                    |           |  |                          |  |                   |               |  |   | 440           | 
|Total capital securities |  |                    |           |  |                          |  |                   |               |  | $ | 628           | 





| | (1) | Our partnership has an offsetting loan receivable
against these securities earning interest at 108% of bank prime.
| | --- | ------------------------------------------------------------------------------------------------------------------



On January 31, 2013, Brookfield Office Properties
redeemed all of the outstanding Class AAA Series F shares for cash of C$25.00 per share plus accrued and unpaid dividends thereon
of C$0.1233, representing a total redemption price of C$25.1233 per share.



In addition to the capital securities presented
in the above table, Brookfield Office Properties also had $491 million of capital securities outstanding at December 31, 2013 (December
31, 2012 – nil), which represent the amount of common equity related to the other non-controlling shareholders’ interests
in DTLA Holdings LLC (“DTLA Holdings”).



65







Retail



Operating Results — Retail



The following table presents the NOI and
FFO of our retail properties by region for the years ended December 31, 2013, 2012 and 2011:



|(US$ Millions)      |  | NOI(1) |     |  | FFO(1) |  
|------------------- |  | ------ | --- |  | ------ | -
|Year ended Dec. 31, |  | 2013   |     |  | 2012   |  
|United States       |  | $      | -   |  |        | $
|Australia           |  |        | 12  |  |        |  
|Brazil              |  |        | 94  |  |        |  
|Europe              |  |        | -   |  |        |  
|                    |  | $      | 106 |  |        | $



| | (1) | See “— Performance Measures” above
in this MD&A for an explanation of components of NOI and FFO.
| | --- | ------------------------------------------------------------------------------------------------



NOI for the year ended December 31, 2013
decreased by $3 million compared with the prior year primarily due to asset sales in Australia during 2013 and currency fluctuation
in Brazil.



NOI for the year ended December 31, 2012
compared with the prior year decreased by $16 million, which was primarily due to asset sales in Brazil in the fourth quarter of
2011 and the first quarter of 2012.



FFO for the year ended December 31, 2013
compared with the prior year increased by $48 million which was primarily due to an increase of $37 million in our share of equity
accounted income excluding fair value gains relating our investments in GGP and Rouse. This increase was driven by a 6% increase
in same-store NOI in GGP’s portfolio and significant interest expense savings across the portfolio. In addition, we acquired
$1.6 billion of additional interests in GGP and Rouse in 2013.



FFO for the year ended December 31, 2012
compared with the prior year increased by $58 million which was primarily due to an increase of $46 million in our share of equity
accounted income excluding fair value gains relating our investment in GGP. The remaining increase relates to our Brazilian operations,
which benefited from lower interest expense due to the restructure of its debt facility in second half of 2011.



The following table presents key metrics
relating to in-place leases of our retail property portfolio:



|                 |  | Dec.
    31, 2013 |       |   | Dec. 31, 2012               | 
|---------------- |  | ----------------- | ----- | - | --------------------------- | 
|                 |  | Occupancy
    (%) |       |   | Avg.
    Lease Term (Years) | 
|United States(1) |  |                   | 95.9  | % |                             | 
|Brazil           |  |                   | 95.7  | % |                             | 
|Australia(2)     |  |                   | 100.0 | % |                             | 
|Average          |  |                   | 95.9  | % |                             | 



(1)Represents regional malls only and excludes
leases on traditional anchor stores and specialty leasing license agreements.

(2) Excludes assets that are being de-leased in
preparation for redevelopment.



Our retail portfolio occupancy rate at December
31, 2013 was 95.9%, up from 95.1% at December 31, 2012. Occupancy levels in our U.S. portfolio increased by 90 basis points from
95.0% at December 31, 2012 to 95.9%. We use in-place rents for our retail segment as a measure of leasing performance, which is
calculated on a cash basis and consists of base minimum rent, plus reimbursements of common area costs, and real estate taxes.
The average in-place rent on leases signed in 2013 in our U.S. portfolio was $55.76 per square foot, up 8.4% or $4.34 per square
foot as compared to the expiring in-place rent on comparable leases. Our U.S. portfolio recorded a 10% increase in suite-to-suite
spreads over the prior year.



66







The following table presents leasing activity
from December 31, 2012 to December 31, 2013:



|              |  | Dec. 31, 2012(1) |        |  |               |  |        |                         |  |  |                    |   |  |                    |       |  |                   |  |        |                   |  |   | Dec.
    31, 2013        | 
|------------- |  | ---------------- | ------ |  | ------------- |  | ------ | ----------------------- |  |  | ------------------ | - |  | ------------------ | ----- |  | ----------------- |  | ------ | ----------------- |  | - | ------------------------ | 
|              |  |                  |        |  |               |  |        |                         |  |  |                    |   |  |                    |       |  | Year One          |  |        | Average           |  |   |                          | 
|              |  | Leasable         |        |  |               |  |        |                         |  |  |                    |   |  |                    |       |  | Leasing           |  |        | Leasing           |  |   | Acq.                     | 
|              |  | Area(1)          |        |  | Leased(1)     |  |        | Total                   |  |  | Expiring           |   |  | Leasing            |       |  | Rent              |  |        | Rent              |  |   | (Disp.)                  | 
|(US $)        |  | (000'sSq.Ft.)    |        |  | (000'sSq.Ft.) |  |        | Expiries(000's Sq.
Ft.) |  |  | Rent($ per Sq.Ft.) |   |  | (000's
    Sq.Ft.) |       |  | ($
    perSq.Ft.) |  |        | ($
    perSq.Ft.) |  |   | Additions(000's Sq. Ft.) | 
|United States |  |                  | 64,800 |  |               |  | 61,659 |                         |  |  | (12,702            | ) |  | $                  | 51.42 |  |                   |  | 13,658 |                   |  | $ | 51.19                    | 
|Brazil        |  |                  | 2,802  |  |               |  | 2,653  |                         |  |  | (827               | ) |  |                    | 34.91 |  |                   |  | 923    |                   |  |   | 31.38                    | 
|Australia     |  |                  | 1,951  |  |               |  | 1,918  |                         |  |  | (6                 | ) |  |                    | 10.74 |  |                   |  | -      |                   |  |   | -                        | 
|Total         |  |                  | 69,553 |  |               |  | 66,230 |                         |  |  | (13,535            | ) |  | $                  | 50.39 |  |                   |  | 14,581 |                   |  | $ | 49.94                    | 

| | (1) | Has been restated to reflect the impact of remeasurements
which are performed annually in the first quarter.
| | --- | ------------------------------------------------------------------------------------------------------------



In addition, we incurred tenant allowances
for our retail operating properties of $169 million for the year ended December 31, 2013 compared with $168 million during 2012.



The following table presents the lease expiry
profile of our retail properties with the associated expiring average in-place rents by region at December 31, 2013:



|                                      |  |                     |        |   |                     |  |       | Expiring Leases | 
|------------------------------------- |  | ------------------- | ------ | - | ------------------- |  | ----- | --------------- | 
|                                      |  |                     |        |   |                     |  |       | 2014            | 
|(US$)                                 |  | Net Rental
    Area |        |   | Currently Available |  |       | (000's sq.ft.)  | 
|Consolidated Properties               |  |                     |        |   |                     |  |       |                 | 
|Brazil                                |  |                     | 2,872  |   |                     |  | 123   |                 | 
|Australia                             |  |                     | 914    |   |                     |  | -     |                 | 
|Total Consolidated Properties         |  |                     | 3,786  |   |                     |  | 123   |                 | 
|Equity Accounted Properties           |  |                     |        |   |                     |  |       |                 | 
|United States                         |  |                     | 60,639 |   |                     |  | 2,504 |                 | 
|Total Equity Accounted
    Properties |  |                     | 60,639 |   |                     |  | 2,504 |                 | 
|Total                                 |  |                     | 64,425 |   |                     |  | 2,627 |                 | 
|Percentage of Total                   |  |                     | 100.0  | % |                     |  | 4.1   | %               | 

| | (1) | Represents regional malls only and excludes leases
on traditional anchor stores and specialty leasing license agreements.
| | --- | -------------------------------------------------------------------------------------------------------------------------



Balance Sheet — Retail



The following table presents equity after
subtracting non-controlling interests of others in operating subsidiaries of our retail properties by region as at December 31,
2013 and 2012:



|                                                                                           |  | United States     |       |  | Brazil        |   |       | Australia         |  |   | Total         | 
|------------------------------------------------------------------------------------------ |  | ----------------- | ----- |  | ------------- | - | ----- | ----------------- |  | - | ------------- | 
|(US$ Millions)                                                                             |  | Dec. 31,
    2013 |       |  | Dec. 31, 2012 |   |       | Dec. 31,
    2013 |  |   | Dec. 31, 2012 | 
|Retail properties                                                                          |  | $                 | -     |  |               | $ | -     |                   |  | $ | 1,775         | 
|Equity accounted investments                                                               |  |                   | 6,443 |  |               |   | 5,219 |                   |  |   | -             | 
|Accounts receivable and other                                                              |  |                   | 868   |  |               |   | 538   |                   |  |   | 277           | 
|                                                                                           |  |                   | 7,311 |  |               |   | 5,757 |                   |  |   | 2,052         | 
|                                                                                           |  |                   |       |  |               |   |       |                   |  |   |               | 
|Property debt                                                                              |  |                   | -     |  |               |   | -     |                   |  |   | 636           | 
|Accounts payable and other                                                                 |  |                   | -     |  |               |   | 305   |                   |  |   | 151           | 
|Non-controlling interests                                                                  |  |                   | -     |  |               |   | 423   |                   |  |   | 937           | 
|Equity after subtracting
    non-controlling interests of others in operating subsidiaries |  | $                 | 7,311 |  |               | $ | 5,029 |                   |  | $ | 328           | 



| | · | Equity after subtracting non-controlling interests of others in operating
subsidiaries in our retail portfolio increased by $2.2 billion to $7.7 billion at December 31, 2013 from December 31, 2012, reflecting
acquisitions of additional interests in GGP and Rouse in April and November of 2013 for a total of approximately $1.6 billion.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In addition, in the fourth quarter of 2013, management reviewed the
operating performance and financial condition of GGP, including the status of the redevelopment projects, to which a significant
portion of the embedded goodwill was ascribed on BPY’s initial investment in GGP. Management determined that, based on the
fair value gains recorded during 2013, a portion of the carrying value of the embedded goodwill ascribed to these redevelopment
properties was realized and management accordingly recognized an impairment loss of $249 million. Consequently, the carrying value
of our investment at December 31, 2013 was approximately $6.0 billion.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



67







| | · | Accounts receivable and other increased by $275 million to $1,146
million at December 31, 2013 from December 31, 2012, which primarily reflects our acquisition of additional GGP warrants.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The decrease in non-controlling interest in the U.S. was a result
of the dissolution of the consolidated fund through which BPY and its partners initially acquired certain interests in GGP and
Rouse. This was part of the transaction whereby we invested $1.4 billion to acquire additional interests in GGP and Rouse in the
fourth quarter of 2013.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The details of property debt for our consolidated
retail properties at December 31, 2013 are as follows:



|(US$ Millions)        |  | Weighted Average Rate |      |   | Debt Balance |  
|--------------------- |  | --------------------- | ---- | - | ------------ | -
|Secured Property Debt |  |                       |      |   |              |  
|Variable rate         |  |                       | 10.3 | % |              | $
|                      |  |                       |      |   |              | $
|                      |  |                       |      |   |              |  
|Current               |  |                       |      |   |              | $
|Non-current           |  |                       |      |   |              |  
|                      |  |                       |      |   |              | $



The details of retail property debt related
to our equity accounted investment in GGP at December 31, 2013 are as follows:



|(US$ Millions)            |  | Weighted Average Rate |     |   | Debt Balance(1) |  
|------------------------- |  | --------------------- | --- | - | --------------- | -
|Unsecured Facilities      |  |                       |     |   |                 |  
|Junior subordinated notes |  |                       | 1.7 | % |                 | $
|                          |  |                       |     |   |                 |  
|Secured Property Debt     |  |                       |     |   |                 |  
|Fixed rate                |  |                       | 4.5 | % |                 |  
|Variable rate             |  |                       | 2.6 | % |                 |  
|                          |  |                       |     |   |                 | $
|                          |  |                       |     |   |                 |  
|Current                   |  |                       |     |   |                 | $
|Non-current               |  |                       |     |   |                 |  
|                          |  |                       |     |   |                 | $

| | (1) | Represents GGP's consolidated and proportionate share
of unconsolidated U.S. property debt.
| | --- | -------------------------------------------------------------------------------------------



The key valuation metrics of our retail
properties, including those within our equity accounted investments, are presented in the following table. The valuations are most
sensitive to changes in the discount rate and timing or variability of cash flows.



|                           |  | United States(1)  |     |   | Brazil        |  |     | Australia     | 
|-------------------------- |  | ----------------- | --- | - | ------------- |  | --- | ------------- | 
|                           |  | Dec.
    31, 2013 |     |   | Dec. 31, 2012 |  |     | Dec. 31, 2011 | 
|Discount rate              |  |                   | 7.6 | % |               |  | 5.7 | %             | 
|Terminal cap rate          |  |                   | 5.8 | % |               |  | n/a |               | 
|Investment horizon (years) |  |                   | 10  |   |               |  | n/a |               | 

| | (1) | The valuation method used at December 31, 2012 and
2011 was the direct capitalization method. The amounts presented as the discount rate relate to the implied capitalization rate.
The terminal capitalization rate and investment horizon are not applicable. Had the direct capitalization method been used at
December 31, 2013, the implied overall capitalization rate would have been 5.4%.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



68







Multi-Family, Industrial and Other



Operating Results — Multi-Family,
Industrial and Other



The following table presents the NOI and
FFO of our multi-family, industrial and other segment for the years ended December 31, 2013, 2012 and 2011:



|(US$ Millions)      |  | NOI(1) |     |  | FFO(1) |  
|------------------- |  | ------ | --- |  | ------ | -
|Year ended Dec. 31, |  | 2013   |     |  | 2012   |  
|                    |  | $      | 412 |  |        | $



| | (1) | See “— Performance Measures” above
in this MD&A for an explanation of components of NOI and FFO.
| | --- | ------------------------------------------------------------------------------------------------



NOI increased from $225 million in 2012
to $412 million in 2013 primarily as a result acquisitions of multi-family and industrial assets during the year. In addition,
the results in 2013 also include a full year of contribution from the Atlantis, which was acquired in April 2012, and a mixed use
portfolio of assets in Australia, which was acquired in September 2012. NOI decreased from $253 million in 2011 to $225 million
in 2012 primarily as a result of dispositions during the year. This decrease was partially offset by the increase in hospitality
NOI as a result of the acquisitions of the Hard Rock Hotel and Casino in Las Vegas in March 2011 and the Atlantis in April 2012.



FFO for the year ended December 31, 2013
increased by $45 million to $52 million compared to the same period in 2012. This increase was the result of the acquisition activity
noted above, as well as development income recorded in our industrial portfolio during the fourth quarter of 2013 and greater investment
income from mezzanine real estate loans. FFO for the year ended December 31, 2012 decreased by $49 million to $7 million compared
to the same period in 2011. This decrease was the result of the acquisition and disposition activity noted above, as well as interest
expense and depreciation and amortization of non-real estate assets related to the acquisitions of the Hard Rock Hotel and Casino
and the Atlantis, partially offset by lower interest expense as a result of refinancing activity in our multi-family portfolio.



Balance Sheet — Multi-Family, Industrial
and Other



The following table presents equity after
subtracting non-controlling interests of others in operating subsidiaries of our multi-family, industrial and other segment:



|(US$ Millions)                                                                         |  | Dec. 31, 2013 |       |  | Dec. 31, 2012 |  
|-------------------------------------------------------------------------------------- |  | ------------- | ----- |  | ------------- | -
|Investment properties                                                                  |  | $             | 3,927 |  |               | $
|Equity accounted investments                                                           |  |               | 703   |  |               |  
|Loans and notes receivable                                                             |  |               | 611   |  |               |  
|Accounts receivable and other                                                          |  |               | 3,809 |  |               |  
|                                                                                       |  |               | 9,050 |  |               |  
|Property-specific borrowings                                                           |  |               | 5,707 |  |               |  
|Accounts payable and other liabilities                                                 |  |               | 451   |  |               |  
|Non-controlling interests                                                              |  |               | 1,850 |  |               |  
|Equity after subtracting non-controlling interests of others in operating subsidiaries |  | $             | 1,042 |  |               | $



Equity after subtracting non-controlling
interests of others in operating subsidiaries increased by $404 million over the prior year as a result of the acquisition of various
multi-family and industrial assets in North America and Europe in 2013.



Our investment properties consist primarily
of industrial and multi-family assets. The accounts receivable and other line items includes the Atlantis hotel in the Bahamas
and the Hard Rock Hotel and Casino in Las Vegas.



69







A summary of loans and notes receivable
by collateral asset class is as follows:



|(US$ Millions) |  | Interest Rate as at Dec. 31, 2013 |  | Maturity as at Dec. 31, 2013 |     | Dec. 31, 2013 |       |               | Dec. 31, 2012    | 
|-------------- |  | --------------------------------- |  | ---------------------------- | --- | ------------- | ----- | ------------- | ---------------- | 
|               |  | Range                             |  | Weighted Average             |     |               | Range |               | Weighted Average | 
|Asset Class    |  |                                   |  |                              |     |               |       |               |                  | 
|Hotel          |  | 2.8% to 2.8%                      |  |                              | 2.8 | %             |       | On Demand     |                  | 
|Office         |  | 2.1% to 11.2%                     |  |                              | 2.6 | %             |       | 2013 to 2014  |                  | 
|Industrial     |  | 2.0% to 7.0%                      |  |                              | 2.8 | %             |       | On completion |                  | 
|Retail         |  | -                                 |  |                              | -   |               |       | -             |                  | 
|Total          |  |                                   |  |                              |     |               |       |               |                  | 



Our loan portfolio is comprised of real
estate mortgages and mezzanine loans. As the portfolio is comprised of a discrete number of loans, we evaluate the credit
quality of each loan and note individually rather than through grouping the portfolio by credit quality indicators.



Property debt related to our multi-family,
industrial and other segment totaled $5.7 billion at December 31, 2013 and had a weighted average interest rate of 3.3% and an
average term to maturity of 2.4 years.



The key valuation metrics of these properties
are presented in the following table. The valuations are most sensitive to changes in the discount rate and timing or variability
of cash flows.



|                           |  | North America     |     |   | Europe        |  |     | Australia     | 
|-------------------------- |  | ----------------- | --- | - | ------------- |  | --- | ------------- | 
|                           |  | Dec.
    31, 2013 |     |   | Dec. 31, 2012 |  |     | Dec. 31, 2011 | 
|Discount rate              |  |                   | 8.4 | % |               |  | 8.7 | %             | 
|Terminal cap rate          |  |                   | 7.4 | % |               |  | 8.0 | %             | 
|Investment horizon (years) |  |                   | 10  |   |               |  | 10  |               | 



Corporate



Balance Sheet — Corporate



The following table presents equity after
subtracting non-controlling interests of others in operating subsidiaries at the corporate level:



|(US$ Millions)                                                                         |  | Dec. 31, 2013 |        |   | Dec. 31, 2012 |  
|-------------------------------------------------------------------------------------- |  | ------------- | ------ | - | ------------- | -
|Accounts receivable and other                                                          |  | $             | 37     |   |               | $
|                                                                                       |  |               |        |   |               |  
|Corporate debt                                                                         |  |               | 496    |   |               |  
|Capital securities                                                                     |  |               | 1,250  |   |               |  
|Accounts payable and other liabilities                                                 |  |               | 589    |   |               |  
|Non-controlling interests                                                              |  |               | 25     |   |               |  
|Equity after subtracting non-controlling interests of others in operating subsidiaries |  | $             | (2,323 | ) |               | $



Accounts payable and other liabilities consist
primarily of deferred tax liabilities established in connection with the spin-off. As at December 31, 2013, we had $1.25 billion
of capital securities outstanding, which were issued by one of our partnership’s holding entities. The following table provides
additional information on the capital securities:



|(US$ Millions)                  |  | Shares Outstanding |            |  | Cumulative Dividend Rate |  |      | Dec. 31, 2013 |  |   | Dec. 31, 2012 | 
|------------------------------- |  | ------------------ | ---------- |  | ------------------------ |  | ---- | ------------- |  | - | ------------- | 
|Class B Junior Preferred Shares |  |                    | 30,000,000 |  |                          |  | 5.75 | %             |  | $ | 750           | 
|Class C Junior Preferred Shares |  |                    | 20,000,000 |  |                          |  | 6.75 | %             |  |   | 500           | 
|Total capital securities        |  |                    |            |  |                          |  |      |               |  | $ | 1,250         | 
|Current                         |  |                    |            |  |                          |  |      |               |  | $ | -             | 
|Non-current                     |  |                    |            |  |                          |  |      |               |  |   | 1,250         | 
|Total capital securities        |  |                    |            |  |                          |  |      |               |  | $ | 1,250         | 



In addition, as at December 31, 2013, we
had $25 million of preferred shares with a cumulative dividend rate of 5% outstanding. The preferred shares were issued by various
holding entities of our partnership.



70







Reconciliation of NOI and FFO for the Years Ended December
31, 2013, 2012 and 2011



|(US$ Millions)                                                                             |  | 2013 |        |   | 2012 |   |        | 2011 | 
|------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|Commercial property revenue                                                                |  | $    | 2,910  |   |      | $ | 2,858  |      | 
|Hospitality revenue                                                                        |  |      | 1,168  |   |      |   | 743    |      | 
|Direct commercial property expense                                                         |  |      | (1,204 | ) |      |   | (1,189 | )    | 
|Direct hospitality expense                                                                 |  |      | (1,081 | ) |      |   | (687   | )    | 
|Depreciation and amortization of real estate assets (1)                                    |  |      | 124    |   |      |   | 49     |      | 
|NOI                                                                                        |  |      | 1,917  |   |      |   | 1,774  |      | 
|Investment and other revenue                                                               |  |      | 209    |   |      |   | 167    |      | 
|Share of equity accounted income excluding fair value gains                                |  |      | 435    |   |      |   | 427    |      | 
|Interest expense                                                                           |  |      | (1,088 | ) |      |   | (1,020 | )    | 
|Administration and other expense                                                           |  |      | (355   | ) |      |   | (205   | )    | 
|Non-controlling interests of others in operating subsidiaries in funds from operations     |  |      | (536   | ) |      |   | (512   | )    | 
|FFO (2)                                                                                    |  |      | 582    |   |      |   | 631    |      | 
|Depreciation and amortization of real estate assets (1)                                    |  |      | (124   | ) |      |   | (49    | )    | 
|Fair value gains, net                                                                      |  |      | 870    |   |      |   | 1,227  |      | 
|Share of equity accounted fair value gains                                                 |  |      | 414    |   |      |   | 808    |      | 
|Income tax expense                                                                         |  |      | (501   | ) |      |   | (489   | )    | 
|Share of equity accounted income tax expense                                               |  |      | (14    | ) |      |   | -      |      | 
|Non-controlling interests of others in operating subsidiaries in income tax expense        |  |      | (320   | ) |      |   | (652   | )    | 
|Net income after subtracting non-controlling interests of others in operating subsidiaries |  |      | 907    |   |      |   | 1,476  |      | 
|Non-controlling interests of others in operating subsidiaries                              |  |      | 856    |   |      |   | 1,164  |      | 
|Net income                                                                                 |  | $    | 1,763  |   |      | $ | 2,640  |      | 

| | (1) | Depreciation and amortization of real estate assets
is a component of direct hospitality expense that is added back to NOI and is deducted in the net income calculation.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | FFO represents interests attributable to limited partnership
units and REUs (defined as Redeemable/Exchangeable and special limited partner units of the operating partnership). The interests
attributable to REUs are presented as non-controlling interests in the condensed consolidated statements of income.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Quarterly Results



The results by quarter for the years ended
December 31, 2013 and 2012 are as follows:



|                                                                                                                                  |  | 2013 |       |  | 2012 |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- |  | ---- | -
|(US$ Millions, except per unit information)                                                                                       |  | Q4   |       |  | Q3   |  
|Total revenue                                                                                                                     |  | $    | 1,021 |  |      | $
|Net income attributable to:                                                                                                       |  |      |       |  |      |  
|Limited partners(1)                                                                                                               |  |      | 35    |  |      |  
|General partner(1)                                                                                                                |  |      | -     |  |      |  
|Brookfield Asset Management(2)                                                                                                    |  |      | -     |  |      |  
|Non-controlling interests attributable to:                                                                                        |  |      |       |  |      |  
|Redeemable/exchangeable and special limited
    partner units of the operating partnership held by Brookfield Asset Management(1) |  |      | 155   |  |      |  
|Interests of others in
    operating subsidiaries                                                                                 |  |      | 136   |  |      |  
|Basic and diluted earnings per LP Unit(3)                                                                                         |  | $    | 0.37  |  |      | $





| | (1) | For the period from April 15, 2013 to December 31,
2013.
| | --- | --------------------------------------------------------

| | (2) | For the periods prior to April 15, 2013.
| | --- | ----------------------------------------

| | (3) | Earnings per unit have been presented effective for
the period from the date of the spin-off on April 15, 2013, as this is the date of legal entitlement of earnings to the limited
partnership unitholders.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Revenue varies quarter to quarter due to
acquisitions and dispositions of commercial and other income producing property, as well as new leases and renewals at market net
rents. In addition, revenue also fluctuates as a result of seasonality, primarily related to our hotel assets. Net income fluctuates
largely due to fair value gains and losses in each given period.



Income Taxes



The major components of income tax expense
include the following:



|(US$ Millions) Year ended Dec. 31, |  | 2013 |     |  | 2012 |   |     | 2011 | 
|---------------------------------- |  | ---- | --- |  | ---- | - | --- | ---- | 
|Current income tax                 |  | $    | 14  |  |      | $ | 121 |      | 
|Deferred income tax                |  |      | 487 |  |      |   | 368 |      | 
|Income tax expense                 |  | $    | 501 |  |      | $ | 489 |      | 



An investment entity which was acquired
during 2013 utilized a pre-acquisition expense, not recognized during purchase accounting to offset post-acquisition gains. In
addition, an investment subsidiary utilized previously unrecognized losses to offset current year taxable income.



71







Our effective tax rate is different from
our domestic statutory income tax rate due to the differences set out below:



|Year ended Dec. 31,                                          |  | 2013 |    |   | 2012 |  |     | 2011 | 
|------------------------------------------------------------ |  | ---- | -- | - | ---- |  | --- | ---- | 
|Statutory income tax rate                                    |  |      | 29 | % |      |  | 27  | %    | 
|Increase (decrease) in rate resulting from:                  |  |      |    |   |      |  |     |      | 
|Portion of income not subject to tax                         |  |      | (3 | ) |      |  | (12 | )    | 
|International operations subject to different tax rates      |  |      | (5 | ) |      |  | 4   |      | 
|Non-controlling interests in income of flow-through entities |  |      | (6 | ) |      |  | 1   |      | 
|Change in basis of accounting of investments in associates   |  |      | 6  |   |      |  | -   |      | 
|Other                                                        |  |      | 1  |   |      |  | (4  | )    | 
|Effective income tax rate                                    |  |      | 22 | % |      |  | 16  | %    | 



As the partnership is not subject to tax,
the above reconciliation has been prepared using a blended statutory rate for jurisdictions where the holding entities and any
direct or indirect corporate subsidiaries of such holding entities operate. For the 2012 and 2011 information, the applicable Canadian
blended Federal and Provincial tax rate of Brookfield is used as the statutory income tax rate since the information for periods
prior to the spin-off is presented using the continuity of interests methodology.



Risk Management



The financial results of our business are
impacted by the performance of our properties and various external factors influencing the specific sectors and geographic locations
in which we operate, including: macro-economic factors such as economic growth, changes in currency, inflation and interest rates;
regulatory requirements and initiatives; and litigation and claims that arise in the normal course of business.



Our property investments are generally subject
to varying degrees of risk depending on the nature of the property. These risks include changes in general economic conditions
(including the availability and costs of mortgage funds), local conditions (including an oversupply of space or a reduction in
demand for real estate in the markets in which we operate), the attractiveness of the properties to tenants, competition from other
landlords and our ability to provide adequate maintenance at an economical cost.



Certain significant expenditures, including
property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must be made regardless of whether a
property is producing sufficient income to service these expenses. Certain properties are subject to mortgages which require substantial
debt service payments. If we become unable or unwilling to meet mortgage payments on any property, losses could be sustained as
a result of the mortgagee’s exercise of its rights of foreclosure or of sale. We believe the stability and long-term nature
of our contractual revenues effectively mitigates these risks.



We are affected by local, regional, national
and international economic conditions and other events and occurrences that affect the markets in which we own assets. A protracted
decline in economic conditions will cause downward pressure on our operating margins and asset values as a result of lower demand
for space.



Substantially all of our properties are
located in North America, Australia, Brazil and Europe. A prolonged downturn in the economies of these regions would result in
reduced demand for space and the number of prospective tenants and will affect the ability of our properties to generate significant
revenue. If there is an increase in operating costs resulting from inflation and other factors, we may not be able to offset such
increases by increasing rents.



We are subject to risks that affect the
retail environment, including unemployment, weak income growth, lack of available consumer credit, industry slowdowns and plant
closures, consumer confidence, increased consumer debt, poor housing market conditions, adverse weather conditions, natural disasters
and the need to pay down existing obligations. All of these factors could negatively affect consumer spending, and adversely affect
the sales of our retail tenants. This could have an unfavorable effect on our operations and our ability to attract new retail
tenants.



Interest Rate and Financing Risk



We attempt to stagger the maturities of
our mortgage portfolio. We have an on-going need to access debt markets to refinance maturing debt as it comes due. There is a
risk that lenders will not refinance such maturing debt on terms and conditions acceptable to us or on any terms at all. Our strategy
to stagger the maturities of our mortgage portfolio attempts to mitigate our exposure to excessive amounts of debt maturing in
any one year.



72







Approximately 52% of our outstanding commercial
property debt at December 31, 2013 is floating rate debt compared to 55% at December 31, 2012. This debt is subject to fluctuations
in interest rates. A 100 basis point increase in interest rates relating to our corporate and commercial property floating rate
debt would result in an increase in annual interest expense of approximately $112 million. A 100 basis point increase in interest
rates relating to fixed rate property debt due within one year would result in an increase in an annual interest expense of approximately
$8 million upon refinancing. In addition, we have exposure to interest rates within our equity accounted investments. We have mitigated,
to some extent, the exposure to interest rate fluctuations through interest rate derivative contracts. See “Derivative Financial
Instruments” below in this MD&A.



At December 31, 2013 we have a level of
indebtedness of 55% of fair value of our portfolio of properties (2012 — 52%). It is our view that such level of indebtedness
is conservative given the cash flow characteristics of our properties and the fair value of our assets. Based on this, we believe
that all debts will be financed or refinanced as they come due in the foreseeable future.



Credit Risk



Credit risk arises from the possibility
that tenants may be unable to fulfill their lease commitments. We mitigate this risk by ensuring that our tenant mix is diversified
and by limiting our exposure to any one tenant. We also maintain a portfolio that is diversified by property type so that exposure
to a business sector is lessened. Government and government agencies comprise 7.0% of our office segment tenant base and, as at
December 31, 2013, no one tenant comprises more than this.



The following list shows the largest tenants
by leasable area in our office portfolio and their respective credit ratings and lease commitments as at December 31, 2013:



|Tenant                             |  | Primary Location                                                       |  | Credit Rating(1) |  | Year of Expiry(2) |         |  | Total (000's Sq.
    Ft.) |  |        | Sq. Ft. (%)(3) | 
|---------------------------------- |  | ---------------------------------------------------------------------- |  | ---------------- |  | ----------------- | ------- |  | ------------------------- |  | ------ | -------------- | 
|Government and Government Agencies |  | Various                                                                |  | AAA/AA+          |  |                   | Various |  |                           |  | 5,468  |                | 
|CIBC World Markets(4)              |  | Calgary/Houston/New York/Toronto                                       |  | A+               |  |                   | 2034    |  |                           |  | 1,429  |                | 
|Suncor Energy Inc.                 |  | Calgary                                                                |  | BBB+             |  |                   | 2028    |  |                           |  | 1,295  |                | 
|Bank of America/Merrill Lynch      |  | Denver/New York/Los Angeles/Toronto/Washington, D.C.                   |  | A-               |  |                   | 2030    |  |                           |  | 1,263  |                | 
|Morgan Stanley                     |  | Denver/New York/Toronto                                                |  | A-               |  |                   | 2023    |  |                           |  | 1,196  |                | 
|Bank of Montreal                   |  | Calgary/Toronto                                                        |  | A+               |  |                   | 2022    |  |                           |  | 1,143  |                | 
|Royal Bank of Canada               |  | Boston/Calgary/New York/Los Angeles/Toronto/Vancouver/Washington, D.C. |  | AA-              |  |                   | 2026    |  |                           |  | 984    |                | 
|PricewaterhouseCoopers             |  | Calgary/Houston/Los Angeles/Perth/Sydney                               |  | Not Rated        |  |                   | 2026    |  |                           |  | 896    |                | 
|JPMorgan Chase & Co.               |  | Denver/New York/Houston/Los Angeles                                    |  | A                |  |                   | 2022    |  |                           |  | 889    |                | 
|KPMG                               |  | Perth/Sydney/Toronto                                                   |  | Not Rated        |  |                   | 2025    |  |                           |  | 853    |                | 
|Total                              |  |                                                                        |  |                  |  |                   |         |  |                           |  | 15,416 |                | 



| | (1) | From Standard & Poor's Rating Services, Moody's
Investment Services, Inc. or DBRS Limited.
| | --- | ------------------------------------------------------------------------------------------

| | (2) | Reflects the year of maturity related to lease(s)
and is calculated for multiple leases on a weighted average basis based on square feet where practicable.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Prior to considering partnership interests in partially-owned
properties.
| | --- | -------------------------------------------------------------------------

| | (4) | CIBC World Markets leases 1.1 million square feet
at 300 Madison Avenue in New York, of which they sublease 925,000 square feet to PricewaterhouseCoopers LLP and approximately
100,000 square feet to Sumitomo Corporation of America.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following list reflects the ten largest
tenants in our retail portfolio as at December 31, 2013. The largest tenant in our portfolio accounted for approximately 2.9% of
minimum rents, tenant recoveries and other.



|Top Ten Largest Tenants          |  | Primary DBA                                              |  | Percent of Minimum Rents, Tenant Recoveries and Other (%) |     
|-------------------------------- |  | -------------------------------------------------------- |  | --------------------------------------------------------- | ----
|L Brands Inc.                    |  | Victoria's Secret, Bath & Body Works, PINK               |  |                                                           | 2.9 
|The Gap, Inc.                    |  | Gap, Banana Republic, Old Navy                           |  |                                                           | 2.4 
|Foot Locker, Inc.                |  | Footlocker, Champs Sports, Footaction USA                |  |                                                           | 2.2 
|Abercrombie & Fitch Stores, Inc. |  | Abercrombie, Abercrombie & Fitch, Hollister, Gilly Hicks |  |                                                           | 1.9 
|Forever 21, Inc.                 |  | Forever 21                                               |  |                                                           | 1.7 
|Express, Inc.                    |  | Express, Express Men                                     |  |                                                           | 1.3 
|Luxottica Group S.p.A.           |  | Lenscrafters, Sunglass Hut, Pearle Vision                |  |                                                           | 1.3 
|American Eagle Outfitters, Inc.  |  | American Eagle, Aerie                                    |  |                                                           | 1.3 
|Genesco Inc.                     |  | Journeys, Lids, Underground Station, Johnston & Murphy   |  |                                                           | 1.2 
|LVMH                             |  | Louis Vuitton, Sephora                                   |  |                                                           | 1.0 
|Total                            |  |                                                          |  |                                                           | 17.2



Environmental Risks



As an owner of real property, we are subject
to various federal, provincial, state and municipal laws relating to environmental matters. Such laws provide that we could be
liable for the costs of removing certain hazardous substances and remediating certain hazardous locations. The failure to remove
or remediate such substances or locations, if any, could adversely affect our ability to sell such real estate or to borrow using
such real estate as collateral and could potentially result in claims against us. We are not aware of any material noncompliance
with environmental laws at any of our properties nor are we aware of any pending or threatened investigations or actions by environmental
regulatory authorities in connection with any of our properties or any pending or threatened claims relating to environmental conditions
at our properties.



73







We will continue to make the necessary capital
and operating expenditures to ensure that we are compliant with environmental laws and regulations. Although there can be no assurances,
we do not believe that costs relating to environmental matters will have a materially adverse effect on our business, financial
condition or results of operations. However, environmental laws and regulations can change and we may become subject to more stringent
environmental laws and regulations in the future, which could have an adverse effect on our business, financial condition or results
of operations.



Economic Risk



Real estate is relatively illiquid. Such
illiquidity may limit our ability to vary our portfolio promptly in response to changing economic or investment conditions. Also,
financial difficulties of other property owners resulting in distressed sales could depress real estate values in the markets in
which we operate.



Our commercial properties generate a relatively
stable source of income from contractual tenant rent payments. Continued growth of rental income is dependent on strong leasing
markets in order to ensure expiring leases are renewed and new tenants are found promptly to fill vacancies.



Taking into account the current state of
the economy, 2014-2015 may not provide the same level of increases in rental rates on renewal as compared to prior years. We are,
however, substantially protected against short-term market conditions, as most of our leases are long-term in nature with an average
term of seven years.



Insurance Risk



We maintain insurance on our properties
in amounts and with deductibles that we believe are in line with what owners of similar properties carry. We maintain all risk
property insurance and rental value coverage (including coverage for the perils of flood, earthquake and named windstorm).



Foreign Exchange Fluctuations



For the year ended December 31, 2013, approximately
33% of our assets and 34% of our revenues originated outside the United States and consequently are subject to foreign currency
risk due to potential fluctuations in exchange rates between these currencies and the U.S. Dollar. To mitigate this risk, we attempt
to maintain a natural hedged position with respect to the carrying value of assets through debt agreements denominated in local
currencies and, from time to time, supplemented through the use of derivative contracts as discussed under “— Derivative
Financial Instruments”.



The following table shows the impact of
a 10% decrease in foreign exchange rates on net income and other comprehensive income:



|                  |  | Dec. 31, 2013                                                                              |       |  | Dec. 31, 2012 |   |      | Dec. 31, 2011 | 
|----------------- |  | ------------------------------------------------------------------------------------------ | ----- |  | ------------- | - | ---- | ------------- | 
|(Millions)        |  | Equity after
    subtracting non-controlling interests of others in operating subsidiaries |       |  | OCI           |   |      | Net Income    | 
|Canadian Dollar   |  | C$                                                                                         | 631   |  |               | $ | (59  | )             | 
|Australian Dollar |  | A$                                                                                         | 1,716 |  |               |   | (154 | )             | 
|British Pound     |  | £                                                                                          | 998   |  |               |   | (165 | )             | 
|Euro              |  | €                                                                                          | 161   |  |               |   | (31  | )             | 
|Brazilian Real    |  | R$                                                                                         | 1,046 |  |               |   | (45  | )             | 
|Total             |  |                                                                                            |       |  |               | $ | (454 | )             | 



Derivative Financial Instruments



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



74







| | · | foreign currency forward contracts to hedge exposures to Canadian
Dollar, Australian Dollar, British Pound and Euro denominated 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;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | interest rate caps to hedge interest rate risk on certain variable
rate debt; and
| | - | ---------------------------------------------------------------------------------



| | · | total return swaps on Brookfield Office Properties’ shares to
economically hedge exposure to variability in its share price under its deferred share unit plan.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



We also designate Canadian Dollar financial
liabilities of certain of our operating entities as hedges of our net investments in our Canadian operations.



Interest Rate Hedging



We have derivatives outstanding that are
designated as cash flow hedges of variability in interest rates associated with forecasted fixed rate financings and existing variable
rate debt.



As at December 31, 2013, we had derivatives
representing a notional amount of $1,552 million in place to fix rates on forecasted fixed rate financings with maturities between
2024 and 2026 at rates between 2.3% and 4.7%. As at December 31, 2012, we had derivatives representing a notional amount of $1,377
million in place to fix rates on forecasted fixed rate financings with a maturity between 2023 and 2025 at rates between 2.1% and
4.7%. The hedged forecasted fixed rate financings are denominated in U.S. Dollars and Canadian Dollars.



As at December 31, 2013, we had derivatives
with a notional amount of $4,188 million in place to fix rates on existing variable rate debt at between 0.6% and 5.9% for debt
maturities between 2014 and 2020. As at December 31, 2012, we had derivatives with a notional amount of $5,034 million in place
to fix rates on existing variable rate debt at between 0.6% and 10.5% for debt maturities between 2013 and 2017. The hedged variable
rate debts are denominated in U.S. Dollars, British Pounds and Australian Dollars.



The fair value of our outstanding interest
rate derivative positions as at December 31, 2013 is a loss of $61 million (December 31, 2012 — loss of $273 million). For
the years ended December 31, 2013, and 2012, the amount of hedge ineffectiveness recorded in interest expense in connection with
our interest rate hedging activities was not significant.



Foreign Currency Hedging



We have derivatives designated as net
investment hedges of our investments in foreign subsidiaries. As at December 31, 2013, we had hedged a notional amount of
£770 million at rates between £0.61/$ and £0.65/$ using foreign currency forward contracts maturing between
May 2014 and November 2014. As at December 31, 2012, we had designated a notional amount of £45 million at
£0.62/$ using foreign currency forward contracts maturing  June 2013. In addition, as at December 31, 2013, we had
hedged a notional amount of €550 million (December 31, 2012 — nil) at rates between €0.73/$ and €0.74/$
using foreign currency forward contracts maturing between and August and December 2014. We had also hedged, as at December
31, 2013, a notional amount of AU$ 535 million (December 31, 2012 — nil) at rates between AU$1.06/$ and AU$1.12/$ using
foreign currency forward contracts maturing between March and November 2014.



The fair value of our outstanding foreign
currency forwards as at December 31, 2013 is a loss of $27 million (December 31, 2012 — nil).



In addition, as of December 31, 2013, we
had designated C$900 million (December 31, 2012 — C$1,100 million) of Canadian dollar financial liabilities as hedges against
our net investment in Canadian operations.



75







Other Derivatives



The following other derivatives have been
entered into to manage financial risks and have not been designated as hedges for accounting purposes.



At December 31, 2013, Brookfield Office
Properties had a total return swap under which Brookfield Office Properties received the return on a notional amount of 1.4 million
Brookfield Office Properties common shares in connection with its deferred share unit plan. The fair value of the total return
swap at December 31, 2013 was $1 million (December 31, 2012 — gain of $1 million) and a $5 million gain in connection with
the total return swap was recognized in general and administrative expense in the year ended December 31, 2013 (2012 — gain
of $1 million, 2011 – gain of $2 million).



At December 31, 2013, we had interest rate
cap contracts outstanding with a notional amount of $3,553 million, at rates between 2.5% and 4.5% and expiring between 2014 and
2016. As at December 31, 2012, we had interest rate cap contracts outstanding with a notional amount of $3,564 million, at rates
between 1.2% and 4.5% and expiring between 2013 and 2016. The fair value of these contracts at December 31, 2013 was nil (December
31, 2012 — nil). In addition, as of December 31, 2013 we had interest rate swaps with a notional amount of $37 million (December
31, 2012 — nil), with interest rates between 0.8% and 1.4% maturing between 2017 and 2020. The fair value of these contracts
as at December 31, 2013 was nil (December 31, 2012 — nil).



Related Party Transactions



In the normal course of operations, our
partnership entered into the transactions below with related parties on market terms. These transactions have been measured at
fair value and are recognized in the consolidated financial statements.



The immediate parent of our partnership
is the managing general partner of our partnership. The ultimate parent of our partnership is Brookfield Asset Management. Other
related parties of our partnership represent its subsidiaries and operating entities. The following table summarizes transactions
with related parties:



|(US$ Millions) Balances outstanding as at                                     |  | Dec. 31, 2013 |     |  | Dec. 31, 2012 |  
|----------------------------------------------------------------------------- |  | ------------- | --- |  | ------------- | -
|Participating loan interests                                                  |  | $             | 747 |  |               | $
|Loans and notes receivable (1)                                                |  |               | 293 |  |               |  
|Receivables and other assets                                                  |  |               | 11  |  |               |  
|Capitalized construction profits payable to Brookfield  Asset Management Inc. |  |               | -   |  |               |  
|Property debt payable                                                         |  |               | 341 |  |               |  
|Other liabilities                                                             |  |               | 98  |  |               |  



|(US$ Millions) Year ended Dec. 31,           |  | 2013 |     |  | 2012 |   |    | 2011 | 
|-------------------------------------------- |  | ---- | --- |  | ---- | - | -- | ---- | 
|Commercial property revenue(2)               |  | $    | 7   |  |      | $ | 10 |      | 
|Interest and other income                    |  |      | 52  |  |      |   | 40 |      | 
|Interest expense on commercial property debt |  |      | 12  |  |      |   | 4  |      | 
|Administration expense (3)                   |  |      | 147 |  |      |   | 51 |      | 
|Management fees paid                         |  |      | 130 |  |      |   | 21 |      | 
|Management fees received                     |  |      | -   |  |      |   | -  |      | 

(1) Includes $128 million receivable from Brookfield
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 notes.

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

(3) Amounts paid to Brookfield and its subsidiaries
for administrative services.



76







Portfolio Listing



The following tables present detail of our
property portfolio by segment and type of property:



|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     | Proportionate to |  |  |        |  |  |          |       
|--------------------------------- |  | ---------- | --- |  | ------------ |  | ----- | --------------------------- |  |  | ---------------------------------------- |  |  | -------------- | ----- |  | ---------------- |  | ------ | ----- |  |  | ----------- |  |  | -------- | ------ |  | ----- |  | --- | ---------------- |  |  | ------ |  |  | -------- | ------
|Office Property Portfolio(1)      |  |            |     |  |              |  |       | Assets
    Under Management |  |  | Proportionate
    at subsidiary-level(2) |  |  | unitholders(3) |       |  | Proportionate(4) | 
|                                  |  | Number of  |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|(Sq.ft. in 000's)                 |  | properties |     |  | Leased
    % |  |       | Office                      |  |  | Retail                                   |  |  | Leasable       |       |  | Parking          |  |        | Total |  |  | Owned
    % |  |  | Leasable |        |  | Total |  |     | Leasable         |  |  | Total  |  |  | Leasable |       
|CONSOLIDATED PROPERTIES           |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|U.S. Properties                   |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|New York                          |  |            | 8   |  |              |  | 80.5  | %                           |  |  | 13,577                                   |  |  |                | 371   |  |                  |  | 13,948 |       |  |  | 555         |  |  |          | 14,503 |  |       |  | 97  | %                |  |  | 13,480 |  |  |          | 14,021
|Boston                            |  |            | 1   |  |              |  | 77.2  | %                           |  |  | 771                                      |  |  |                | 25    |  |                  |  | 796    |       |  |  | 236         |  |  |          | 1,032  |  |       |  | 99  | %                |  |  | 791    |  |  |          | 1,025 
|Washington, D.C.                  |  |            | 30  |  |              |  | 90.1  | %                           |  |  | 5,952                                    |  |  |                | 264   |  |                  |  | 6,216  |       |  |  | 3,447       |  |  |          | 9,663  |  |       |  | 86  | %                |  |  | 5,319  |  |  |          | 8,324 
|Los Angeles                       |  |            | 22  |  |              |  | 80.6  | %                           |  |  | 9,668                                    |  |  |                | 455   |  |                  |  | 10,123 |       |  |  | 2,011       |  |  |          | 12,134 |  |       |  | 54  | %                |  |  | 5,604  |  |  |          | 6,556 
|San Diego                         |  |            | 2   |  |              |  | 61.8  | %                           |  |  | 338                                      |  |  |                | -     |  |                  |  | 338    |       |  |  | -           |  |  |          | 338    |  |       |  | 100 | %                |  |  | 338    |  |  |          | 338   
|Houston                           |  |            | 7   |  |              |  | 91.7  | %                           |  |  | 6,484                                    |  |  |                | 117   |  |                  |  | 6,601  |       |  |  | 2,084       |  |  |          | 8,685  |  |       |  | 79  | %                |  |  | 5,316  |  |  |          | 6,850 
|Denver                            |  |            | 2   |  |              |  | 77.5  | %                           |  |  | 2,595                                    |  |  |                | 48    |  |                  |  | 2,643  |       |  |  | 1,092       |  |  |          | 3,735  |  |       |  | 75  | %                |  |  | 1,998  |  |  |          | 2,806 
|Seattle                           |  |            | 2   |  |              |  | 89.4  | %                           |  |  | 696                                      |  |  |                | 3     |  |                  |  | 699    |       |  |  | 157         |  |  |          | 856    |  |       |  | 50  | %                |  |  | 349    |  |  |          | 428   
|San Francisco/San Jose            |  |            | 9   |  |              |  | 71.7  | %                           |  |  | 647                                      |  |  |                | 12    |  |                  |  | 659    |       |  |  | 6           |  |  |          | 665    |  |       |  | 100 | %                |  |  | 659    |  |  |          | 665   
|                                  |  |            | 83  |  |              |  | 83.3  | %                           |  |  | 40,728                                   |  |  |                | 1,295 |  |                  |  | 42,023 |       |  |  | 9,588       |  |  |          | 51,611 |  |       |  | 80  | %                |  |  | 33,854 |  |  |          | 41,013
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Canadian Properties               |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Toronto                           |  |            | 12  |  |              |  | 94.2  | %                           |  |  | 8,002                                    |  |  |                | 748   |  |                  |  | 8,750  |       |  |  | 1,851       |  |  |          | 10,601 |  |       |  | 54  | %                |  |  | 4,720  |  |  |          | 5,746 
|Calgary                           |  |            | 8   |  |              |  | 99.7  | %                           |  |  | 5,330                                    |  |  |                | 305   |  |                  |  | 5,635  |       |  |  | 1,194       |  |  |          | 6,829  |  |       |  | 42  | %                |  |  | 2,366  |  |  |          | 2,869 
|Ottawa                            |  |            | 6   |  |              |  | 96.4  | %                           |  |  | 1,711                                    |  |  |                | 33    |  |                  |  | 1,744  |       |  |  | 804         |  |  |          | 2,548  |  |       |  | 21  | %                |  |  | 366    |  |  |          | 535   
|Vancouver                         |  |            | 1   |  |              |  | 87.8  | %                           |  |  | 488                                      |  |  |                | 94    |  |                  |  | 582    |       |  |  | 258         |  |  |          | 840    |  |       |  | 83  | %                |  |  | 483    |  |  |          | 697   
|Other                             |  |            | 1   |  |              |  | 100.0 | %                           |  |  | -                                        |  |  |                | 3     |  |                  |  | 3      |       |  |  | -           |  |  |          | 3      |  |       |  | 83  | %                |  |  | 2      |  |  |          | 2     
|                                  |  |            | 28  |  |              |  | 96.0  | %                           |  |  | 15,531                                   |  |  |                | 1,183 |  |                  |  | 16,714 |       |  |  | 4,107       |  |  |          | 20,821 |  |       |  | 47  | %                |  |  | 7,937  |  |  |          | 9,849 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Australian Properties             |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Sydney                            |  |            | 7   |  |              |  | 99.2  | %                           |  |  | 1,032                                    |  |  |                | 271   |  |                  |  | 1,303  |       |  |  | 168         |  |  |          | 1,471  |  |       |  | 69  | %                |  |  | 908    |  |  |          | 1,014 
|Melbourne                         |  |            | 2   |  |              |  | 100.0 | %                           |  |  | 1,334                                    |  |  |                | 33    |  |                  |  | 1,367  |       |  |  | 133         |  |  |          | 1,500  |  |       |  | 93  | %                |  |  | 1,275  |  |  |          | 1,401 
|Brisbane                          |  |            | 2   |  |              |  | 89.3  | %                           |  |  | 480                                      |  |  |                | 40    |  |                  |  | 520    |       |  |  | 28          |  |  |          | 548    |  |       |  | 79  | %                |  |  | 412    |  |  |          | 433   
|Perth                             |  |            | 3   |  |              |  | 99.6  | %                           |  |  | 1,431                                    |  |  |                | 105   |  |                  |  | 1,536  |       |  |  | 60          |  |  |          | 1,596  |  |       |  | 77  | %                |  |  | 1,188  |  |  |          | 1,231 
|New Zealand                       |  |            | 6   |  |              |  | 96.7  | %                           |  |  | 707                                      |  |  |                | 29    |  |                  |  | 736    |       |  |  | 105         |  |  |          | 841    |  |       |  | 100 | %                |  |  | 736    |  |  |          | 841   
|                                  |  |            | 20  |  |              |  | 98.2  | %                           |  |  | 4,984                                    |  |  |                | 478   |  |                  |  | 5,462  |       |  |  | 494         |  |  |          | 5,956  |  |       |  | 82  | %                |  |  | 4,519  |  |  |          | 4,920 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|European Properties               |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|London                            |  |            | 5   |  |              |  | 94.9  | %                           |  |  | 1,312                                    |  |  |                | 32    |  |                  |  | 1,344  |       |  |  | 34          |  |  |          | 1,378  |  |       |  | 100 | %                |  |  | 1,344  |  |  |          | 1,378 
|                                  |  |            | 5   |  |              |  | 94.9  | %                           |  |  | 1,312                                    |  |  |                | 32    |  |                  |  | 1,344  |       |  |  | 34          |  |  |          | 1,378  |  |       |  | 100 | %                |  |  | 1,344  |  |  |          | 1,378 
|Total Consolidated Properties     |  |            | 136 |  |              |  | 88.0  | %                           |  |  | 62,555                                   |  |  |                | 2,988 |  |                  |  | 65,543 |       |  |  | 14,223      |  |  |          | 79,766 |  |       |  | 72  | %                |  |  | 47,654 |  |  |          | 57,160
|EQUITY ACCOUNTED PROPERTIES       |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|U.S. Properties                   |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|New York                          |  |            | 3   |  |              |  | 87.1  | %                           |  |  | 4,934                                    |  |  |                | 175   |  |                  |  | 5,109  |       |  |  | 92          |  |  |          | 5,201  |  |       |  | 56  | %                |  |  | 2,886  |  |  |          | 2,934 
|Los Angeles                       |  |            | 6   |  |              |  | 81.4  | %                           |  |  | 1,869                                    |  |  |                | 15    |  |                  |  | 1,884  |       |  |  | 389         |  |  |          | 2,273  |  |       |  | 72  | %                |  |  | 1,473  |  |  |          | 1,637 
|San Diego                         |  |            | 1   |  |              |  | 84.0  | %                           |  |  | 123                                      |  |  |                | -     |  |                  |  | 123    |       |  |  | -           |  |  |          | 123    |  |       |  | 100 | %                |  |  | 123    |  |  |          | 123   
|San Francisco/San Jose            |  |            | 1   |  |              |  | 63.2  | %                           |  |  | 289                                      |  |  |                | -     |  |                  |  | 289    |       |  |  | -           |  |  |          | 289    |  |       |  | 100 | %                |  |  | 289    |  |  |          | 289   
|Denver                            |  |            | 2   |  |              |  | 79.6  | %                           |  |  | 582                                      |  |  |                | -     |  |                  |  | 582    |       |  |  | -           |  |  |          | 582    |  |       |  | 100 | %                |  |  | 582    |  |  |          | 582   
|Seattle                           |  |            | 4   |  |              |  | 58.0  | %                           |  |  | 364                                      |  |  |                | -     |  |                  |  | 364    |       |  |  | -           |  |  |          | 364    |  |       |  | 100 | %                |  |  | 364    |  |  |          | 364   
|                                  |  |            | 17  |  |              |  | 83.2  | %                           |  |  | 8,161                                    |  |  |                | 190   |  |                  |  | 8,351  |       |  |  | 481         |  |  |          | 8,832  |  |       |  | 67  | %                |  |  | 5,717  |  |  |          | 5,929 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Australian Properties             |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Sydney                            |  |            | 8   |  |              |  | 96.2  | %                           |  |  | 3,375                                    |  |  |                | 165   |  |                  |  | 3,540  |       |  |  | 288         |  |  |          | 3,828  |  |       |  | 49  | %                |  |  | 1,723  |  |  |          | 1,866 
|Melbourne                         |  |            | 1   |  |              |  | 98.2  | %                           |  |  | 679                                      |  |  |                | 26    |  |                  |  | 705    |       |  |  | 106         |  |  |          | 811    |  |       |  | 43  | %                |  |  | 303    |  |  |          | 349   
|Canberra                          |  |            | 1   |  |              |  | 100.0 | %                           |  |  | 176                                      |  |  |                | -     |  |                  |  | 176    |       |  |  | 28          |  |  |          | 204    |  |       |  | 100 | %                |  |  | 176    |  |  |          | 204   
|                                  |  |            | 10  |  |              |  | 96.7  | %                           |  |  | 4,230                                    |  |  |                | 191   |  |                  |  | 4,421  |       |  |  | 422         |  |  |          | 4,843  |  |       |  | 52  | %                |  |  | 2,202  |  |  |          | 2,419 
|Total Equity Accounted Properties |  |            | 27  |  |              |  | 87.9  | %                           |  |  | 12,391                                   |  |  |                | 381   |  |                  |  | 12,772 |       |  |  | 903         |  |  |          | 13,675 |  |       |  | 62  | %                |  |  | 7,919  |  |  |          | 8,348 
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |       |  |                  |  |        |       |  |  |             |  |  |          |        |  |       |  |     |                  |  |  |        |  |  |          |       
|Total Office Properties           |  |            | 163 |  |              |  | 88.0  | %                           |  |  | 74,946                                   |  |  |                | 3,369 |  |                  |  | 78,315 |       |  |  | 15,126      |  |  |          | 93,441 |  |       |  | 71  | %                |  |  | 55,573 |  |  |          | 65,508



(1) Does not include office assets held through
our approximate 22% interest in Canary Wharf.

(2) Reflects our partnership's interest before
considering non-controlling interests, such as minority interests in Brookfield Office Properties and Multiplex New Zealand Property
Fund.

(3) Reflects our partnership's interest net of
non-controlling interests described in note (2) above and attributable to limited partner units and Redeemable/Exchangeable and
special limited partner units of the operating partnership held by Brookfield.

(4) Reflects our partnership's proportionate interest
net of non-controlling interests described in note (3) above and the Redeemable/Exchangeable and special limited partner units
of the operating partnership held by Brook field.



77







|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     | Proportionate to |  |  |         |  |  |          |        
|--------------------------------- |  | ---------- | --- |  | ------------ |  | ----- | --------------------------- |  |  | ---------------------------------------- |  |  | -------------- | ------- |  | ---------------- |  | ------- | ----- |  |  | ----------- |  |  | -------- | ------- |  | ----- |  | --- | ---------------- |  |  | ------- |  |  | -------- | -------
|Retail Property Portfolio(1)      |  |            |     |  |              |  |       | Assets
    Under Management |  |  | Proportionate
    at subsidiary-level(2) |  |  | unitholders(3) |         |  | Proportionate(4) | 
|                                  |  | Number of  |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|(Sq.ft. in 000's)                 |  | properties |     |  | Leased
    % |  |       | Office                      |  |  | Retail                                   |  |  | Leasable       |         |  | Parking          |  |         | Total |  |  | Owned
    % |  |  | Leasable |         |  | Total |  |     | Leasable         |  |  | Total   |  |  | Leasable |        
|CONSOLIDATED PROPERTIES           |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|Brazilian Properties              |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|Rio de Janeiro                    |  |            | 2   |  |              |  | 96.1  | %                           |  |  | -                                        |  |  |                | 961     |  |                  |  | 961     |       |  |  | -           |  |  |          | 961     |  |       |  | 73  | %                |  |  | 703     |  |  |          | 703    
|São Paulo                         |  |            | 5   |  |              |  | 94.9  | %                           |  |  | -                                        |  |  |                | 1,684   |  |                  |  | 1,684   |       |  |  | -           |  |  |          | 1,684   |  |       |  | 51  | %                |  |  | 862     |  |  |          | 862    
|Belo Horizonte                    |  |            | 1   |  |              |  | 99.7  | %                           |  |  | -                                        |  |  |                | 227     |  |                  |  | 227     |       |  |  | -           |  |  |          | 227     |  |       |  | 50  | %                |  |  | 114     |  |  |          | 114    
|                                  |  |            | 8   |  |              |  | 95.7  | %                           |  |  | -                                        |  |  |                | 2,872   |  |                  |  | 2,872   |       |  |  | -           |  |  |          | 2,872   |  |       |  | 58  | %                |  |  | 1,679   |  |  |          | 1,679  
|Australian Properties             |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|Sydney                            |  |            | 1   |  |              |  | 100.0 | %                           |  |  | -                                        |  |  |                | 914     |  |                  |  | 914     |       |  |  | -           |  |  |          | 914     |  |       |  | 100 | %                |  |  | 914     |  |  |          | 914    
|Total Consolidated Properties     |  |            | 9   |  |              |  | 96.8  | %                           |  |  | -                                        |  |  |                | 3,786   |  |                  |  | 3,786   |       |  |  | -           |  |  |          | 3,786   |  |       |  | 68  | %                |  |  | 2,593   |  |  |          | 2,593  
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|EQUITY ACCOUNTED PROPERTIES       |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|U.S. Properties                   |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|Northeast Region                  |  |            | 13  |  |              |  | 96.3  | %                           |  |  | -                                        |  |  |                | 15,301  |  |                  |  | 15,301  |       |  |  | -           |  |  |          | 15,301  |  |       |  | 87  | %                |  |  | 13,303  |  |  |          | 13,303 
|Mideast Region                    |  |            | 20  |  |              |  | 95.8  | %                           |  |  | 348                                      |  |  |                | 18,648  |  |                  |  | 18,996  |       |  |  | -           |  |  |          | 18,996  |  |       |  | 88  | %                |  |  | 16,649  |  |  |          | 16,649 
|East North Central Region         |  |            | 21  |  |              |  | 94.7  | %                           |  |  | 643                                      |  |  |                | 20,309  |  |                  |  | 20,952  |       |  |  | -           |  |  |          | 20,952  |  |       |  | 88  | %                |  |  | 18,370  |  |  |          | 18,370 
|West North Central Region         |  |            | 12  |  |              |  | 96.5  | %                           |  |  | -                                        |  |  |                | 10,568  |  |                  |  | 10,568  |       |  |  | -           |  |  |          | 10,568  |  |       |  | 95  | %                |  |  | 10,044  |  |  |          | 10,044 
|Southeast Region                  |  |            | 17  |  |              |  | 96.2  | %                           |  |  | 374                                      |  |  |                | 16,169  |  |                  |  | 16,543  |       |  |  | -           |  |  |          | 16,543  |  |       |  | 81  | %                |  |  | 13,420  |  |  |          | 13,420 
|Southwest Region                  |  |            | 24  |  |              |  | 97.1  | %                           |  |  | 162                                      |  |  |                | 25,197  |  |                  |  | 25,359  |       |  |  | -           |  |  |          | 25,359  |  |       |  | 88  | %                |  |  | 22,423  |  |  |          | 22,423 
|Mountain Region                   |  |            | 21  |  |              |  | 95.8  | %                           |  |  | 98                                       |  |  |                | 17,327  |  |                  |  | 17,425  |       |  |  | -           |  |  |          | 17,425  |  |       |  | 91  | %                |  |  | 15,831  |  |  |          | 15,831 
|Pacific Region                    |  |            | 26  |  |              |  | 95.8  | %                           |  |  | 844                                      |  |  |                | 22,829  |  |                  |  | 23,673  |       |  |  | -           |  |  |          | 23,673  |  |       |  | 87  | %                |  |  | 20,592  |  |  |          | 20,592 
|Total Equity Accounted Properties |  |            | 154 |  |              |  | 95.9  | %                           |  |  | 2,469                                    |  |  |                | 146,348 |  |                  |  | 148,817 |       |  |  | -           |  |  |          | 148,817 |  |       |  | 88  | %                |  |  | 130,632 |  |  |          | 130,632
|                                  |  |            |     |  |              |  |       |                             |  |  |                                          |  |  |                |         |  |                  |  |         |       |  |  |             |  |  |          |         |  |       |  |     |                  |  |  |         |  |  |          |        
|Total Retail Properties           |  |            | 163 |  |              |  | 95.9  | %                           |  |  | 2,469                                    |  |  |                | 150,134 |  |                  |  | 152,603 |       |  |  | -           |  |  |          | 152,603 |  |       |  | 88  | %                |  |  | 133,225 |  |  |          | 133,225



(1) Does not include non-regional malls.

(2) Reflects our partnership's interest before
considering non-controlling interests, including minority interests in GGP, Brazil Retail Fund and Multiplex New Zealand Property
Fund.

(3) Reflects our partnership's interest
net of non-controlling interests described in note (2) above and attributable to limited partner units and Redeemable/Exchangeable
and special limited partner units of the operating partnership held by Brookfield.

(4) Reflects our partnership's proportionate interest
net of non-controlling interests described in note (3) above and the Redeemable/Exchangeable and special limited partner units
of the operating partnership held by Brook field.





|Multi-family Property Portfolio   |  |            |    |  | Number
    of units | 
|--------------------------------- |  | ---------- | -- |  | ------------------- | 
|                                  |  | Number of  |    |  | Assets Under        | 
|                                  |  | properties |    |  | Management          | 
|CONSOLIDATED PROPERTIES           |  |            |    |  |                     | 
|Texas                             |  |            | 6  |  |                     | 
|North Carolina                    |  |            | 19 |  |                     | 
|Virginia                          |  |            | 7  |  |                     | 
|Florida                           |  |            | 4  |  |                     | 
|South Carolina                    |  |            | 8  |  |                     | 
|Maryland                          |  |            | 2  |  |                     | 
|Canada                            |  |            | 2  |  |                     | 
|Total Consolidated Properties     |  |            | 48 |  |                     | 
|EQUITY ACCOUNTED PROPERTIES       |  |            |    |  |                     | 
|Texas                             |  |            | 10 |  |                     | 
|North Carolina                    |  |            | 1  |  |                     | 
|Florida                           |  |            | 5  |  |                     | 
|Georgia                           |  |            | 8  |  |                     | 
|Washington                        |  |            | 5  |  |                     | 
|Colorado                          |  |            | 3  |  |                     | 
|Arizona                           |  |            | 2  |  |                     | 
|Connecticut                       |  |            | 2  |  |                     | 
|Massachusetts                     |  |            | 2  |  |                     | 
|Total Equity Accounted Properties |  |            | 38 |  |                     | 
|                                  |  |            |    |  |                     | 
|Total Multi-family Properties     |  |            | 86 |  |                     | 



(1) Reflects interest net of non-controlling
interests of others in operating subsidiaries.

(2) Reflects our partnership's interest net of
non-controlling interests described in note (1) above and attributable to limited partner units and Redeemable/Exchangeable and
special limited partner units of the operating partnership held by Brookfield.

(3) Reflects our partnership's proportionate interest
net of non-controlling interests described in note (2) above and the Redeemable/Exchangeable and special limited partner units
of the operating partnership held by Brookfield.



78







|Industrial Property Portfolio     |  |            |     |  | Sq.
    ft. in 000's | 
|--------------------------------- |  | ---------- | --- |  | -------------------- | 
|                                  |  | Number of  |     |  | Assets Under         | 
|                                  |  | properties |     |  | Management           | 
|CONSOLIDATED PROPERTIES           |  |            |     |  |                      | 
|Atlanta                           |  |            | 2   |  |                      | 
|Memphis                           |  |            | 2   |  |                      | 
|Cincinnati/Indianapolis           |  |            | 5   |  |                      | 
|Chicago                           |  |            | 4   |  |                      | 
|Texas Border                      |  |            | 38  |  |                      | 
|Los Angeles                       |  |            | 9   |  |                      | 
|Dallas                            |  |            | 8   |  |                      | 
|Pennsylvania, Maryland, Virginia  |  |            | 4   |  |                      | 
|New Jersey                        |  |            | 1   |  |                      | 
|Houston, Austin, San Antonio      |  |            | 14  |  |                      | 
|Phoenix                           |  |            | 4   |  |                      | 
|South Florida                     |  |            | 3   |  |                      | 
|Central Florida                   |  |            | 1   |  |                      | 
|Other U.S.                        |  |            | 3   |  |                      | 
|Mexico                            |  |            | 35  |  |                      | 
|Germany                           |  |            | 13  |  |                      | 
|France                            |  |            | 4   |  |                      | 
|Italy                             |  |            | 1   |  |                      | 
|Spain                             |  |            | 4   |  |                      | 
|United Kingdom                    |  |            | 1   |  |                      | 
|Total Consolidated Properties     |  |            | 156 |  |                      | 
|EQUITY ACCOUNTED PROPERTIES       |  |            |     |  |                      | 
|Atlanta                           |  |            | 13  |  |                      | 
|Memphis                           |  |            | 10  |  |                      | 
|Cincinnati/Indianapolis           |  |            | 8   |  |                      | 
|Chicago                           |  |            | 10  |  |                      | 
|Los Angeles                       |  |            | 7   |  |                      | 
|Dallas                            |  |            | 7   |  |                      | 
|Pennsylvania, Maryland, Virginia  |  |            | 2   |  |                      | 
|New Jersey                        |  |            | 4   |  |                      | 
|Houston, Austin, San Antonio      |  |            | 2   |  |                      | 
|Phoenix                           |  |            | 1   |  |                      | 
|South Florida                     |  |            | 10  |  |                      | 
|Other U.S.                        |  |            | 1   |  |                      | 
|Canada                            |  |            | 2   |  |                      | 
|Germany                           |  |            | 1   |  |                      | 
|France                            |  |            | 1   |  |                      | 
|Italy                             |  |            | 1   |  |                      | 
|Total Equity Accounted Properties |  |            | 80  |  |                      | 
|                                  |  |            |     |  |                      | 
|Total Industrial Properties       |  |            | 236 |  |                      | 



(1) Reflects interest net of non-controlling
interests of others in operating subsidiaries.

(2) Reflects our partnership's interest net of
non-controlling interests described in note (1) above and attributable to limited partner units and Redeemable/Exchangeable and
special limited partner units of the operating partnership held by Brookfield.

3) Reflects our partnership's proportionate interest
net of non-controlling interests described in note (2) above and the Redeemable/Exchangeable and special limited partner units
of the operating partnership held by Brookfield.





|Hotel Property Portfolio          |  |            |   |  | Number
    of rooms | 
|--------------------------------- |  | ---------- | - |  | ------------------- | 
|                                  |  | Number of  |   |  | Assets Under        | 
|                                  |  | properties |   |  | Management          | 
|CONSOLIDATED PROPERTIES           |  |            |   |  |                     | 
|North America                     |  |            | 2 |  |                     | 
|Total Consolidated Properties     |  |            | 2 |  |                     | 
|EQUITY ACCOUNTED PROPERTIES       |  |            |   |  |                     | 
|Australia                         |  |            | 6 |  |                     | 
|Total Equity Accounted Properties |  |            | 6 |  |                     | 
|                                  |  |            |   |  |                     | 
|Total Hotel Properties            |  |            | 8 |  |                     | 



(1) Reflects interest net of non-controlling
interests of others in operating subsidiaries.

(2) Reflects our partnership's interest net of
non-controlling interests described in note (1) above and attributable to limited partner units and Redeemable/Exchangeable and
special limited partner units of the operating partnership held by Brookfield.

(3) Reflects our partnership's proportionate
interest net of non-controlling interests described in note (2) above and the Redeemable/Exchangeable and special limited partner
units of the operating partnership held by Brookfield.



79







Critical Accounting Policies, Estimates and Judgments



The discussion and analysis of our financial
condition and results of operations is based upon the consolidated financial statements, which have been prepared in accordance
with IFRS. The preparation of the consolidated financial statements, in conformity with IFRS, requires management to make estimates
and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.



Our most critical accounting policies are
those that we believe are the most important in portraying our financial condition and results of operations, and require the most
subjectivity and estimates by our management.



Investment Properties



Investment properties include commercial
properties held to earn rental income and properties that are being constructed or developed for future use as investment properties.
Commercial properties and commercial developments are recorded at fair value, determined based on available market evidence, at
the balance sheet date. We determine the fair value of each investment property based upon, among other things, rental income from
current leases and assumptions about rental income from future leases reflecting market conditions at the balance sheet date, less
future cash flows in respect of such leases. Fair values are primarily determined by 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. Active developments are 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. Valuations
of investment properties are most sensitive to changes in the discount rate and timing or variability of cash flows.



The cost of commercial developments includes
direct development costs, realty taxes and borrowing costs directly attributable to the development. Borrowing costs associated
with direct expenditures on properties under development or redevelopment are capitalized. Borrowing costs are also capitalized
on the purchase cost of a site or property acquired specifically for development or redevelopment in the short-term but only where
activities necessary to prepare the asset for development or redevelopment are in progress. The amount of borrowing costs capitalized
is determined first by reference to borrowings specific to the project, where relevant, and otherwise by applying a weighted average
cost of borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments. Where borrowings
are associated with specific developments, the amount capitalized is the gross cost incurred on those borrowings less any investment
income arising on their temporary investment. Borrowing costs are capitalized from the commencement of the development until the
date of practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods when development
activity is interrupted. We consider practical completion to have occurred when the property is capable of operating in the manner
intended by management. Generally this occurs upon completion of construction and receipt of all necessary occupancy and other
material permits. Where we have pre-leased space as of or prior to the start of the development and the lease requires us to construct
tenant improvements which enhance the value of the property, practical completion is considered to occur on completion of such
improvements.



Initial direct leasing costs we incur in
negotiating and arranging tenant leases are added to the carrying amount of investment properties.



Business Combinations



We account for the acquisition of businesses
using the acquisition method. We measure the cost of an acquisition at the aggregate of the fair values at the date of exchange
of assets given, liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3, “Business
Combinations” are recognized at their fair values at the acquisition date, except for non-current assets that are classified
as held-for-sale and measured at fair value, less costs to sell. The interests of non-controlling shareholders in the acquiree
are initially measured at fair value or at the non-controlling interests’ proportionate share of identifiable assets, liabilities
and contingent liabilities acquired.



To the extent fair value of consideration
paid is less than the fair value of net identifiable tangible and intangible assets, the excess is recognized in net income. To
the extent the fair value of consideration paid exceeds the fair value of the net identifiable tangible and intangible assets,
the excess is recorded as goodwill.



80







Where a business combination is achieved
in stages, previously held interests in the acquired entity are re-measured to fair value at the acquisition date, which is the
date control is obtained, and the resulting gain or loss, if any, is recognized in net income. Amounts arising from interests in
the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified
to net income. Changes in our partnership’s ownership interest of a subsidiary that do not result in a gain or loss of control
are accounted for as equity transactions and are recorded as a component of equity. Acquisition costs are recorded as an expense
in net income as incurred.



In applying this policy, judgment is applied
in determining whether an acquisition meets the definition of a business combination or an asset acquisition by considering the
nature of the assets acquired and the processes applied to those assets, or if the integrated set of assets and activities is capable
of being conducted and managed for the purpose of providing a return to investors or other owners.



The determination of whether an acquisition
meets the definition of a business results in measurement differences on initial recognition of the acquired net assets. If the
acquisition is determined to be a business combination these differences include the nature of deferred tax assets and liabilities
that may be recorded and the requirement to recognize goodwill or negative goodwill, as applicable, for differences between the
consideration provided and the fair value of the net assets acquired. Additionally, transaction costs incurred to effect a business
combination are required to be expensed where for an asset acquisition transaction costs would be capitalized to the initial carrying
amount of the acquired asset.



Basis of Accounting for Investees



Our partnership consolidates an investee
when it controls the investee, with control existing if and only if it has power over the investee; exposure, or rights, to variable
returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of our
partnership’s returns. Whether our partnership consolidates or equity accounts an investee may have a significant impact
on the presentation of our partnership’s consolidated financial statements, especially as it relates to the consolidation
of the operating partnership.



In determining if our partnership has power
over an investee our partnership makes judgments when identifying which activities of the investee are relevant in significantly
affecting returns of the investee and the extent of our partnership’s existing rights that give it the current ability to
direct the relevant activities of the investee. Our partnership will also make judgments as to the amount of potential voting rights
which provide our partnership or unrelated parties voting powers, the existence of contractual relationships that provide our partnership
voting power, the ability to appoint directors and the ability of other investors to remove our partnership as a manager or general
partner. Our partnership has entered into voting agreements to provide the partnership with the ability to contractually direct
the relevant activities of the investee (formally referred to as “power” within IFRS 10, “Consolidated Financial
Statements”). In assessing if our partnership has exposure, or rights, to variable returns from its involvement with the
investee our partnership makes judgments concerning whether returns from an investee are variable and how variable those returns
are on the basis of the substance of the arrangement, the size of those returns and the size of those returns relative to others,
particularly in circumstances where our partnership’s voting interest differs from its ownership interest in an investee.
In determining if our partnership has the ability to use its power over the investee to affect the amount of our partnership’s
returns our partnership makes judgments when it is an investor as to whether it is a principal or agent and whether another entity
with decision-making rights is acting as an agent for our partnership. If our partnership determines that it is acting as an agent,
as opposed to principal, it does not control the investee.



Revaluation Method for Property, Plant and Equipment



Our partnership uses the revaluation method
of accounting for certain classes of property, plant and equipment. Property, plant and equipment measured using the revaluation
method is initially measured at cost and subsequently carried at its revalued amount, being the fair value at the date of the revaluation
less any subsequent accumulated depreciation and any accumulated impairment losses. Revaluations are made on an annual basis to
ensure that the carrying amount does not differ significantly from fair value. Where the carrying amount of an asset increases
as a result of a revaluation surplus, the increase is recognized in other comprehensive income and accumulated in equity in revaluation
surplus, unless the increase reverses a previously recognized impairment recorded through net income, in which case that portion
of the increase is recognized in net income. Where the carrying amount of an asset decreases, the decrease is recognized in other
comprehensive income to the extent of any balance existing in revaluation surplus in respect of the asset, with the remainder of
the decrease recognized in net income. In applying this policy judgment is required in determining the valuation model employed
and the selection of appropriate assumptions used in estimating the fair value of assets to which the revaluation model is applicable.



81







Canary Wharf Group plc



We have determined that, notwithstanding
our 22% common equity interest, we do not exercise significant influence over Canary Wharf as we are not able to elect board members
or otherwise influence the financial and operating decisions.



General Growth Properties, Inc.



As of December 31, 2013, we held an indirect
28% interest in GGP and were entitled to nominate three of the nine directors to GGP’s board and vote all of our shares for
those directors.



We account for our investment in GGP following
the equity method of accounting. The carrying value of our investment in GGP consists of our original cost of the investment plus
our share of the earnings of GGP, determined in accordance with our accounting policies under IFRS, less distributions received
from GGP. This includes our share of GGP’s unrealized fair value gains (losses) in respect of investment property, which
is determined in accordance with our accounting policy for valuation of investment properties. Accordingly, the substantial variance
between the value of our investment in GGP based on the publicly-traded share price and the carrying value of the equity accounted
investment is the result of recording our share of the IFRS net earnings of GGP, which includes the cumulative unrealized fair
value gains arising from the significant fair value increases in the underlying investment properties.



We consider the guidance in IAS 28, “Investments
in Associates and Joint Ventures”, and IAS 36, “Impairment of Assets” to determine if there are indicators of
impairment, one of which is whether there is a significant or prolonged decline in the fair value of an investment in an equity
instrument below its cost. Accordingly, we consider whether the variance between the value of the investment as determined using
the publicly-traded share price and the carrying value is an indicator of impairment.



Our evaluation of whether there were impairment
indicators present included consideration of a number of factors as required by IAS 36 including an evaluation of the technological,
market, economic and legal environment in which GGP operates; consideration of whether GGP was, or in the near future is expected
to be, in significant financial difficulty and an assessment of trends in actual net cash flows or operating profit or loss of
GGP. Further, with respect specifically to the variance between the value of the investment as determined using the publicly-traded
share price and the carrying value determined under IAS 28, we consider additional factors relative to this variance. This includes
an analysis of the original blended cost of our investment in GGP compared to the publicly-traded share price over the period from
acquisition dates through each reporting date; the trend in the share price of GGP as at each reporting date up to and including
the current date; and an assessment of the underlying cash flows that are expected to be derived from the operating and redevelopment
properties, including the significant recovery in property values contributing to the fair value gains recorded by GGP.



Taxation



We apply judgment in determining the tax
rate applicable to our REIT operating entities and identifying the temporary differences related to such operating entities with
respect to which deferred income taxes are recognized. Deferred taxes related to temporary differences arising in the company’s
REIT operating entities, joint ventures and associates are measured based on the tax rates applicable to distributions received
by the investor entity on the basis that REITs can deduct dividends or distributions paid such that their liability for income
taxes is substantially reduced or eliminated for the year, and we intend that these entities will continue to distribute their
taxable income and continue to qualify as REITs for the foreseeable future.



We measure deferred income taxes associated
with our investment properties based on our specific intention with respect to each asset at the end of the reporting period. Where
we have a specific intention to sell a property in the foreseeable future, deferred taxes on the building portion of the investment
property are measured based on the tax consequences following from the disposition of the property. Otherwise, deferred taxes are
measured on the basis the carrying value of the investment property will be recovered substantially through use. Judgment is required
in determining the manner in which the carrying amount of each investment property will be recovered.



We also make judgments with respect to the
taxation of gains inherent in our investments in foreign subsidiaries and joint ventures. While we believe that the recovery of
our original investment in these foreign subsidiaries and joint ventures will not result in additional taxes, certain unremitted
gains inherent in those entities could be subject to foreign taxes depending on the manner of realization.



82







Revenue Recognition



For investment properties, we account for
our leases with tenants as operating leases as we have retained substantially all of the risks and benefits of ownership of our
investment properties. Revenue recognition under a lease commences when the tenant has a right to use the leased asset. Generally,
this occurs on the lease inception date or, where the company is required to make additions to the property in the form of tenant
improvements which enhance the value of the property, upon substantial completion of the improvements. The total amount of contractual
rent to be received from operating leases is recognized on a straight-line basis over the term of the lease; a straight-line rent
receivable, which is included in the carrying amount of investment property, is recorded for the difference between the rental
revenue recorded and the contractual amount received.



Rental revenue also includes percentage
participating rents and recoveries of operating expenses, including property and capital taxes. Percentage participating rents
are recognized when tenants' specified sales targets have been met. Operating expense recoveries are recognized in the period that
recoverable costs are chargeable to tenants.



With regards to hospitality revenue, we
recognize revenue on rooms, food and other revenue as services are provided. We recognize rooms revenue net of taxes and levies
that are assessed by government-related agencies. Advanced deposits are deferred and included in accounts payable and other liabilities
until services are provided to the customer. We recognize the difference between gaming wins and losses from casino gaming activities
as gaming revenue. We recognize liabilities for funds deposited by patrons before gaming play occurs and for chips in the patrons’
possession, both of which are included in accounts payable and other liabilities. Revenue and expenses from tour operations include
the sale of travel and leisure packages and are recognized on the day the travel package begins. Amounts collected in advance from
guests are deferred and included in accounts payable and other liabilities until such amounts are earned.



Financial Instruments



We classify our financial instruments into
categories based on the purpose for which the instrument was acquired or issued, its characteristics and our designation of the
instrument. The category into which we classify financial instruments determines its measurement basis (e.g., fair value, amortized
cost) subsequent to initial recognition. We hold financial instruments that represent secured debt and equity interests in commercial
properties that are measured at fair value. Estimation of the fair value of these instruments is subject to the estimates and assumptions
associated with valuation of investment properties. When designating derivatives in cash flow hedging relationships, we make assumptions
about the timing and amount of forecasted transactions, including anticipated financings and refinancings.



Fair value is the amount that willing parties
would accept to exchange a financial instrument based on the current market for instruments with the same risk, principal and remaining
maturity. The fair value of interest bearing financial assets and liabilities is determined by discounting the contractual principal
and interest payments at estimated current market interest rates for the instrument. Current market rates are determined by reference
to current benchmark rates for a similar term and current credit spreads for debt with similar terms and risk.



Use of Estimates



The company makes estimates and assumptions
that affect carried amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amount
of earnings for the period. Actual results could differ from estimates. The estimates and assumptions that are critical to the
determination of the amounts reported in the consolidated financial statements relate to the following:



(i)    Investment property



We determine the fair value of each operating
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. Fair values
are primarily determined by 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. Certain operating properties are valued
using a direct capitalization approach whereby a capitalization rate is applied to estimated current year cash flows. Development
properties under active development 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 our policy, we measure our operating properties and development properties using valuations prepared by management. From time
to time, we obtain valuations of selected operating properties and development properties prepared by qualified external valuation
professionals in connection with financing transactions or for other purposes, and while management considers the results of such
valuations they do not form the basis of the company’s reported values.



83







(ii)   Financial instruments



We determine the fair value of our warrants
to acquire common shares of GGP using a Black-Scholes option pricing model wherein we are required to make estimates and assumptions
regarding expected future volatility of GGP’s shares and the term of the warrants.



We have certain financial assets and liabilities
with embedded participation features related to the values of investment properties whose fair values are based on the fair values
of the related properties.



We hold other financial instruments that
represent equity interests in investment property entities that are measured at fair value as these financial instruments are designated
as fair value through profit or loss or available-for-sale. Estimation of the fair value of these instruments is also subject to
the estimates and assumptions associated with investment properties.



The fair value of interest rate caps is
determined based on generally accepted pricing models using quoted market interest rates for the appropriate term. Interest rate
swaps are valued at the present value of estimated future cash flows and discounted based on applicable yield curves derived from
market interest rates.



Application of the effective interest method
to certain financial instruments involves estimates and assumptions about the timing and amount of future principal and interest
payments.



Future Accounting Policy Changes



We anticipate adopting each of the accounting
policy changes below in the first quarter of the year for which the standard is applicable and are currently evaluating the impact
of each.



Levies



IFRIC 21, “Levies” (“IFRIC
21”) addresses when an entity should recognize a liability to pay a government levy other than income taxes. IFRIC 21 is
an interpretation of IAS 37, “Provisions, Contingent Liabilities and Contingent Assets” (“IAS 37”). IAS
37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation
as a result of a past event. IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity
described in the relevant legislation that triggers the payment of the levy. IFRIC 21 is effective for annual periods beginning
on or after January 1, 2014. Retrospective application of this interpretation is required. The partnership is currently evaluating
the impact of IFRIC 21 to its consolidated financial statements.



Financial Instruments



IFRS 9, “Financial Instruments”
(“IFRS 9”) was issued by the IASB on November 12, 2009 and will replace IAS 39, “Financial Instruments: Recognition
and Measurement” (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured
at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages
its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets.
The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. The
IASB has not finalized a mandatory adoption date. The partnership is currently evaluating the impact of IFRS 9 to its consolidated
financial statements.



84







| | 5.B. | LIQUIDITY AND CAPITAL RESOURCES
| | ---- | -------------------------------



The capital of our business consists
of property debt, other secured and unsecured debt, capital securities, preferred stock and equity. Our objectives when
managing this capital are to maintain an appropriate balance between holding a sufficient amount of capital to support our
operations and to reduce our weighted average cost of capital and improve the returns on equity through value
enhancement initiatives and the consistent monitoring of the balance between debt and equity financing of the subsidiaries.
As at December 31, 2013, the recorded values
of capital totaled $49 billion (December 31, 2012 — $45 billion). Our principal liquidity needs for the next year are
to:



| | · | fund recurring expenses;
| | - | ------------------------



| | · | meet debt service requirements;
| | - | -------------------------------



| | · | fund those capital expenditures deemed mandatory, including tenant
improvements;
| | - | --------------------------------------------------------------------------------



| | · | fund development costs not covered under construction loans;
| | - | ------------------------------------------------------------



| | · | fund investing activities which could include discretionary capital
expenditures;
| | - | ---------------------------------------------------------------------------------



| | · | fund property acquisitions; and
| | - | -------------------------------



| | · | fund distributions to unitholders.
| | - | ----------------------------------



We plan to meet these needs with one or
more of the following:



| | · | cash flows from operations;
| | - | ---------------------------



| | · | construction loans;
| | - | -------------------



| | · | proceeds from sales of assets;
| | - | ------------------------------



| | · | proceeds from sale of non-controlling interests in subsidiaries; and
| | - | --------------------------------------------------------------------



| | · | credit facilities and refinancing opportunities.
| | - | ------------------------------------------------



We attempt to maintain a level of liquidity
to ensure we are able to react to investment opportunities quickly and on a value basis. Our primary sources of liquidity consist
of cash and undrawn committed credit facilities, as well as cash flow from operating activities. In addition, we structure our
affairs to facilitate monetization of longer-duration assets through financings, co-investor participations or refinancings. We
also generate liquidity by accessing capital markets on an opportunistic basis. The following table summarizes the various sources
of cash flows of our operating entities which supplement our liquidity.



|                                                |  |   |        |  |  |  
|----------------------------------------------- |  | - | ------ |  |  | -
|(US$ Millions) Year ended Dec. 31,              |  |   | 2013   |  |  |  
|Cash flow from operating activities             |  | $ | 421    |  |  | $
|Borrowings                                      |  |   | 8,775  |  |  |  
|Capital securities issued                       |  |   | 392    |  |  |  
|Proceeds from equity installment receivable     |  |   | -      |  |  |  
|Proceeds from asset sales                       |  |   | 1,627  |  |  |  
|Proceeds from sales of financial assets         |  |   | 296    |  |  |  
|Loans and notes receivable collected            |  |   | 199    |  |  |  
|Loans and notes receivable collected            |  |   | -      |  |  |  
|Contributions from parent company               |  |   | 20     |  |  |  
|Restricted cash and deposits                    |  |   | 4      |  |  |  
|Acquisition of subsidiaries, net of disposition |  |   | 215    |  |  |  
|Contributions from non-controlling interest     |  |   | 1,128  |  |  |  
|                                                |  | $ | 13,077 |  |  | $





We seek to increase income from our existing
properties by maintaining quality standards for our properties that promote high occupancy rates and support increases in rental
rates while reducing tenant turnover and related retenanting costs, and by controlling operating expenses. Consequently, we believe
our revenue, along with proceeds from financing activities and divestitures, will continue to provide the necessary funds to cover
our short-term liquidity needs. However, material changes in the factors described above may adversely affect our net cash flows.



Most of our borrowings are in the form of
long term asset-specific financings with recourse only to the specific assets. Limiting recourse to specific assets ensures that
poor performance within one area should not compromise our ability to finance the balance of our operations. A summary of our debt
profile for each of our office and retail segments are included elsewhere in this Form 20-F.



85







As at December 31, 2013 we had $883 million
of committed corporate credit facilities in Brookfield Office Properties consisting of a revolving credit facility from a syndicate
of banks totaling $695 million and bilateral agreements between Brookfield Canada Office Properties and a number of Canadian chartered
banks for an aggregate of C$200 million. The balance drawn on these facilities was $336 million (December 31, 2012 — $68
million). We incurred $16 million in interest expense related to these corporate credit facilities for the year ended December
31, 2013 (2012 — $16 million)



As at December 31, 2013, we had $550 million
of bilateral corporate revolving credit facilities with eleven financial institutions. At December 31, 2013, the balance drawn
on these facilities was $496 million (December 31, 2012 — not applicable). We incurred $6 million in interest expense related
to these corporate revolving credit facilities in the year ended December 31, 2013 (2012 — not applicable).



On December 6, 2013, we entered into of
a $500 million subordinated credit facility with a subsidiary of Brookfield Asset Management to supplement our liquidity. As of
December 31, 2013, the balance drawn on this facility was nil. Under the facility, we do not pay a commitment fee on any undrawn
balance.



At December 31, 2013, the book value of
our limited partnership units was $2.5 billion, compared with a market capitalization of approximately $2.0 billion, calculated
as total limited partnership units outstanding of 102.5 million multiplied by $19.94, the closing price per limited partnership
unit on the New York Stock Exchange on December 31, 2013.



| | 5.C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
| | ---- | ----------------------------------------------------



Not applicable.



| | 5.D. | TREND INFORMATION
| | ---- | -----------------



We will seek to increase the cash flows
from our office and retail property activities through continued leasing activity as described below. In particular, we are operating
below our historical office occupancy level in the United States, which provides the opportunity to expand cash flows through higher
occupancy. In addition, we believe that most of our markets have favorable outlooks, which we believe also provides an opportunity
for strong growth in lease rates. We do, however, still face a meaningful amount of office lease rollover in 2014/2015, which may
restrain FFO growth from this part of our portfolio in the near future. Our beliefs as to the opportunities for our partnership
to increase its occupancy levels, lease rates and cash flows are based on assumptions about our business and markets that management
believes are reasonable in the circumstances. There can be no assurance as to growth in occupancy levels, lease rates or cash flows.
See “Special Note Regarding Forward-Looking Statements”.



Transaction activity is picking up across
our global real estate markets and we are considering a number of different opportunities to acquire single assets, development
sites and portfolios at attractive returns. In our continued effort to enhance returns through capital reallocation, we are also
looking to divest all of, or a partial interest in, a number of mature assets to capitalize on existing market conditions.



Given the small amount of new office and
retail development that occurred over the last decade and the near total development halt during the global financial crisis, we
see an opportunity to advance our development inventory in the near term in response to demand we are seeing in our major markets.
In addition, we continue to reposition and redevelop existing retail properties, in particular, a number of the highest performing
shopping centers in the United States.



| | 5.E. | OFF-BALANCE SHEET ARRANGEMENTS
| | ---- | ------------------------------



We do not have any off-balance sheet arrangements
that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to
investors.



86







| | 5.F. | TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
| | ---- | ---------------------------------------------



The following table summarizes our significant
contractual obligations as of December 31, 2013 and 2012:





|(US$ Millions)                        |  |       |        |  | Payments
    Due By Period |   |       |                 | 
|------------------------------------- |  | ----- | ------ |  | -------------------------- | - | ----- | --------------- | 
|As at Dec. 31, 2013                   |  | Total |        |  | Less
    than 1 Year       |   |       | 2
    - 3 Years | 
|Property debt                         |  | $     | 21,640 |  |                            | $ | 5,120 |                 | 
|Capital securities                    |  |       | 2,369  |  |                            |   | 188   |                 | 
|Other financial liabilities           |  |       | 1,915  |  |                            |   | 1,665 |                 | 
|Interest expense(1) on the following: |  |       |        |  |                            |   |       |                 | 
|Property and other secured debt       |  |       | 4,127  |  |                            |   | 983   |                 | 
|Capital securities                    |  |       | 673    |  |                            |   | 110   |                 | 
|Interest rate swaps                   |  |       | 1      |  |                            |   | -     |                 | 





|(1) | Represents aggregate interest expense expected to be paid over the term of the obligations. Variable interest rate payments have been calculated based on current rates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| | ------- | ------------------------------------------



| | 6.A. | DIRECTORS AND SENIOR MANAGEMENT
| | ---- | -------------------------------



Governance



As required by law, our limited partnership
agreement provides for the management and control of our company by a general partner rather than a board of directors and officers.
The BPY General Partner serves as our company’s general partner and has a board of directors. The BPY General Partner has
no executive officers. The BPY General Partner has sole responsibility and authority for the central management and control of
our company, which is exercised through its board of directors.



The following table presents certain information
concerning the current board of directors of the BPY General Partner:



|Name and Residence(1)                                      |  | Age |  | Position with theBPY General Partner |  | Principal Occupation                                                                         
|---------------------------------------------------------- |  | --- |  | ------------------------------------ |  | ---------------------------------------------------------------------------------------------
|                                                           |  |     | 
|Gordon E. Arnell
        Calgary, Canada                   |  | 79  |  | Director                             |  | Corporate Director                                                                           
|                                                           |  |     |  |                                      |  |                                                                                              
|Jeffrey M. Blidner
        Toronto, Canada                 |  | 66  |  | Director                             |  | Senior Managing Partner of Brookfield Asset Management                                       
|                                                           |  |     | 
|Omar Carneiro da Cunha(3)
        Rio de Janeiro, Brazil   |  | 68  |  | Director                             |  | Senior Partner of Dealmaker Ltd. and BOND Consultoria Empresarial e Participacoes            
|                                                           |  |     | 
|Stephen DeNardo(2)
        Stamford, United States         |  | 61  |  | Director                             |  | Managing Director and President and Chief Executive Officer of RiverOak Investment Corp., LLC
|                                                           |  |     | 
|Louis Joseph Maroun(2)(3)
        Full Fathoms, Bermuda    |  | 64  |  | Director                             |  | Executive Chairman of Sigma Real Estate Advisors/Sigma Capital Corporation                   
|                                                           |  |     | 
|Lars Rodert(3)
        Genese, Belgium                     |  | 53  |  | Director                             |  | Senior Portfolio Manager of Inter IKEA Treasury, North America and Europe                    
|                                                           |  |     | 
|José Ramón Valente
        Vías(2)
        Santiago, Chile |  | 52  |  | Director                             |  | Partner and Executive Director of ECONSULT                                                   



|(1) | The business address for each of the directors is 73 Front Street, Hamilton, HM 12, Bermuda.                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                
|(2) | Member of the audit committee. Stephen DeNardo is the Chair of the audit committee and is the audit committee financial expert.
|    |                                                                                                                                
|(3) | Member of the governance and nominating committee. Louis Joseph Maroun is the Chair of the governance and nominating committee.



87







Set forth below is biographical information
for the BPY General Partner’s current directors.



Gordon E. Arnell. Mr. Arnell
was Chairman of Brookfield Office Properties from October 1995 to July 2012. Mr. Arnell was President of Brookfield Office
Properties from 1990 to 1995 and Chief Executive Officer from 1990 to 2000. He has also previously held senior executive roles
at Oxford Development Group Ltd. and Trizec Corporation Ltd.



Jeffrey M. Blidner. Mr. Blidner
is a Senior Managing Partner of Brookfield Asset Management and is responsible for strategic planning and transaction execution.
Mr. Blidner is also a director of a number of Brookfield companies in Europe and Canada. Prior to joining Brookfield in 2000,
Mr. Blidner was a senior partner at Goodman & Carr LLP, a Toronto-based law firm. Mr. Blidner’s practice
focused on merchant banking transactions, public offerings, mergers and acquisitions, management buy-outs and private equity transactions.
Mr. Blidner received his LLB from Osgood Hall Law School and was called to the Bar in Ontario as a Gold Medalist.



Omar Carneiro da Cunha. Mr.
Cunha is a Senior Partner with Dealmaker Ltd., a consultancy and M&A advisory firm, with a focus in telecommunications, information
technology, oil & gas and retail, and has also been a Senior Partner of BOND Consultoria Empresarial e Participacoes since
1994. He was the Chairman of “Bob’s”, a Brazilian fast food company, from 1995 to 2008, a director of the Energisa
Group since 1996, and a director of Grupo Libra since 2010. In 2005, Mr. Cunha was the Deputy Chairman and Chief Executive Officer
of VARIG Brazilian Airline. From 1995 to 1998, Mr. Cunha was the President of AT&T Brasil and a member of the Management Committee
of AT&T International. Prior to that, Mr. Cunha worked for 27 years in Brazil and abroad for the Royal Dutch/Shell Group, and
was President of Shell Brasil, Billiton Metals and Shell Quimica from 1991 to 1994. Mr. Cunha is currently a member of the board
of Acao Communitaria do Brasil, Cultura Inglesa S/A, UHF Inc. and of the American Chamber of Commerce for Brazil.



Stephen DeNardo. Mr. DeNardo
is currently managing director and president and CEO of RiverOak Investment Corp., LLC and has held this position since 1999. From
1997 to 1999 he was Partner and Senior Vice President of ING Realty Partners, where he managed a $1 billion portfolio. Prior to
his employment with ING Realty Partners, he was President of ARES Realty Capital from 1991 to 1997, where he managed a $5 billion
portfolio of diversified debt and equity assets. Before joining ARES Realty Capital, he was a Partner at First Winthrop Corporation.
Mr. DeNardo has held a license as a Certified Public Accountant since 1978 and has a B.S. in Accounting from Fairleigh Dickinson
University.



Louis Joseph Maroun. Mr. Maroun
is the Founder and Executive Chairman of Sigma Real Estate Advisors/Sigma Capital Corporation, which specializes in international
real estate advisory services. Prior to this role, Mr. Maroun was the Executive Chairman of ING Real Estate Canada, and held
executive positions in a number of real estate companies where he was responsible for overseeing operations, real estate transactions,
asset and property management, as well as many other related functions. Mr. Maroun also is on the board of directors of Brookfield
Renewable Energy Partners L.P. and Summit Industrial Income REIT. Mr. Maroun graduated from the University of New Brunswick in
1972 with a Bachelor’s degree followed by a series of post graduate studies and in January of 2007, after a long and successful
career in investment real estate, Mr. Maroun was elected to the position of Fellow of the Royal Institute of Chartered Surveyors.



Lars Rodert. Mr. Rodert is
a Senior Portfolio Manager for Inter IKEA Treasury in North America and Europe. Prior to this role, he was most recently Chief
Investment Officer, North America, at SEB Asset Management and prior to that he was Head of International Equities at the same
firm. Based in Belgium, Mr. Rodert has an in depth knowledge of continental European markets and is seasoned in analyzing
investment opportunities. Mr. Rodert holds a Bachelor of Arts degree from Stockholm University, with a major in finance.



José Ramón Valente Vías.
Mr. Valente is a partner and executive director of ECONSULT. Mr. Valente is the representative in Chile of Fidelity Investments
(U.S.A.) and was a founding partner and director of Duff and Phelps Rating Agency in Chile, Argentina and Peru between 1989 and
2000. Mr. Valente was a Finance and Macroeconomics professor in Universidad de Chile and Universidad Gabriela Mistral between 1989
and 1993. Mr. Valente is currently a member of the board of several companies, such as Transelec Chile S.A., Indura S.A. and Cementos
Bío Bío S.A. Mr. Valente is currently a director of the SEP (Public Companies System of the Chilean State). Mr. Valente
holds a Commercial Engineering degree from Universidad de Chile and Master in Business Administration from the University of Chicago.



Additional Information About Directors
and Officers



Mr. Cunha was a director of Varig S.A. —
Vição Aérea Rio-Grandense from February 2005 to October 2005. On June 17, 2005, Varig S.A. — Vição
Aérea Rio-Grandense applied for a grant of judicial recovery with a view to restructuring payments to its creditors. On
August 20, 2010, Varig S.A. — Vição Aérea Rio-Grandense was declared bankrupt. The bankruptcy proceedings
are still underway.



88







Our Management



The Service Providers, wholly-owned subsidiaries
of Brookfield Asset Management, provide management services to us pursuant to our Master Services Agreement. Brookfield has
built its property platform through the integration of formative portfolio acquisitions and single asset transactions over several
decades and throughout all phases of the real estate investment cycle. Having invested over $18 billion of equity in the real estate
sector since 1989, Brookfield has a track record of delivering compelling, risk-adjusted returns to investors through a variety
of publicly-listed company and private partnership vehicles. The Service Providers’ investment and asset management professionals
are complemented by the depth of real estate investment and operational expertise throughout our operating platforms which specialize
in office, retail, multi-family and industrial assets, generating significant and stable operating cash flows. Members of
Brookfield’s senior management and other individuals from Brookfield’s global affiliates are drawn upon to fulfill
the Service Providers’ obligations to provide us with management services under our Master Services Agreement.



The following table presents certain information
concerning the Chief Executive Officer and the Chief Financial Officer of our Service Providers:



|Name             |  | Age |  | Years ofExperience |  | Years atBrookfield |  | Positionwith one ofthe Service Providers |                        
|---------------- |  | --- |  | ------------------ |  | ------------------ |  | ---------------------------------------- | -----------------------
|Richard B. Clark |  | 56  |  | 32                 |  | 29                 |  |                                          | Chief Executive Officer
|                 |  |     |  |                    |  |                    |  |                                          |                        
|John Stinebaugh  |  | 47  |  | 25                 |  | 9                  |  |                                          | Chief Financial Officer



Messrs. Clark and Stinebaugh have substantial
operational and transaction origination and execution expertise, having put together numerous consortiums, partnerships and joint
ventures for large multifaceted transactions. They have also been integral in building and developing Brookfield’s real property
and infrastructure platforms. Set forth below is biographical information for Messrs. Clark and Stinebaugh .



Richard B. Clark. Mr. Clark
is the Chief Executive Officer of Brookfield Asset Management’s global real estate group, Brookfield Property Group, and
Chairman of Brookfield Office Properties’ Board of Directors since 2012. He was Chief Executive Officer of Brookfield Office
Properties from 2002 to 2012 and was also the President from 2012 to 2011. He was President and Chief Executive Officer of Brookfield
Office Properties’ U.S. operations from 2000-2002; and prior to that held senior management positions for Brookfield Office
Properties and its predecessor companies including Chief Operating Officer, Executive Vice President and Director of Leasing. Mr.
Clark is currently also a Senior Managing Partner of Brookfield Asset Management. Mr. Clark is on the Executive Committee
of the Real Estate Roundtable, is a board member of the Mental Health Association of New York City and is Chairman of the Board
of the National Eating Disorders Association. Mr. Clark sits on the board of directors of GGP and is Chairman and a director
of Rouse.



John Stinebaugh.Mr. Stinebaugh
is the Chief Financial Officer of Brookfield’s global property group. He was Chief Financial Officer of Brookfield’s
infrastructure group from 2007 to 2013. Prior to joining Brookfield, Mr. Stinebaugh was with Credit Suisse Securities (U.S.A.)
LLC where he was responsible for mergers and acquisitions and leveraged financings in the energy group. Mr. Stinebaugh graduated
with a degree in economics from Harvard University and received his Chartered Financial Analyst designation in 1995.



The directors and officers of the BPY General
Partner and our Service Providers and their associates, as a group, beneficially own, directly or indirectly, or exercise control
and direction over, our units representing in the aggregate less than 1% of our issued and outstanding units on a fully exchanged
basis.



89







| | 6.B. | COMPENSATION
| | ---- | ------------



The BPY General Partner pays each of its
directors $100,000 per year for serving on its board of directors and various board committees. The BPY General Partner pays the
chair of the audit committee an additional $20,000 per year and pays the other members of the audit committee an additional $10,000
per year for serving in such positions.



The BPY General Partner does not have any
employees. Our partnership has entered into a Master Services Agreement with the Service Providers pursuant to which each Service
Provider and certain other affiliates of Brookfield provide, or arrange for other Service Providers to provide, day-to-day management
and administrative services for our company, the Property Partnership and the Holding Entities. The fees payable under the Master
Service Agreement are set forth under Item 7.B “Major Shareholders and Related Party Transactions — Related Party Transactions
— Our Master Services Agreement — Management Fee”.



Pursuant to our Master Services Agreement,
members of Brookfield’s senior management and other individuals from Brookfield’s global affiliates are drawn upon
to fulfill obligations under the Master Services Agreement. However, these individuals, including the Brookfield employees identified
in the table under Item 6.A. “Directors, Senior Management and Employees — Directors and Senior Management —
Our Management”, will not be compensated by our company or the BPY General Partner. Instead, they will continue to be compensated
by Brookfield.



| | 6.C. | BOARD PRACTICES
| | ---- | ---------------



Board Structure, Practices and Committees



The structure, practices and committees
of the BPY General Partner’s board of directors, including matters relating to the size and composition of the board of directors,
the election and removal of directors, requirements relating to board action and the powers delegated to board committees, are
governed by the BPY General Partner’s bye-laws. The BPY General Partner’s board of directors is responsible for supervising
the management, control, power and authority of the BPY General Partner except as required by applicable law or the bye-laws of
the BPY General Partner. The following is a summary of certain provisions of those bye-laws that affect our company’s governance.



Size, Independence and Composition
of the Board of Directors



The BPY General Partner’s board of
directors may consist of between 3 and 11 directors or such other number of directors as may be determined from time to time by
a resolution of the BPY General Partner’s shareholders and subject to its bye-laws. The board is currently set at seven directors
and a majority of the directors of the BPY General Partner’s board of directors are independent. In addition, the BPY General
Partner’s bye-laws provide that not more than 50% of the directors (as a group) or the independent directors (as a group)
may be residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the board of directors from
time to time).



Election and Removal of Directors



The BPY General Partner’s board of
directors is appointed by its shareholders and each of its current directors will serve until the earlier of his or her death,
resignation or removal from office. Vacancies on the board of directors may be filled and additional directors may be added by
a resolution of the BPY General Partner’s shareholders or a vote of the directors then in office. A director may be removed
from office by a resolution duly passed by the BPY General Partner’s shareholders. A director will be automatically removed
from the board of directors if he or she becomes bankrupt, insolvent or suspends payments to his or her creditors, or becomes prohibited
by law from acting as a director.



Action by the Board of Directors



The BPY General Partner’s board of
directors may take action in a duly convened meeting at which a quorum is present or by a written resolution signed by all directors
then holding office. The BPY General Partner’s board of directors will hold a minimum of four meetings per year. When action
is to be taken at a meeting of the board of directors, the affirmative vote of a majority of the votes cast is required for any
action to be taken.



90







Transactions Requiring Approval
by the Governance and Nominating Committee



The BPY General Partner’s governance
and nominating committee has approved a conflicts policy which addresses the approval and other requirements for transactions in
which there is greater potential for a conflict of interest to arise. These transactions include:



| | · | acquisitions by us from, and dispositions by us to, Brookfield;
| | - | ---------------------------------------------------------------



| | · | the dissolution of our partnership or the Property Partnership;
| | - | ---------------------------------------------------------------



| | · | any material amendment to our Master Services Agreement, the Relationship Agreement, our limited partnership agreement or the
Property Partnership’s limited partnership agreement;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | any material service agreement or other material arrangement pursuant to which Brookfield will be paid a fee, or other consideration
other than any agreement or arrangement contemplated by our Master Services Agreement;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | termination of, or any determinations regarding indemnification under, our Master Services Agreement, our limited partnership
agreement or the Property Partnership’s limited partnership agreement; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | any other material transaction involving us and Brookfield.
| | - | -----------------------------------------------------------



Our conflicts policy requires the transactions
described above to be approved by the BPY General Partner’s governance and nominating committee. Pursuant to our conflicts
policy, the BPY General Partner’s governance and nominating committee may grant approvals for any of the transactions described
above in the form of general guidelines, policies or procedures in which case no further special approval will be required in connection
with a particular transaction or matter permitted thereby. The conflicts policy can be amended at the discretion of the BPY General
Partner’s governance and nominating committee. See Item 7.B. “Major Shareholders and Related Party Transactions
— Related Party Transactions — Relationship with Brookfield — Conflicts of Interest and Fiduciary Duties”.



Service Contracts



There are no service contracts with directors
that provide benefit upon termination of office or services.



Transactions in which a Director
has an Interest



A director who directly or indirectly has
an interest in a contract, transaction or arrangement with the BPY General Partner, our company or certain of our affiliates is
required to disclose the nature of his or her interest to the full board of directors. Such disclosure may generally take the form
of a general notice given to the board of directors to the effect that the director has an interest in a specified company or firm
and is to be regarded as interested in any contract, transaction or arrangement with that company or firm or its affiliates. A
director may participate in any meeting called to discuss or any vote called to approve the transaction in which the director has
an interest and no transaction approved by the board of directors will be void or voidable solely because the director was present
at or participates in the meeting in which the approval was given provided that the board of directors or a board committee authorizes
the transaction in good faith after the director’s interest has been disclosed or the transaction is fair to the BPY General
Partner and our company at the time it is approved.



Audit Committee



The BPY General Partner’s board of
directors is required to maintain an audit committee that operates pursuant to a written charter. The audit committee is required
to consist solely of independent directors and each member must be financially literate. Not more than 50% of the audit committee
members may be residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated by the board of directors
from time to time).



The audit committee is responsible for assisting
and advising the BPY General Partner’s board of directors with respect to:



| | · | our accounting and financial reporting processes;
| | - | -------------------------------------------------



| | · | the integrity and audits of our financial statements;
| | - | -----------------------------------------------------



91







| | · | our compliance with legal and regulatory requirements; and
| | - | ----------------------------------------------------------



| | · | the qualifications, performance and independence of our independent accountants.
| | - | --------------------------------------------------------------------------------



The audit committee is responsible for engaging
our independent auditors, reviewing the plans and results of each audit engagement with our independent auditors, approving professional
services provided by our independent accountants, considering the range of audit and non-audit fees charged by our independent
auditors and reviewing the adequacy of our internal accounting controls.



Governance and Nominating Committee



The BPY General Partner’s board of
directors is required to maintain at all times a governance and nominating committee that operates pursuant to a written charter.
The governance and nominating committee will consist solely of independent directors and not more than 50% of the governance and
nominating committee members may be residents of any one jurisdiction (other than Bermuda and any other jurisdiction designated
by the board of directors from time to time).



The governance and nominating committee
has approved a conflicts policy which addresses the approval and other requirements for transactions in which there is a greater
potential for a conflict of interest to arise. The governance and nominating committee may be required to approve any such transactions.
See “— Transactions Requiring Approval by the Governance and Nominating Committee”.



The governance and nominating committee
is responsible for approving the appointment by the sitting directors of a person to the office of director and for recommending
a slate of nominees for election as directors by the BPY General Partner’s shareholders. The governance and nominating committee
is responsible for assisting and advising the BPY General Partner’s board of directors with respect to matters relating to
the general operation of the board of directors, our company’s governance, the governance of the BPY General Partner and
the performance of its board of directors. The governance and nominating committee is responsible for reviewing and making recommendations
to the board of directors of the BPY General Partner concerning the remuneration of directors and committee members and any changes
in the fees to be paid pursuant to our Master Services Agreement.



Indemnification and Limitations on Liability



Our Limited Partnership Agreement



The laws of Bermuda permit the partnership
agreement of a limited partnership, such as our company, to provide for the indemnification of a partner, the officers and directors
of a partner and any other person against any and all claims and demands whatsoever, except to the extent that the indemnification
may be held by the courts of Bermuda to be contrary to public policy or to the extent that the laws of Bermuda prohibit indemnification
against personal liability that may be imposed under specific provisions of the laws of Bermuda. The laws of Bermuda also permit
a partnership to pay or reimburse an indemnified person’s expenses in advance of a final disposition of a proceeding for
which indemnification is sought. See Item 10.B. “Additional Information — Memorandum and Articles of Association
— Description of Our Units and Our Limited Partnership Agreement — Indemnification; Limitations on Liability”
for a description of the indemnification arrangements in place under our limited partnership agreement.



The BPY General Partner’s
Bye-laws



The laws of Bermuda permit the bye-laws
of an exempted company, such as the BPY General Partner, to provide for the indemnification of its officers, directors and shareholders
and any other person designated by the company against any and all claims and demands whatsoever, except to the extent that the
indemnification may be held by the courts of Bermuda to be contrary to public policy or to the extent that the laws of Bermuda
prohibit indemnification against personal liability that may be imposed under specific provisions of Bermuda law, such as the prohibition
under the Bermuda Companies Act 1981 to indemnify liabilities arising from fraud or dishonesty. The BPY General Partner’s
bye-laws provide that, as permitted by the laws of Bermuda, it will pay or reimburse an indemnified person’s expenses in
advance of a final disposition of a proceeding for which indemnification is sought.



Under the BPY General Partner’s bye-laws,
the BPY General Partner is required to indemnify, to the fullest extent permitted by law, its affiliates, directors, officers,
resident representative, shareholders and employees, any person who serves on a governing body of the Property Partnership or any
of its subsidiaries and certain others against any and all losses, claims, damages, liabilities, costs or expenses (including legal
fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands,
actions, suits or proceedings, incurred by an indemnified person in connection with our company’s investments and activities
or in respect of or arising from their holding such positions, except to the extent that the claims, liabilities, losses, damages,
costs or expenses are determined to have resulted from the indemnified person’s bad faith, fraud or willful misconduct, or
in the case of a criminal matter, action that the indemnified person knew to have been unlawful. In addition, under the BPY General
Partner’s bye-laws: (i) the liability of such persons has been limited to the fullest extent permitted by law and except
to the extent that their conduct involves bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that
the indemnified person knew to have been unlawful; and (ii) any matter that is approved by the independent directors will
not constitute a breach of any duties stated or implied by law or equity, including fiduciary duties. The BPY General Partner’s
bye-laws require it to advance funds to pay the expenses of an indemnified person in connection with a matter in which indemnification
may be sought until it is determined that the indemnified person is not entitled to indemnification.



92







Insurance



Our partnership has obtained insurance coverage
under which the directors of the BPY General Partner are insured, subject to the limits of the policy, against certain losses arising
from claims made against such directors by reason of any acts or omissions covered under the policy in their respective capacities
as directors of the BPY General Partner, including certain liabilities under securities laws. The insurance applies in certain
circumstances where we may not indemnify the BPY General Partner’s directors and officers for their acts or omissions.



| | 6.D. | EMPLOYEES
| | ---- | ---------



As at December 31, 2013, our operating entities
had approximately 15,000 employees. Our company does not currently have any senior management who carry out the management and
activities of our company. The Service Providers, wholly-owned subsidiaries of Brookfield Asset Management, provide management
services to us pursuant to our Master Services Agreement.



| | 6.E. | SHARE OWNERSHIP
| | ---- | ---------------



Each of the directors and officers of the
BPY General Partner own less than 1% of our units.



| | ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
| | ------- | -------------------------------------------------



| | 7.A. | MAJOR SHAREHOLDERS
| | ---- | ------------------



As of the date of this Form 20-F,
there are 233,757,451 limited partnership units of our company outstanding. To our knowledge, as at the date of this Form
20-F, no person or company, other than Brookfield, Future Fund Board of Guardians, or Future Fund, and Partners
Limited, beneficially owns or controls or directs, directly or indirectly, more than 5% of our units. Brookfield beneficially
owns 45,249,931 limited partnership units, 138,875 general partner units, 432,649,105 Redemption-Exchange Units and
4,759,997 special limited partnership interests in the Property Partnership, collectively an approximate 72% interest in our
company (on a fully-exchanged basis) including its indirect general partnership interest in our company held by the BPY
General Partner. See also the information contained in this Form 20-F under Item 10.B “Additional Information
— Memorandum and Articles of Association — Description of our Units and our Limited Partnership
Agreement”.



As of March 28, 2014, 72,662 of our outstanding
units were held by 1,406 holders of record in the United States, not including units of our company held of record by DTC. As of
March 28, 2014, DTC was the holder of record of 68,262,044 units.



As of March 28, 2014, 1,903,438 of our outstanding
units were held by holders of record in Canada, not including units of our company held of record by CDS. As of March 28, 2014,
CDS was the holder of record of 132,145,849 units.



The following table presents information
regarding the beneficial ownership of our units, as of March 28, 2014, by each person or entity that we know beneficially owns
5% or more of our units.



|                                                                                                                                                            |  | Units Outstanding |            
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | -----------
|Name and Address                                                                                                                                            |  | Units Owned       |            
|Brookfield Asset Management Inc. Suite 300, Brookfield Place, 181 Bay Street, Toronto, Ontario M5J 2T3                                                      |  |                   | 482,797,908
|                                                                                                                                                            |  |                   |            
|Future Fund Board of Guardians
                                 Level 43, 120 Collins Street
                                 Melbourne VIC 3000, Australia |  |                   | 12,128,906 
|                                                                                                                                                            |  |                   |            
|Partners Limited Suite 300, Brookfield Place, 181 Bay Street, Toronto, Ontario, M5J 2T3                                                                     |  |                   | 486,442,924



|(1) | Assumes that all of the Redemption-Exchange Units are exchanged for units of our company in accordance with the Redemption-Exchange Mechanism.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------





| | (2) | Based on information provided on the Schedule 13D filed by Future Fund on November 12, 2013. Assuming that all the Redemption-Exchange
Units are exchanged for units of our company in accordance with the Redemption-Exchange Mechanism, the percentage beneficially
owned by Future Fund would be 2%. As disclosed in Future Fund’s Schedule 13D, Future Fund may be deemed to be the beneficial
owner of units beneficially owned by Brookfield and its affiliates, and Future Fund disclaims beneficial ownership of such units.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Our major unitholders have the same voting
rights as all other holders of our units.



93







| | 7.B. | RELATED PARTY TRANSACTIONS
| | ---- | --------------------------



GGP Liquidity Transaction



In November 2013, we acquired additional
shares and warrants of GGP for total consideration of $1.4 billion. As a result of the acquisition, we increased our fully-diluted
ownership interest in GGP to 32%, assuming the exercise of all of the outstanding warrants, or approximately 28% on an undiluted
basis. Prior to this transaction, Brookfield Asset Management managed a 43% fully-diluted interest in GGP on behalf of a consortium
that was formed to invest in the recapitalization of GGP in March 2010. As part of the consortium, our fully-diluted interest in
GGP was 25%. The transaction was part of a broader reorganization of the consortium led by Brookfield through which our company
owns its interest in GGP. The consortium was reorganized to provide liquidity for investors in the consortium now that its original
investment objectives had been successfully achieved. Our company acquired interests in GGP from certain consortium members, as
well as all of the interests in GGP that were distributed to Brookfield in payment of its carried interest entitlement of approximately
$529 million, as manager of the consortium. In total, our company acquired 53 million shares of GGP and warrants to acquire an
additional 26 million shares. The GGP consortium will continue on revised terms with our company and a smaller group of consortium
investors owning a combined 40% of GGP on a fully-diluted basis or 34% on an undiluted basis. Our company also acquired 1.1 million
common shares of Rouse from certain consortium members and Brookfield. As a result, our company increased its ownership in Rouse
to approximately 39%.



The acquisition was funded through the issuance
of $435 million of our units to institutional investors and $996 million of Redemption Exchange Units to Brookfield. Our units
of BPY and the Redemption Exchange Units were issued at a price of $19.42 per unit, being the volume weighted average trading price
of our units on the NYSE for the 21 trading days ending on October 29, 2013. Following the equity issuances, Brookfield’s
interest in our company (on a fully exchanged basis) decreased from approximately 92% to approximately 89%.



The purchase prices for the GGP and Rouse
shares were also determined with reference to their respective 21 day volume weighted average trading prices ending on October
29, 2013. The price for the warrants was determined through negotiation with consortium investors as an agreed premium of $1.93
to the “in the money” value of the warrants based on the same 21 day volume weighted average trading price of the GGP
shares. The exercise price per share of the warrants on November 1, 2013 was $9.4061 per share.



In connection with the transaction, Brookfield
was issued a number of securities equal to approximately 11% of our outstanding units (calculated including the Redemption Exchange
Units). The Governance and Nominating Committee of our company, comprising entirely of independent directors, unrelated to Brookfield,
unanimously recommended the issuance to and purchase from Brookfield to the board of the general partner of our company, who then
unanimously approved it (with directors affiliated with Brookfield abstaining from the vote).



RELATIONSHIP WITH BROOKFIELD



Brookfield Asset Management



Brookfield Asset Management is a global
alternative asset manager with over $175 billion in assets under management. It has over a 100-year history of owning and operating
assets with a focus on property, renewable power, infrastructure and private equity. Brookfield has a range of public and private
investment products and services. Brookfield Asset Management is listed on the NYSE under the symbol “BAM”, on the
TSX under the symbol “BAM.A” and on the NYSE Euronext under the symbol “BAMA”.



Brookfield believes its operating experience
is an essential differentiating factor in its past ability to generate significant risk-adjusted returns. In addition, Brookfield
has demonstrated particular expertise in sourcing and executing large-scale multifaceted transactions across a wide spectrum of
real estate sectors and geographies.



As a global alternative asset manager, Brookfield
brings a strong and proven corporate platform supporting legal, tax, operations oversight, investor reporting, portfolio administration
and other client services functions. Brookfield’s management team is multi-disciplinary, comprising investment and operations
professionals, each with significant expertise in evaluating and executing investment opportunities and investing on behalf of
itself and institutional investors.



We are an affiliate of Brookfield. We have
entered into a number of agreements and arrangements with Brookfield in order to enable us to be established as a separate entity
and pursue our vision of being a leading owner and operator of high quality commercial real estate assets. While we believe that
our ongoing relationship with Brookfield provides us with a unique competitive advantage as well as access to opportunities that
would otherwise not be available to us, we operate very differently from an independent, stand-alone entity. We describe below
this relationship as well as potential conflicts of interest (and the methods for resolving them) and other material considerations
arising from our relationship with Brookfield.



94







Relationship Agreement



Our company, the Property Partnership, the
Holding Entities, the Service Providers and Brookfield Asset Management have entered into an agreement, referred to as the Relationship
Agreement, that governs aspects of the relationship among them. Pursuant to the Relationship Agreement, Brookfield Asset Management
has agreed that we will serve as the primary entity through which acquisitions of commercial property will be made by Brookfield
Asset Management and its affiliates on a global basis.



In the commercial property industry, it
is common for assets to be owned through consortiums and partnerships of institutional equity investors and owner/operators such
as ourselves. Accordingly, an integral part of our strategy is to pursue acquisitions through consortium arrangements with institutional
investors, strategic partners or financial sponsors and to form partnerships to pursue acquisitions on a specialized or global
basis.



Brookfield Asset Management has a strong
track record of leading such consortiums and partnerships and actively managing underlying assets to improve performance. Brookfield
has also established and manages a number of private investment entities, managed accounts, joint ventures, consortiums, partnerships
and investment funds whose investment objectives include the acquisition of commercial property and Brookfield may in the future
establish similar funds. Nothing in the Relationship Agreement will limit or restrict Brookfield from establishing or advising
these or similar entities or limit or restrict any such entities from carrying out any investment. Brookfield Asset Management
has agreed that it will offer our company the opportunity to take up Brookfield’s share of any investment through these consortium
arrangements or by one of these entities that involves the acquisition of commercial property that is suitable for us, subject
to certain limitations.



Under the terms of the Relationship Agreement,
our company, the Property Partnership and the Holding Entities have acknowledged and agreed that Brookfield carries on a diverse
range of businesses worldwide, including the development, ownership and/or management of commercial property, and investing (and
advising on investing) in commercial property, or loans, debt instruments and other securities with underlying collateral or exposure
to commercial property and that except as explicitly provided in the Relationship Agreement, the Relationship Agreement does not
in any way limit or restrict Brookfield from carrying on its business.



Our ability to grow depends in part on Brookfield
identifying and presenting us with acquisition opportunities. Brookfield’s commitment to us and our ability to take advantage
of opportunities is subject to a number of limitations such as our financial capacity, the suitability of the acquisition in terms
of the underlying asset characteristics and its fit with our strategy, limitations arising from the tax and regulatory regimes
that govern our affairs and certain other restrictions. See Item 3.D. “Key Information — Risk Factors —
Risks Relating to Our Relationship with Brookfield”. Under the terms of the Relationship Agreement, our company, the Property
Partnership and the Holding Entities have acknowledged and agreed that, subject to providing us the opportunity to participate
on the basis described above, Brookfield may pursue other business activities and provide services to third parties that compete
directly or indirectly with us. In addition, Brookfield has established or advised, and may continue to establish or advise, other
entities that rely on the diligence, skill and business contacts of Brookfield’s professionals and the information and acquisition
opportunities they generate during the normal course of their activities. Our company, the Property Partnership and the Holding
Entities have acknowledged and agreed that some of these entities may have objectives that overlap with our objectives or may acquire
commercial property that could be considered appropriate acquisitions for us, and that Brookfield may have financial incentives
to assist those other entities over us. If any of the Service Providers determine that an opportunity is not suitable for us, Brookfield
may still pursue such opportunity on its own behalf. Our company, the Property Partnership and the Holding Entities have further
acknowledged and agreed that nothing in the Relationship Agreement will limit or restrict: (i) Brookfield’s ability
to make any investment recommendation or take any other action in connection with its public securities business; (ii) Brookfield
from investing in any loans or debt securities or from taking any action in connection with any loan or debt security notwithstanding
that the underlying collateral comprises or includes commercial property provided that the original purpose of the investment was
not to acquire a controlling interest in such property; or (iii) Brookfield from acquiring or holding an investment of less
than 5% of the outstanding shares of a publicly traded company or from carrying out any other investment in a company or real estate
portfolio where the underlying assets do not principally constitute commercial property. Due to the foregoing, we expect to compete
from time to time with other affiliates of Brookfield Asset Management or other third parties for access to the benefits that we
expect to realize from Brookfield Asset Management’s involvement in our business.



95







In the event of the termination of our Master
Services Agreement, the Relationship Agreement would also terminate, including Brookfield’s commitments to provide us with
acquisition opportunities, as described above.



Under the Relationship Agreement, our company,
the Property Partnership and the Holding Entities have agreed that none of Brookfield nor any affiliate, director, officer, employee,
contractor, agent, advisor, member, partner, shareholder or other representative of Brookfield, will be liable to us for any claims,
liabilities, losses, damages, costs or expenses (including legal fees) arising in connection with the business, investments and
activities in respect of or arising from the Relationship Agreement, except to the extent that the claims, liabilities, losses,
damages, costs or expenses are determined to have resulted from the person’s bad faith, fraud, willful misconduct or gross
negligence, or in the case of a criminal matter, action that the person knew to have been unlawful. The maximum amount of the aggregate
liability of Brookfield, or any of its affiliates, or of any director, officer, employee, contractor, agent, advisor, member, partner,
shareholder or other representative of Brookfield, will be equal to the amounts previously paid in the two most recent calendar
years by the Service Recipients pursuant to our Master Services Agreement.



Other Services



Brookfield may provide services to our operating
entities which are outside the scope of our Master Services Agreement under arrangements that are on market terms and conditions
and pursuant to which Brookfield will receive fees. The services that may be provided under these arrangements include financial
advisory, property management, facilities management, development, relocation services, construction activities, marketing or other
services.



Preferred Shares of Certain Holding Entities



Brookfield holds $750 million of Class B
and $500 million of Class C redeemable preferred shares of CanHoldco, one of our Holding Entities, which it received as partial
consideration for causing the Property Partnership to acquire substantially all of Brookfield Asset Management’s commercial
property operations. The Class B preferred shares are entitled to receive a cumulative preferential dividend equal to 5.75% of
their redemption value as and when declared by the board of directors of CanHoldco until the fifth anniversary of their issuance,
after which the preferred shares will be entitled to receive a cumulative preferential dividend equal to 5.0% plus the prevailing
yield for 5-year U.S. Treasury Notes. CanHoldco may redeem the Class B preferred shares at any time and must redeem all of the
outstanding Class B preferred shares on the tenth anniversary of their issuance. Brookfield has a right of retraction following
the fifth anniversary of the issuance of the Class B preferred shares. The Class C preferred shares are entitled to receive a cumulative
preferential dividend equal to 6.75% of their redemption value as and when declared by the board of directors of CanHoldco. CanHoldco
may redeem the Class C preferred shares at any time and must redeem all of the outstanding Class C preferred shares on the seventh
anniversary of their issuance. Brookfield has a right of retraction following the third anniversary of the issuance of the Class
C preferred shares. The Class B and Class C preferred shares will be entitled to vote with the common shares of CanHoldco and each
class of preferred shares will have an aggregate of 1% of the votes to be cast in respect of CanHoldco. We have agreed to use our
commercially reasonable efforts to, as soon as reasonably practical, issue debt or equity securities or borrow money from one or
more financial institutions or other lenders, on terms reasonably acceptable to us, in an aggregate amount sufficient to fund the
redemption by CanHoldco of the Class C preferred shares. The terms of any such financing may be less favorable to us than the terms
of the Class C preferred shares.



In addition, Brookfield has provided $5 million
of working capital to each of CanHoldco and four wholly-owned subsidiaries of other Holding Entities, for a total of $25 million,
through a subscription for preferred shares of such entities. These preferred shares are entitled to receive a cumulative preferential
cash dividend equal to 5% as and when declared by the board of directors of the applicable entity and are redeemable at the option
of the applicable entity, subject to certain limitations, at any time after the twentieth anniversary of their issuance. The preferred
shares will be entitled to vote with the common shares of the applicable entity and will have an aggregate of 1% of the votes to
be cast in respect of the applicable entity.



Redemption-Exchange Mechanism



At any time after April 15, 2015, the holders
of Redemption-Exchange Units of the Property Partnership will have the right to require the Property Partnership to redeem all
or a portion of the Redemption-Exchange Units for either (a) cash in an amount equal to the market value of one of our units
multiplied by the number of units to be redeemed (subject to certain adjustments) or (b) such other amount of cash may be
agreed by the relevant holder and the Property Partnership, subject to our company’s right to acquire such interests (in
lieu of redemption) in exchange for our units. See Item 10.B. “Additional Information — Memorandum and Articles
of Association — Description of the Property Partnership Limited Partnership Agreement — Redemption-Exchange Mechanism”.
Taken together, the effect of the redemption right and the right of exchange is that the holders of Redemption-Exchange Units will
receive our units, or the value of such units, at the election of our company. Should we determine not to exercise our right of
exchange, cash required to fund a redemption of Redemption-Exchange Units will likely be financed by a public offering of our units.



96







Registration Rights Agreement



Our company has entered into a customary
registration rights agreement with Brookfield pursuant to which we have agreed that, upon the request of Brookfield, our company
will file one or more registration statements to register for sale under the U.S. Securities Act of 1933, as amended, or one or
more prospectuses to qualify the distribution in Canada of, any of our units held by Brookfield (including units of our company
acquired pursuant to the Redemption-Exchange Mechanism). Under the registration rights agreement, our company will not be required
to file a U.S. registration statement or a Canadian prospectus unless Brookfield requests that units having a value of at least
$50 million be registered or qualified. In the registration rights agreement, we have agreed to pay expenses in connection with
such registration and sales, except for any underwriting discounts or commissions, which will be borne by the selling unitholder,
and to indemnify Brookfield for material misstatements or omissions in the registration statement and/or prospectus.



Equity Enhancement and Incentive Distributions



Property Special LP, a wholly-owned subsidiary
of Brookfield Asset Management, is entitled to receive equity enhancement distributions and incentive distributions from the Property
Partnership as a result of its ownership of the special limited partnership interest in the Property Partnership. Property Special
LP will receive quarterly equity enhancement distributions equal to 0.3125% of the amount by which our company’s total capitalization
value exceeds an initial reference value determined based on the market capitalization immediately following the spin-off, subject
to certain adjustments. In addition, Property Special LP will receive incentive distributions calculated in increments based on
the amount by which quarterly distributions on the limited partnership units of the Property Partnership exceed specified target
levels as set forth in the Property Partnership’s limited partnership agreement.



We believe these arrangements create an
incentive for Brookfield to manage our company in a way that helps us achieve our goal of creating value for our unitholders both
through distributions and capital appreciation. For a further explanation of the equity enhancement and incentive distributions,
together with examples of how such amounts are calculated, see Item 10.B. “Additional Information — Memorandum
and Articles of Association — Description of the Property Partnership Limited Partnership Agreement — Distributions”.



Property Special LP may, at its sole discretion,
elect to reinvest equity enhancement distributions and incentive distributions in exchange for Redemption-Exchange Units.



To the extent that any Holding Entity or
any operating entity pays to Brookfield any comparable performance or incentive distribution, the amount of any future incentive
distributions will be reduced in an equitable manner to avoid duplication of distributions.



General Partner Distributions



Pursuant to our limited partnership agreement,
the BPY General Partner is entitled to receive a general partner distribution equal to 0.2% of the total distributions of our company.



Special Limited Partner Distributions



Pursuant to the limited partnership agreement
of the Property Partnership, Property Special LP is entitled to receive a distribution from the Property Partnership equal to a
share of the total distributions of the Property Partnership in proportion to Property Special LP’s percentage interest in
the Property Partnership which will be equal to 1% of the total distributions of the Property Partnership. See Item 10.B.
“Additional Information — Memorandum and Articles of Association — Description of the Property Partnership Limited
Partnership Agreement — Distributions”.



Credit Facility



On December 6, 2013, we entered into a $500 million
subordinated credit facility with Brookfield to supplement our liquidity. Under the facility, we do not pay a commitment fee on
any undrawn balance.The size of this facility was increased to $700 million in March 2014.



97







Indemnification Arrangements



Subject to certain limitations, Brookfield
and its directors, officers, agents, subcontractors, contractors, delegates, members, partners, shareholders and employees generally
benefit from indemnification provisions and limitations on liability that are included in our limited partnership agreement, the
BPY General Partner’s bye-laws, the Property Partnership’s limited partnership agreement, our Master Services Agreement
and other arrangements with Brookfield. See Item 7.B. “Major Shareholders and Related Party Transactions — Related
Party Transactions — Our Master Services Agreement”, Item 10.B. “Additional Information — Memorandum
and Articles of Association — Description of Our Units and Our Limited Partnership Agreement — Indemnification; Limitations
of Liability” and Item 10.B. “Additional Information — Memorandum and Articles of Association —
Description of the Property Partnership Limited Partnership Agreement — Indemnification; Limitations of Liability”.



Licensing Agreement



Our company and the Property Partnership
have each entered into a licensing agreement with Brookfield pursuant to which Brookfield has granted a non-exclusive, royalty-free
license to use the name “Brookfield” and the Brookfield logo. Other than under this limited license, we do not have
a legal right to the “Brookfield” name and the Brookfield logo. Brookfield Asset Management may terminate the licensing
agreement immediately upon termination of our Master Services Agreement and it may be terminated in the circumstances described
under Item 4.B. “Information on the Company — Business Overview — Intellectual Property”.



Conflicts of Interest and Fiduciary Duties



Our organizational and ownership structure
and strategy involve a number of relationships that may give rise to conflicts of interest between our company and our unitholders,
on the one hand, and Brookfield, on the other hand. In particular, conflicts of interest could arise, among other reasons, because:



| | · | in originating and recommending acquisition opportunities, Brookfield has significant discretion to determine the suitability
of opportunities for us and to allocate such opportunities to us or to itself or third parties;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | because of the scale of typical commercial property acquisitions and because our strategy includes completing acquisitions
through consortium or partnership arrangements with pension funds and other financial sponsors, we will likely make co-investments
with Brookfield and Brookfield-sponsored funds or Brookfield-sponsored or co-sponsored consortiums and partnerships involving third
party investors to whom Brookfield will owe fiduciary duties, which it does not owe to us;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the same professionals within Brookfield’s organization who are involved in acquisitions that are suitable for us are
responsible for the consortiums and partnerships referred to above, as well as having other responsibilities within Brookfield’s
broader asset management business. Limits on the availability of such individuals will likewise result in a limitation on the availability
of acquisition opportunities for us;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | there may be circumstances where Brookfield will determine that an acquisition opportunity is not suitable for us because of
the fit with our acquisition strategy, limits arising due to regulatory or tax considerations, limits on our financial capacity
or because of the immaturity of the target assets and Brookfield is entitled to pursue the acquisition on its own behalf rather
than offering us the opportunity to make the acquisition;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | where Brookfield has made an acquisition, it may transfer it to us at a later date after the assets have been developed or
we have obtained sufficient financing;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our relationship with Brookfield involves a number of arrangements pursuant to which Brookfield provides various services,
access to financing arrangements and originates acquisition opportunities, and circumstances may arise in which these arrangements
will need to be amended or new arrangements will need to be entered into;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | as our arrangements with Brookfield were effectively determined by Brookfield in the context of the spin-off, they may contain
terms that are less favorable than those which otherwise might have been negotiated between unrelated parties;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Brookfield is generally entitled to share in the returns generated by our operations, which could create an incentive for it
to assume greater risks when making decisions than it otherwise would in the absence of such arrangements;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



98







| | · | Brookfield is permitted to pursue other business activities and provide services to third parties that compete directly with
our business and activities without providing us with an opportunity to participate, which could result in the allocation of Brookfield’s
resources, personnel and acquisition opportunities to others who compete with us;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Brookfield does not owe our company or our unitholders any fiduciary duties, which may limit our recourse against it; and
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | the liability of Brookfield and its directors is limited under our arrangements with them, and we have agreed to indemnify
Brookfield and its directors against claims, liabilities, losses, damages, costs or expenses which they may face in connection
with those arrangements, which may lead them to assume greater risks when making decisions than they otherwise would if such decisions
were being made solely for its own account, or may give rise to legal claims for indemnification that are adverse to the interests
of our unitholders.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See Item 3.D. “Key Information —
Risk Factors — Risks Relating to Our Relationship with Brookfield — Our organizational and ownership structure,
as well as our contractual arrangements with Brookfield, may create significant conflicts of interest that may be resolved in a
manner that is not in the best interests of our company or the best interests of our unitholders”.



With respect to transactions in which there
may be a conflict of interest, the BPY General Partner may be required to seek the prior approval of its governance and nominating
committee pursuant to a conflicts policy that has been approved by its governance and nominating committee. These transactions
include: (i) acquisitions by us from, and dispositions by us to, Brookfield; (ii) the dissolution of our partnership
or the Property Partnership; (iii) any material amendment to our Master Services Agreement, the Relationship Agreement, our
limited partnership agreement or the Property Partnership’s limited partnership agreement; (iv) any material service
agreement or other material arrangement pursuant to which Brookfield will be paid a fee, or other consideration other than any
agreement or arrangement contemplated by our Master Services Agreement; (v) termination of, or any determinations regarding
indemnification under, our Master Services Agreement, our limited partnership agreement or the Property Partnership’s limited
partnership agreement; and (vi) any other material transaction involving us and Brookfield. Pursuant to our conflicts policy,
the BPY General Partner’s governance and nominating committee may grant prior approvals for any of these transactions in
the form of general guidelines, policies or procedures in which case no further special approval will be required in connection
with a particular transaction or matter permitted thereby. In certain circumstances, these transactions may be related party transactions
for the purposes of, and subject to certain requirements of, Multilateral Instrument 61-101 — Protection of Minority Security
Holders in Special Transactions, or MI 61-101. MI 61-101 provides a number of circumstances in which a transaction between
an issuer and a related party may be subject to valuation and minority approval requirements. See “Canadian Securities Law
Exemptions” below for application of MI 61-101 to our company.



The conflicts policy states that conflicts
be resolved based on the principles of transparency, third-party validation and approvals. The policy recognizes the benefit to
us of our relationship with Brookfield and our intent to pursue a strategy that seeks to maximize the benefits from this relationship.
The policy also recognizes that the principal areas of potential application of the policy on an ongoing basis will be in connection
with our acquisitions and our participation in Brookfield led consortiums and partnership arrangements, together with any management
or service arrangements entered into in connection therewith or the ongoing operations of the underlying operating entities.



In general, the policy provides that acquisitions
that are carried out jointly by us and Brookfield, or in the context of a Brookfield-led or co-led consortium or partnership be
carried out on the basis that the consideration paid by us be no more, on a per share or proportionate basis, than the consideration
paid by Brookfield or other participants, as applicable. The policy also provides that any fees or carried interest payable in
respect of our proportionate investment, or in respect of an acquisition made solely by us, must be credited in the manner contemplated
by the Property Partnership’s limited partnership agreement, where applicable, or that such fees or carried interest must
either have been negotiated with another arm’s length participant or otherwise demonstrated to be on market terms (or better).
The policy generally provides that if the acquisition involves the purchase by us of an asset from Brookfield, or the participation
in a transaction involving the purchase by us and Brookfield of different assets, that a fairness opinion or, in some circumstances,
a valuation or appraisal by a qualified expert be obtained. These requirements provided for in the conflicts policy are in addition
to any disclosure, approval, or valuation requirements that may arise under applicable law.



Our limited partnership agreement contains
various provisions that modify the fiduciary duties that might otherwise be owed to us and our unitholders. These duties include
the duties of care and loyalty. In the absence of provisions in our limited partnership agreement to the contrary, the duty of
loyalty would generally prohibit the BPY General Partner from taking any action or engaging in any transaction as to which it has
a conflict of interest. Our limited partnership agreement prohibits our limited partners from advancing claims that otherwise might
raise issues as to compliance with fiduciary duties or applicable law. For example, the agreement provides that the BPY General
Partner and its affiliates do not have any obligation under our limited partnership agreement, or as a result of any duties stated
or implied by law or equity, including fiduciary duties, to present business or investment opportunities to our company, the Property
Partnership, any Holding Entity or any other holding entity established by us. It also allows affiliates of the BPY General Partner
to engage in activities that may compete with us or our activities. In addition, the agreement permits the BPY General Partner
to take into account the interests of third parties, including Brookfield, when resolving conflicts of interest.



99







These modifications to the fiduciary duties
are detrimental to our unitholders because they restrict the remedies available for actions that might otherwise constitute a breach
of fiduciary duty and permit conflicts of interest to be resolved in a manner that is not always in the best interests of our company
or the best interests of our unitholders. We believe it is necessary to modify the fiduciary duties that might otherwise be owed
to us and our unitholders, as described above, due to our organizational and ownership structure and the potential conflicts of
interest created thereby. Without modifying those duties, the ability of the BPY General Partner to attract and retain experienced
and capable directors and to take actions that we believe are necessary for the carrying out of our business would be unduly limited
due to their concern about potential liability. See Item 3.D. “Key Information — Risk Factors — Risks Relating
to Our Relationship with Brookfield — Our Master Services Agreement and our other arrangements with Brookfield do not impose
on Brookfield any fiduciary duties to act in the best interests of our unitholders.”



Canadian Securities Law Exemptions



MI 61-101 provides a number of circumstances
in which a transaction between an issuer and a related party may be subject to valuation and minority approval requirements. An
exemption from such requirements is available when the fair market value of the transaction is not more than 25% of the market
capitalization of the issuer. Our company has been granted exemptive relief from the requirements of MI 61-101 that, subject to
certain conditions, permits it to be exempt from the minority approval and valuation requirements for transactions that would have
a value of less than 25% of our market capitalization, if the indirect equity interest in our company, which is held in the form
of Redemption-Exchange Units, is included in the calculation of our company’s market capitalization. As a result, the 25%
threshold, above which the minority approval and valuation requirements apply, is increased to include the approximately 68% indirect
interest in our company held in the form of Redemption-Exchange Units. See Item 7.B. “Major Shareholders and Related
Party Transactions — Related Party Transactions — Relationship with Brookfield — Conflicts of Interest and
Fiduciary Duties” above.



Although our company is a reporting issuer
in Canada, it is a “SEC foreign issuer” under Canadian securities regulations and exempt from certain Canadian securities
laws relating to continuous disclosure obligations and proxy solicitation as long as we comply with certain reporting requirements
applicable in the United States, provided that the relevant documents filed with the SEC are filed in Canada and sent to our company’s
unitholders in Canada to the extent and in the manner and within the time required by applicable U.S. requirements. Therefore,
there may be less publicly available information in Canada about us than is regularly published by or about other reporting issuers
in Canada. Our company has undertaken to the provincial and territorial securities regulatory authorities in Canada that to the
extent it complies with the foreign private issuer disclosure regime under U.S. securities law:



| | · | our company will only rely on the exemptions in Part 4 of National Instrument 71-102 – Continuous Disclosure
and Other Exemptions Relating to Foreign Issuers;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our company will not rely on any exemption from the foreign private issuer disclosure regime;
| | - | ---------------------------------------------------------------------------------------------



| | · | our company will file its financial statements pursuant to Part 4 of National Instrument 51-102 – Continuous Disclosure
Obligations, or NI 51-102, except that our company does not have to comply with the conditions in section 4.2 of NI 51-102 if it
files such financial statements on or before the date that it is required to file its Form 20-F with the SEC;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our company will file an interim financial report as set out in Part 4 of NI 51-102 and the management’s discussion and
analysis as set out in Part 5 of NI 51-102 for each period commencing on the first day of the financial year and ending nine, six,
or three months before the end of the financial year;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our company will file a material change report as set out in Part 7 of NI 51-102 in respect of any material change in the affairs
of our company that is not reported or filed by our company on SEC Form 6-K; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



100







| | · | our company will include in any prospectus filed by our company financial statements or other information about any acquisition
that would have been or would be a significant acquisition for the purposes of Part 8 of NI 51-102 that our company has completed
or has progressed to a state where a reasonable person would believe that the likelihood of our company completing the acquisition
is high if the inclusion of the financial statements is necessary for the prospectus to contain full, true and plain disclosure
of all materials facts relating to the securities being distributed. The requirement to include financial statements or other information
will be satisfied by including or incorporating by reference (a) the financial statements or other information as set out
in Part 8 of NI 51-102, or (b) satisfactory alternative financial statements or other information, unless at least nine months
of the operations of the acquired business or related businesses are incorporated into our company’s current annual financial
statements included or incorporated by reference in the prospectus.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



OUR MASTER SERVICES AGREEMENT



The Service Recipients have entered into
a Master Services Agreement pursuant to which the Service Providers have agreed to provide or arrange for other Service Providers
to provide management and administration services to our company and the other Service Recipients.



The following is a summary of certain provisions
of our Master Services Agreement and is qualified in its entirety by reference to all of the provisions of the agreement. Because
this description is only a summary of our Master Services Agreement, it does not necessarily contain all of the information that
you may find useful. We therefore urge you to review our Master Services Agreement in its entirety. Our Master Services Agreement
is available electronically on the website of the SEC at www.sec.gov and on our SEDAR profile at www.sedar.com
and is available to our unitholders as described under Item 10.C. “Additional Information — Material Contracts”
and Item 10.H. “Documents on Display”.



Appointment of the Service Providers
and Services Rendered



Under our Master Services Agreement, the
Service Recipients have appointed the Service Providers, as the Service Providers, to provide or arrange for the provision by an
appropriate Service Provider of the following services:



| | · | supervising the carrying out of all day-to-day management, secretarial, accounting, banking, treasury, administrative, liaison,
representative, regulatory and reporting functions and obligations;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | providing overall strategic advice to the Holding Entities including advising with respect to the expansion of their business
into new markets;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | · | supervising the establishment and maintenance of books and records;
| | - | -------------------------------------------------------------------



| | · | identifying and recommending to the Holding Entities acquisitions or dispositions from time to time and, where requested to
do so, assisting in negotiating the terms of such acquisitions or dispositions;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | recommending and, where requested to do so, assisting in the raising of funds whether by way of debt, equity or otherwise,
including the preparation, review or distribution of any prospectus or offering memorandum in respect thereof and assisting with
communications support in connection therewith;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | recommending to the Holding Entities suitable candidates to serve on the boards of directors or the equivalent governing bodies
of our operating entities;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | making recommendations with respect to the exercise of any voting rights to which the Holding Entities are entitled in respect
of our operating entities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | making recommendations with respect to the payment of dividends by the Holding Entities or any other distributions by the Service
Recipients, including distributions by our company to our unitholders;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | monitoring and/or oversight of the applicable Service Recipient’s accountants, legal counsel and other accounting, financial
or legal advisors and technical, commercial, marketing and other independent experts, and managing litigation in which a Service
Recipient is sued or commencing litigation after consulting with, and subject to the approval of, the relevant board of directors
or its equivalent;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



101







| | · | attending to all matters necessary for any reorganization, bankruptcy proceedings, dissolution or winding up of a Service Recipient,
subject to approval by the relevant board of directors or its equivalent;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | supervising the making of all tax elections, determinations and designations, the timely calculation and payment of taxes payable
and the filing of all tax returns due, by each Service Recipient;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | supervising the preparation of the Service Recipients’ annual consolidated financial statements, quarterly interim financial
statements and other public disclosure;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | making recommendations in relation to and effecting the entry into insurance of each Service Recipient’s assets, together
with other insurances against other risks, including directors and officers insurance as the relevant Service Provider and the
relevant board of directors or its equivalent may from time to time agree;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | arranging for individuals to carry out the functions of principal executive, accounting and financial officers for our company
only for purposes of applicable securities laws;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | providing individuals to act as senior officers of the Holding Entities as agreed from time to time, subject to the approval
of the relevant board of directors or its equivalent;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | providing advice, when requested, to the Service Recipients regarding the maintenance of compliance with applicable laws and
other obligations; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | · | providing all such other services as may from time to time be agreed with the Service Recipients that are reasonably related
to the Service Recipient’s day-to-day operations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Service Providers’ activities
are subject to the supervision of the board of directors or equivalent governing body of the BPY General Partner and of each of
the other Service Recipients, as applicable. The relevant governing body remains responsible for all investment and divestment
decisions made by the Service Recipient.



Any Service Provider may, from time to time,
appoint an affiliate of Brookfield to act as a new Service Provider under our Master Services Agreement, effective upon the execution
of a joinder agreement by the new Service Provider.



Management Fee



Pursuant to our Master Services Agreement,
we pay a base management fee to the Service Providers equal to $12.5 million per quarter (subject to an annual escalation by a
specified inflation factor beginning on January 1, 2014). For any quarter in which the BPY General Partner determines that
there is insufficient available cash to pay the base management fee as well as the next regular distribution on our units, the
Service Recipients may elect to pay all or a portion of the base management fee in our units or Redemption-Exchange Units, subject
to certain conditions.



Reimbursement of Expenses and Certain
Taxes



We will also reimburse the Service Providers
for any out-of-pocket fees, costs and expenses incurred in the provision of the management and administration services, including
those of any third party. However, the Service Recipients are not required to reimburse the Service Providers for the salaries
and other remuneration of their management, personnel or support staff who carry out any services or functions for such Service
Recipients or overhead for such persons.



The relevant Service Recipient will reimburse
the Service Providers for all other out-of-pocket fees, costs and expenses incurred in connection with the provision of the services
including those of any third party. Such out-of-pocket fees, costs and expenses are expected to include, among other things: (i) fees,
costs and expenses relating to any debt or equity financing; (ii) fees, costs and expenses incurred in connection with the
general administration of any Service Recipient in respect of services; (iii) taxes, licenses and other statutory fees or
penalties levied against or in respect of a Service Recipient; (iv) amounts owed by the Service Providers under indemnification,
contribution or similar arrangements; (v) fees, costs and expenses relating to our financial reporting, regulatory filings
and investor relations and the fees, costs and expenses of agents, advisors and other persons who provide services to or on behalf
of a Service Recipient; and (vi) any other fees, costs and expenses incurred by the Service Providers that are reasonably
necessary for the performance by the Service Providers of their duties and functions under our Master Services Agreement.



102







In addition, the Service Recipients are
required to pay all fees, costs and expenses incurred in connection with the investigation, acquisition, holding or disposal of
any asset or business that is made or that is proposed to be made by us. Such additional fees, expenses and costs represent out-of-pocket
costs associated with investment activities that will be undertaken pursuant to our Master Services Agreement.



The Service Recipients are also required
to pay or reimburse the Service Providers for all sales, use, value added, goods and services, harmonized sales, withholding or
other taxes or customs duties or other governmental charges levied or imposed by reason of our Master Services Agreement or any
agreement it contemplates, other than income taxes, corporation taxes, capital taxes or other similar taxes payable by the Service
Providers, which are personal to the Service Providers.



Assignment



Our Master Services Agreement may not be
assigned by the Service Providers without the prior written consent of our company except that (i) any Service Provider may
subcontract or arrange for the provision of services by another Service Provider, provided that the Service Providers remain liable
under the agreement, and (ii) any of the Service Providers may assign the agreement to an affiliate or to a person that is
its successor by way of merger, amalgamation or acquisition of the business of the Service Provider.



Termination



Our Master Services Agreement continues
in perpetuity until terminated in accordance with its terms. However, the Service Recipients may terminate our Master Services
Agreement upon written notice of termination from the BPY General Partner to the Service Providers if any of the following occurs:



| | · | any of the Service Providers defaults in the performance or observance of any material term, condition or covenant contained
in the agreement in a manner that results in material harm to the Service Recipients and the default continues unremedied for a
period of 60 days after written notice of the breach is given to such Service Provider;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | any of the Service Providers engages in any act of fraud, misappropriation of funds or embezzlement against any Service Recipient
that results in material harm to the Service Recipients;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | any of the Service Providers is grossly negligent in the performance of its obligations under the agreement and such gross
negligence results in material harm to the Service Recipients; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | certain events relating to the bankruptcy or insolvency of each of the Service Providers.
| | - | -----------------------------------------------------------------------------------------



The Service Recipients have no right to
terminate for any other reason, including if any of the Service Providers or Brookfield experiences a change of control. The BPY
General Partner may only terminate our Master Services Agreement on behalf of our company with the prior unanimous approval of
the BPY General Partner’s independent directors.



Our Master Services Agreement expressly
provides that our Master Services Agreement may not be terminated by the BPY General Partner due solely to the poor performance
or the underperformance of any of our operations.



The Service Providers may terminate our
Master Services Agreement upon written notice of termination to the BPY General Partner if any Service Recipient defaults in the
performance or observance of any material term, condition or covenant contained in the agreement in a manner that results in material
harm to the Service Providers and the default continues unremedied for a period of 60 days after written notice of the breach
is given to the Service Recipient. The Service Providers may also terminate our Master Services Agreement upon the occurrence of
certain events relating to the bankruptcy or insolvency of the Service Recipients.



If our Master Services Agreement is terminated,
the licensing agreement, the Relationship Agreement and any of Brookfield Asset Management’s obligations under the Relationship
Agreement will also terminate.



103







Indemnification and Limitations on Liability



Under our Master Services Agreement, the
Service Providers have not assumed and do not assume any responsibility other than to provide or arrange for the provision of the
services called for thereunder in good faith and will not be responsible for any action that the Service Recipients take in following
or declining to follow the advice or recommendations of the Service Providers. In addition, under our Master Services Agreement,
the Service Providers and the related indemnified parties will not be liable to the Service Recipients for any act or omission,
except for conduct that involved bad faith, fraud, willful misconduct, gross negligence or in the case of a criminal matter, conduct
that the indemnified person knew was unlawful. The maximum amount of the aggregate liability of the Service Providers or any of
their affiliates, or of any director, officer, agent, subcontractor, contractor, delegate, member, partner, shareholder, employee
or other representative of the Service Providers or any of their affiliates, will be equal to the amounts previously paid by the
Service Recipients in respect of services pursuant to our Master Services Agreement in the two most recent calendar years. The
Service Recipients have agreed to indemnify the Service Providers, their affiliates, directors, officers, agents, subcontractors,
delegates, members, partners, shareholders and employees to the fullest extent permitted by law from and against any claims, liabilities,
losses, damages, costs or expenses (including legal fees) incurred by an indemnified person or threatened in connection with our
respective businesses, investments and activities or in respect of or arising from our Master Services Agreement or the services
provided by the Service Providers, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined
to have resulted from the indemnified person’s bad faith, fraud or willful misconduct, gross negligence or in the case of
a criminal matter, action that the indemnified person knew to have been unlawful.



Outside Activities



Our Master Services Agreement does not prohibit
the Service Providers or their affiliates from pursuing other business activities or providing services to third parties that
compete directly or indirectly with us.



VOTING AGREEMENTS



Our company and Brookfield have determined
that it is advisable for our company to have control over the entities through which we hold certain of our operating entities,
or the Specified Entities, including GGP, Rouse and certain of our private equity funds. Accordingly, our company has entered into
voting agreements to provide us with voting rights over the Specified Entities.



Pursuant to the voting agreements, voting
rights with respect to any of the Specified Entities will be voted in accordance with the direction of our company or one of the
Holding Entities with respect to certain matters, typically including: (i) the election of directors; (ii) any sale of
all or substantially all of its assets; (iii) any merger, amalgamation, consolidation, business combination or other material
corporate transaction, except in connection with any internal reorganization that does not result in a change of control; (iv) any
plan or proposal for a complete or partial liquidation or dissolution, or any reorganization or any case, proceeding or action
seeking relief under any existing laws or future laws relating to bankruptcy or insolvency; (v) any amendment to its governing
documents; or (vi) any commitment or agreement to do any of the foregoing.



INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS



To the knowledge of our company, no current
or former director, officer or employee of our company, nor any associate or affiliate of any of them, is or was indebted to our
company at any time since its formation.



The aggregate indebtedness to Brookfield
Office Properties, one of our operating entities, or its subsidiaries of all officers, directors and employees and former officers,
directors and employees of Brookfield Office Properties and its subsidiaries was C$698,726. No loans have been extended since July 30,
2002 to directors, executives or senior officers of Brookfield Office Properties. Richard B. Clark, the former CEO of Brookfield
Office Properties, had an outstanding non-interest bearing loan from Brookfield Office Properties of C$698,726. The largest amount
outstanding of such loan during the 12 months ended December 31, 2013 was C$698,726. Mr. Clark’s common shares
purchased with the loan are held as security for the loan.



INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS



Except as disclosed in this Form 20-F, no
proposed director or senior officer of the BPY General Partner or the Service Providers or other insider of our company, nor any
associate or affiliate of the foregoing persons, has any existing or potential material conflict of interest with our company,
the Property Partnership or any of its subsidiaries or interest in any material transaction involving our company, the Property
Partnership or any of its subsidiaries.



| | 7.C. | INTERESTS OF EXPERTS AND COUNSEL
| | ---- | --------------------------------



Not applicable.



104







| | ITEM 8. | FINANCIAL INFORMATION
| | ------- | ---------------------



| | 8.A. | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
| | ---- | -------------------------------------------------------



See Item 18. “Financial Statements”.



| | 8.B. | SIGNIFICANT CHANGES
| | ---- | -------------------



On
January 8, 2014, Brookfield Office Properties increased its corporate revolving credit facility from $695 million to $1 billion
through a syndicate of lending institutions led by Deutsche Bank AG, RBC Capital Markets and Citigroup Global Markets Inc. The
upsized floating-rate credit facility holds a four-year term with two six-month extension options. The facility also features an
accordion option through which Brookfield Office Properties can draw an additional $250 million at the consent of the lenders.



On
January 13, 2014, Rouse completed an underwritten public offering of 8,050,000 shares of its common stock, including the exercise
of an over-allotment option for 1,050,000 shares of its common stock, which decreased our ownership interest in Rouse to 34%.



On
February 10, 2014, GGP announced the acquisition of 27,624,282 of its common shares from affiliates of Pershing Square Capital
Management, L.P. at $20.12 per share for total consideration of approximately $566 million. The transaction reduced GGP’s
total diluted common shares outstanding to approximately 937 million shares.



In
February 2014, the partnership funded its portion of a $500 million investment of preferred equity in CXTD, a wholly-owned entity
of Hong Kong listed developer Shui On Land. CXTD owns a premier portfolio of office and retail assets in Shanghai.



On
February 12, 2014, we announced the commencement of our offer to acquire any or all of the common shares of Brookfield
Office Properties that we do not currently own. Under the Offer, Brookfield Office Properties shareholders were able to elect
to receive one BPY limited partnership unit or $20.34 in cash for each Brookfield Office Properties common share, subject
to pro-ration. As of March 31, 2014, Brookfield Office Properties shareholders tendered 220 million common shares pursuant
to the Offer.  On March 20, 2014, we announced that we intend to acquire the remainder of Brookfield Office Properties common
shares in a second stage transaction. We will now own, directly or indirectly, 89% of the issued and outstanding common
shares of Brookfield Office Properties on a fully-diluted basis.



On March 18, 2014 we entered into the BPY
Credit Facility, consisting of a $1.5 billion term acquisition credit facility to fund the Offer, or the Acquisition Credit Facility,
and a $1 billion revolving facility to be used to replace our existing revolving credit facilities, to fund a portion of the additional
cash required to complete the Offer and any second-step transaction up to a limit of $365,508,000, and for general corporate and
operating purposes.



Borrowings under the BPY Credit Facility
will be subject to certain customary conditions for loan facilities of this type. Interest under the BPY Credit Facility is payable,
at the option of borrowers thereunder, either at a base rate plus 1.25% or a LIBOR-based rate plus 2.25%. The BPY Credit Facility
will have a term of two years, with a one-year extension at our option for up to $1.5 billion of commitments subject to the satisfaction
of certain conditions and the payment of extension fees. The BPY Credit Facility may be prepaid, in whole or in part (subject to
minimums and increments), at any time and without bonus or penalty. We will be required to reduce the aggregate principal amount
outstanding under the Acquisition Credit Facility to $500 million or less prior to the second anniversary of the facility, and
such reduction is required to exercise the one-year extension option. Subject to certain exceptions and limitations, we will be
required to cause a specified percentage (based on the amount outstanding under the Acquisition Credit Facility) of the net proceeds
that we receive from certain future asset sales and debt issuances to be applied to repay the Acquisition Credit Facility. Any
portion of such net sale and financing proceeds that is not required to be repaid to the lenders in the first instance and is not
reinvested within a specified time period, must similarly be used to repay the Acquisition Credit Facility. Our operating entities
are subject to limited covenants in respect of their corporate debt and were in compliance with all such covenants as of December
31, 2013. Our operating subsidiaries are also in compliance with all covenants and other capital requirements related to regulatory
or contractual obligations of material consequence to us.



| | ITEM 9. | THE OFFER AND LISTING
| | ------- | ---------------------



| | 9.A. | OFFER AND LISTING DETAILS
| | ---- | -------------------------



The following table sets forth the annual
high and low prices and trading volume for our units on the TSX and NYSE for the periods indicated since when-issued trading commenced
on April 15, 2013:



105







TSX



|Period                       |  | High |       |  | Low |    |       | Volume | 
|---------------------------- |  | ---- | ----- |  | --- | -- | ----- | ------ | 
|Year Ended December 31, 2013 |  | C$   | 24.70 |  |     | C$ | 19.47 |        | 



NYSE



|Period                       |  | High |       |  | Low |   |       | Volume | 
|---------------------------- |  | ---- | ----- |  | --- | - | ----- | ------ | 
|Year Ended December 31, 2013 |  | $    | 23.99 |  |     | $ | 18.80 |        | 



The following table sets forth the quarterly
high and low prices and trading volume for our units on the TSX and NYSE for the periods indicated since when-issued trading commenced
on April 15, 2013:



TSX



|Period                               |  | High |       |  | Low |    |       | Volume | 
|------------------------------------ |  | ---- | ----- |  | --- | -- | ----- | ------ | 
|April 15, 2013 to June 30, 2013      |  | C$   | 24.70 |  |     | C$ | 20.10 |        | 
|July 1, 2013 to September 30, 2013   |  |      | 22.25 |  |     |    | 19.47 |        | 
|October 1, 2013 to December 31, 2013 |  |      | 21.74 |  |     |    | 19.59 |        | 
|January 1, 2014 to March 31, 2014    |  |      | 22.26 |  |     |    | 20.41 |        | 



NYSE



|Period                               |  | High |       |  | Low |   |       | Volume | 
|------------------------------------ |  | ---- | ----- |  | --- | - | ----- | ------ | 
|April 15, 2013 to June 30, 2013      |  | $    | 23.99 |  |     | $ | 19.07 |        | 
|July 1, 2013 to September 30, 2013   |  |      | 21.49 |  |     |   | 18.80 |        | 
|October 1, 2013 to December 31, 2013 |  |      | 20.50 |  |     |   | 18.85 |        | 
|January 1, 2014 to March 31, 2014    |  |      | 20.23 |  |     |   | 18.19 |        | 



The following table sets forth the monthly
high and low prices and trading volume for our units on the TSX and NYSE for the most recent six months:



TSX



|Period                                |  | High |       |  | Low |    |       | Volume | 
|------------------------------------- |  | ---- | ----- |  | --- | -- | ----- | ------ | 
|October 1, 2013 to October 31, 2013   |  | C$   | 20.70 |  |     | C$ | 19.59 |        | 
|November 1, 2013 to November 30, 2013 |  |      | 21.19 |  |     |    | 19.78 |        | 
|December 1, 2013 to December 31, 2013 |  |      | 21.74 |  |     |    | 20.51 |        | 
|January 1, 2014 to January 31, 2014   |  |      | 21.46 |  |     |    | 20.62 |        | 
|February 1, 2014 to February 28, 2014 |  |      | 22.26 |  |     |    | 20.41 |        | 
|March 1, 2014 to March 31, 2014       |  |      | 22.18 |  |     |    | 20.50 |        | 



106







NYSE



|Period                                |  | High |       |  | Low |   |       | Volume | 
|------------------------------------- |  | ---- | ----- |  | --- | - | ----- | ------ | 
|October 1, 2013 to October 31, 2013   |  | $    | 20.00 |  |     | $ | 18.90 |        | 
|November 1, 2013 to November 30, 2013 |  |      | 19.87 |  |     |   | 18.85 |        | 
|December 1, 2013 to December 31, 2013 |  |      | 20.50 |  |     |   | 19.28 |        | 
|January 1, 2014 to January 31, 2014   |  |      | 20.23 |  |     |   | 18.74 |        | 
|February 1, 2014 to February 28, 2014 |  |      | 19.95 |  |     |   | 18.45 |        | 
|March 1, 2014 to March 31, 2014       |  |      | 20.08 |  |     |   | 18.19 |        | 



| | 9.B. | PLAN OF DISTRIBUTION
| | ---- | --------------------



Not applicable.



| | 9.C. | MARKETS
| | ---- | -------



Our units are listed on the NYSE and TSX
under the symbols “BPY” and “BPY.UN”, respectively.



| | 9.D. | SELLING SHAREHOLDERS
| | ---- | --------------------



Not applicable.



| | 9.E. | DILUTION
| | ---- | --------



Not applicable.



| | 9.F. | EXPENSES OF THE ISSUE
| | ---- | ---------------------



Not applicable.



| | ITEM 10. | ADDITIONAL INFORMATION
| | -------- | ----------------------



| | 10.A. | SHARE CAPITAL
| | ----- | -------------



Not applicable.



| | 10.B. | MEMORANDUM AND ARTICLES OF ASSOCIATION
| | ----- | --------------------------------------



DESCRIPTION OF OUR UNITS AND OUR LIMITED PARTNERSHIP AGREEMENT



The following is a description of the material
terms of our units and our limited partnership agreement, and is qualified in its entirety by reference to all of the provisions
of our limited partnership agreement. Because this description is only a summary of the terms of our units and our limited partnership
agreement, it does not contain all of the information that you may find useful. For more complete information, you should read
our limited partnership agreement. The limited partnership agreement is available electronically on the website of the SEC at www.sec.gov
and on our SEDAR profile at www.sedar.com and is available to our holders as described under Item 10.C. “Additional
Information — Material Contracts” and Item 10.H. “Documents on Display”.



Formation and Duration



Our company is a Bermuda exempted limited
partnership registered under the Bermuda Limited Partnership Act 1883 and the Bermuda Exempted Partnerships Act 1992. Our company
has a perpetual existence and will continue as a limited liability partnership unless terminated or dissolved in accordance with
our limited partnership agreement. Our partnership interests consist of our units, which represent limited partnership interests
in our company, and any additional partnership interests representing limited partnership interests that we may issue in the future
as described below under “— Issuance of Additional Partnership Interests”.



107







Management



As required by law, our limited partnership
agreement provides for the management and control of our company by a general partner, the BPY General Partner.



Nature and Purpose



Under our limited partnership agreement,
the purpose of our company is to: acquire and hold interests in the Property Partnership and, subject to the approval of the BPY
General Partner, interests in any other entity; engage in any activity related to the capitalization and financing of our company’s
interests in such entities; serve as the managing general partner of the Property Partnership and execute and deliver, and perform
the functions of a managing general partner of the Property Partnership specified in, the limited partnership agreement of the
Property Partnership; and engage in any other activity that is incidental to or in furtherance of the foregoing and that is approved
by the BPY General Partner and that lawfully may be conducted by a limited partnership organized under the Bermuda Limited Partnership
Act 1883, the Bermuda Exempted Partnerships Act 1992 and our limited partnership agreement.



Our Units



Our units are non-voting limited partnership
interests in our company. A holder of our units does not hold a share of a body corporate. As holders of units of our company,
holders will not have statutory rights normally associated with ownership of shares of a corporation including, for example, the
right to bring “oppression” or “derivative” actions. The rights of holders of units of our company are
based on our limited partnership agreement, amendments to which may be proposed only by or with the consent of the BPY General
Partner as described below under “— Amendment of Our Limited Partnership Agreement”.



Units of our company represent a fractional
limited partnership interest in our company and do not represent a direct investment in our company’s assets and should not
be viewed by investors as direct securities of our company’s assets. Holders of our units are not entitled to the withdrawal
or return of capital contributions in respect of our units, except to the extent, if any, that distributions are made to such holders
pursuant to our limited partnership agreement or upon the liquidation of our company as described below under “— Liquidation
and Distribution of Proceeds” or as otherwise required by applicable law.Except to the extent expressly provided
in our limited partnership agreement, a holder of our units will not have priority over any other holder of our units, either as
to the return of capital contributions or as to profits, losses or distributions.



Holders of our units do not have the ability
to call meetings of unitholders, and holders of our units are not entitled to vote on matters relating to our company except as
described below under “— No Management or Control; No Voting”. Any action that may be taken at a meeting of unitholders
may be taken without a meeting if written consent is solicited by or on behalf of the BPY General Partner and receives approval
of not less than the minimum percentage of support necessary to authorize or take such action at a meeting as described below under “—
Meetings”.



Exchange LP Units and the Support Agreement



In connection with the Offer, Canadian residents
had the election to receive an exchangeable unit, or an Exchange LP Unit, of Brookfield Office Properties Exchange L.P., or Exchange
LP, an Ontario partnership, instead of our units, which allows for full or partial deferral of capital gains for Canadian federal
income tax purposes. Holders of Exchange LP Units are entitled to receive distributions economically equivalent to the distributions,
if any, paid from time to time by us on our units. Exchange LP Units are not transferrable, except upon the death of a holder.



Holders of Exchange LP Units are entitled
at any time to retract (i.e., to require Exchange LP to redeem) any or all Exchange LP Units held by them and to receive in exchange
one of our units, plus the full amount of all declared and unpaid distributions on the Exchange LP Units and all distributions
declared on one of our units that have not yet been declared or paid on the Exchange LP Units, or the Distribution Amount, if any.
Instead of Exchange LP redeeming the retracted units, we have a call right to purchase all but not less than all of the units covered
by the retraction request.



Exchange LP has the right, commencing on
the seventh anniversary of the initial take-up date of the Offer, to redeem all of the then outstanding Exchange LP Units for a
purchase price equal to one of our units for each outstanding Exchange LP Unit plus the Distribution Amount, if any. The redemption
date may be accelerated if certain conditions are met. Instead of Exchange LP redeeming such Exchange LP Units, we have a call
right to require that each holder of Exchange LP Units sell all the Exchange LP Units held by such holder to us on the redemption
date upon payment by us to such holder of the purchase price for such Exchange LP Units.



108







Under the Support Agreement between us and
Exchange LP, we have covenanted that, so long as such Exchange LP Units not owned by us or our subsidiaries are outstanding, we
will, among other things: (a) not declare or pay any distribution on our units unless (i) on the same day Exchange LP declares
or pays, as the case may be, an equivalent distribution on the Exchange LP Units and (ii) Exchange LP has sufficient money to pay
such distribution; (b) take actions reasonably necessary to ensure that the declaration date, record date and payment date for
distributions on the Exchange LP Units are the same as those for any corresponding distributions on our units; (c) take all actions
reasonably necessary to enable Exchange LP to pay the liquidation amount, the retraction price or the redemption price to the holders
of the Exchange LP Units in the event of a liquidation, dissolution or winding up of Exchange LP, a retraction request by a holder
of Exchange LP Units or a redemption of Exchange LP Units , as the case may be.



The Support Agreement also provides that,
without the prior approval of Exchange LP and the holders of Exchange LP Units, we will not distribute our units or rights to subscribe
for our units or other property or assets to all or substantially all of our holders, change any of the rights, privileges or other
terms of our units, or change the then outstanding number of our units into a lesser or greater number, unless the same or an equivalent
distribution on, or change to, the Exchange LP Units is made simultaneously. In the event of any proposed cash offer, share exchange
offer, issuer bid, take-over bid or similar transaction affecting our units, we and Exchange LP will use reasonable best efforts
to take all actions necessary or desirable to enable holders of Exchange LP Units to participate in such transaction to the same
extent and on an economically equivalent basis as our holders.



The foregoing is a summary of certain of
the material terms of the Exchange LP Units, as set out in the limited partnership agreement of Exchange LP, and the Support Agreement
and is qualified in its entirety by reference to the full text of the limited partnership agreement of Exchange LP and the Support
Agreement, which are available electronically on the website of the SEC at www.sec.gov and on our SEDAR profile at
www.sedar.com.



Distribution Reinvestment Plan



We have a distribution reinvestment plan
for holders of our units resident in Canada. We may in the future expand our distribution reinvestment plan to include holders
of our units resident in the United States. The Property Partnership also has a distribution reinvestment plan. Holders of
our units who are not resident in Canada or the United States may participate in the distribution reinvestment plan provided
that there are not any laws or governmental regulations that may limit or prohibit them from doing so. The following is a summary
of the principal terms of our company’s distribution reinvestment plan.



Pursuant to the distribution reinvestment
plan, holders of our units can elect to have distributions paid on units held by them automatically reinvested in additional units
in accordance with the terms of the plan. Distributions to be reinvested in our units under the distribution reinvestment plan
are reduced by the amount of any applicable withholding tax.



Distributions due to plan participants are
paid to the plan agent for the benefit of the plan participants and, if a plan participant has elected to have his or her distributions
automatically reinvested, or applied, on behalf of such plan participant to the purchase of additional units, such purchases will
be made from our company on the distribution date at a price per unit calculated by reference to the volume weighted average of
the trading price for our units on the NYSE for the five trading days immediately preceding the date the relevant distribution
is paid by our company.



As soon as reasonably practicable after
each distribution payment date, a statement of account will be mailed to each participant setting out the amount of the relevant
cash distribution reinvested, the price of each unit purchased, the number of units purchased under the distribution reinvestment
plan on the distribution payment date and the total number of units, computed to four decimal places, held for the account of the
participant under the distribution reinvestment plan (or, in the case of beneficial holders, CDS Clearing and Depository Services Inc.,
or CDS, will receive such statement on behalf of the beneficial holders participating in the plan). While our company does not
issue fractional units, a plan participant’s entitlement to units purchased under the distribution reinvestment plan may
include a fraction of a unit and such fractional units shall accumulate. A cash adjustment for any fractional units will be paid
by the plan agent upon the withdrawal from or termination by a plan participant of his or her participation in the distribution
reinvestment plan or upon termination of the distribution reinvestment plan at a price per unit based upon the closing price for
our units on the NYSE on the trading day immediately preceding such withdrawal or termination. A registered holder may, at any
time, obtain unit certificates for any number of whole units held for the participant’s account under the plan by notifying
the plan agent. Certificates for units acquired under the plan will not be issued to participants unless specifically requested.
Prior to pledging, selling or otherwise transferring units held for a participant’s account (except for sale of our units
through the plan agent), a registered holder must request that his or her units be electronically transferred to his or her brokerage
account or a unit certificate be issued. The automatic reinvestment of distributions under the plan will not relieve participants
of any income tax obligations applicable to such distributions. No brokerage commissions are payable in connection with the purchase
of our units under the distribution reinvestment plan and all administrative costs are borne by our company.



109







Unitholders can terminate their participation
in the distribution reinvestment plan by providing, or by causing to be provided, notice to the plan agent. Such notice, if actually
received by the plan agent no later than five business days prior to a record date, will have effect in respect of the distribution
to be made as of such date. Thereafter, distributions to such unitholders will be in cash. In addition, unitholders may request
that all or part of their units be sold. When our units are sold through the plan agent, a holder will receive the proceeds less
a handling charge and any brokerage trading fees. Our company is able to terminate the distribution reinvestment plan, in its sole
discretion, upon notice to the plan participants and the plan agent, but such action will have no retroactive effect that would
prejudice a participant’s interest. Our company is also able to amend, modify or suspend the distribution reinvestment plan
at any time in its sole discretion, provided that our company, through the plan agent, gives notice of any amendment, modification
or suspension to the distribution reinvestment plan that in our company’s opinion may materially prejudice participants.



The Property Partnership has a corresponding
distribution reinvestment plan in respect of distributions made to our company and to holders of the Redemption-Exchange Units.
Our company does not intend to reinvest distributions it receives from the Property Partnership in the Property Partnership’s
distribution reinvestment plan except to the extent that holders of our units elect to reinvest distributions pursuant to our distribution
reinvestment plan. Brookfield has advised our company that it may from time to time reinvest distributions it receives from us
in respect of our units or from the Property Partnership in respect of the Redemption-Exchange Units pursuant to the distribution
reinvestment plans of our company or the Property Partnership, as applicable. To the extent Brookfield reinvests distributions
it receives on our units, it will receive additional units of our company. To the extent Brookfield elects to reinvest distributions
it receives from the Property Partnership pursuant to the Property Partnership’s distribution reinvestment plan, it will
receive Redemption-Exchange Units. Such Redemption-Exchange Units received by Brookfield also would become subject to the Redemption-Exchange
Mechanism and may therefore result in Brookfield acquiring additional units of our company.



Issuance of Additional Partnership Interests



The BPY General Partner has broad rights
to cause our company to issue additional partnership interests and may cause us to issue additional partnership interests (including
new classes of partnership interests and options, rights, warrants and appreciation rights relating to such interests) for any
partnership purpose, at any time and on such terms and conditions as it may determine without the approval of any limited partners.
Any additional partnership interests may be issued in one or more classes, or one or more series of classes, with such designations,
preferences, rights, powers and duties (which may be senior to existing classes and series of partnership interests) as may be
determined by the BPY General Partner in its sole discretion, all without the approval of our limited partners.



Investments in Property Partnership



If and to the extent that our company raises
funds by way of the issuance of equity or debt securities, or otherwise, pursuant to a public offering, private placement or otherwise,
an amount equal to the proceeds will be invested in the Property Partnership, unless otherwise agreed by us and the Property Partnership.



Capital Contributions



No partner has the right to withdraw any
or all of its capital contribution. The limited partners have no liability for further capital contributions to our company. Each
limited partner’s liability will be limited to the amount of capital such partner is obligated to contribute to our company
for its limited partner interest plus its share of any undistributed profits and assets, subject to certain exceptions. See “—
Limited Liability” below.



Distributions



Distributions to partners of our company
will be made only as determined by the BPY General Partner in its sole discretion. However, the BPY General Partner will not be
permitted to cause our company to make a distribution if it does not have sufficient cash on hand to make the distribution (including
as a result of borrowing), the distribution would render it insolvent, or if, in the opinion of the BPY General Partner, the distribution
would leave it with insufficient funds to meet any future or contingent obligations, or the distribution would contravene the Bermuda
Limited Partnership Act 1883. For greater certainty, our company, the Property Partnership or one or more of the Holding Entities
may (but none is obligated to) borrow money in order to obtain sufficient cash to make a distribution. The amount of taxes withheld
or paid by us in respect of our units held by limited partners or the BPY General Partner shall be treated either as a distribution
to such partner or as a general expense of our company as determined by the BPY General Partner in its sole discretion.



110







The BPY General Partner has sole authority
to determine whether our company will make distributions and the amount and timing of these distributions. The BPY General Partner
has adopted a distribution policy pursuant to which our company intends to make quarterly cash distributions in an initial amount
currently anticipated to be approximately $1.00 per unit on an annualized basis. We are targeting an initial pay-out ratio of approximately
80% of FFO. See Item 5.A. “Operating and Financial Review and Prospects — Operating Results” for a discussion
of FFO. We will initially pursue a distribution growth rate target in the range of 3% to 5% annually. Our company, the Property
Partnership or one or more Holding Entities may (but none is obligated to) borrow money in order to obtain sufficient cash to make
a distribution.



From time to time our distributions may
exceed the above percentages as a result of acquisitions that are attractive on a long-term cash flow and/or total return basis
but are not immediately accretive to FFO. However, there can be no assurance that we will be able to make distributions in the
amounts discussed above or meet our target growth rate. Our company’s ability to make distributions will depend on our company
receiving sufficient distributions from the Property Partnership, which in turn depend on the Property Partnership receiving sufficient
distributions from the Holding Entities, and we cannot assure you that our company will in fact make cash distributions as intended.
In particular, the amount and timing of distributions will depend upon a number of factors, including, among others, our actual
results of operations and financial condition, the amount of cash that is generated by our operations and investments, restrictions
imposed by the terms of any indebtedness that is incurred to leverage our operations and investments or to fund liquidity needs,
levels of operating and other expenses, contingent liabilities and other factors that the BPY General Partner deems relevant.



Distributions made by the Property Partnership
will be made pro rata with respect to the Property Partnership’s managing general partnership interest owned by us
and those limited partnership interests owned by Brookfield. Our company’s ability to make distributions will also be subject
to additional risks and uncertainties, including those set forth in this Form 20-F under Item 3.D. “Key Information
— Risk Factors” and Item 5. “Operating and Financial Review and Prospects”. In particular, see Item
3.D “Key Information — Risk Factors — We may not be able to make distributions to holders of our units in
amounts intended or at all” and “— Our organizational and ownership structure, as well as our contractual arrangements
with Brookfield, may create significant conflicts of interest that may be resolved in a manner that is not in the best interests
of our company or the best interests of our unitholders.” In addition, the BPY General Partner will not be permitted to cause
our company to make a distribution if we do not have sufficient cash on hand to make the distribution, if the distribution would
render our company insolvent or if, in the opinion of the BPY General Partner, the distribution would leave us with insufficient
funds to meet any future or contingent obligations.



Allocations of Income and Losses



Limited partners share in the net profits
and net losses of our company generally in accordance with their respective percentage interest in our company.



Net income and net losses for U.S. federal
income tax purposes will be allocated for each taxable year or other relevant period among our partners using a monthly, quarterly
or other permissible convention pro rata on a per unit basis, except to the extent otherwise required by law or pursuant to tax
elections made by our company. Each item of income, gain, loss and deduction so allocated to a partner of our partnership generally
will be the same source and character as though such partner had realized the item directly.



The income for Canadian federal income tax
purposes of our company for a given fiscal year will be allocated to each partner in an amount calculated by multiplying such income
by a fraction, the numerator of which is the sum of the distributions received by such partner with respect to such fiscal year
and the denominator of which is the aggregate amount of the distributions made by our company to partners with respect to such
fiscal year. To such end, any person who was a partner at any time during such fiscal year but who has transferred all of their
units before the last day of that fiscal year may be deemed to be a partner on the last day of such fiscal year for the purposes
of subsection 96(1) of the Tax Act. Generally, the source and character of items of income so allocated to a partner with respect
to a fiscal year of our company will be the same source and character as the distributions received by such partner with respect
to such fiscal year. The BPY General Partner may adjust allocations of items that would otherwise be made pursuant to the terms
of our limited partnership agreement to the extent necessary to avoid an adverse effect on our company’s limited partners,
subject to the approval of a committee of the board of directors of the BPY General Partner made up of independent directors.



If, with respect to a given fiscal year,
no distribution is made by our company or we have a loss for Canadian federal income tax purposes, one quarter of the income, or
loss, as the case may be, for Canadian federal income tax purposes of our company for such fiscal year, will be allocated to the
partners of record at the end of each calendar quarter ending in such fiscal year pro rata to their respective percentage interests
in our company, which in the case of the BPY General Partner shall mean 0.2%, and in the case of all of our limited partners shall
mean in the aggregate 99.8%, which aggregate percentage interest shall be allocated among the limited partners in the proportion
that the number of our units held at each such date by a limited partner is of the total number of our units issued and outstanding
at each such date. Generally, the source and character of such income or losses so allocated to a partner at the end of each calendar
quarter will be the same source and character as the income or loss earned or incurred by our company in such calendar quarter.



111







Limited Liability



Assuming that a limited partner does not
participate in the control or management of our company or conduct the affairs of, sign or execute documents for or otherwise bind
our company within the meaning of the Bermuda Limited Partnership Act 1883 and otherwise acts in conformity with the provisions
of our limited partnership agreement, such partner’s liability under the Bermuda Limited Partnership Act 1883 and our limited
partnership agreement will be limited to the amount of capital such partner is obligated to contribute to our company for its limited
partner interest plus its share of any undistributed profits and assets, except as described below.



If it were determined, however, that a limited
partner was participating in the control or management of our company or conducting the affairs of, signing or executing documents
for or otherwise binding our company (or purporting to do any of the foregoing) within the meaning of the Bermuda Limited Partnership
Act 1883 or the Bermuda Exempted Partnerships Act 1992, such limited partner would be liable as if it were a general partner of
our partnership in respect of all debts of our company incurred while that limited partner was so acting or purporting to act.
Neither our limited partnership agreement nor the Bermuda Limited Partnership Act 1883 specifically provides for legal recourse
against the BPY General Partner if a limited partner were to lose limited liability through any fault of the BPY General Partner.
While this does preclude a limited partner from seeking legal recourse, we are not aware of any precedent for such a claim in Bermuda
case law.



No Management or Control; No Voting



Our company’s limited partners, in
their capacities as such, may not take part in the management or control of the activities and affairs of our company and do not
have any right or authority to act for or to bind our company or to take part or interfere in the conduct or management of our
company. Limited partners are not entitled to vote on matters relating to our company, although holders of units are entitled to
consent to certain matters with respect to certain amendments to our limited partnership agreement and certain matters with respect
to the withdrawal of the BPY General Partner as described in further detail below. Each unit entitles the holder thereof to one
vote for the purposes of any approvals of holders of units.



Meetings



The BPY General Partner may call special
meetings of the limited partners at a time and place outside of Canada determined by the BPY General Partner on a date not less
than 10 days nor more than 60 days after the mailing of notice of the meeting. The limited partners do not have the ability to
call a special meeting. Only holders of record on the date set by the BPY General Partner (which may not be less than 10 nor more
than 60 days before the meeting) are entitled to notice of any meeting.



Written consents may be solicited only by
or on behalf of the BPY General Partner. Any such consent solicitation may specify that any written consents must be returned to
our company within the time period, which may not be less than 20 days, specified by the BPY General Partner.



For purposes of determining holders of partnership
interests entitled to provide consents to any action described above, the BPY General Partner may set a record date, which may
be not less than 10 nor more than 60 days before the date by which record holders are requested in writing by the BPY General
Partner to provide such consents. Only those holders of partnership interests on the record date established by the BPY General
Partner will be entitled to provide consents with respect to matters as to which a consent right applies.



Amendment of Our Limited Partnership
Agreement



Amendments to our limited partnership agreement
may be proposed only by or with the consent of the BPY General Partner. To adopt a proposed amendment, other than the amendments
that do not require limited partner approval discussed below, the BPY General Partner must seek approval of a majority of our outstanding
units required to approve the amendment, either by way of a meeting of the limited partners to consider and vote upon the proposed
amendment or by written approval.



112







Prohibited Amendments



No amendment may be made that would:



| | 1. | enlarge the obligations of any limited partner without its consent, except that any amendment that would have a material adverse
effect on the rights or preferences of any class of partnership interests in relation to other classes of partnership interests
may be approved by at least a majority of the type or class of partnership interests so affected; or
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable,
reimbursable or otherwise payable by our company to the BPY General Partner or any of its affiliates without the consent of the
BPY General Partner, which may be given or withheld in its sole discretion.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The provision of our limited partnership
agreement preventing the amendments having the effects described in clauses (1) and (2) above can be amended upon the
approval of the holders of at least 90% of the outstanding units.



No Limited Partner Approval



Subject to applicable law, the BPY General
Partner may generally make amendments to our limited partnership agreement without the approval of any limited partner to reflect:



| | 1. | a change in the name of our company, the location of our registered office or our registered agent;
| | -- | ---------------------------------------------------------------------------------------------------



| | 2. | the admission, substitution or withdrawal of partners in accordance with our limited partnership agreement;
| | -- | -----------------------------------------------------------------------------------------------------------



| | 3. | a change that the BPY General Partner determines is reasonable and necessary or appropriate for our company to qualify or to
continue our company’s qualification as an exempted limited partnership under the laws of Bermuda or a partnership in which
the limited partners have limited liability under the laws of any jurisdiction or is necessary or advisable in the opinion of the
BPY General Partner to ensure that our company will not be treated as an association taxable as a corporation or otherwise taxed
as an entity for tax purposes;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | an amendment that the BPY General Partner determines to be necessary or appropriate to address certain changes in tax regulations,
legislation or interpretation;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | an amendment that is necessary, in the opinion of our counsel, to prevent our company or the BPY General Partner or its directors
or officers, from in any manner being subjected to the provisions of the Investment Company Act or similar legislation in other
jurisdictions;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | an amendment that the BPY General Partner determines in its sole discretion to be necessary or appropriate for the creation,
authorization or issuance of any class or series of partnership interests or options, rights, warrants or appreciation rights relating
to partnership securities;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | any amendment expressly permitted in our limited partnership agreement to be made by the BPY General Partner acting alone;
| | -- | --------------------------------------------------------------------------------------------------------------------------



| | 8. | any amendment that the BPY General Partner determines in its sole discretion to be necessary or appropriate to reflect and
account for the formation by our company of, or its investment in, any corporation, partnership, joint venture, limited liability
company or other entity, as otherwise permitted by our limited partnership agreement;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9. | a change in our company’s fiscal year and related changes; or
| | -- | -------------------------------------------------------------



| | 10. | any other amendments substantially similar to any of the matters described in (1) through (9) above.
| | --- | ----------------------------------------------------------------------------------------------------



In addition, the BPY General Partner may
make amendments to our limited partnership agreement without the approval of any limited partner if those amendments, in the discretion
of the BPY General Partner:



| | 1. | do not adversely affect our company’s limited partners considered as a whole (including any particular class of partnership
interests as compared to other classes of partnership interests) in any material respect;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



113







| | 2. | are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order,
ruling or regulation of any governmental agency or judicial authority;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | are necessary or appropriate to facilitate the trading of our units or to comply with any rule, regulation, guideline or requirement
of any securities exchange on which our units are or will be listed for trading;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | are necessary or appropriate for any action taken by the BPY General Partner relating to splits or combinations of units under
the provisions of our limited partnership agreement; or
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | are required to effect the intent expressed in this Form 20-F or the intent of the provisions of our limited partnership agreement
or are otherwise contemplated by our limited partnership agreement.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Opinion of Counsel and Limited
Partner Approval



The BPY General Partner will not be required
to obtain an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners if one
of the amendments described above under “— No Limited Partner Approval” should occur. No other amendments to
our limited partnership agreement will become effective without the approval of holders of at least 90% of our units, unless our
company obtains an opinion of counsel to the effect that the amendment will not (i) cause our company to be treated as an
association taxable as a corporation or otherwise taxable as an entity for tax purposes (provided that for U.S. tax purposes the
BPY General Partner has not made the election described below under “— Election to be Treated as a Corporation”),
or (ii) affect the limited liability under the Bermuda Limited Partnership Act 1883 of any of our company’s limited
partners.



In addition to the above restrictions, any
amendment that would have a material adverse effect on the rights or preferences of any type or class of partnership interests
in relation to other classes of partnership interests will also require the approval of the holders of at least a majority of the
outstanding partnership interests of the class so affected.



In addition, any amendment that reduces
the voting percentage required to take any action must be approved by the written consent or affirmative vote of limited partners
whose aggregate outstanding voting units constitute not less than the voting requirement sought to be reduced.



Sale or Other Disposition of Assets



Our limited partnership agreement generally
prohibits the BPY General Partner, without the prior approval of the holders of at least 662/3%
of the voting power of our units, from causing our company to, among other things, sell, exchange or otherwise dispose of all or
substantially all of our assets in a single transaction or a series of related transactions. However, the BPY General Partner,
in its sole discretion, may mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets
(including for the benefit of persons who are not our company or our company’s subsidiaries) without that approval. The BPY
General Partner may also sell all or substantially all of our assets under any forced sale of any or all of our assets pursuant
to the foreclosure or other realization upon those encumbrances without that approval.



Take-Over Bids



If, within 120 days after the date of a
take-over bid, as defined in the Securities Act (Ontario), the take-over bid is accepted by holders of not less than 90% of our
outstanding units, other than our units held at the date of the take-over bid by the offeror or any affiliate or associate of the
offeror, and the offeror acquires the units deposited or tendered under the take-over bid, the offeror will be entitled to acquire
our units not deposited under the take-over bid on the same terms as the units acquired under the take-over bid.



Election to be Treated as a Corporation



If the BPY General Partner determines in
its sole discretion that it is no longer in our company’s best interests to continue as a partnership for U.S. federal income
tax purposes, the BPY General Partner may elect to treat our company as an association or as a publicly traded partnership taxable
as a corporation for U.S. federal (and applicable state) income tax purposes.



Termination and Dissolution



Our company will terminate upon the earlier
to occur of: (i) the date on which all of our company’s assets have been disposed of or otherwise realized by us and
the proceeds of such disposals or realizations have been distributed to partners; (ii) the service of notice by the BPY General
Partner, with the special approval of a majority of its independent directors, that in its opinion the coming into force of any
law, regulation or binding authority renders illegal or impracticable the continuation of our company; and (iii) at the election
of the BPY General Partner, if our company, as determined by the BPY General Partner, is required to register as an “investment
company” under the Investment Company Act or similar legislation in other jurisdictions.



114







Our partnership will be dissolved upon the
withdrawal of the BPY General Partner as the general partner of our partnership (unless a successor entity becomes the general
partner as described in the following sentence or the withdrawal is effected in compliance with the provisions of our limited partnership
agreement that are described below under “— Withdrawal of the BPY General Partner”) or the date on which any
court of competent jurisdiction enters a decree of judicial dissolution of our partnership or an order to wind-up or liquidate
the BPY General Partner without the appointment of a successor in compliance with the provisions of our limited partnership agreement
that are described below under “— Withdrawal of the BPY General Partner”. Our partnership will be reconstituted
and continue without dissolution if within 30 days of the date of dissolution (and provided a notice of dissolution has not been
filed with the Bermuda Monetary Authority), a successor general partner executes a transfer deed pursuant to which the new general
partner assumes the rights and undertakes the obligations of the general partner, but only if our partnership receives an opinion
of counsel that the admission of the new general partner will not result in the loss of limited liability of any limited partner.



Liquidation and Distribution of Proceeds



Upon our dissolution, unless our company
is continued as a new limited partnership, the liquidator authorized to wind-up our company’s affairs will, acting with all
of the powers of the BPY General Partner that the liquidator deems necessary or appropriate in its judgment, liquidate our company’s
assets and apply the proceeds of the liquidation first, to discharge our company’s liabilities as provided in our limited
partnership agreement and by law and thereafter to the partners pro rata according to the percentages of their respective partnership
interests as of a record date selected by the liquidator. The liquidator may defer liquidation of our assets for a reasonable period
of time or distribute assets to partners in kind if it determines that an immediate sale or distribution of all or some of our
company’s assets would be impractical or would cause undue loss to the partners.



Withdrawal of the BPY General Partner



The BPY General Partner may withdraw as
the general partner without first obtaining approval of our unitholders by giving written notice to the other partners, and that
withdrawal will not constitute a violation of our limited partnership agreement.



Upon the withdrawal of a general partner,
the holders of at least a majority of our units may select a successor to that withdrawing general partner. If a successor is not
selected, or is selected but an opinion of counsel regarding limited liability, tax matters and the Investment Company Act (and
similar legislation in other jurisdictions) cannot be obtained, our company will be dissolved, wound up and liquidated. See “—
Termination and Dissolution” above.



In the event of the withdrawal of a general
partner, where such withdrawal will violate our limited partnership agreement, a successor general partner will have the option
to purchase the general partnership interest of the departing general partner for a cash payment equal to its fair market value.
Under all other circumstances where a general partner withdraws, the departing general partner will have the option to require
the successor general partner to purchase the general partnership interest of the departing general partner for a cash payment
equal to its fair market value. In each case, this fair market value will be determined by agreement between the departing general
partner and the successor general partner. If no agreement is reached within 30 days of the general partner’s departure,
an independent investment banking firm or other independent expert selected by the departing general partner and the successor
general partner will determine the fair market value. If the departing general partner and the successor general partner cannot
agree upon an expert within 45 days of the general partner’s departure, then an expert chosen by agreement of the experts
selected by each of them will determine the fair market value.



If the option described above is not exercised
by either the departing general partner or the successor general partner, the departing general partner’s general partnership
interest will automatically convert into units pursuant to a valuation of those interests as determined by an investment banking
firm or other independent expert selected in the manner described in the preceding paragraph.



Transfer of the General Partnership Interest



The BPY General Partner may transfer all
or any part of its general partnership interests without first obtaining approval of any unitholder. As a condition of this transfer,
the transferee must: (i) be an affiliate of the general partner of the Property Partnership (or the transfer must be made
concurrently with a transfer of the general partnership units of the Property Partnership to an affiliate of the transferee); (ii) agree
to assume the rights and duties of the BPY General Partner to whose interest that transferee has succeeded; (iii) agree to
assume and be bound by the provisions of our limited partnership agreement; and (iv) furnish an opinion of counsel regarding
limited liability, tax matters and the Investment Company Act (and similar legislation in other jurisdictions). Any transfer of
the general partnership interest is subject to prior notice to and approval of the relevant Bermuda regulatory authorities. At
any time, the members of the BPY General Partner may sell or transfer all or part of their shares in the BPY General Partner without
the approval of the unitholders.



115







Partnership Name



If the BPY General Partner ceases to be
the general partner of our partnership and our new general partner is not an affiliate of Brookfield, our company will be required
by our limited partnership agreement to change our name to a name that does not include “Brookfield” and which could
not be capable of confusion in any way with such name. Our limited partnership agreement explicitly provides that this obligation
shall be enforceable and waivable by the BPY General Partner notwithstanding that it may have ceased to be the general partner
of our partnership.



Transactions with Interested Parties



The BPY General Partner, its affiliates
and their respective partners, members, directors, officers, employees and shareholders, which we refer to as “interested
parties,” may become limited partners or beneficially interested in limited partners and may hold, dispose of or otherwise
deal with our units with the same rights they would have if the BPY General Partner was not a party to our limited partnership
agreement. An interested party will not be liable to account either to other interested parties or to our company, our company’s
partners or any other persons for any profits or benefits made or derived by or in connection with any such transaction.



Our limited partnership agreement permits
an interested party to sell investments to, purchase assets from, vest assets in and enter into any contract, arrangement or transaction
with our company, the Property Partnership, any of the Holding Entities, any operating entity or any other holding entity established
by our company and may be interested in any such contract, transaction or arrangement and shall not be liable to account either
to our company, the Property Partnership, any of the Holding Entities, any operating entity or any other holding entity established
by our company or any other person in respect of any such contract, transaction or arrangement, or any benefits or profits made
or derived therefrom, by virtue only of the relationship between the parties concerned, subject to the bye-laws of the BPY General
Partner.



Outside Activities of the BPY General
Partner; Conflicts of Interest



Under our limited partnership agreement,
the BPY General Partner is required to maintain as its sole activity the activity of acting as the general partner of our partnership.
The BPY General Partner is not permitted to engage in any business or activity or incur or guarantee any debts or liabilities except
in connection with or incidental to its performance as general partner or incurring, guaranteeing, acquiring, owning or disposing
of debt or equity securities of the Property Partnership, a Holding Entity or any other holding entity established by our company.



Our limited partnership agreement provides
that each person who is entitled to be indemnified by our company (other than the BPY General Partner), as described below under
“— Indemnification; Limitation on Liability”, will have the right to engage in businesses of every type and description
and other activities for profit, and to engage in and possess interests in business ventures of any and every type or description,
irrespective of whether: (i) such businesses and activities are similar to our activities; or (ii) such businesses and
activities directly compete with, or disfavor or exclude, the BPY General Partner, our company, the Property Partnership, any Holding
Entity, any operating entity or any other holding entity established by us. Such business interests, activities and engagements
will be deemed not to constitute a breach of our limited partnership agreement or any duties stated or implied by law or equity,
including fiduciary duties, owed to any of the BPY General Partner, our company, the Property Partnership, any Holding Entity,
any operating entity and any other holding entity established by us (or any of their respective investors), and shall be deemed
not to be a breach of the BPY General Partner’s fiduciary duties or any other obligation of any type whatsoever of the BPY
General Partner. None of the BPY General Partner, our company, the Property Partnership, any Holding Entity, any operating entity,
any other holding entity established by us or any other person shall have any rights by virtue of our limited partnership agreement
or our partnership relationship established thereby or otherwise in any business ventures of any person who is entitled to be indemnified
by our company as described below under “— Indemnification; Limitation on Liability”.



The BPY General Partner and the other indemnified
persons described in the preceding paragraph do not have any obligation under our limited partnership agreement or as a result
of any duties stated or implied by law or equity, including fiduciary duties, to present business or investment opportunities to
our company, our limited partners, the Property Partnership, any Holding Entity, any operating entity or any other holding entity
established by our company. These provisions do not affect any obligation of an indemnified person to present business or investment
opportunities to our company, the Property Partnership, any Holding Entity, any operating entity or any other holding entity established
by our company pursuant to the Relationship Agreement or a separate written agreement between such persons.



116







Any conflicts of interest and potential
conflicts of interest that are approved by the BPY General Partner’s governance and nominating committee from time to time
will be deemed approved by all partners. Pursuant to our conflicts policy, by a majority vote, independent directors may grant
approvals for any of the transactions described above in the form of general guidelines, policies or procedures in which case no
further special approval will be required in connection with a particular transaction or matter permitted thereby. See Item 7.B.
“Major Shareholders and Related Party Transactions — Related Party Transactions — Relationship with Brookfield
— Conflicts of Interest and Fiduciary Duties”.



Indemnification; Limitations on Liability



Under our limited partnership agreement,
our company is required to indemnify to the fullest extent permitted by law the BPY General Partner and any of its affiliates (and
their respective officers, directors, agents, shareholders, partners, members and employees), any person who serves on a governing
body of the Property Partnership, a Holding Entity, operating entity or any other holding entity established by our company and
any other person designated by the BPY General Partner as an indemnified person, in each case, against all losses, claims, damages,
liabilities, costs or expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings, incurred by an indemnified person in connection
with our investments and activities or by reason of their holding such positions, except to the extent that the claims, liabilities,
losses, damages, costs or expenses are determined to have resulted from the indemnified person’s bad faith, fraud or willful
misconduct, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful. In addition, under
our limited partnership agreement: (i) the liability of such persons has been limited to the fullest extent permitted by law,
except to the extent that their conduct involves bad faith, fraud or willful misconduct, or in the case of a criminal matter, action
that the indemnified person knew to have been unlawful; and (ii) any matter that is approved by the independent directors
of the BPY General Partner will not constitute a breach of our limited partnership agreement or any duties stated or implied by
law or equity, including fiduciary duties. Our limited partnership agreement requires us to advance funds to pay the expenses of
an indemnified person in connection with a matter in which indemnification may be sought until it is determined that the indemnified
person is not entitled to indemnification.



Accounts, Reports and Other Information



Under our limited partnership agreement,
within the time required by applicable law, including any rules of any applicable securities exchange, the BPY General Partner
is required to prepare financial statements in accordance with IFRS or such other appropriate accounting principles as determined
from time to time and make publicly available as of a date selected by the BPY General Partner, in its sole discretion, our company’s
financial statements together with a statement of the accounting policies used in their preparation, such information as may be
required by applicable laws and regulations and such information as the BPY General Partner deems appropriate. Our company’s
annual financial statements must be audited by an independent accounting firm of international standing. Our company’s quarterly
financial statements may be unaudited and will be made available publicly as and within the time period required by applicable
laws and regulations, including any rules of any applicable securities exchange.



The BPY General Partner is also required
to use commercially reasonable efforts to prepare and send to the limited partners of our partnership on an annual basis a Schedule
K-1 (or equivalent). The BPY General Partner will, where reasonably possible, prepare and send information required by the non-U.S.
limited partners of our partnership for U.S. federal income tax reporting purposes. The BPY General Partner will also use commercially
reasonable efforts to supply information required by limited partners of our partnership for Canadian federal income tax purposes.



Governing Law; Submission to Jurisdiction



Our limited partnership agreement is governed
by and will be construed in accordance with the laws of Bermuda. Under our limited partnership agreement, each of our company’s
partners (other than governmental entities prohibited from submitting to the jurisdiction of a particular jurisdiction) will submit
to the non-exclusive jurisdiction of any court in Bermuda in any dispute, suit, action or proceeding arising out of or relating
to our limited partnership agreement. Each partner waives, to the fullest extent permitted by law, any immunity from jurisdiction
of any such court or from any legal process therein and further waives, to the fullest extent permitted by law, any claim of inconvenient
forum, improper venue or that any such court does not have jurisdiction over the partner. Any final judgment against a partner
in any proceedings brought in a court in Bermuda will be conclusive and binding upon the partner and may be enforced in the courts
of any other jurisdiction of which the partner is or may be subject, by suit upon such judgment. The foregoing submission to jurisdiction
and waivers will survive the dissolution, liquidation, winding up and termination of our company.



117







Transfers of Units



We are not required to recognize any transfer
of our units until certificates, if any, evidencing such units are surrendered for registration of transfer. Each person to whom
a unit is transferred (including any nominee holder or an agent or representative acquiring such unit for the account of another
person) will be admitted to our partnership as a partner with respect to the unit so transferred subject to and in accordance with
the terms of our limited partnership agreement. Any transfer of a unit will not entitle the transferee to share in the profits
and losses of our company, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar
item or to any other rights to which the transferor was entitled until the transferee becomes a partner and a party to our limited
partnership agreement.



By accepting a unit for transfer in accordance
with our limited partnership agreement, each transferee will be deemed to have:



| | · | executed our limited partnership agreement and become bound by the terms thereof;
| | - | ---------------------------------------------------------------------------------



| | · | granted an irrevocable power of attorney to the BPY General Partner or the liquidator of our company and any officer thereof
to act as such partner’s agent and attorney-in-fact to execute, swear to, acknowledge, deliver, file and record in the appropriate
public offices: (i) all certificates, documents and other instruments relating to the existence or qualification of our company
as an exempted limited partnership (or a partnership in which the limited partners have limited liability) in Bermuda and in all
jurisdictions in which our company may conduct activities and affairs or own property; any amendment, change, modification or restatement
of our limited partnership agreement, subject to the requirements of our limited partnership agreement; the dissolution and liquidation
of our company; the admission or withdrawal of any partner of our partnership or any capital contribution of any partner of our
partnership; the determination of the rights, preferences and privileges of any class or series of units or other partnership interests
of our company, and any tax election with any limited partner or general partner on behalf of our partnership or the partners;
and (ii) subject to the requirements of our limited partnership agreement, all ballots, consents, approvals, waivers, certificates,
documents and other instruments necessary or appropriate, in the sole discretion of the BPY General Partner or the liquidator of
our company, to make, evidence, give, confirm or ratify any voting consent, approval, agreement or other action that is made or
given by our company’s partners or is consistent with the terms of our limited partnership agreement or to effectuate the
terms or intent of our limited partnership agreement;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | made the consents and waivers contained in our limited partnership agreement, including with respect to the approval of the
transactions and agreements entered into in connection with our formation and the spin-off; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | ratified and confirmed all contracts, agreements, assignments and instruments entered into on behalf of our company in accordance
with our limited partnership agreement, including the granting of any charge or security interest over the assets of our company
and the assumption of any indebtedness in connection with the affairs of our company.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The transfer of any unit and the admission
of any new partner to our partnership will not constitute any amendment to our limited partnership agreement.



Book-Based System



Our units may be represented in the form
of one or more fully registered unit certificates held by, or on behalf of, the Canadian Depository for Securities, or CDS, or
the Depository Trust Company, or DTC, as applicable, as custodian of such certificates for the participants of CDS or DTC, registered
in the name of CDS or DTC or their respective nominee, and registration of ownership and transfers of our units may be effected
through the book-based system administered by CDS or DTC as applicable.



DESCRIPTION OF THE PROPERTY PARTNERSHIP LIMITED PARTNERSHIP
AGREEMENT



The following is a description of the material
terms of the Property Partnership’s limited partnership agreement and is qualified in its entirety by reference to all of
the provisions of such agreement. You are not a limited partner of the Property Partnership and do not have any rights under its
limited partnership agreement. However, our company is the managing general partner of the Property Partnership and is responsible
for the management and control of the Property Partnership.



118







We have included a summary of what we believe
are the most important provisions of the Property Partnership’s limited partnership agreement because we conduct our operations
through the Property Partnership and the Holding Entities and our rights with respect to our partnership interest in the Property
Partnership are governed by the terms of the Property Partnership’s limited partnership agreement. Because this description
is only a summary of the terms of the agreement, it does not contain all of the information that you may find useful. For more
complete information, you should read the Property Partnership’s limited partnership agreement. The agreement is available
electronically on the website of the SEC at www.sec.gov and on our SEDAR profile at www.sedar.com and
is available to our unitholders as described under Item 10.C. “Additional Information — Material Contracts”
and Item 10.H. “Documents on Display”.



Formation and Duration



The Property Partnership is a Bermuda exempted
limited partnership registered under the Bermuda Limited Partnership Act 1883 and the Bermuda Exempted Partnerships Act 1992. The
Property Partnership has a perpetual existence and will continue as a limited liability partnership unless our partnership is terminated
or dissolved in accordance with its limited partnership agreement.



Management



As required by law, the Property Partnership’s
limited partnership agreement provides for the management and control of the Property Partnership by its managing general partner,
our company.



Nature and Purpose



Under its limited partnership agreement,
the purpose of the Property Partnership is to: acquire and hold interests in the Holding Entities and, subject to the approval
of our company, any other entity; engage in any activity related to the capitalization and financing of the Property Partnership’s
interests in such entities; and engage in any other activity that is incidental to or in furtherance of the foregoing and that
is approved by our company and that lawfully may be conducted by a limited partnership organized under the Bermuda Limited Partnership
Act 1883, the Bermuda Exempted Partnerships Act 1992 and our limited partnership agreement.



Units



In connection with the spin-off, Class A
limited partnership units of the Property Partnership were issued to our company, the Redemption-Exchange Units were issued to
certain wholly-owned subsidiaries of Brookfield Asset Management and the general partnership interests were issued to Property
Special LP (formerly known as Brookfield Property GP L.P.). On August 8, 2013, we effected a restructuring pursuant to which: (i)
all of the Class A limited partnership units of the Property Partnership were reclassified as managing general partnership interests
in the Property Partnership, or Managing General Partner Units; and (ii) all of the general partnership interests in the Property
Partnership were reclassified as special limited partnership interests in the Property Partnership, or the Special Limited Partner
Units.



As of the date hereof, the Property Partnership
has three classes of units: Redemption-Exchange Units, Special Limited Partner Units and Managing General Partner Units. Holders
of any class of Property Partnership units are not entitled to the withdrawal or return of capital contributions in respect of
their units, except to the extent, if any, that distributions are made to such holders pursuant to the Property Partnership’s
limited partnership agreement or upon the dissolution of the Property Partnership as described below under “— Dissolution”
or as otherwise required by applicable law. Holders of the Property Partnership’s units are not entitled to vote on matters
relating to the Property Partnership except as described below under “— No Management or Control; No Voting”.
Except to the extent expressly provided in the Property Partnership’s limited partnership agreement, a holder of Property
Partnership units will not have priority over any other holder of Property Partnership units, either as to the return of capital
contributions or as to profits, losses or distributions. The Property Partnership’s limited partnership agreement does not
contain any restrictions on ownership of the Property Partnership units. The units of the Property Partnership have no par or other
stated value.



All of the outstanding Redemption-Exchange
Units and Special Limited Partner Units are held by certain wholly-owned subsidiaries of Brookfield Asset Management and all of
the outstanding Managing General Partner Units are held by our company.



119







Issuance of Additional Partnership Interests



The Property Partnership may issue additional
partnership interests (including Managing General Partner Units, Special Limited Partner Units and Redemption-Exchange Units as
well as new classes of partnership interests and options, rights, warrants and appreciation rights relating to such interests)
for any partnership purpose, at any time and on such terms and conditions as our company may determine without the approval of
any limited partners. Any additional partnership interests may be issued in one or more classes, or one or more series of classes,
with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of partnership
interests) as may be determined by our company in its sole discretion, all without the approval of our limited partners.



Redemption-Exchange Mechanism



At any time after two years from April 15,
2013, the date of closing of the spin-off, the holders of the Redemption-Exchange Units will have the right to require the Property
Partnership to redeem all or a portion of the Redemption-Exchange Units for cash, subject to our company’s right to acquire
such interests for our units as described below. Any such holder may exercise its right of redemption by delivering a notice of
redemption to the Property Partnership and our company.



After presentation for redemption, it will
receive, subject to our company’s right to acquire such interests (in lieu of redemption) in exchange for units of our company,
either (a) cash in an amount equal to the market value of one of our units (as determined by reference to the five day volume
weighted average of the trading price of our units on the principal stock exchange for our units based on trading volumes) multiplied
by the number of units to be redeemed or (b) such other amount of cash as may be agreed by such holder and the Property Partnership.
Upon its receipt of the redemption notice, our company will have a right to elect, at its sole discretion, to acquire all (but
not less than all) Redemption-Exchange Units presented to the Property Partnership for redemption in exchange for units of our
company on a one for one basis. Upon a redemption, the holder’s right to receive distributions with respect to the Redemption-Exchange
Units so redeemed will cease.



The date of exchange specified in any redemption
notice may not be less than five business days nor more than twenty business days after the date upon which the redemption notice
is received by the Property Partnership and our company. At any time prior to the applicable redemption-exchange date, any holder
of Redemption-Exchange Units who delivers a redemption notice will be entitled to withdraw such redemption notice.



Brookfield’s aggregate limited
partnership interest in our company is currently approximately72% as of the date of this Form 20-F if it exercised
its redemption right in full and our company exercised its right to acquire such interests in exchange for units of our
company on the Redemption-Exchange Units redeemed.



Distributions



Distributions by the Property Partnership
will be made in the sole discretion of our company. However, our company will not be permitted to cause the Property Partnership
to make a distribution if the Property Partnership does not have sufficient cash on hand to make the distribution, the distribution
would render the Property Partnership insolvent or if, in the opinion of our company, the distribution would or might leave the
Property Partnership with insufficient funds to meet any future or contingent obligations, or the distribution would contravene
the Bermuda Limited Partnership Act 1883. For greater certainty, the Property Partnership or one or more of the Holding Entities
may (but none is obligated to) borrow money in order to obtain sufficient cash to make a distribution.



Except as set forth below, prior to the
dissolution of the Property Partnership, distributions of available cash (if any), including cash that has been borrowed for such
purpose, in any given quarter will be made by the Property Partnership as follows, referred to as the Regular Distribution Waterfall:



| | · | first, 100% of any available cash to our company until our company has been distributed an amount equal to our expenses and
outlays for the quarter properly incurred;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | second, to the extent distributions in respect of Redemption-Exchange Units have accrued in previous quarters (as described
in the next paragraph), 100% to all the holders of Redemption-Exchange Units pro rata in proportion to their respective percentage
interests (which will be calculated using Redemption-Exchange Units only) (which distribution will be treated as having been made
pursuant to the fourth and fifth provision below, as applicable) of all amounts that have been accrued in previous quarters and
not yet recovered to the holders of Redemption-Exchange Units;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



120







| | · | third, an equity enhancement distribution of 100% of any available cash then remaining to Property Special LP until an amount
equal to 0.3125% of the amount by which our company’s total capitalization value exceeds the total capitalization value of
our company determined immediately following the spin-off has been distributed to Property Special LP, provided that for any quarter
in which our company determines that there is insufficient cash to pay this equity enhancement distribution, our company may elect
to pay all or a portion of this distribution in Redemption-Exchange Units. This distribution for any quarter will be reduced by
an amount equal to (i) fees in excess of the base management fee of $12.5 million (plus the amount of any annual escalation by
the specified inflation factor) that are payable under our Master Services Agreement in such quarter plus (ii) the proportion of
each cash payment in relation to such quarter made by an Operating Entity to Brookfield, including any payment made in the form
of a dividend, distribution or other profit entitlement, which our company determines to be comparable to this equity enhancement
distribution that is attributable to the amount that a Service Recipient has committed and/or contributed at such time (either
as debt or equity) to such Operating Entity (and, in the case of a commitment, as set forth in the terms of the subscription agreement
or other underlying documentation with respect to such Operating Entity at or prior to such time), provided that the aggregate
amount of any such payments under this clause (ii) will not exceed an amount equal to 0.3125% of the amount the Service Recipient
has so committed and/or contributed. The total capitalization value of our company will be equal to the aggregate of the value
of all of our outstanding units and the securities of other Service Recipients that are not held by our company, the Property Partnership,
the Holding Entities, the operating entities or any other direct or indirect subsidiary of a Holding Entity, plus all outstanding
third party debt (including, generally, debt owed to Brookfield but not amounts owed under the Brookfield revolving credit facility
that was in place at closing of the spin-off) with recourse against our company, the Property Partnership or a Holding Entity,
less all cash held by such entities;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | fourth, 100% of any available cash then remaining to the owners of the Property Partnership’s partnership interests,
pro rata to their percentage interests, until an amount equal to the First Distribution Threshold, scheduled to be $0.275 per unit,
has been distributed in respect of each partnership interest of the Property Partnership during such quarter;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | fifth, 85% of any available cash then remaining to the owners of the Property Partnership’s partnership interests, pro
rata to their percentage interests, and an incentive distribution of 15% to Property Special LP, until an amount equal to the Second
Distribution Threshold, scheduled to be $0.30 per unit, has been distributed in respect of each partnership interest of the Property
Partnership during such quarter; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | thereafter, 75% of any available cash then remaining to the owners of the Property Partnership’s partnership interests,
pro rata to their percentage interests, and an incentive distribution of 25% to Property Special LP.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



To date, no equity enhancement or incentive
distributions have been made to Property Special LP. Set forth below is an example of how the equity enhancement and incentive
distributions to be made to Property Special LP are calculated on a quarterly and annualized basis. The figures used below are
for illustrative purposes only and are not indicative of our company’s expectations.1



121







|                                                             |  |           |       |  | Quarterly    |   |        | Annualized | 
|------------------------------------------------------------ |  | --------- | ----- |  | ------------ | - | ------ | ---------- | 
|Equity Enhancement Distribution Calculation                  |  | Units (m) |       |  | Per Unit ($) |   |        | Total ($m) | 
|Initial capitalization(1)                                    |  |           |       |  |              |   |        |            | 
|Market value of our company’s units per unit                 |  |           |       |  |              | $ | 21.914 |            | 
|Our company’s units                                          |  |           | 80.2  |  |              |   |        |            | 
|Redemption-Exchange Units held by Brookfield(2)              |  |           | 386.1 |  |              |   |        |            | 
|Total units                                                  |  |           | 466.3 |  |              |   |        |            | 
|Total market value                                           |  |           |       |  |              |   |        |            | 
|                                                             |  |           |       |  |              |   |        |            | 
|Preferred shares of holding entities held by Brookfield      |  |           |       |  |              |   |        |            | 
|Recourse debt, net of cash                                   |  |           |       |  |              |   |        |            | 
|Total capitalization                                         |  |           |       |  |              |   |        |            | 
|                                                             |  |           |       |  |              |   |        |            | 
|Capitalization at illustrative quarter end(3)                |  |           |       |  |              |   |        |            | 
|Market value of our company’s units per unit                 |  |           |       |  |              | $ | 20.00  |            | 
|Our company’s units                                          |  |           | 107.4 |  |              |   |        |            | 
|Redemption-Exchange Units held by Brookfield(2)              |  |           | 432.6 |  |              |   |        |            | 
|Total units                                                  |  |           | 540.1 |  |              |   |        |            | 
|Total market value                                           |  |           |       |  |              |   |        |            | 
|Preferred shares of holding entities held by Brookfield      |  |           |       |  |              |   |        |            | 
|Recourse debt, net of cash                                   |  |           |       |  |              |   |        |            | 
|Total capitalization                                         |  |           |       |  |              |   |        |            | 
|Increase in total capitalization                             |  |           |       |  |              |   |        |            | 
|                                                             |  |           |       |  |              |   |        |            | 
|Days in quarter / year                                       |  |           |       |  |              |   |        |            | 
|Fraction of quarter / year(4)                                |  |           |       |  |              |   |        |            | 
|Equity enhancement distribution fee rate                     |  |           |       |  |              |   |        |            | 
|Gross equity enhancement distribution to Property Special LP |  |           |       |  |              |   |        |            | 
|Fee offsets(5)                                               |  |           |       |  |              |   |        |            | 
|Net equity                                                   |  |           |       |  |              |   |        |            | 



122







Notes:

|(1) | For purposes of calculating the equity enhancement distribution at each quarter end, the initial total capitalization against which the quarter end total capitalization is measured will always be our company’s total capitalization immediately following the spin-off. For purposes of calculating the initial total capitalization, securities were valued based on their volume weighted average trading price on the principal stock exchange (NYSE) for the 30 trading days commencing on April 15, 2013, the date of the spin off; provided that if a security is not traded on a stock exchange, the fair market value of such security is determined by the BPY General Partner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | Includes (a) Redemption-Exchange Units of the Property Partnership that are held by Brookfield and that are redeemable for cash or exchangeable for our company’s units in accordance with the Redemption-Exchange Mechanism and (b) a special limited partnership interest in the Property Partnership held by Property Special LP. For purposes of calculating total capitalization, the value of these securities is assumed to be equal to the value of our company’s units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | Based on the number of units and Redemption-Exchange Units as of December 31, 2013. For purposes of calculating the quarter end total capitalization, securities were valued based on their volume weighted average trading price on the principal stock exchange (NYSE) for the preceding five trading days; provided that if a security is not traded on a stock exchange, the fair market value of such security is determined by the BPY General Partner. For illustrative purposes only, the example above assumes a value of $20.00 per unit and Redemption-Exchange Unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4) | The example above assumes a full illustrative quarter and a full illustrative year. The equity enhancement distribution fee will be pro-rated for any partial payment period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(5) | The equity enhancement distribution for any quarter will be reduced by an amount equal to (i) fees in excess of the base management fee of $12.5 million (plus the amount of any annual escalation by the specified inflation factor) that are payable under the Master Services Agreement in such quarter plus (ii) the proportion of each cash payment in relation to such quarter made by an operating entity to Brookfield, including any payment made in the form of a dividend, distribution or other profit entitlement, which our company determines to be comparable to the equity enhancement distribution that is attributable to the amount that a Service Recipient has committed and/or contributed at such time (either as debt or equity) to such operating entity (and, in the case of a commitment, as set forth in the terms of the subscription agreement or other underlying documentation with respect to such operating entity at or prior to such time), provided that the aggregate amount of any such payments under this clause (ii) will not exceed an amount equal to 0.3125% of the amount the Service Recipient has so committed and/or contributed. For any quarter in which our company determines that there is insufficient cash to pay the equity enhancement distribution, our company may elect to pay all or a portion of this distribution in Redemption-Exchange Units.



123







|                                                                                                |  |           |       |  | Quarterly    |   |       | Annualized | 
|----------------------------------------------------------------------------------------------- |  | --------- | ----- |  | ------------ | - | ----- | ---------- | 
|Incentive Distribution Calculation                                                              |  | Units (m) |       |  | Per Unit ($) |   |       | Total ($m) | 
|Illustrative distribution                                                                       |  |           |       |  |              | $ | 0.250 |            | 
|First distribution threshold                                                                    |  |           |       |  |              | $ | 0.275 |            | 
|Total units of Property Partnership(1)                                                          |  |           | 540.1 |  |              |   |       |            | 
|Total first distribution                                                                        |  |           |       |  |              |   |       |            | 
|Distribution in excess of first distribution threshold                                          |  |           |       |  |              | $ | —     |            | 
|Total units of Property Partnership(1)                                                          |  |           | 540.1 |  |              |   |       |            | 
|Second distribution to all partners                                                             |  |           |       |  |              |   |       |            | 
|15% incentive distribution to Property Special LP                                               |  |           |       |  |              |   |       |            | 
|Total second distribution                                                                       |  |           |       |  |              |   |       |            | 
|Distribution in excess of second distribution threshold                                         |  |           |       |  |              | $ | —     |            | 
|Total units of Property Partnership(1)                                                          |  |           | 540.1 |  |              |   |       |            | 
|Third distribution to all partners                                                              |  |           |       |  |              |   |       |            | 
|25% incentive distribution to Property Special LP                                               |  |           |       |  |              |   |       |            | 
|Total third distribution                                                                        |  |           |       |  |              |   |       |            | 
|Total distributions to partners of the Property Partnership (including incentive distributions) |  |           |       |  |              |   |       |            | 
|Total incentive distributions to Property Special LP                                            |  |           |       |  |              |   |       |            | 



Notes:

|(1) | Based on the number of units on December 31, 2013. Includes (a) managing general partnership interests in the Property Partnership held by our company, (b) Redemption-Exchange Units of the Property Partnership that are held by Brookfield and that are redeemable for cash or exchangeable for the company’s units in accordance with the Redemption-Exchange Mechanism and (c) a special limited partnership interest in the Property Partnership held by Property Special LP.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The table below quantifies, on a quarterly
and annualized basis, all management fees and equity enhancement and incentive distributions that would be earned based on the
equity enhancement and incentive distribution examples set forth above. Other than the fixed base management fee, the table below
is for illustrative purposes only and is not indicative of our company’s expectations.



|                                       |  | Quarterly |      |  | Annualized |  
|-------------------------------------- |  | --------- | ---- |  | ---------- | -
|Total Amounts for Illustrative Quarter |  | $m        |      |  | $m         |  
|Fixed base management fee1             |  | $         | 12.5 |  |            | $
|Equity enhancement distribution        |  |           | —    |  |            |  
|Incentive distribution                 |  |           | —    |  |            |  
|Total amounts                          |  | $         | 12.5 |  |            | $



Notes:

|(1) | Pursuant to the Master Services Agreement, we pay the Service Providers a fixed base management fee equal to $12.5 million per quarter (subject to an annual escalation by a specified inflation factor beginning on January 1, 2014). For any quarter in which the BPY General Partner determines that there is insufficient available cash to pay the base management fee as well as the next regular distribution on our units, we may elect to pay all or a portion of the base management fee in our units or in limited partnership units of the Property Partnership, subject to certain conditions.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



124







If, prior to the dissolution of the Property
Partnership, available cash in any quarter is not sufficient to pay a distribution to the owners of all Property Partnership interests,
pro rata to their percentage interest, then our company may elect to pay the distribution at the then current level first to our
company, in respect of the Managing General Partner Units of the Property Partnership held by our company, and then to the holders
of the Redemption-Exchange Units to the extent practicable, and shall accrue any such deficiency for payment from available cash
in future quarters as described above.



If, prior to the dissolution of the Property
Partnership, available cash is deemed by our company, in its sole discretion, to be (i) attributable to sales or other dispositions
of the Property Partnership’s assets, and (ii) representative of unrecovered capital, then such available cash shall
be distributed to the partners of the Property Partnership in proportion to the unrecovered capital attributable to the Property
Partnership interests held by the partners until such time as the unrecovered capital attributable to each such partnership interest
is equal to zero. Thereafter, distributions of available cash made by the Property Partnership (to the extent made prior to dissolution)
will be made in accordance with the Regular Distribution Waterfall.



Upon the occurrence of an event resulting
in the dissolution of the Property Partnership, all cash and property of the Property Partnership in excess of that required to
discharge the Property Partnership’s liabilities will be distributed as follows: (i) to the extent such cash and/or
property is attributable to a realization event occurring prior to the event of dissolution, such cash and/or property will be
distributed in accordance with the Regular Distribution Waterfall and/or the distribution waterfall applicable to unrecovered capital,
(ii) the aggregate amount of distributions previously deferred in respect of the Redemption-Exchange Units and not previously recovered
and (iii) all other cash and/or property will be distributed in the manner set forth below:



| | · | first, 100% to our company until our company has received an amount equal to the excess of: (i) the amount of our outlays
and expenses incurred during the term of the Property Partnership; over (ii) the aggregate amount of distributions received
by our company pursuant to the first tier of the Regular Distribution Waterfall during the term of the Property Partnership;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | second, 100% to Property Special LP until Property Special LP has received an amount equal to the fair market value of the
equity enhancement distribution entitlement, as determined by a qualified independent valuator in accordance with the Property
Partnership’s limited partnership agreement, provided that such amount may not exceed 2.5 times the aggregate equity enhancement
distribution payments made to Property Special LP during the immediately prior 24 months;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | third, 100% to the partners of the Property Partnership, in proportion to their respective amounts of unrecovered capital in
the Property Partnership;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | fourth, 100% to the owners of the Property Partnership’s partnership interests, pro rata to their percentage interests,
until an amount has been distributed in respect of each partnership interest of the Property Partnership equal to the excess of:
(i) the First Distribution Threshold for each quarter during the term of the Property Partnership (subject to adjustment upon
the subsequent issuance of additional partnership interests in the Property Partnership); over (ii) the aggregate amount of
distributions made in respect of a partnership interest of Property Partnership pursuant to the third tier of the Regular Distribution
Waterfall during the term of the Property Partnership (subject to adjustment upon the subsequent issuance of additional partnership
interests in the Property Partnership);
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | fifth, 85% to the owners of the Property Partnership’s partnership interests, pro rata to their percentage interests,
and 15% to Property Special LP, until an amount has been distributed in respect of each partnership interest of the Property Partnership
equal to the excess of: (i) the Second Distribution Threshold less the First Distribution Threshold for each quarter during
the term of the Property Partnership (subject to adjustment upon the subsequent issuance of additional partnership interests in
the Property Partnership); over (ii) the aggregate amount of distributions made in respect of a partnership interest of the
Property Partnership pursuant to the fourth tier of the Regular Distribution Waterfall during the term of the Property Partnership
(subject to adjustment upon the subsequent issuance of additional partnership interests in the Property Partnership); and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | thereafter, 75% to the owners of the Property Partnership’s partnership interests, pro rata to their percentage interests,
and 25% to Property Special LP.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



125







Each partner’s percentage interest
is determined by the relative portion of all outstanding partnership interests held by that partner from time to time and is adjusted
upon and reflects the issuance of additional partnership interests of the Property Partnership. In addition, the unreturned capital
attributable to each of our partnership interests, as well as certain of the distribution thresholds set forth above, may be adjusted
pursuant to the terms of the limited partnership agreement of the Property Partnership so as to ensure the uniformity of the economic
rights and entitlements of: (i) the previously outstanding Property Partnership’s partnership interests; and (ii) the
subsequently-issued Property Partnership’s partnership interests.



The limited partnership agreement of the
Property Partnership provides that, to the extent that any Holding Entity or any operating entity pays to Brookfield any comparable
performance or incentive distribution, the amount of any incentive distributions paid to Property Special LP in accordance with
the distribution entitlements described above will be reduced in an equitable manner to avoid duplication of distributions.



Property Special LP may elect, at its sole
discretion, to reinvest equity enhancement distributions and incentive distributions in Redemption-Exchange Units.



No Management or Control; No Voting



The Property Partnership’s limited
partners, in their capacities as such, may not take part in the management or control of the activities and affairs of the Property
Partnership and do not have any right or authority to act for or to bind the Property Partnership or to take part or interfere
in the conduct or management of the Property Partnership. Limited partners are not entitled to vote on matters relating to the
Property Partnership, although holders of units are entitled to consent to certain matters as described below under “— Amendment
of the Property Partnership Limited Partnership Agreement”, “— Opinion of Counsel and Limited Partner Approval”,
and “— Withdrawal of the Managing General Partner” which may be effected only with the consent of the holders
of the percentages of outstanding units of the Property Partnership specified below. For purposes of any approval required from
holders of the Property Partnership’s units, if holders of Redemption-Exchange Units are entitled to vote, they will be entitled
to one vote per unit held subject to a maximum number of votes equal to 49% of the total voting power of all units of the Property
Partnership then issued and outstanding. Each unit entitles the holder thereof to one vote for the purposes of any approvals of
holders of units.



Meetings



Our company may call special meetings of
the limited partners at a time and place outside of Canada determined by it on a date not less than 10 days nor more than 60 days
after the mailing of notice of the meeting. Special meetings of the limited partners may also be called by limited partners owning
50% or more of the outstanding partnership interests of the class or classes for which a meeting is proposed. For this purpose,
our partnership interests outstanding do not include partnership interests owned by our company or Brookfield. Only holders of
record on the date set by our company (which may not be less than 10 days nor more than 60 days, before the meeting) are entitled
to notice of any meeting.



Amendment of the Property Partnership
Limited Partnership Agreement



Amendments to the Property Partnership’s
limited partnership agreement may be proposed only by or with the consent of our company. To adopt a proposed amendment, other
than the amendments that do not require limited partner approval discussed below, our company must seek approval of a majority
of the Property Partnership’s outstanding units required to approve the amendment, either by way of a meeting of the limited
partners to consider and vote upon the proposed amendment or by written approval. For this purpose, the Redemption-Exchange Units
will not constitute a separate class and will vote together with the other outstanding limited partnership units of the Property
Partnership.



For purposes of any approval required from
holders of the Property Partnership’s units, if holders of Redemption-Exchange Units are entitled to vote, they will be entitled
to one vote per unit held subject to a maximum number of votes equal to 49% of the total voting power of all units of the Property
Partnership then issued and outstanding.



Prohibited Amendments



No amendment may be made that would:



| | 1. | enlarge the obligations of any limited partner of the Property Partnership without its consent, except that any amendment that
would have a material adverse effect on the rights or preferences of any class of partnership interests in relation to other classes
of partnership interests may be approved by at least a majority of the type or class of partnership interests so affected; or
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



126







| | 2. | enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable,
reimbursable or otherwise payable by the Property Partnership to Property Special LP or any of its affiliates without the consent
of Property Special LP which may be given or withheld in its sole discretion.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The provision of the Property Partnership’s
limited partnership agreement preventing the amendments having the effects described in clauses (1) or (2) above can
be amended upon the approval of the holders of at least 90% of the outstanding limited partnership units of the Property Partnership.



No Limited Partner Approval



Subject to applicable law, our company may
generally make amendments to the Property Partnership’s limited partnership agreement without the approval of any limited
partner to reflect:



| | 1. | a change in the name of the Property Partnership, the location of the Property Partnership’s registered office or the
Property Partnership’s registered agent;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | the admission, substitution, withdrawal or removal of partners in accordance with the limited partnership agreement of the
Property Partnership;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | a change that our company determines is reasonable and necessary or appropriate for the Property Partnership to qualify or
to continue its qualification as an exempted limited partnership under the laws of Bermuda or a partnership in which the limited
partners have limited liability under the laws of any jurisdiction or is necessary or advisable in the opinion of our company to
ensure that the Property Partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity
for tax purposes;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | an amendment that our company determines to be necessary or appropriate to address certain changes in tax regulations, legislation
or interpretation;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | an amendment that is necessary, in the opinion of counsel, to prevent the Property Partnership or our company or its directors
or officers, from in any manner being subjected to the provisions of the Investment Company Act or similar legislation in other
jurisdictions;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | an amendment that our company determines in its sole discretion to be necessary or appropriate for the creation, authorization
or issuance of any class or series of partnership interests or options, rights, warrants or appreciation rights relating to partnership
interests;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | any amendment expressly permitted in the Property Partnership’s limited partnership agreement to be made by our company
acting alone;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------



| | 8. | any amendment that our company determines in its sole discretion to be necessary or appropriate to reflect and account for
the formation by the Property Partnership of, or its investment in, any corporation, partnership, joint venture, limited liability
company or other entity, as otherwise permitted by the Property Partnership’s limited partnership agreement;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9. | a change in the Property Partnership’s fiscal year and related changes;
| | -- | -----------------------------------------------------------------------



| | 10. | any amendment concerning the computation or allocation of specific items of income, gain, expense or loss among the partners
that, in the sole discretion of our company, is necessary or appropriate to: (i) comply with the requirements of applicable
law; (ii) reflect the partners’ interests in the Property Partnership; or (iii) consistently reflect the distributions
made by the Property Partnership to the partners pursuant to the terms of the limited partnership agreement of the Property Partnership;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 11. | any amendment that our company determines in its sole discretion to be necessary or appropriate to address any statute, rule,
regulation, notice, or announcement that affects or could affect the U.S. federal income tax treatment of any allocation or distribution
related to any interest of our company in the profits of the Property Partnership; or
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



127







| | 12. | any other amendments substantially similar to any of the matters described in (1) through (11) above.
| | --- | -----------------------------------------------------------------------------------------------------



In addition, our company may make amendments
to the Property Partnership’s limited partnership agreement without the approval of any limited partner if those amendments,
in the discretion of our company:



| | 1. | do not adversely affect the Property Partnership’s limited partners considered as a whole (including any particular class
of partnership interests as compared to other classes of partnership interests) in any material respect;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order,
ruling or regulation of any governmental agency or judicial authority;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | are necessary or appropriate for any action taken by our company relating to splits or combinations of units under the provisions
of the Property Partnership’s limited partnership agreement; or
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | are required to effect the intent expressed in the final registration statement and prospectus of our company filed in connection
with the spin-off or the intent of the provisions of the Property Partnership’s limited partnership agreement or are otherwise
contemplated by the Property Partnership’s limited partnership agreement.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Opinion of Counsel and Limited
Partner Approval



Our company will not be required to obtain
an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners if one of the amendments
described above under “— No Limited Partner Approval” should occur. Any other amendment to the Property Partnership’s
limited partnership agreement will only become effective either with the approval of at least 90% of the Property Partnership’s
units or if an opinion of counsel is obtained to effect that the amendment will not (i) cause the Property Partnership to
be treated as an association taxable as a corporation or otherwise taxable as an entity for tax purposes (provided that for U.S.
tax purposes our company has not made the election described below under “— Election to be Treated as a Corporation”),
or (ii) affect the limited liability under the Bermuda Limited Partnership Act 1883 of any of the Property Partnership’s
limited partners.



In addition to the above restrictions, any
amendment that would have a material adverse effect on the rights or preferences of any type or class of partnership interests
in relation to other classes of partnership interests will also require the approval of the holders of at least a majority of the
outstanding partnership interests of the class so affected.



In addition, any amendment that reduces
the voting percentage required to take any action must be approved by the written consent or affirmative vote of limited partners
whose aggregate outstanding voting units constitute not less than the voting requirement sought to be reduced.



Sale or Other Disposition of Assets



The Property Partnership’s limited
partnership agreement generally prohibits our company, without the prior approval of the holders of a majority of the units of
the Property Partnership, from causing the Property Partnership to, among other things, sell, exchange or otherwise dispose of
all or substantially all of the Property Partnership’s assets in a single transaction or a series of related transactions,
including by approving on the Property Partnership’s behalf the sale, exchange or other disposition of all or substantially
all of the assets of the Property Partnership’s subsidiaries. However, our company, in its sole discretion, may mortgage,
pledge, hypothecate or grant a security interest in all or substantially all of the Property Partnership’s assets (including
for the benefit of persons who are not the Property Partnership or the Property Partnership’s subsidiaries) without that
approval. Our company may also sell all or substantially all of the Property Partnership’s assets under any forced sale of
any or all of the Property Partnership’s assets pursuant to the foreclosure or other realization upon those encumbrances
without that approval.



Election to be Treated as a Corporation



If our company determines that it is no
longer in the Property Partnership’s best interests to continue as a partnership for U.S. federal income tax purposes, our
company may elect to treat the Property Partnership as an association or as a publicly traded partnership taxable as a corporation
for U.S. federal (and applicable state) income tax purposes.



128









Dissolution



The Property Partnership will dissolve and
its affairs will be wound up upon the earlier to occur of: (i) the service of notice by our company, with the approval of
a majority of the members of the independent directors of the BPY General Partner, that in the opinion of our company the coming
into force of any law, regulation or binding authority renders illegal or impracticable the continuation of the Property Partnership;
(ii) the election of our company if the Property Partnership, as determined by our company, is required to register as an
“investment company” under the Investment Company Act or similar legislation in other jurisdictions; (iii) the
date that our company withdraws from the Property Partnership (unless a successor entity becomes the managing general partner of
the Property Partnership as described below under “— Withdrawal of the Managing General Partner”); (iv) the
date on which any court of competent jurisdiction enters a decree of judicial dissolution of the Property Partnership or an order
to wind-up or liquidate our company without the appointment of a successor in compliance with the provisions of the Property Partnership’s
limited partnership agreement that are described below under “— Withdrawal of the Managing General Partner”;
and (v) the date on which our company decides to dispose of, or otherwise realize proceeds in respect of, all or substantially
all of the Property Partnership’s assets in a single transaction or series of transactions.



The Property Partnership will be reconstituted
and continue without dissolution if within 30 days of the date of dissolution (and provided that a notice of dissolution with respect
to the Property Partnership has not been filed with the Bermuda Monetary Authority), a successor managing general partner executes
a transfer deed pursuant to which the new managing general partner assumes the rights and undertakes the obligations of the original
managing general partner, but only if the Property Partnership receives an opinion of counsel that the admission of the new managing
general partner will not result in the loss of limited liability of any limited partner of the Property Partnership.



Withdrawal of the Managing General Partner



Our company may withdraw as managing general
partner without first obtaining approval of unitholders by giving written notice, and that withdrawal will not constitute a violation
of the limited partnership agreement.



Upon the withdrawal of our company, the
holders of at least a majority of outstanding units may select a successor to that withdrawing managing general partner. If a successor
is not selected, or is selected but an opinion of counsel regarding limited liability, tax matters and the Investment Company Act
(and similar legislation in other jurisdictions) cannot be obtained, the Property Partnership will be dissolved, wound up and liquidated.
See “— Dissolution” above.



Our company may not be removed as managing
general partner by the partners of the Property Partnership.



In the event of the withdrawal of a managing
general partner as a result of certain events relating to the bankruptcy, insolvency or dissolution of that managing general partner,
which withdrawal will violate the Property Partnership’s limited partnership agreement, a successor managing general partner
will have the option to purchase the Managing General Partner Units of the departing managing general partner for a cash payment
equal to its fair market value. Under all other circumstances where a managing general partner withdraws, the departing managing
general partner will have the option to require the successor managing general partner to purchase the Managing General Partner
Units of the departing managing general partner for a cash payment equal to its fair market value. In each case, this fair market
value will be determined by agreement between the departing managing general partner and the successor managing general partner.
If no agreement is reached within 30 days of the managing general partner’s departure, an independent investment banking
firm or other independent expert selected by the departing managing general partner and the successor managing general partner
will determine the fair market value. If the departing managing general partner and the successor managing general partner cannot
agree upon an expert within 45 days of the managing general partner’s departure, then an expert chosen by agreement
of the experts selected by each of them will determine the fair market value.



If the option described above is not exercised
by either the departing managing general partner or the successor managing general partner, the departing managing general partner’s
Managing General Partner Units will automatically convert into units pursuant to a valuation of those interests as determined by
an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.



Transfer of the Managing General Partner
Units



Our company may transfer all or any part
of its Managing General Partner Units without first obtaining approval of any unitholder. As a condition of this transfer, the
transferee must: (i) be an affiliate of the BPY General Partner (or the transfer must be made concurrently with a transfer
of the general partnership units of our company to an affiliate of the transferee); (ii) agree to assume the rights and duties
of the managing general partner to whose interest that transferee has succeeded; (iii) agree to assume the provisions of the
Property Partnership’s limited partnership agreement; and (iv) furnish an opinion of counsel regarding limited liability,
tax matters and the Investment Company Act (and similar legislation in other jurisdictions). Any transfer of the Managing General
Partner Units is subject to prior notice to and approval of the relevant Bermuda regulatory authorities. At any time, the BPY General
Partner may transfer all or any part of its general partnership interests in our company without the approval of our unitholders
as described under Item 10.B. “Memorandum and Articles of Association — Description of our Units and our Limited
Partnership Agreement — Transfer of the General Partnership Interest”.



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Transactions with Interested Parties



Our company, its affiliates and their respective
partners, members, directors, officers, employees and shareholders, which we refer to as “interested parties”, may
become limited partners or beneficially interested in limited partners and may hold, dispose of or otherwise deal with units of
the Property Partnership with the same rights they would have if our company and the BPY General Partner were not a party to the
limited partnership agreement of the Property Partnership. An interested party will not be liable to account either to other interested
parties or to the Property Partnership, its partners or any other persons for any profits or benefits made or derived by or in
connection with any such transaction.



The limited partnership agreement of the
Property Partnership permits an interested party to sell investments to, purchase assets from, vest assets in and enter into any
contract, arrangement or transaction with our company, the Property Partnership, any of the Holding Entities, any operating entity
or any other holding entity established by the Property Partnership and may be interested in any such contract, transaction or
arrangement and shall not be liable to account either to the Property Partnership, any of the Holding Entities, any operating entity
or any other holding entity established by the Property Partnership or any other person in respect of any such contract, transaction
or arrangement, or any benefits or profits made or derived therefrom, by virtue only of the relationship between the parties concerned,
subject to the bye-laws of the BPY General Partner.



Outside Activities of the Managing General
Partner



In accordance with our limited partnership
agreement, our company is authorized to: (i) acquire and hold interests in the Property Partnership and, subject to the approval
of the BPY General Partner, interests in any other entity; (ii) engage in any activity related to the capitalization and financing
of our company’s interests in the Property Partnership and such other entities; (iii) serve as the managing general partner
of the Property Partnership and execute and deliver, and perform the functions of a managing general partner specified in, the
limited partnership agreement of the Property Partnership; and (iv) engage in any other activity that is incidental to or in furtherance
of the foregoing and that is approved by the BPY General Partner and that lawfully may be conducted by a limited partnership organized
under the Bermuda Limited Partnership Act 1883, the Bermuda Exempted Partnerships Act 1992 and our limited partnership agreement.



The Property Partnership’s limited
partnership agreement provides that each person who is entitled to be indemnified by the Property Partnership, as described below
under “— Indemnification; Limitations on Liability”, will have the right to engage in businesses of every type
and description and other activities for profit, and to engage in and possess interests in business ventures of any and every type
or description, irrespective of whether: (i) such businesses and activities are similar to our activities; or (ii) such
businesses and activities directly compete with, or disfavor or exclude, the BPY General Partner, our company, the Property Partnership,
any Holding Entity, any operating entity, or any other holding entity established by the Property Partnership. Such business interests,
activities and engagements will be deemed not to constitute a breach of the Property Partnership’s limited partnership agreement
or any duties stated or implied by law or equity, including fiduciary duties, owed to any of the BPY General Partner, our company,
the Property Partnership, any Holding Entity, any operating entity, and any other holding entity established by the Property Partnership
(or any of their respective investors), and shall be deemed not to be a breach of our company’s fiduciary duties or any other
obligation of any type whatsoever of our company. None of the BPY General Partner, our company, the Property Partnership, any Holding
Entity, operating entity, any other holding entity established by the Property Partnership or any other person shall have any rights
by virtue of the Property Partnership’s limited partnership agreement or our partnership relationship established thereby
or otherwise in any business ventures of any person who is entitled to be indemnified by the Property Partnership as described
below under “— Indemnification; Limitations on Liability”.



Our company and the other indemnified persons
described in the preceding paragraph do not have any obligation under the Property Partnership’s limited partnership agreement
or as a result of any duties stated or implied by law or equity, including fiduciary duties, to present business or investment
opportunities to the Property Partnership, the limited partners of the Property Partnership, any Holding Entity, operating entity,
or any other holding entity established by the Property Partnership. These provisions do not affect any obligation of such indemnified
person to present business or investment opportunities to our company, the Property Partnership, any Holding Entity, any operating
entity or any other holding entity established by the Property Partnership pursuant to the Relationship Agreement or any separate
written agreement between such persons.



130







Accounts, Reports and Other Information



Under the Property Partnership’s limited
partnership agreement, our company is required to prepare financial statements in accordance with IFRS or such other appropriate
accounting principles as determined from time to time by our company, in its sole discretion.



Our company is also required to use commercially
reasonable efforts to prepare and send to the limited partners of the Property Partnership on an annual basis a Schedule K-1 (or
equivalent). Our company will also, where reasonably possible, prepare and send information required by the non-U.S. limited partners
of the Property Partnership for U.S. federal income tax reporting purposes.



Indemnification; Limitations on Liability



Under the Property Partnership’s limited
partnership agreement, it is required to indemnify to the fullest extent permitted by law the BPY General Partner, our company
and any of their respective affiliates (and their respective officers, directors, agents, shareholders, partners, members and employees),
any person who serves on a governing body of the Property Partnership, a Holding Entity, operating entity or any other holding
entity established by our company and any other person designated by its general partner as an indemnified person, in each case,
against all losses, claims, damages, liabilities, costs or expenses (including legal fees and expenses), judgments, fines, penalties,
interest, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, incurred by an
indemnified person in connection with its business, investments and activities or by reason of their holding such positions, except
to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted from the indemnified
person’s bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person
knew to have been unlawful. In addition, under the Property Partnership’s limited partnership agreement: (i) the liability
of such persons has been limited to the fullest extent permitted by law, except to the extent that their conduct involves bad faith,
fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful;
and (ii) any matter that is approved by the independent directors will not constitute a breach of any duties stated or implied
by law or equity, including fiduciary duties. The Property Partnership’s limited partnership agreement requires it to advance
funds to pay the expenses of an indemnified person in connection with a matter in which indemnification may be sought until it
is determined that the indemnified person is not entitled to indemnification.



Governing Law



The Property Partnership’s limited
partnership agreement is governed by and will be construed in accordance with the laws of Bermuda.



| | 10.C. | MATERIAL CONTRACTS
| | ----- | ------------------



The following are the only material contracts,
other than contracts entered into in the ordinary course of business, which have been entered into by us since our formation:



| | 1. | Support Agreement, dated March 19, 2014, between Brookfield Property Partners L.P. and Brookfield Office Properties Exchange
LP described under “Additional Information — Memorandum and Articles of Association — Description of Our Units
and Our Limited Partnership Agreement”;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Credit Agreement, dated March 18, 2014, by and among Brookfield Property Split Corp., Brookfield Office Properties Exchange
LP, Brookfield Property Partners L.P., Brookfield Property L.P., and the other borrowers and lenders thereto described under Item
8.B. “Significant Changes”;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Amended and Restated Master Purchase Agreement described under Item 4.A. “Information on the Company — History
and Development of the Company”;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | Amended and Restated Master Services Agreement by and among Brookfield Asset Management, the Service Recipients and the Service
Providers described under Item 7.B. “Major Shareholders and Related Party Transactions — Related Party Transactions
— Our Master Services Agreement”;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



131







| | 5. | Relationship Agreement by and among Brookfield Asset Management, our company and the Service Providers and others described
under Item 7.B. “Major Shareholders and Related Party Transactions — Related Party Transactions — Relationship
with Brookfield — Relationship Agreement”;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | Registration Rights Agreement between our company and Brookfield Asset Management described under the heading Item 7.B.
“Major Shareholders and Related Party Transactions — Related Party Transactions — Relationship with Brookfield
— Registration Rights Agreement”;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Acknowledgement of Termination of Voting Agreement by and among Brookfield Asset Management, Brookfield Property General Partner
Limited and our company dated August 8, 2013.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8. | Second Amended and Restated Limited Partnership Agreement of our partnership described under Item 10.B. “Additional
Information — Memorandum and Articles of Association — Description of Our Units and Our Limited Partnership Agreement”;
and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9. | Second Amended and Restated Limited Partnership Agreement of the Property Partnership described under Item 10.B. “Additional
Information — Memorandum and Articles of Association — Description of the Property Partnership Limited Partnership
Agreement”.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Copies of the agreements noted above are
available, free of charge, from the BPY General Partner and are available electronically on the website of the SEC at www.sec.gov
and on our SEDAR profile at www.sedar.com. Written requests for such documents should be directed to our Corporate
Secretary at 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda.



| | 10.D. | EXCHANGE CONTROLS
| | ----- | -----------------



There are currently no governmental laws,
decrees, regulations or other legislation of Bermuda which restrict the import or export of capital or the remittance of dividends,
interest or other payments to non-residents of Bermuda holding our units.



| | 10.E. | TAXATION
| | ----- | --------



The following summary discusses certain
material U.S., Canadian, and Bermudian tax considerations related to the holding and disposition of our units as of the date hereof.
Prospective purchasers of our units are advised to consult their own tax advisers concerning the consequences under the tax laws
of the country of which they are resident or in which they are otherwise subject to tax of making an investment in our units.



U.S. Tax Considerations



This summary discusses certain material
U.S. federal income tax considerations to unitholders relating to the holding and disposition of our units as of the date hereof.
This summary is based on provisions of the U.S. Internal Revenue Code, on the regulations promulgated thereunder, or the U.S. Treasury
Regulations, and on published administrative rulings, judicial decisions, and other applicable authorities, all as in effect on
the date hereof and all of which are subject to change at any time, possibly with retroactive effect. This summary is necessarily
general and may not apply to all categories of investors, some of whom may be subject to special rules, including, without limitation,
persons that own 5% or more of our units (whether directly, indirectly, or by attribution, and including for this purpose any interest
that is convertible into our units), dealers in securities or currencies, financial institutions or financial services entities,
mutual funds, life insurance companies, persons that hold our units as part of a straddle, hedge, constructive sale or conversion
transaction with other investments, persons whose units are loaned to a short seller to cover a short sale of units, persons whose
functional currency is not the U.S. Dollar, persons who have elected mark-to-market accounting, persons who hold our units
through a partnership or other entity treated as a pass-through entity for U.S. federal income tax purposes, persons for whom our
units are not a capital asset, persons who are liable for the alternative minimum tax and certain U.S. expatriates or former long-term
residents of the United States. Tax-exempt organizations are addressed separately below. The actual tax consequences of the ownership
and disposition of our units will vary depending on your individual circumstances.



For purposes of this discussion, a “U.S.
Holder” is a beneficial owner of one or more of our units that is for U.S. federal income tax purposes: (i) an individual
citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation for U.S. federal income
tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an
estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust (a) that
is subject to the primary supervision of a court within the United States and all substantial decisions of which one or more U.S.
persons have the authority to control or (b) that has a valid election in effect under applicable U.S. Treasury Regulations
to be treated as a U.S. person.



132







A “Non-U.S. Holder” is a beneficial
owner of one or more of our units, other than a U.S. Holder or an entity classified as a partnership or other fiscally transparent
entity for U.S. federal tax purposes.



If a partnership holds our units, the tax
treatment of a partner of such partnership generally will depend upon the status of the partner and the activities of our partnership.
Partners of partnerships that hold our units should consult their own tax advisers.



This discussion does not constitute tax
advice and is not intended to be a substitute for tax planning. You should consult your own tax adviser concerning the U.S. federal,
state and local income tax consequences particular to your ownership and disposition of our units, as well as any consequences
under the laws of any other taxing jurisdiction.



Partnership Status of Our Company
and the Property Partnership



Each of our company and the Property Partnership
has made a protective election to be classified as a partnership for U.S. federal tax purposes. An entity that is treated as a
partnership for U.S. federal tax purposes incurs no U.S. federal income tax liability. Instead, each partner is required to take
into account its allocable share of items of income, gain, loss, deduction, or credit of our partnership in computing its U.S.
federal income tax liability, regardless of whether cash distributions are made. Distributions of cash by a partnership to a partner
generally are not taxable unless the amount of cash distributed to a partner is in excess of the partner’s adjusted basis
in its partnership interest.



An entity that would otherwise be classified
as a partnership for U.S. federal income tax purposes may nonetheless be taxable as a corporation if it is a “publicly traded
partnership”, unless an exception applies. Our company is publicly traded. However, an exception, referred to as the “Qualifying
Income Exception”, exists with respect to a publicly traded partnership if (i) at least 90% of such partnership’s
gross income for every taxable year consists of “qualifying income” and (ii) our partnership would not be required
to register under the Investment Company Act if it were a U.S. corporation. Qualifying income includes certain interest income,
dividends, real property rents, gains from the sale or other disposition of real property, and any gain from the sale or disposition
of a capital asset or other property held for the production of income that otherwise constitutes qualifying income.



The BPY General Partner intends to manage
the affairs of our company and the Property Partnership so that our company will meet the Qualifying Income Exception in each taxable
year. Accordingly, the BPY General Partner believes that our company will be treated as a partnership and not as an association
taxable as a corporation for U.S. federal income tax purposes.



If our company fails to meet the Qualifying
Income Exception, other than a failure which is determined by the IRS to be inadvertent and which is cured within a reasonable
time after discovery, or if our company is required to register under the Investment Company Act, our company will be treated as
if it had transferred all of its assets, subject to liabilities, to a newly formed corporation, on the first day of the year in
which our company fails to meet the Qualifying Income Exception, in return for stock in such corporation, and then distributed
the stock to our unitholders in liquidation. This deemed contribution and liquidation generally would be tax-free to a U.S. Holder,
unless our company were to have liabilities in excess of the tax basis of its assets at such time. Thereafter, our company would
be treated as a corporation for U.S. federal income tax purposes.



If our company were treated as a corporation
in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, our company’s
items of income, gain, loss, deduction, or credit would be reflected only on our company’s tax return rather than being passed
through to our unitholders, and our company would be subject to U.S. corporate income tax and potentially branch profits tax with
respect to its income, if any, effectively connected with a U.S. trade or business. Moreover, under certain circumstances, our
company might be classified as a PFIC, for U.S. federal income tax purposes, and a U.S. Holder would be subject to the rules applicable
to PFICs discussed below. See “— Consequences to U.S. Holders — Passive Foreign Investment Companies”.
Subject to the PFIC rules, distributions made to U.S. Holders would be treated as taxable dividend income to the extent of our
company’s current or accumulated earnings and profits. Any distribution in excess of current and accumulated earnings and
profits would first be treated as a tax-free return of capital to the extent of a U.S. Holder’s adjusted tax basis in its
units. Thereafter, to the extent such distribution were to exceed a U.S. Holder’s adjusted tax basis in its units, the distribution
would be treated as gain from the sale or exchange of such units. The amount of a distribution treated as a dividend could be eligible
for reduced rates of taxation, provided certain conditions are met. In addition, interest and certain other passive income received
by our company with respect to U.S. investments generally would be subject to U.S. withholding tax at a rate of 30% (although certain
Non-U.S. Holders nevertheless might be entitled to certain treaty benefits in respect of their allocable share of such income)
and U.S. Holders would not be allowed a tax credit with respect to any such tax withheld. In addition, the “portfolio interest”
exemption would not apply to certain interest income of our company (although certain Non-U.S. Holders nevertheless might be entitled
to certain treaty benefits in respect of their allocable share of such income).



133







Based on the foregoing consequences, the
treatment of our company as a corporation could materially reduce a holder’s after-tax return and therefore could result
in a substantial reduction of the value of our units. If the Property Partnership were to be treated as a corporation for U.S.
federal income tax purposes, consequences similar to those described above would apply.



The remainder of this summary assumes that
our company and the Property Partnership will be treated as partnerships for U.S. federal tax purposes. We expect that a substantial
portion of the items of income, gain, deduction, loss, or credit realized by our company will be realized in the first instance
by the Property Partnership and allocated to our company for reallocation to our unitholders. Unless otherwise specified, references
in this section to realization of our company’s items of income, gain, loss, deduction, or credit include a realization of
such items by the Property Partnership (or other lower tier partnership) and the allocation of such items to our company.



Proposed Legislation



Over the past several years, a number of
legislative and administrative proposals relating to partnership taxation have been introduced and, in certain cases, have been
passed by the U.S. House of Representatives. On May 28, 2010, the U.S. House of Representatives passed legislation which,
if it had been finally enacted into law and applied to our company or to the Property Partnership, could have had adverse consequences,
including (i) the recharacterization of capital gain income as “ordinary income”, (ii) the potential reclassification
of qualified dividend income as “ordinary income” subject to a higher rate of U.S. income tax, and (iii) potential
limitations on the ability of our company to meet the “qualifying income” exception for taxation as a partnership for
U.S. federal income tax purposes. This legislation was not passed by the U.S. Senate and therefore was not enacted into law. However,
similar legislation was introduced in both the U.S. House of Representatives and the U.S. Senate in February 2013.



The Obama administration has indicated it
supports the adoption of legislation that similarly changes the treatment of carried interest for U.S. federal income tax purposes.
In its published revenue proposals for 2014, the Obama administration proposed that the current law governing the treatment of
carried interest be changed to subject such income to ordinary income tax. The Obama administration’s published revenue proposals
for previous years contained similar proposals.



It remains unclear whether any legislation
related to such revenue proposals or similar to the legislation described above will be proposed or enacted by the U.S. Congress
and, if enacted, whether such legislation would affect an investment in our company. You should consult your own tax adviser as
to the potential effect of any proposed or future legislation on an investment in our company.



The remainder of this discussion is based
on current law without regard to the proposed legislation or administrative proposals discussed above.



Consequences to U.S. Holders



Holding of Our Units



Income and Loss. If you are a U.S.
Holder, you will be required to take into account, as described below, your allocable share of our company’s items of income,
gain, loss, deduction, and credit for each of our company’s taxable years ending with or within your taxable year. Each item
generally will have the same character and source as though you had realized the item directly. You must report such items without
regard to whether any distribution has been or will be received from our company. Our company intends to make cash distributions
to all unitholders on a quarterly basis in amounts generally expected to be sufficient to permit U.S. Holders to fund their estimated
U.S. tax obligations (including U.S. federal, state, and local income taxes) with respect to their allocable shares of our company’s
net income or gain. However, based upon your particular tax situation and simplifying assumptions that our company will make in
determining the amount of such distributions, and depending upon whether you elect to reinvest such distributions pursuant to the
distribution reinvestment plan, if available, your tax liability might exceed cash distributions made to you, in which case any
tax liabilities arising from your ownership of our units would need to be satisfied from your own funds.



With respect to U.S. Holders who are individuals,
certain dividends paid by a corporation (including certain qualified foreign corporations) to our company and that are allocable
to such U.S. Holders may qualify for reduced rates of taxation. A qualified foreign corporation includes a foreign corporation
that is eligible for the benefits of specified income tax treaties with the United States. In addition, a foreign corporation is
treated as a qualified corporation with respect to its shares that are readily tradable on an established securities market in
the United States. Among other exceptions, U.S. Holders who are individuals will not be eligible for reduced rates of taxation
on any dividends if the payer is a PFIC for the taxable year in which such dividends are paid or for the preceding taxable year.
Dividends received by non-corporate U.S. Holders may be subject to an additional Medicare tax on unearned income of 3.8% (see “—Medicare
Tax” below). U.S. Holders that are corporations generally will not be entitled to a “dividends received deduction”
in respect of dividends paid by non-U.S. corporations in which our company (through the Property Partnership) owns stock. You should
consult your own tax adviser regarding the application of the foregoing rules in light of your particular circumstances.



134







For U.S. federal income tax purposes, your
allocable share of our company’s items of income, gain, loss, deduction, or credit will be governed by our limited partnership
agreement if such allocations have “substantial economic effect” or are determined to be in accordance with your interest
in our company. Similarly, our company’s allocable share of items of income, gain, loss, deduction, or credit of the Property
Partnership will be governed by the limited partnership agreement of the Property Partnership if such allocations have “substantial
economic effect” or are determined to be in accordance with our company’s interest in the Property Partnership. The
BPY General Partner believes that, for U.S. federal income tax purposes, such allocations should be given effect, and the BPY General
Partner intends to prepare and file tax returns based on such allocations. If the IRS were to successfully challenge the allocations
made pursuant to either our company’s limited partnership agreement or the limited partnership agreement of the Property
Partnership, then the resulting allocations for U.S. federal income tax purposes might be less favorable than the allocations set
forth in such agreements.



Basis. You will have an initial tax
basis in your units equal to the sum of (i) the amount of cash paid for our units (or, if you received your units pursuant to the
spin-off, their fair market value on the date you received them pursuant to the spin-off) and (ii) your share of our company’s
liabilities, if any. That basis will be increased by your share of our company’s income and by increases in your share of
our company’s liabilities, if any. That basis will be decreased, but not below zero, by distributions you receive from our
company, by your share of our company’s losses, and by any decrease in your share of our company’s liabilities. Under
applicable U.S. federal income tax rules, a partner in a partnership has a single, or “unitary”, tax basis in his or
her partnership interest, unlike a shareholder of a corporation. As a result, any amount you pay to acquire additional units (including
through the distribution reinvestment plan, if available) will be averaged with the adjusted tax basis of units owned by you prior
to the acquisition of such additional units. The BPY General Partner expresses no opinion regarding the appropriate methodology
to be used in making this determination.



For purposes of the foregoing rules, the
rules discussed immediately below, and the rules applicable to a sale or exchange of our units, our company’s liabilities
generally will include our company’s share of any liabilities of the Property Partnership.



Limits on Deductions for Losses and Expenses.
Your deduction of your allocable share of our company’s losses will be limited to your tax basis in our units and, if you
are an individual or a corporate holder that is subject to the “at risk” rules, to the amount for which you are considered
to be “at risk” with respect to our company’s activities, if that is less than your tax basis. In general, you
will be at risk to the extent of your tax basis in our units, reduced by (i) the portion of that basis attributable to your
share of our company’s liabilities for which you will not be personally liable (excluding certain qualified non-recourse
financing) and (ii) any amount of money you borrow to acquire or hold our units, if the lender of those borrowed funds owns
an interest in our company, is related to you, or can look only to your units for repayment. Your at-risk amount generally will
increase by your allocable share of our company’s income and gain and decrease by distributions you receive from our company
and your allocable share of losses and deductions. You must recapture losses deducted in previous years to the extent that distributions
cause your at-risk amount to be less than zero at the end of any taxable year. Losses disallowed or recaptured as a result of these
limitations will carry forward and will be allowable to the extent that your tax basis or at-risk amount, whichever is the limiting
factor, subsequently increases. Upon the taxable disposition of our units, any gain recognized by you can be offset by losses that
were previously suspended by the at-risk limitation, but may not be offset by losses suspended by the basis limitation. Any excess
loss above the gain previously suspended by the at-risk or basis limitations may no longer be used. You should consult your own
tax adviser as to the effects of the at-risk rules.



Limitations on Deductibility of Organizational
Expenses and Syndication Fees. In general, neither our company nor any U.S. Holder may deduct organizational or syndication
expenses. Similar rules apply to organizational or syndication expenses incurred by the Property Partnership. Syndication fees
(which would include any sales or placement fees or commissions) must be capitalized and cannot be amortized or otherwise deducted.



Limitations on Interest Deductions.
Your share of our company’s interest expense is likely to be treated as “investment interest” expense. For a
non-corporate U.S. Holder, the deductibility of “investment interest” expense is generally limited to the amount of
such holder’s “net investment income”. Your share of our company’s dividend and interest income will be
treated as investment income, although “qualified dividend income” subject to reduced rates of tax in the hands of
an individual will only be treated as investment income if such individual elects to treat such dividend as ordinary income not
subject to reduced rates of tax. In addition, state and local tax laws may disallow deductions for your share of our company’s
interest expense.



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Net investment income includes gross income
from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible expenses,
other than interest, directly connected with the production of investment income, but generally does not include gains attributable
to the disposition of property held for investment.



Deductibility of Partnership Investment
Expenditures by Individual Partners and by Trusts and Estates. Subject to certain exceptions, all miscellaneous itemized deductions
of an individual taxpayer, and certain of such deductions of an estate or trust, are deductible only to the extent that such deductions
exceed 2% of the taxpayer’s adjusted gross income. Moreover, the otherwise allowable itemized deductions of individuals whose
gross income exceeds an applicable threshold amount are subject to reduction by an amount equal to the lesser of (i) 3% of
the excess of the individual’s adjusted gross income over the threshold amount and (ii) 80% of the amount of the individual’s
itemized deductions. The operating expenses of our company, including our company’s allocable share of the base management
fee or any other management fees, may be treated as miscellaneous itemized deductions subject to the foregoing rule. Accordingly,
if you are a non-corporate U.S. Holder, you should consult your own tax adviser regarding the application of these limitations.



Treatment of Distributions



Distributions of cash by our company generally
will not be taxable to you to the extent of your adjusted tax basis (described above) in our units. Any cash distributions in excess
of your adjusted tax basis generally will be considered to be gain from the sale or exchange of our units (described below). Such
gain generally will be treated as capital gain and will be long-term capital gain if your holding period for our units exceeds
one year. A reduction in your allocable share of our liabilities, and certain distributions of marketable securities by our company,
if any, will be treated similar to cash distributions for U.S. federal income tax purposes.



Sale or Exchange of Our Units



You will recognize gain or loss on the sale
or taxable exchange of our units equal to the difference, if any, between the amount realized and your tax basis in our units sold
or exchanged. Your amount realized will be measured by the sum of the cash or the fair market value of other property received
plus your share of our company’s liabilities, if any.



Gain or loss recognized by you upon the
sale or exchange of our units generally will be taxable as capital gain or loss and will be long-term capital gain or loss if you
held our units for more than one year as of the date of such sale or exchange. Assuming you have not elected to treat your share
of our company’s investment in any PFIC as a “qualified electing fund”, gain attributable to such investment
in a PFIC would be taxable in the manner described below in “—Passive Foreign Investment Companies”. In addition,
certain gain attributable to “unrealized receivables” or “inventory items” could be characterized as ordinary
income rather than capital gain. For example, if our company were to hold debt acquired at a market discount, accrued market discount
on such debt would be treated as “unrealized receivables”. The deductibility of capital losses is subject to limitations.



U.S. Holders who acquire our units at different
times and intend to sell all or a portion of our units within a year of the most recent purchase should consult their own tax advisers
regarding the application of certain “split holding period” rules to such sale and the treatment of any gain or loss
as long-term or short-term capital gain or loss.



Medicare Tax



U.S. Holders that are individuals, estates,
or trusts may be required to pay a 3.8% Medicare tax on the lesser of (i) the excess of such U.S. Holders’ “modified
adjusted gross income” (or “adjusted gross income” in the case of estates and trusts) over certain thresholds
and (ii) such U.S. Holders’ “net investment income” (or “undistributed net investment income” in
the case of estates and trusts). Net investment income generally is expected to include your allocable share of our income, as
well as gain realized by you from a sale of our units. Under recently promulgated U.S. Treasury Regulations, special rules relating
to the 3.8% Medicare tax may apply to dividends and gain, if any, derived by a U.S. Holder with respect to an investment through
our company in a PFIC. See “— Consequences to U.S. Holders — Passive Foreign Investment Companies”. U.S.
Holders should consult their own tax advisers regarding the implications of the 3.8% Medicare tax for the ownership and disposition
of our units.



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Foreign Tax Credit Limitations



If you are a U.S. Holder, you generally
will be entitled to a foreign tax credit with respect to your allocable share of creditable foreign taxes paid on our company’s
income and gain. Complex rules may, depending on your particular circumstances, limit the availability or use of foreign tax credits.
Gain from the sale of our company’s investments may be treated as U.S.-source gain. Consequently, you may not be able to
use the foreign tax credit arising from any foreign taxes imposed on such gain unless the credit can be applied (subject to applicable
limitations) against U.S. tax due on other income treated as derived from foreign sources. Certain losses that our company incurs
may be treated as foreign-source losses, which could reduce the amount of foreign tax credits otherwise available.



Section 754 Election



Our company and the Property Partnership
have each made the election permitted by Section 754 of the U.S. Internal Revenue Code, or the Section 754 Election.
The Section 754 Election cannot be revoked without the consent of the IRS. The Section 754 Election generally requires
our company to adjust the tax basis in its assets, or inside basis, attributable to a transferee of our units under Section 743(b)
of the U.S. Internal Revenue Code to reflect the purchase price paid by the transferee for our units. This election does not apply
to a person who purchases units directly from us. For purposes of this discussion, a transferee’s inside basis in our company’s
assets will be considered to have two components: (i) the transferee’s share of our company’s tax basis in our
company’s assets, or common basis, and (ii) the adjustment under Section 743(b) of the U.S. Internal Revenue Code
to that basis. The foregoing rules would also apply to the Property Partnership.



Generally, a Section 754 Election would
be advantageous to a transferee U.S. Holder if such holder’s tax basis in its units were higher than such units’ share
of the aggregate tax basis of our company’s assets immediately prior to the transfer. In that case, as a result of the Section 754
Election, the transferee U.S. Holder would have a higher tax basis in its share of our company’s assets for purposes of calculating,
among other items, such holder’s share of any gain or loss on a sale of our company’s assets. Conversely, a Section 754
Election would be disadvantageous to a transferee U.S. Holder if such holder’s tax basis in its units were lower than such
units’ share of the aggregate tax basis of our company’s assets immediately prior to the transfer. Thus, the fair market
value of our units may be affected either favorably or adversely by the election.



Whether or not the Section 754 Election
is made, if our units are transferred at a time when our company has a “substantial built-in loss” in its assets, our
company will be obligated to reduce the tax basis in the portion of such assets attributable to such units.



The calculations involved in the Section 754
Election are complex, and the BPY General Partner advises that it will make such calculations on the basis of assumptions as to
the value of our assets and other matters. U.S. Holders should consult their own tax advisers as to the effects of the Section 754
Election.



Uniformity of Our Units



Because we cannot match transferors and
transferees of our units, we must maintain uniformity of the economic and tax characteristics of our units to a purchaser of our
units. In the absence of uniformity, we may be unable to comply fully with a number of U.S. federal income tax requirements. A
lack of uniformity can result from a literal application of certain U.S. Treasury regulations to our company’s Section 743(b)
adjustments, a determination that our company’s Section 704(c) allocations are unreasonable, or other reasons. Section 704(c)
allocations would be intended to reduce or eliminate the disparity between tax basis and the value of our company’s assets
in certain circumstances, including on the issuance of additional units. In order to maintain the fungibility of all of our units
at all times, we will seek to achieve the uniformity of U.S. tax treatment for all purchasers of our units which are acquired at
the same time and price (irrespective of the identity of the particular seller of our units or the time when our units are issued),
through the application of certain tax accounting principles that the BPY General Partner believes are reasonable for our company.
However, the IRS may disagree with us and may successfully challenge our application of such tax accounting principles. Any non-uniformity
could have a negative impact on the value of our units.



Foreign Currency Gain or Loss



Our company’s functional currency
is the U.S. Dollar, and our company’s income or loss is calculated in U.S. Dollars. It is likely that our company will
recognize “foreign currency” gain or loss with respect to transactions involving non-U.S. Dollar currencies. In
general, foreign currency gain or loss is treated as ordinary income or loss. You should consult your own tax adviser regarding
the tax treatment of foreign currency gain or loss.



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Passive Foreign Investment Companies



U.S. Holders may be subject to special rules
applicable to indirect investments in foreign corporations, including an investment through our company in a PFIC. A PFIC is defined
as any foreign corporation with respect to which (after applying certain look-through rules) either (i) 75% or more of its
gross income for a taxable year is “passive income” or (ii) 50% or more of its assets in any taxable year (generally
based on the quarterly average of the value of its assets) produce or are held for the production of “passive income”.
There are no minimum stock ownership requirements for PFICs. If you hold an interest in a foreign corporation for any taxable year
during which the corporation is classified as a PFIC with respect to you, then the corporation will continue to be classified as
a PFIC with respect to you for any subsequent taxable year during which you continue to hold an interest in the corporation, even
if the corporation’s income or assets would not cause it to be a PFIC in such subsequent taxable year, unless an exception
applies.



Subject to certain elections described below,
any gain on the disposition of stock of a PFIC owned by you indirectly through our company, as well as income realized on certain
“excess distributions” by such PFIC, would be treated as though realized ratably over the shorter of your holding period
of our units or our company’s holding period for the PFIC. Such gain or income generally would be taxable as ordinary income,
and dividends paid by the PFIC would not be eligible for the preferential tax rates for dividends paid to non-corporate U.S. Holders.
In addition, an interest charge would apply, based on the tax deemed deferred from prior years.



If you were to make an election to treat
your share of our company’s interest in a PFIC as a “qualified electing fund”, such election a “QEF election”,
for the first year you were treated as holding such interest, then in lieu of the tax consequences described in the paragraph immediately
above, you would be required to include in income each year a portion of the ordinary earnings and net capital gains of the PFIC,
even if not distributed to our company or to you. A QEF election must be made by you on an entity-by-entity basis. To make a QEF
election, you must, among other things, (i) obtain a PFIC annual information statement (through an intermediary statement
supplied by our company) and (ii) prepare and submit IRS Form 8621 with your annual income tax return. To the extent reasonably
practicable, we intend to timely provide you with the information necessary to make a QEF election with respect to any entity that
the BPY General Partner believes is a PFIC with respect to you. Any such election should be made for the first year our company
holds an interest in such entity or for the first year in which you hold our units, if later.



Once you have made a QEF election for an
entity, such election applies to any additional shares of interest in such entity acquired directly or indirectly, including through
additional units acquired after the QEF election is made (such as units acquired under the distribution reinvestment plan, if available).
If you were to make a QEF election after the first year that you were treated as holding an interest in a PFIC, the adverse tax
consequences relating to PFIC stock would continue to apply with respect to the pre-QEF election period, unless you were to make
a “purging election”. The purging election would create a deemed sale of your previously held share of our company’s
interests in a PFIC. The gain recognized by the purging election would be subject to the special tax and interest charge rules,
which treat the gain as an excess distribution, as described above. As a result of the purging election, you would have a new basis
and holding period in your share of our company’s interests in the PFIC. You should consult your own tax adviser as to the
manner in which such direct inclusions could affect your allocable share of our company’s income and your tax basis in our
units and the advisability of making a QEF election or a purging election.



Recently promulgated U.S. Treasury
Regulations contain special rules for applying the 3.8% Medicare tax (as described above under “— Medicare
Tax”) to non-corporate U.S. Holders making QEF Elections. Although the special rules apply to taxable years beginning
on or after January 1, 2014, you are permitted to rely on the special rules for taxable years beginning on or after January 1,
2013. Under the special rules, if you are a non-corporate U.S. Holder that has made a QEF Election with respect to our company’s
interest in a PFIC, then you are permitted to make a special election to treat your share of the ordinary earnings and net capital
gains of the PFIC as net investment income for purposes of the 3.8% Medicare tax. If you do not make this special election, then
your share of PFIC distributions generally will be treated as net investment income for purposes of the 3.8% Medicare tax (to the
extent such distributions are made out of the earnings and profits of the PFIC, are not treated as dividends under the QEF rules,
and are attributable to ordinary earnings and net capital gains included in income under the QEF rules in taxable years beginning
on or after January 1, 2013). In addition, if you do not make the special election, you may be required to calculate your
basis in our units for purposes of the 3.8% Medicare tax in a manner that differs from the calculation of your basis in our units
for U.S. federal income tax purposes generally. You should consult your own tax adviser regarding the implications of the
special election, as well as the other implications of the 3.8% Medicare tax and the recently promulgated U.S. Treasury Regulations
for your ownership and disposition of our units.



In the case of a PFIC that is a publicly
traded foreign company, and in lieu of making a QEF Election, an election may be made to “mark to market” the stock
of such foreign company on an annual basis. Pursuant to such an election, you would include in each year as ordinary income the
excess, if any, of the fair market value of such stock over its adjusted basis at the end of the taxable year. The BPY General
Partner currently believes it is possible that one or more of our existing or future operating entities will qualify as PFICs that
are publicly traded. However, there can be no assurance that a mark-to-market election will be available for any such entity. You
should consult your own tax adviser regarding the availability of the mark-to-market election with respect to any PFIC in which
you are treated as owning an interest through our company.



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Based on our organizational structure, as
well as our company’s expected income and assets, the BPY General Partner currently believes that one or more of our existing
Holding Entities and operating entities are likely to be classified as PFICs. Moreover, we may in the future acquire certain investments
or operating entities through one or more Holding Entities treated as corporations for U.S. federal income tax purposes, and such
future Holding Entities or other companies in which we acquire an interest may be treated as PFICs. In addition, in order to ensure
that we satisfy the Qualifying Income Exception, we may decide to hold an existing or future operating entity through a Holding
Entity that would be classified as a PFIC. See “—Investment Structure” below.



Recently enacted U.S. legislation requires
each U.S. person who directly or indirectly owns an interest in a PFIC to file an annual report with the IRS, and the failure to
file such report could result in the imposition of penalties on such U.S. person and in the extension of the statute of limitations
with respect to federal income tax returns filed by such U.S. person. You should consult your own tax adviser regarding the PFIC
rules, including the potential effect of this legislation on your filing requirements and the advisability of making a QEF election,
a special election under the recently promulgated U.S. Treasury Regulations relating to the 3.8% Medicare tax, or, if applicable,
a mark-to-market election with respect to any PFIC in which you are treated as owning an interest through our company.



Investment Structure



To ensure that our company meets the Qualifying
Income Exception for publicly traded partnerships (discussed above) and complies with certain requirements in its limited partnership
agreement, we may structure certain investments through an entity classified as a corporation for U.S. federal income tax purposes.
Such investments will be structured as determined in the sole discretion of the BPY General Partner generally to be efficient for
our unitholders. However, because our unitholders will be located in numerous taxing jurisdictions, no assurance can be given that
any such investment structure will benefit all our unitholders to the same extent, and such an investment structure might even
result in additional tax burdens on some unitholders. As discussed above, if any such entity were a non-U.S. corporation, it might
be considered a PFIC. If any such entity were a U.S. corporation, it would be subject to U.S. federal net income tax on its income,
including any gain recognized on the disposition of its investments. In addition, if the investment were to involve U.S. real property,
gain recognized on the disposition of the investment by a corporation generally would be subject to corporate level tax, whether
the corporation were a U.S. or a non-U.S. corporation.



U.S. Withholding Taxes



Although each U.S. Holder is required to
provide us with an IRS Form W-9, we nevertheless may be unable to accurately or timely determine the tax status of our investors
for purposes of determining whether U.S. withholding applies to payments made by our company to some or all of our unitholders.
In such a case, payments made by our company to U.S. Holders might be subject to U.S. “backup” withholding at the applicable
rate or other U.S. withholding taxes. You would be able to treat as a credit your allocable share of any U.S. withholding taxes
paid in the taxable year in which such withholding taxes were paid and, as a result, you might be entitled to a refund of such
taxes from the IRS. In the event you transfer or otherwise dispose of some or all of your units, special rules might apply for
purposes of determining whether you or the transferee of such units were subject to U.S. withholding taxes in respect of income
allocable to, or distributions made on account of, such units or entitled to refunds of any such taxes withheld. See below “Administrative
Matters—Certain Effects of a Transfer of Units”. You should consult your own tax adviser regarding the treatment of
U.S. withholding taxes.



Transferor/Transferee Allocations



Our company may allocate items of income,
gain, loss, and deduction using a monthly or other convention, whereby any such items recognized in a given month by our company
are allocated to our unitholders as of a specified date of such month. As a result, if you transfer your units, you might be allocated
income, gain, loss, and deduction realized by our company after the date of the transfer. Similarly, if you acquire additional
units, you might be allocated income, gain, loss, and deduction realized by our company prior to your ownership of such units.



139







Although Section 706 of the U.S. Internal
Revenue Code generally governs allocations of items of partnership income and deductions between transferors and transferees of
partnership interests, it is not clear that our company’s allocation method complies with the requirements. If our company’s
convention were not permitted, the IRS might contend that our company’s taxable income or losses must be reallocated among
our unitholders. If such a contention were sustained, your tax liabilities might be adjusted to your detriment. The BPY General
Partner is authorized to revise our company’s method of allocation between transferors and transferees (as well as among
investors whose interests otherwise vary during a taxable period).



U.S. Federal Estate Tax Consequences



If our units are included in the gross estate
of a U.S. citizen or resident for U.S. federal estate tax purposes, then a U.S. federal estate tax might be payable in connection
with the death of such person. Individual U.S. Holders should consult their own tax advisers concerning the potential U.S. federal
estate tax consequences with respect to our units.



Certain Reporting Requirements



A U.S. Holder who invests more than $100,000
in our company may be required to file IRS Form 8865 reporting the investment with such U.S. Holder’s U.S. federal income
tax return for the year that includes the date of the investment. You may be subject to substantial penalties if you fail to comply
with this and other information reporting requirements with respect to an investment in our units. You should consult your own
tax adviser regarding such reporting requirements.



U.S. Taxation of Tax-Exempt U.S. Holders
of Our Units



Income recognized by a U.S. tax-exempt organization
is exempt from U.S. federal income tax except to the extent of the organization’s UBTI. UBTI is defined generally as any
gross income derived by a tax-exempt organization from an unrelated trade or business that it regularly carries on, less the deductions
directly connected with that trade or business. In addition, income arising from a partnership (or other entity treated as a partnership
for U.S. federal income tax purposes) that holds operating assets or is otherwise engaged in a trade or business generally will
constitute UBTI. Notwithstanding the foregoing, UBTI generally does not include any dividend income, interest income, certain other
categories of passive income, or capital gains realized by a tax-exempt organization, so long as such income is not “debt-financed”,
as discussed below. The BPY General Partner currently believes that our company should not be regarded as engaged in a trade or
business, and anticipates that any operating assets held by our company will be held through entities that are treated as corporations
for U.S. federal income tax purposes.



The exclusion from UBTI does not apply to
income from “debt-financed property”, which is treated as UBTI to the extent of the percentage of such income that
the average acquisition indebtedness with respect to the property bears to the average tax basis of the property for the taxable
year. If an entity treated as a partnership for U.S. federal income tax purposes incurs acquisition indebtedness, a tax-exempt
partner in such partnership will be deemed to have acquisition indebtedness equal to its allocable portion of such acquisition
indebtedness. If any such indebtedness were used by our company or by the Property Partnership to acquire property, such property
generally would constitute debt-financed property, and any income from or gain from the disposition of such debt-financed property
allocated to a tax-exempt organization generally would constitute UBTI to such tax-exempt organization. In addition, even if such
indebtedness were not used either by our company or by the Property Partnership to acquire property but were instead used to fund
distributions to our unitholders, if a tax-exempt organization subject to taxation in the United States were to use such proceeds
to make an investment outside our company, the IRS might assert that such investment constitutes debt-financed property to such
unitholder with the consequences noted above. The BPY General Partner does not expect our company or the Property Partnership to
directly incur debt to acquire property, and the BPY General Partner does not believe that our company or the Property Partnership
will generate UBTI attributable to debt-financed property in the future. Moreover, the BPY General Partner intends to use commercially
reasonable efforts to structure the activities of our company and the Property Partnership, respectively, to avoid generating UBTI.
However, neither our company nor the Property Partnership is prohibited from incurring indebtedness, and no assurance can be provided
that neither our company nor the Property Partnership will generate UBTI attributable to debt-financed property in the future.
Tax-exempt U.S. Holders should consult their own tax advisers regarding the tax consequences of an investment in our units.



Consequences to Non-U.S. Holders



Based on our organizational structure, as
well as our company’s expected income and assets, the BPY General Partner currently believes that our company is unlikely
to earn income treated as effectively connected with a U.S. trade or business, including effectively connected income attributable
to the sale of a “U.S. real property interest”, as defined in the U.S. Internal Revenue Code. If, as anticipated, our
company is not treated as engaged in a U.S. trade or business or as deriving income which is treated as effectively connected with
a U.S. trade or business, and provided that a Non-U.S. Holder is not itself engaged in a U.S. trade or business, then such Non-U.S.
Holder generally will not be subject to U.S. tax return filing requirements solely as a result of owning our units and generally
will not be subject to U.S. federal income tax on its allocable share of our company’s interest and dividends from non-U.S.-sources
or gain from the sale or other disposition of securities or real property located outside of the United States.



140







However, there can be no assurance that
the law will not change or that the IRS will not deem our company to be engaged in a U.S. trade or business. If, contrary to the
BPY General Partner’s expectations, our company is treated as engaged in a U.S. trade or business, then a Non-U.S. Holder
generally would be required to file a U.S. federal income tax return, even if no effectively connected income were allocable to
it. If our company were to have income treated as effectively connected with a U.S. trade or business, then a Non-U.S. Holder would
be required to report that income and would be subject to U.S. federal income tax at the regular graduated rates. In addition,
our company might be required to withhold U.S. federal income tax on such Non-U.S. Holder’s distributive share of such income.
A corporate Non-U.S. Holder might also be subject to branch profits tax at a rate of 30%, or at a lower treaty rate, if applicable.
Finally, if our company were treated as engaged in a U.S. trade or business, a portion of any gain realized by a Non-U.S. Holder
upon the sale or exchange of its units could be treated as income effectively connected with a U.S. trade or business and therefore
subject to U.S. federal income tax at the regular graduated rates.



In general, even if our company is not engaged
in a U.S. trade or business, and assuming you are not otherwise engaged in a U.S. trade or business, you will nonetheless be subject
to a withholding tax of 30% on the gross amount of certain U.S.-source income which is not effectively connected with a U.S. trade
or business. Income subjected to such a flat tax rate is income of a fixed or determinable annual or periodic nature, including
certain interest income. Such withholding tax may be reduced or eliminated with respect to certain types of income under an applicable
income tax treaty between the United States and your country of residence or under the “portfolio interest” rules or
other provisions of the U.S. Internal Revenue Code, provided that you provide proper certification as to your eligibility for such
treatment. Notwithstanding the foregoing, and although each Non-U.S. Holder is required to provide us with an IRS Form W-8, we
nevertheless may be unable to accurately or timely determine the tax status of our investors for purposes of establishing whether
reduced rates of withholding apply to some or all of our investors. In such a case, your allocable share of distributions of U.S.-source
interest income will be subject to U.S. withholding tax at a rate of 30%. Further, if you would not be subject to U.S. tax based
on your tax status or otherwise were eligible for a reduced rate of U.S. withholding, you might need to take additional steps to
receive a credit or refund of any excess withholding tax paid on your account, which could include the filing of a non-resident
U.S. income tax return with the IRS. Among other limitations applicable to claiming treaty benefits, if you reside in a treaty
jurisdiction which does not treat our company as a pass-through entity, you might not be eligible to receive a refund or credit
of excess U.S. withholding taxes paid on your account. In the event you transfer or otherwise dispose of some or all of your units,
special rules may apply for purposes of determining whether you or the transferee of such units are subject to U.S. withholding
taxes in respect of income allocable to, or distributions made on account of, such units or entitled to refunds of any such taxes
withheld. See “—Administrative Matters—Certain Effects of a Transfer of Units” below. You should consult
your own tax adviser regarding the treatment of U.S. withholding taxes.



Special rules may apply in the case of a
Non-U.S. Holder (i) that has an office or fixed place of business in the United States; (ii) that is present in the United
States for 183 days or more in a taxable year; or (iii) that is (a) a former citizen or long-term resident of the United
States, (b) a foreign insurance company that is treated as holding a partnership interest in our company in connection with
its U.S. business, (c) a PFIC, or (d) a corporation that accumulates earnings to avoid U.S. federal income tax. You should
consult your own tax adviser regarding the application of these special rules.



Taxes in Other Jurisdictions



Based on our expected method of operation
and the ownership of our operating entities indirectly through corporate Holding Entities, we do not expect any unitholder, solely
as a result of owning our units, to be subject to any additional income taxes imposed on a net basis or additional tax return filing
requirements in any jurisdiction in which we conduct activities or own property. However, there can be no assurance that, solely
as a result of owning our units, you will not be subject to certain taxes, including non-U.S., state and local income taxes, unincorporated
business taxes and estate, inheritance or intangible taxes imposed by the various jurisdictions in which we do business or own
property now or in the future, even if you do not reside in any of these jurisdictions. Consequently, you may also be required
to file non-U.S., state and local income tax returns in some or all of these jurisdictions. Further, you may be subject to penalties
for failure to comply with these requirements. It is your responsibility to file all U.S. federal, state, local, and non-U.S. tax
returns that may be required of you.



Income or gain from investments held by
our company may be subject to withholding or other taxes in jurisdictions outside the United States, except to the extent an income
tax treaty applies. If you wish to claim the benefit of an applicable income tax treaty, you might be required to submit information
to one or more of our company, an intermediary, or a tax authority in such jurisdiction. You should consult your own tax adviser
regarding the U.S. federal, state, local, and non-U.S. tax consequences of an investment in our company.



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Administrative Matters



Tax Matters Partner



The BPY General Partner acts as our company’s
“tax matters partner”. As the tax matters partner, the BPY General Partner has the authority, subject to certain restrictions,
to act on behalf of our company in connection with any administrative or judicial review of our company’s items of income,
gain, loss, deduction, or credit.



Information Returns



We have agreed to use commercially reasonable
efforts to furnish to you, within 90 days after the close of each calendar year, tax information (including IRS Schedule K-1),
which describes on a U.S. Dollar basis your share of our company’s income, gain, loss, and deduction for our preceding
taxable year. However, providing this U.S. tax information to our unitholders will be subject to delay in the event of, among other
reasons, the late receipt of any necessary tax information from lower-tier entities. It is therefore possible that, in any taxable
year, you will need to apply for an extension of time to file your tax returns. In preparing this U.S. tax information, we will
use various accounting and reporting conventions, some of which have been mentioned in the previous discussion, to determine your
share of income, gain, loss, and deduction. The IRS may successfully contend that certain of these reporting conventions are impermissible,
which could result in an adjustment to your income or loss.



Our
company may be audited by the IRS. Adjustments resulting from an IRS audit could require you to adjust a prior year’s tax
liability and result in an audit of your own tax return. Any audit of your tax return could result in adjustments not related to
our tax returns, as well as those related to our tax returns.



Tax Shelter Regulations and Related
Reporting Requirements



If we were to engage in a “reportable
transaction”, we (and possibly our unitholders) would be required to make a detailed disclosure of the transaction to the
IRS in accordance with regulations governing tax shelters and other potentially tax-motivated transactions. A transaction may be
a reportable transaction based upon any of several factors, including the fact that it is a type of tax avoidance transaction publicly
identified by the IRS as a “listed transaction” or “transaction of interest”, or that it produces certain
kinds of losses in excess of $2 million (or, in the case of certain foreign currency transactions, losses in excess of $50,000).
An investment in our company may be considered a “reportable transaction” if, for example, our company were to recognize
certain significant losses in the future. In certain circumstances, a unitholder who disposes of an interest in a transaction resulting
in the recognition by such holder of significant losses in excess of certain threshold amounts may be obligated to disclose its
participation in such transaction. Certain of these rules are unclear, and the scope of reportable transactions can change retroactively.
Therefore, it is possible that the rules may apply to transactions other than significant loss transactions.



Moreover, if we were to participate in a
reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, you might be subject to
significant accuracy related penalties with a broad scope, for those persons otherwise entitled to deduct interest on federal tax
deficiencies, non-deductibility of interest on any resulting tax liability, and in the case of a listed transaction, an extended
statute of limitations. We do not intend to participate in any reportable transaction with a significant purpose to avoid or evade
tax, nor do we intend to participate in any listed transactions. However, no assurance can be provided that the IRS will not assert
that we have participated in such a transaction.



You should consult your own tax adviser
concerning any possible disclosure obligation under the regulations governing tax shelters with respect to the disposition of our
units.



Taxable Year



Our company currently uses the calendar
year as its taxable year for U.S. federal income tax purposes. Under certain circumstances which we currently believe are unlikely
to apply, a taxable year other than the calendar year may be required for such purposes.



Constructive Termination



Subject to the electing large partnership
rules described below, our company will be considered to have been terminated for U.S. federal income tax purposes if there is
a sale or exchange of 50% or more of our units within a 12-month period.



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A constructive termination of our company
would result in the close of its taxable year for all unitholders. If a unitholder reports on a taxable year other than a fiscal
year ending on our company’s year-end, and the unitholder is otherwise subject to U.S. federal income tax, the closing of
our company’s taxable year may result in more than 12 months of our company’s taxable income or loss being includable
in such unitholder’s taxable income for the year of the termination. We would be required to make new tax elections after
a termination, including a new Section 754 Election. A constructive termination could also result in penalties and other adverse
tax consequences if we were unable to determine that the termination had occurred. Moreover, a constructive termination might either
accelerate the application of, or subject our company to, any tax legislation enacted before the termination.



Elective Procedures for Large Partnerships



The U.S. Internal Revenue Code allows large
partnerships to elect streamlined procedures for income tax reporting. This election would reduce the number of items that must
be separately stated on the IRS Schedules K-1 that are issued to our unitholders, and such IRS Schedules K-1 would have to be provided
to holders on or before the first March 15 following the close of each taxable year. In addition, this election would prevent
our company from suffering a “technical termination” (which would close our company’s taxable year and require
that we make a new Section 754 Election) if, within a 12-month period, there were a sale or exchange of 50% or more of our
total units. Despite the foregoing benefits, there are also costs and administrative burdens associated with such an election.
Consequently, as of this time, our company has not elected to be subject to the reporting procedures applicable to large partnerships.



Withholding and Backup Withholding



For each calendar year, we will report to
you and to the IRS the amount of distributions that we pay, and the amount of tax (if any) that we withhold on these distributions.
The proper application to our company of the rules for withholding under Sections 1441 through 1446 of the U.S. Internal Revenue
Code (applicable to certain dividends, interest, and amounts treated as effectively connected with a U.S. trade or business, among
other items) is unclear. Because the documentation we receive may not properly reflect the identities of unitholders at any particular
time (in light of possible sales of our units), we may over-withhold or under-withhold with respect to a particular unitholder.
For example, we may impose withholding, remit such amount to the IRS and thus reduce the amount of a distribution paid to a Non-U.S.
Holder. It may be the case, however, that the corresponding amount of our income was not properly allocable to such holder, and
the appropriate amount of withholding should have been less than the actual amount withheld. Such Non-U.S. Holder would be entitled
to a credit against the holder’s U.S. federal income tax liability for all withholding, including any such excess withholding.
However, if the withheld amount were to exceed the holder’s U.S. federal income tax liability, the holder would need to apply
for a refund to obtain the benefit of such excess withholding. Similarly, we may fail to withhold on a distribution, and it may
be the case that the corresponding income was properly allocable to a Non-U.S. Holder and that withholding should have been imposed.
In such case, we intend to pay the under-withheld amount to the IRS, and we may treat such under-withholding as an expense that
will be borne indirectly by all unitholders on a pro rata basis (since we may be unable to allocate any such excess withholding
tax cost to the relevant Non-U.S. Holder).



Under the backup withholding rules, you
may be subject to backup withholding tax with respect to distributions paid unless: (i) you are an exempt recipient and demonstrate
this fact when required; or (ii) provide a taxpayer identification number, certify as to no loss of exemption from backup
withholding tax, and otherwise comply with the applicable requirements of the backup withholding tax rules. A U.S. Holder that
is exempt should certify such status on a properly completed IRS Form W-9. A Non-U.S. Holder may qualify as an exempt recipient
by submitting a properly completed IRS Form W-8. Backup withholding is not an additional tax. The amount of any backup withholding
from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund
from the IRS, provided you supply the required information to the IRS in a timely manner. If you do not timely provide our company,
or the applicable nominee, broker, clearing agent, or other intermediary, with IRS Form W-9 or IRS Form W-8, as applicable, or
such form is not properly completed, then our company may become subject to U.S. backup withholding taxes in excess of what would
have been imposed had our company or the applicable intermediary received properly completed forms from all unitholders. For administrative
reasons, and in order to maintain the fungibility of our units, such excess U.S. backup withholding taxes may be treated by our
company as an expense that will be borne indirectly by all unitholders on a pro rata basis (e.g., since it may be impractical for
us to allocate any such excess withholding tax cost to the unitholders that failed to timely provide the proper U.S. tax forms).



Foreign Account Tax Compliance



FATCA imposes a 30% withholding tax on “withholdable
payments” made to a “foreign financial institution” or a “non-financial foreign entity”, unless such
financial institution or entity satisfies certain information reporting or other requirements. Withholdable payments include certain
U.S.-source income (such as interest, dividends, and other passive income) and gross proceeds from the sale or disposition of property
that can produce U.S.-source interest or dividends. The withholding tax applies to withholdable payments made on or after July
1, 2014 (or January 1, 2017 in the case of gross proceeds and “foreign passthru payments” attributable to withholdable
payments). The BPY General Partner intends to ensure that our company complies with FATCA, including by entering into an agreement
with the IRS if necessary, so as to ensure that the 30% withholding tax does not apply to any withholdable payments received by
our company, the Property Partnership, the Holding Entities, or the operating entities.



143







If our organizational structure or the manner
in which we hold our investments is modified in the future, including for the purpose of facilitating future acquisitions, then
unitholders may be required to properly certify their FATCA status (generally on IRS Form W-8 or IRS Form W-9, as applicable) and
satisfy any other applicable requirements under FATCA to ensure that the 30% withholding tax does not apply to their allocable
share of any such payments made by our company. In addition, special rules may apply to unitholders who own our units directly
and not through a broker. Such unitholders should consult their own tax advisers regarding the consequences under FATCA of owning
our units in registered form.



The foregoing rules remain subject to modification
by an applicable intergovernmental agreement between the United States and another country, such as the agreement in effect between
the United States and Bermuda for cooperation to facilitate the implementation of FATCA, or by future U.S. Treasury Regulations
or guidance. Unitholders should consult their own tax advisers regarding the consequences under FATCA of an investment in our units.



Information Reporting with Respect
to Foreign Financial Assets



Under U.S. Treasury Regulations, U.S. individuals
that own “specified foreign financial assets” with an aggregate fair market value exceeding either $50,000 on the last
day of the taxable year or $75,000 at any time during the taxable year generally are required to file an information report with
respect to such assets with their tax returns. Significant penalties may apply to persons who fail to comply with these rules.
Specified foreign financial assets include not only financial accounts maintained in foreign financial institutions, but also,
unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial
instrument or contract held for investment that has an issuer or counterparty other than a U.S. person, and any interest in a foreign
entity. Upon the issuance of future U.S. Treasury Regulations, these information reporting requirements may apply to certain U.S.
entities that own specified foreign financial assets. The failure to report information required under the current regulations
could result in substantial penalties and in the extension of the statute of limitations with respect to federal income tax returns
filed by you. You should consult your own tax adviser regarding the possible implications of these U.S. Treasury Regulations for
an investment in our units.



Certain Effects of a Transfer of Units



Our company may allocate items of income,
gain, loss, deduction, and credit using a monthly or other convention, whereby any such items recognized in a given month by our
company are allocated to our unitholders as of a specified date of such month. The Property Partnership may invest in debt obligations
or other securities for which the accrual of interest or income thereon is not matched by a contemporaneous receipt of cash. Any
such accrued interest or other income would be allocated pursuant to such monthly or other convention. Consequently, our unitholders
may recognize income in excess of cash distributions received from our company, and any income so included by a unitholder would
increase the basis such unitholder has in our units and would offset any gain (or increase the amount of loss) realized by such
unitholder on a subsequent disposition of its units. In addition, U.S. withholding taxes generally would be withheld by our company
only on the payment of cash in respect of such accrued interest or other income, and, therefore, it is possible that some unitholders
would be allocated income which might be distributed to a subsequent unitholder, and such subsequent unitholder would be subject
to withholding at the time of distribution. As a result, the subsequent unitholder, and not the unitholder who was allocated income,
would be entitled to claim any available credit with respect to such withholding.



The Property Partnership has invested and
will continue to invest in certain Holding Entities and operating entities organized in non-U.S. jurisdictions, and income and
gain from such investments may be subject to withholding and other taxes in such jurisdictions. If any such non-U.S. taxes were
imposed on income allocable to a U.S. Holder, and such holder were thereafter to dispose of its units prior to the date distributions
were made in respect of such income, under applicable provisions of the U.S. Internal Revenue Code and U.S. Treasury regulations,
the unitholder to whom such income was allocated (and not the unitholder to whom distributions were ultimately made) would, subject
to other applicable limitations, be the party permitted to claim a credit for such non-U.S. taxes for U.S. federal income tax purposes.
Thus a unitholder may be affected either favorably or adversely by the foregoing rules. Complex rules may, depending on a unitholder’s
particular circumstances, limit the availability or use of foreign tax credits, and you are urged to consult your own tax adviser
regarding all aspects of foreign tax credits.



144







Nominee Reporting



Persons who hold an interest in our company
as a nominee for another person may be required to furnish to us:



| | (a) | the name, address and taxpayer identification number of the beneficial owner and the nominee;
| | --- | ---------------------------------------------------------------------------------------------



| | (b) | whether the beneficial owner is (1) a person that is not a U.S. person, (2) a foreign government, an international
organization, or any wholly owned agency or instrumentality of either of the foregoing, or (3) a tax-exempt entity;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | the amount and description of units held, acquired, or transferred for the beneficial owner; and
| | --- | ------------------------------------------------------------------------------------------------



| | (d) | specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition
cost for purchases, as well as the amount of net proceeds from sales.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Brokers and financial institutions may be
required to furnish additional information, including whether they are U.S. persons and specific information on our units they
acquire, hold, or transfer for their own account. A penalty of $100 per failure, up to a maximum of $1,500,000 per calendar year,
generally is imposed by the U.S. Internal Revenue Code for the failure to report such information to us. The nominee is required
to supply the beneficial owner of our units with the information furnished to us.



New Legislation or Administrative
or Judicial Action



The U.S. federal income tax treatment of
our unitholders depends, in some instances, on determinations of fact and interpretations of complex provisions of U.S. federal
income tax law for which no clear precedent or authority may be available. You should be aware that the U.S. federal income tax
rules, particularly those applicable to partnerships, are constantly under review (including currently) by the Congressional tax-writing
committees and other persons involved in the legislative process, the IRS, the U.S. Treasury Department and the courts, frequently
resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications
and interpretations, any of which could adversely affect the value of our units and be effective on a retroactive basis. For example,
changes to the U.S. federal tax laws and interpretations thereof could make it more difficult or impossible for our company to
be treated as a partnership that is not taxable as a corporation for U.S. federal income tax purposes, affect the tax considerations
of owning our units, change the character or treatment of portions of our company’s income, and adversely affect an investment
in our units. Such changes could also affect or cause our company to change the way it conducts its activities, affect the tax
considerations of an investment in our company, and otherwise change the character or treatment of portions of our company’s
income (including changes that recharacterize certain allocations as potentially non-deductible fees).



Our company’s organizational documents
and agreements permit the BPY General Partner to modify our limited partnership agreement from time to time, without the consent
of our unitholders, to elect to treat our company as a corporation for U.S. federal tax purposes, or to address certain changes
in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material
adverse impact on some or all of our unitholders.



THE FOREGOING DISCUSSION IS NOT INTENDED
AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. THE TAX MATTERS RELATING TO OUR COMPANY AND UNITHOLDERS ARE COMPLEX AND ARE SUBJECT TO
VARYING INTERPRETATIONS. MOREOVER, THE EFFECT OF EXISTING INCOME TAX LAWS, THE MEANING AND IMPACT OF WHICH IS UNCERTAIN, AND OF
PROPOSED CHANGES IN INCOME TAX LAWS WILL VARY WITH THE PARTICULAR CIRCUMSTANCES OF EACH UNITHOLDER, AND IN REVIEWING THIS ANNUAL
REPORT THESE MATTERS SHOULD BE CONSIDERED. UNITHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE U.S. FEDERAL,
STATE, LOCAL, AND OTHER TAX CONSEQUENCES OF ANY INVESTMENT IN OUR UNITS.



Canadian Federal Income Tax Considerations



The following is a summary of the principal
Canadian federal income tax consequences under the Tax Act of the holding and disposition of units in our company generally applicable
to a unitholder, who for purposes of the Tax Act and at all relevant times, holds our units as capital property, deals at arm’s
length with and is not affiliated with our company, the Property Partnership, the BPY General Partner and their respective affiliates,
or a Holder. Generally, our units will be considered to be capital property to a Holder, provided that the Holder does not use
or hold our units in the course of carrying on a business of trading or dealing in securities and has not acquired them in one
or more transactions considered to be an adventure or concern in the nature of trade.



145







This summary is not applicable to a Holder:
(i) that is a “financial institution” as defined in the Tax Act for purposes of the “mark-to-market”
rules, (ii) that is a “specified financial institution” as defined in the Tax Act, (iii) who makes or has
made a functional currency reporting election pursuant to section 261 of the Tax Act, (iv) an interest in which would be a
“tax shelter investment” as defined in the Tax Act or who acquires our units as a “tax shelter investment”
(and this summary assumes that no such persons hold our units), (v) who has, directly or indirectly, a “significant
interest” as defined in subsection 34.2(1) of the Tax Act in our company, or (vi) to whom any affiliate of our company
is a “foreign affiliate” as defined in the Tax Act. Any such Holders should consult their own tax advisors with respect
to an investment in our units.



This summary is based on the current provisions
of the Tax Act, all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance
(Canada) prior to the date hereof, or the Tax Proposals, and the current published administrative and assessing policies and practices
of the CRA. This summary assumes that all Tax Proposals will be enacted in the form proposed but no assurance can be given that
the Tax Proposals will be enacted in the form proposed or at all. This summary does not otherwise take into account or anticipate
any changes in law, whether by judicial, administrative or legislative decision or action or changes in the CRA’s administrative
and assessing policies and practices, nor does it take into account provincial, territorial or foreign income tax legislation or
considerations, which may differ significantly from those described herein. Holders should consult their own tax advisors in respect
of the provincial, territorial or foreign income tax consequences to them of holding and disposing of our units.



This summary assumes that neither our company
nor the Property Partnership will be considered to carry on business in Canada. The BPY General Partner intends to organize and
conduct the affairs of each of these entities, to the extent possible, so that neither of these entities should be considered to
carry on business in Canada for purposes of the Tax Act. However, no assurance can be given in this regard.



This summary also assumes that neither our
company nor the Property Partnership is a “tax shelter” or “tax shelter investment”, each as defined in
the Tax Act. However, no assurance can be given in this regard.



This summary also assumes that neither our
company nor the Property Partnership will be a “SIFT partnership” at any relevant time for purposes of the SIFT
Rules on the basis that neither our company nor the Property Partnership will be a “Canadian resident partnership”
at any relevant time. However, there can be no assurance that the SIFT Rules will not be revised or amended such that the SIFT
Rules will apply.



This summary does not address the deductibility
of interest on money borrowed to acquire our units.



This summary is of a general nature only
and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Holder, and no representation
with respect to the Canadian federal income tax consequences to any particular Holder is made. Consequently, Holders are advised
to consult their own tax advisors with respect to their particular circumstances. See also Item 3.D “Risk Factors —
Risks Relating to Taxation.”



For purposes of the Tax Act, all amounts
relating to the acquisition, holding or disposition of our units must be expressed in Canadian dollars including any distributions,
adjusted cost base and proceeds of disposition. For purposes of the Tax Act, amounts denominated in a currency other than the Canadian
dollar generally must be converted into Canadian dollars using the rate of exchange quoted by the Bank of Canada at noon on the
date such amounts arose, or such other rate of exchange as is acceptable to the CRA.



Taxation of Canadian Resident
Limited Partners



The following is a discussion of the consequences
under the Tax Act to a Holder who, for purposes of the Tax Act and at all relevant times, is resident or deemed to be resident
in Canada, or a Canadian Limited Partner.



Computation of Income or Loss



Each Canadian Limited Partner is required
to include (or, subject to the “at-risk rules” discussed below, entitled to deduct) in computing his or her income
for a particular taxation year the Canadian Limited Partner’s pro rata share of the income (or loss) of our company
for its fiscal year ending in, or coincidentally with, the Canadian Limited Partner’s taxation year end, whether or not any
of that income is distributed to the Canadian Limited Partner in the taxation year and regardless of whether our units were held
throughout such year.



146







Our company will not itself be a taxable
entity and is not expected to be required to file an income tax return in Canada for any taxation year. However, the income (or
loss) of our company for a fiscal period for purposes of the Tax Act will be computed as if it were a separate person resident
in Canada and the unitholders will be allocated a share of that income (or loss) in accordance with our limited partnership agreement.
The income (or loss) of our company will include our company’s share of the income (or loss) of the Property Partnership
for a fiscal year determined in accordance with the Property Partnership’s limited partnership agreement. For this purpose,
our company’s fiscal year end and that of the Property Partnership will be December 31.



The income for tax purposes of our company
for a given fiscal year of our company will be allocated to each Canadian Limited Partner in an amount calculated by multiplying
such income that is allocable to unitholders by a fraction, the numerator of which is the sum of the distributions received by
such Canadian Limited Partner with respect to such fiscal year and the denominator of which is the aggregate amount of the distributions
made by our company to all unitholders with respect to such fiscal year.



If, with respect to a given fiscal year,
no distribution is made by us to our unitholders or our company has a loss for tax purposes, one quarter of the income, or loss,
as the case may be, for tax purposes of our company for such fiscal year that is allocable to unitholders, will be allocated to
our unitholders of record at the end of each calendar quarter ending in such fiscal year in the proportion that the number of our
units held at each such date by a unitholder is of the total number of units of our company that are issued and outstanding at
each such date. Generally, the source and character of such income or loss allocated to a unitholder at the end of the each calendar
quarter will be the same source and character as the income or loss earned or incurred by our company in such calendar quarter.



The income of our company as determined
for purposes of the Tax Act may differ from its income as determined for accounting purposes and may not be matched by cash distributions.
In addition, for purposes of the Tax Act, all income (or losses) of our company and the Property Partnership must be calculated
in Canadian currency. Where our company (or the Property Partnership) holds investments denominated in U.S. dollars or other foreign
currencies, gains and losses may be realized by our company as a consequence of fluctuations in the relative values of the Canadian
and foreign currencies.



In computing the income (or loss) of our
company, deductions may be claimed in respect of reasonable administrative costs, interest and other expenses incurred by us for
the purpose of earning income, subject to the relevant provisions of the Tax Act. Our company may also deduct from its income for
the year a portion of the reasonable expenses, if any, incurred by our company to issue our units. The portion of such issue expenses
deductible by our company in a taxation year is 20% of such issue expenses, pro-rated where our company’s taxation year is
less than 365 days. Our company and the Property Partnership may be required to withhold and remit Canadian federal withholding
tax on any management or administration fees or charges paid or credited to a non-resident person, to the extent that such management
or administration fees or charges are deductible in computing our company’s or the Property Partnership’s income from
a source in Canada.



In general, a Canadian Limited Partner’s
share of any income (or loss) from our company from a particular source will be treated as if it were income (or loss) of the Canadian
Limited Partner from that source, and any provisions of the Tax Act applicable to that type of income (or loss) will apply to the
Canadian Limited Partner. Our company will invest in limited partnership units of the Property Partnership. In computing our company’s
income (or loss) under the Tax Act, the Property Partnership will itself be deemed to be a separate person resident in Canada which
computes its income (or loss) and allocates to its partners their respective share of such income (or loss). Accordingly, the source
and character of amounts included in (or deducted from) the income of Canadian Limited Partners on account of income (or loss)
earned by the Property Partnership generally will be determined by reference to the source and character of such amounts when earned
by the Property Partnership.



The characterization by the CRA of gains
realized by our company or the Property Partnership on the disposition of investments as either capital gains or income gains will
depend largely on factual considerations, and no conclusions are expressed herein.



A Canadian Limited Partner’s share
of taxable dividends received or considered to be received by our company in a fiscal year from a corporation resident in Canada
will be treated as a dividend received by the Canadian Limited Partner and will be subject to the normal rules in the Tax Act applicable
to such dividends, including the enhanced gross-up and dividend tax credit for “eligible dividends,” as defined in
the Tax Act, when the dividend received by the Property Partnership is designated as an “eligible dividend”.



147







Foreign taxes paid by our company or
the Property Partnership and taxes withheld at source on amounts paid or credited to our company or the Property Partnership
(other than for the account of a particular unitholder) will be allocated pursuant to the governing partnership agreement.
Each Canadian Limited Partner’s share of the “business-income tax” and “non-business-income tax”
paid to the government of a foreign country for a year will be creditable against its Canadian federal income tax liability
to the extent permitted by the detailed foreign tax credit rules contained in the Tax Act. Although the foreign tax
credit provisions are designed to avoid double taxation, the maximum credit is limited. Because of this, and because of
timing differences in recognition of expenses and income and other factors, there is a risk of double taxation. Under the
Foreign Tax Credit Generator Rules, the foreign “business-income tax” or “non-business income tax”
allocated to a Canadian Limited Partner for the purpose of determining such Canadian Limited Partner’s foreign tax
credit for any taxation year may be limited in certain circumstances, including where a Canadian Limited Partner’s
share of the income of our company or the Property Partnership under the income tax laws of any country (other than Canada)
under whose laws the income of our company or the Property Partnership is subject to income taxation, or the Relevant Foreign
Tax Law, is less than the Canadian Limited Partner’s share of such income for purposes of the Tax Act. For this
purpose, a Canadian Limited Partner is not considered to have a lesser direct or indirect share of the income of our company
or the Property Partnership under the Relevant Foreign Tax Law than for the purposes of the Tax Act solely because, among
other reasons, of a difference between the Relevant Foreign Tax Law and the Tax Act in the manner of computing the income of
our company or the Property Partnership or in the manner of allocating the income of our company or the Property Partnership
because of the admission or withdrawal of a partner. No assurance can be given that the Foreign Tax Credit Generator Rules
will not apply to any Canadian Limited Partner. If the Foreign Tax Credit Generator Rules apply, the allocation to a Canadian
Limited Partner of foreign “business-income tax” or “non-business income tax” paid by our company or
the Property Partnership, and therefore such Canadian Limited Partner’s foreign tax credits will be limited.



Our company and the Property Partnership
will be deemed to be a non-resident person in respect of certain amounts paid or credited or deemed to be credited to them by a
person resident or deemed to be resident in Canada, including dividends or interest. Dividends or interest (other than interest
exempt from Canadian federal withholding tax) paid or deemed to be paid by a person resident or deemed to be resident in Canada
to the Property Partnership will be subject to withholding tax under Part XIII of the Tax Act at the rate of 25%. However,
the CRA’s administrative practice in similar circumstances is to permit the rate of Canadian federal withholding tax applicable
to such payments to be computed by looking through our partnership and taking into account the residency of the partners (including
partners who are resident in Canada) and any reduced rates of Canadian federal withholding tax that any non-resident partners may
be entitled to under an applicable income tax treaty or convention, provided that the residency status and entitlement to the treaty
benefits can be established. In determining the rate of Canadian federal withholding tax applicable to amounts paid by the Holding
Entities to the Property Partnership, we expect the Holding Entities to look-through the Property Partnership and our company to
the residency of the partners of our company (including partners who are residents of Canada) and to take into account any reduced
rates of Canadian federal withholding tax that non-resident partners may be entitled to under an applicable income tax treaty or
convention in order to determine the appropriate amount of Canadian federal withholding tax to withhold from dividends or interest
paid to the Property Partnership. However, there can be no assurance that the CRA will apply its administrative practice in this
context. Under the Treaty, in certain circumstances a Canadian resident payer is required to look-through fiscally transparent
partnerships, such as our company and the Property Partnership, to the residency and Treaty entitlements of their partners and
to take into account the reduced rates of Canadian federal withholding tax that such partners may be entitled to under the Treaty.



If our company incurs losses for tax purposes,
each Canadian Limited Partner will be entitled to deduct in the computation of income for tax purposes the Canadian Limited Partner’s
pro rata share of any net losses for tax purposes of our company for its fiscal year to the extent that the Canadian
Limited Partner’s investment is “at-risk” within the meaning of the Tax Act. The Tax Act contains “at-risk
rules” which may, in certain circumstances, restrict the deduction of a limited partner’s share of any losses of a
limited partnership. The BPY General Partner does not anticipate that our company or the Property Partnership will incur losses
but no assurance can be given in this regard. Accordingly, Canadian Limited Partners should consult their own tax advisors for
specific advice with respect to the potential application of the “at-risk rules”.



Section 94.1 of the Tax Act contains
rules relating to investments by a taxpayer in Non-Resident Entities that could, in certain circumstances, cause income to be imputed
to Canadian Limited Partners, either directly or by way of allocation of such income imputed to our company or the Property Partnership.
These rules would apply if it is reasonable to conclude, having regard to all the circumstances, that one of the main reasons for
the Canadian Limited Partner, our company or the Property Partnership acquiring or holding an investment in a non-resident entity
is to derive a benefit from “portfolio investments” in certain assets from which the Non-Resident Entity may reasonably
be considered to devise its value in such a manner that taxes under the Tax Act on income, profits and gains from such assets
for any year are significantly less than they would have been if such income, profits and gains had been earned directly. In determining
whether this is the case, section 94.1 of the Tax Act provides that consideration must be given to, among other factors,
the extent to which the income, profits and gains for any fiscal period are distributed in that or the immediately following fiscal
period. No assurance can be given that section 94.1 of the Tax Act will not apply to a Canadian Limited Partner, our
company or the Property Partnership. If these rules apply to a Canadian Limited Partner, our company or the Property Partnership,
income, determined by reference to a prescribed rate of interest plus two percent applied to the “designated cost”,
as defined in section 94.1 of the Tax Act, of the interest in the Non-Resident Entity, will be imputed directly to the
Canadian Limited Partner or to our company or to the Property Partnership and allocated to the Canadian Limited Partner in accordance
with the rules in section 94.1 of the Tax Act. The rules in section 94.1 of the Tax Act are complex and Canadian
Limited Partners should consult their own tax advisors regarding the application of these rules to them in their particular circumstances.



148







Dividends paid to the Property Partnership
by a CFA of the Property Partnership will be included in computing the income of the Property Partnership. To the extent that any
of the CFAs or Indirect CFAs earn income that is characterized as FAPI in a particular taxation year of the CFA or Indirect CFA,
the FAPI allocable to the Property Partnership under the rules in the Tax Act must be included in computing the income of the Property
Partnership for Canadian federal income tax purposes for the fiscal period of the Property Partnership in which the taxation year
of that CFA or Indirect CFA ends, whether or not the Property Partnership actually receives a distribution of that FAPI. Our company
will include its share of such FAPI of the Property Partnership in computing its income for Canadian federal income tax purposes
and Canadian Limited Partners will be required to include their proportionate share of such FAPI allocated from our company in
computing their income for Canadian federal income tax purposes. As a result, Canadian Limited Partners may be required to include
amounts in their income even though they have not and may not receive an actual cash distribution of such amounts. If an amount
of FAPI is included in computing the income of the Property Partnership for Canadian federal income tax purposes, an amount may
be deductible in respect of the “foreign accrual tax” applicable to the FAPI. Any amount of FAPI included in income
net of the amount of any deduction in respect of “foreign accrual tax” will increase the adjusted cost base to the
Property Partnership of its shares of the particular CFA in respect of which the FAPI was included. At such time as the Property
Partnership receives a dividend of this type of income that was previously included in the Property Partnership’s income
as FAPI, such dividend will effectively not be included in computing the income of the Property Partnership and there will be a
corresponding reduction in the adjusted cost base to the Property Partnership of the particular CFA shares. Under the Foreign Tax
Credit Generator Rules, the “foreign accrual tax” applicable to a particular amount of FAPI included in the Property
Partnership’s income in respect of a particular “foreign affiliate” of the Property Partnership may be limited
in certain specified circumstances, including where the direct or indirect share of the income of any member of the Property Partnership
(which is deemed for this purpose to include a Canadian Limited Partner) that is a person resident in Canada or a “foreign
affiliate” of such a person is, under a Relevant Foreign Tax Law, less than such member’s share of such income for
purposes of the Tax Act. No assurances can be given that the Foreign Tax Credit Generator Rules will not apply to the Property
Partnership. For this purpose, a Canadian Limited Partner is not considered to have a lesser direct or indirect share of the income
of the Property Partnership under the Relevant Foreign Tax Law than for purposes of the Tax Act solely because, among other reasons,
of a difference between the Relevant Foreign Tax Law and the Tax Act in the manner of computing the income of the Property Partnership
or in the manner of allocating the income of the Property Partnership because of the admission or withdrawal of a partner. If the
Foreign Tax Credit Generator Rules apply, the “foreign accrual tax” applicable to a particular amount of FAPI included
in the Property Partnership’s income in respect of a particular “foreign affiliate” of the Property Partnership
will be limited.



Disposition of Our Units



The disposition by a Canadian Limited Partner
of a unit of our company will result in the realization of a capital gain (or capital loss) by such limited partner in the amount,
if any, by which the proceeds of disposition of a unit, less any reasonable costs of disposition, exceed (or are exceeded by) the
adjusted cost base of such unit. In general, the adjusted cost base of a Canadian Limited Partner’s units of our company
will be equal to: (i) the actual cost of the units (excluding any portion thereof financed with limited recourse indebtedness);
plus (ii) the pro rata share of the income of our company allocated to the Canadian Limited Partner for the fiscal
years of our company ending before the relevant time; less (iii) the aggregate of the pro rata share of losses of our
company allocated to the Canadian Limited Partner (other than losses which cannot be deducted because they exceed the Canadian
Limited Partner’s “at-risk” amount) for the fiscal years of our company ending before the relevant time; and
less (iv) the Canadian Limited Partner’s distributions received from our company made before the relevant time. The adjusted
cost base of each of our units will be subject to the averaging provisions contained in the Tax Act.



Where a Canadian Limited Partner disposes
of all of its units of our company, it will no longer be a partner of our partnership. If, however, a Canadian Limited Partner
is entitled to receive a distribution from our company after the disposition of all such units, then the Canadian Limited Partner
will be deemed to dispose of the units at the later of: (i) the end of the fiscal year of our company during which the disposition
occurred; and (ii) the date of the last distribution made by our company to which the Canadian Limited Partner was entitled.
The pro rata share of the income (or loss) for tax purposes of our company for a particular fiscal year which is allocated
to a Canadian Limited Partner who has ceased to be a partner will generally be added (or deducted) in the computation of the adjusted
cost base of the Canadian Limited Partner’s units immediately prior to the time of the disposition. Canadian Limited Partners
should consult their own tax advisors for advice with respect to the specific tax consequences to them of disposing of units
of our company.



149







A Canadian Limited Partner will realize
a deemed capital gain if, and to the extent that, the adjusted cost base of the Canadian Limited Partner’s units of our company
is negative at the end of any of our fiscal years. In such a case, the adjusted cost base of the Canadian Limited Partner’s
units of our company will be nil at the beginning of our next fiscal year.



Taxation of Capital Gains and Capital
Losses



In general, one-half of a capital gain realized
by a Canadian Limited Partner must be included in computing such Canadian Limited Partner’s income as a taxable capital gain.
One-half of a capital loss is deducted as an allowable capital loss against taxable capital gains realized in the year and any
remainder may be deducted against net taxable capital gains in any of the three years preceding the year or any year following
the year to the extent and under the circumstances described in the Tax Act.



Special rules in the Tax Act may apply to
disallow the one-half treatment on all or a portion of a capital gain realized on a disposition of our units to a tax-exempt person
or a non-resident person. Canadian Limited Partners contemplating such a disposition should consult their own tax advisors in this
regard.



A Canadian Limited Partner that is throughout
the relevant taxation year a “Canadian-controlled private corporation,” as defined in the Tax Act may be liable to
pay an additional refundable tax of 62/3% on its “aggregate investment income”, as defined in
the Tax Act, for the year, which is defined to include taxable capital gains. Canadian Limited Partners that are individuals or
trusts may be subject to the alternative minimum tax rules. Such Canadian Limited Partners should consult their own tax advisors.



Eligibility for Investment



Provided that our units are listed on a
“designated stock exchange” (which currently includes the NYSE and the TSX), our units will be “qualified investments”
under the Tax Act for a trust governed by an RRSP, deferred profit sharing plan, RRIF, registered education savings plan,
registered disability savings plan, and a TFSA. Taxes may be imposed in respect of the acquisition or holding of non-qualified
investments by such registered plans and certain other taxpayers and with respect to the acquisition or holding of “prohibited
investments” by an RRSP, RRIF or TFSA.



Our units will not be a “prohibited
investment” for a trust governed by a RRSP, RRIF or TFSA, provided that the holder of the TFSA or the annuitant of the RRSP
or RRIF, as the case may be, deals at arm’s length with our company for purposes of the Tax Act does not have a “significant
interest,” as defined in the Tax Act for purposes of the prohibited investment rules, in our company. Unitholders who
intend to hold our units in a TFSA, RRSP, or RRIF should consult with their own tax advisors regarding the application of the foregoing
prohibited investment rules having regard to their particular circumstances.



Alternative Minimum Tax



Canadian Limited Partners that are individuals
or trusts may be subject to the alternative minimum tax rules. Such Canadian Limited Partners should consult their own tax advisors.



Taxation of Non-Canadian Limited
Partners



The following summary generally applies
to a Holder who, for purposes of the Tax Act, at all relevant times, is not, and is not deemed to be resident in Canada and who
does not use or hold and is not deemed to use or hold our units in connection with a business carried on, or deemed to be carried
on, in Canada, or a Non-Canadian Limited Partner.



The following summary assumes that (i) our
units are not and will not at any relevant time constitute “taxable Canadian property” of any Non-Canadian Limited
Partner, and (ii) our company and the Property Partnership will not dispose of property that is “taxable Canadian property”.
“Taxable Canadian property” includes, but is not limited to, property that is used or held in a business carried on
in Canada and shares of corporations that are not listed on a “designated stock exchange” if more than 50% of the fair
market value of the shares is derived from certain Canadian properties during the 60-month period immediately preceding the disposition
or deemed disposition. In general, our units will not constitute “taxable Canadian property” of any Non-Canadian Limited
Partner at the time of disposition or deemed disposition, unless (a) at any time during the 60-month period immediately preceding
the disposition or deemed disposition, more than 50% of the fair market value of our units was derived, directly or indirectly
(excluding through a corporation, partnership or trust, the shares or interests in which were not themselves “taxable Canadian
property”), from one or any combination of: (i) real or immovable property situated in Canada; (ii) “Canadian
resource property”; (iii) “timber resource property”; and (iv) options in respect of, or interests
in, or for civil law rights in, such property, whether or not such property exists, or (b) our units are otherwise deemed
to be “taxable Canadian property”. Since our company’s assets will consist principally of units of the Property
Partnership, our units would generally be “taxable Canadian property” at a particular time if the units of the Property
Partnership held by our company derived, directly or indirectly, excluding through a corporation, partnership or trust, the shares
or interests in which were not themselves “taxable Canadian property”) more than 50% of their fair market value from
properties described in (i) to (iv) above, at any time in the 60-month period preceding the particular time. The BPY
General Partner does not expect our units to be “taxable Canadian property” of any Non-Canadian Limited Partner at
any relevant time and does not expect our company or the Property Partnership to dispose of “taxable Canadian property”.
However, no assurance can be given in this regard. See also Item 3.D “Risk Factors — Risks Relating to Taxation.”



150







Special rules, which are not discussed in
this summary, may apply to a Non-Canadian Limited Partner that is an insurer carrying on business in Canada and elsewhere.



Taxation of Income or Loss



A Non-Canadian Limited Partner will not
be subject to Canadian federal income tax under Part I of the Tax Act on its share of income from a business carried on by our
company (or the Property Partnership) outside Canada or the non-business income earned by our company (or the Property Partnership)
from sources in Canada. However, a Non-Canadian Limited Partner may be subject to Canadian federal withholding tax under Part XIII
of the Tax Act, as described below. The BPY General Partner intends to organize and conduct the affairs of our company and the
Property Partnership, to the extent possible, such that Non-Canadian Limited Partners should not be considered to be carrying on
business in Canada solely by virtue of holding our units. However, no assurance can be given in this regard.



Our company and the Property Partnership
will be deemed to be a non-resident person in respect of certain amounts paid or credited or deemed to be paid or credited to them
by a person resident or deemed to be resident in Canada, including dividends or interest. Dividends or interest (other than interest
exempt from Canadian federal withholding tax) paid or deemed to be paid by a person resident or deemed to be resident in Canada
to the Property Partnership will be subject to withholding tax under Part XIII of the Tax Act at the rate of 25%. However, the
CRA’s administrative practice in similar circumstances is to permit the rate of Canadian federal withholding tax applicable
to such payments to be computed by looking through our partnership and taking into account the residency of the partners (including
partners who are resident in Canada) and any reduced rates of Canadian federal withholding tax that any non-resident partners may
be entitled to under an applicable income tax treaty or convention, provided that the residency status and entitlement to the treaty
benefits can be established. In determining the rate of Canadian federal withholding tax applicable to amounts paid by Holding
Entities to the Property Partnership, we expect the Holding Entities to look-through the Property Partnership and our company to
the residency of the partners of our company (including partners who are residents of Canada) and to take into account any reduced
rates of Canadian federal withholding tax that Non-Canadian Limited Partners may be entitled to under an applicable income tax
treaty or convention in order to determine the appropriate amount of Canadian federal withholding tax to withhold from dividends
or interest paid to the Property Partnership. However, there can be no assurance that the CRA would apply its administrative practice
in this context. Under the Treaty, in certain circumstances a Canadian resident payer is required to look-through fiscally transparent
partnerships, such as our company and the Property Partnership, to the residency and Treaty entitlements of their partners and
take into account the reduced rates of Canadian federal withholding tax that such partners may be entitled to under the Treaty.



Bermuda Tax Considerations



In Bermuda there are no taxes on profits,
income or dividends, nor is there any capital gains tax, estate duty or death duty. Profits can be accumulated and it is not obligatory
to pay dividends. As “exempted undertakings”, exempted partnerships and overseas partnerships are entitled to apply
for (and will ordinarily receive) an assurance pursuant to the Exempted Undertakings Tax Protection Act 1966 that, in the event
that legislation introducing taxes computed on profits or income, or computed on any capital asset, gain or appreciation, is enacted,
such taxes shall not be applicable to our partnership or any of its operations until March 31, 2015. Such an assurance may
include the assurance that any tax in the nature of estate duty or inheritance tax shall not be applicable to the units, debentures
or other obligations of our partnership.



Exempted partnerships and overseas partnerships
fall within the definition of “international businesses” for the purposes of the Stamp Duties (International Businesses
Relief) Act 1990, which means that instruments executed by or in relation to an exempted partnership or an overseas partnership
are exempt from stamp duties (such duties were formerly applicable under the Stamp Duties Act 1976). Thus, stamp duties are not
payable upon, for example, an instrument which effects the transfer or assignment of a unit in an exempted partnership or an overseas
partnership, or the sale or mortgage of partnership assets; nor are they payable upon the partnership capital.



151







| | 10.F. | DIVIDENDS AND PAYING AGENTS
| | ----- | ---------------------------



Not applicable.



| | 10.G. | STATEMENT BY EXPERTS
| | ----- | --------------------



Not applicable.



| | 10.H | DOCUMENTS ON DISPLAY
| | ---- | --------------------



Any statement in this Form 20-F about any
of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the Form
20-F, the contract or document is deemed to modify the description contained in this Form 20-F. You must review the exhibits themselves
for a complete description of the contract or document.



Brookfield Asset Management and our company
are both subject to the information filing requirements of the Exchange Act, and accordingly are required to file periodic reports
and other information with the SEC. As a foreign private issuer under the SEC’s regulations, we expect to file annual reports
on Form 20-F and will furnish other reports on Form 6-K. The information disclosed in our reports may be less extensive than that
required to be disclosed in annual and quarterly reports on Forms 10-K and 10-Q required to be filed with the SEC by U.S. issuers.
Moreover, as a foreign private issuer, we are not subject to the proxy requirements under Section 14 of the Exchange Act,
and the BPY General Partner’s directors and our principal unitholders are not subject to the insider short swing profit reporting
and recovery rules under Section 16 of the Exchange Act. Our and Brookfield Asset Management’s SEC filings are available
at the SEC’s website at www.sec.gov. You may also read and copy any document we or Brookfield Asset Management
files with the SEC at the public reference facilities maintained by the SEC at SEC Headquarters, Public Reference Section, 100
F Street, N.E., Washington D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities
by calling the SEC at 1-800-SEC-0330.



In addition, Brookfield Asset Management
and our company are required by Canadian securities laws to file documents electronically with Canadian securities regulatory authorities
and these filings are available on our or Brookfield Asset Management’s SEDAR profile at www.sedar.com. Written
requests for such documents should be directed to our Corporate Secretary at 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda.



| | 10.I. | SUBSIDIARY INFORMATION
| | ----- | ----------------------



Not applicable.



| | ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| | -------- | ----------------------------------------------------------



See the information contained in this Form
20-F under Item 5. “Operating and Financial Review and Prospects”.



| | ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| | -------- | ------------------------------------------------------



Not applicable.



PART
II



| | ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
| | -------- | -----------------------------------------------



None.



| | ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
| | -------- | ----------------------------------------------------------------------------



None.



152









| | ITEM 15. | CONTROLS AND PROCEDURES
| | -------- | -----------------------



Disclosure Controls and Procedures



As of December 31, 2013, an evaluation
of the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e)
of the Exchange Act) was carried out under the supervision and with the participation of persons performing the functions of principal
executive and principal financial officers for us and our Service Providers. Based upon that evaluation, the persons performing
the functions of principal executive and principal financial officers for us have concluded that, as of December 31, 2013,
our disclosure controls and procedures were effective: (i) to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms; and (ii) to ensure that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is accumulated and communicated to our management, including the persons performing the
functions of principal executive and principal financial officers for us, to allow timely decisions regarding required disclosure.



It should be noted that while our management,
including persons performing the functions of principal executive and principal financial officers for us, believe our disclosure
controls and procedures provide a reasonable level of assurance that such controls and procedures are effective, they do not expect
that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter
how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met.



Management’s Annual Report on Internal
Control Over Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a−15(f).
Under the supervision and with the participation of our management, including persons performing the functions of principal executive
and principal financial officers for us, we conducted an evaluation of the effectiveness of our internal control over financial
reporting as of December 31, 2013, based on the criteria set forth in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on evaluation under the Framework in 1992 Internal Control—Integrated
Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2013.



Internal control systems, no matter how
well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.



Changes in Internal Control



There was no change in our internal control
over financial reporting during the year ended December 31, 2013, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.



| | ITEM 16. | [RESERVED]
| | -------- | ----------



| | 16.A. | AUDIT COMMITTEE FINANCIAL EXPERTS
| | ----- | ---------------------------------



The BPY General Partner’s board of
directors has determined that Stephen DeNardo possesses specific accounting and financial management expertise and that he is an
audit committee financial expert as defined by the SEC and is independent within the meaning of the rules of the NYSE. The BPY
General Partner’s board of directors has also determined that other members of the Audit Committee have sufficient experience
and ability in finance and compliance matters to enable them to adequately discharge their responsibilities.



| | 16.B. | CODE OF ETHICS
| | ----- | --------------



On April 4, 2013, the BPY General Partner
adopted a Code of Conduct and Ethics, or the Code, that applies to the members of the board of directors of the BPY General Partner,
our Company and any officers or employees of the BPY General Partner. We have posted a copy of the Code on our website at www.brookfieldpropertypartners.com.



| | 16.C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
| | ----- | --------------------------------------



The BPY General Partner has retained Deloitte
LLP to act as our Company’s independent registered public accounting firm.



The table below summarizes the fees for
professional services rendered by Deloitte LLP for the audit of our annual financial statements for the periods ended December
31, 2013.



153









|                      |  | December 31,2013 |        |   | December 31,2012(5) |  
|--------------------- |  | ---------------- | ------ | - | ------------------- | -
|THOUSANDS             |  | USD              |        | % |                     |  
|Audit fees(1)         |  | $                | 4,377  |   | 23                  | %
|Audit-related fees(2) |  |                  | 13,324 |   | 70                  | %
|Tax fees(3)           |  |                  | 1,168  |   | 6                   | %
|Other(4)              |  |                  | 107    |   | 1                   | %
|Total                 |  | $                | 18,976 |   | 100                 | %





|(1) | Audit fees include fees for services that would normally be provided by the external auditor in connection with statutory and regulatory filings or engagements, including fees for services necessary to perform an audit or review in accordance with generally accepted auditing standards. This category also includes services that generally only the external auditor reasonably can provide, including comfort letters, statutory audits, attest services, consents and assistance with and review of certain documents filed with securities regulatory authorities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2) | Audit-related fees are for assurance and related services, such as due diligence services, that traditionally are performed by the external auditor. More specifically, these services include, among others: employee benefit plan audits, accounting consultations and audits in connection with acquisitions, attest services that are not required by statute or regulation, and consultation concerning financial accounting and reporting standards.                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(3) | Tax fees are principally for assistance in tax return preparation and tax advisory services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(4) | All other fees include fees for assistance with corporate and social responsibility
    reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(5) | Professional fees for services rendered by Deloitte LLP for the audit of the carve-out financial statements of the
    Commercial Property Operations of Brookfield Asset Management.                                                                                                                                                                                                                                                                                                                                                                                        



The audit committee of the BPY General Partner
pre-approves all audit and non-audit services provided to our partnership by Deloitte LLP.



| | 16.D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
| | ----- | ----------------------------------------------------------



None.



| | 16.E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
| | ----- | ----------------------------------------------------------------------



None.



| | 16.F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
| | ----- | --------------------------------------------



None.



| | 16.G. | CORPORATE GOVERNANCE
| | ----- | --------------------



Our corporate practices are not materially
different from those required of domestic limited partnerships under the NYSE Listing Standards.



| | 16.H. | MINING SAFETY DISCLOSURE
| | ----- | ------------------------



Pursuant to Section 1503(a) of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, issuers that are operators, or that have a subsidiary that is an operator,
of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information
regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related
fatalities under the regulation of the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine
Safety and Health Act of 1977, as amended (the “Mine Act”). During the fiscal year ended December 31, 2013, our company
did not have any mines in the United States subject to regulation by MSHA under the Mine Act.



154









PART
III



| | ITEM 17. | FINANCIAL STATEMENTS
| | -------- | --------------------



Not applicable.



| | ITEM 18. | FINANCIAL STATEMENTS
| | -------- | --------------------



See the list of financial statements beginning
on page F-1 which are filed as part of the annual report on Form 20-F.



155







| | ITEM 19. | EXHIBITS
| | -------- | --------



|Number |  | Description                                                                                                                                                                                                                                   
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|1.1    |  | Certificate of registration of our company, registered as of January 3, 2013*                                                                                                                                                                 
|       | 
|1.3    |  | Second Amended and Restated Limited Partnership Agreement of our company, dated August 8, 2013****                                                                                                                                            
|       | 
|4.1    |  | Amended and Restated Master Purchase Agreement between our company and Brookfield Asset Management**                                                                                                                                          
|       | 
|4.2    |  | Amended and Restated Master Services Agreement by and among Brookfield Asset Management, the Service Recipients and the Service Providers, dated January 1, 2014*****                                                                         
|       | 
|4.3    |  | Second Amended and Restated Limited Partnership Agreement of the Property Partnership, dated August 8, 2013****                                                                                                                               
|       | 
|4.4    |  | Relationship Agreement among our company, the Property Partnership, the Holding Entities, the Service Providers and Brookfield Asset Management, dated April 15, 2013***                                                                      
|       | 
|4.5    |  | Registration Rights Agreement between our company and Brookfield Asset Management dated
April 10, 2013***                                                                                                                                     
|       | 
|4.6    |  | Acknowledgement of Termination of Voting Agreement among Brookfield Asset Management, Brookfield Property General Partner Limited and our company, dated August 8, 2013****                                                                   
|       | 
|4.7    |  | Credit Agreement, dated March 18, 2014, by and among Brookfield Property Split Corp., Brookfield Office Properties Exchange LP, Brookfield Property Partners L.P., Brookfield Property L.P., and the other borrowers and lenders thereto******
|       | 
|4.8    |  | Support Agreement, dated March 19, 2014, between Brookfield Property Partners L.P. and Brookfield Office Properties Exchange LP******                                                                                                         





156









|12.1 |  | Certification ofRichard B. Clark,Chief Executive Officer, Brookfield Property Group LLC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*******                                        
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                  
|12.2 |  | Certification of John Stinebaugh, Chief Financial Officer, Brookfield Property Group LLC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*******                                       
|     | 
|13.1 |  | Certification of Richard B. Clark, Chief Executive Officer, Brookfield Property Group LLC, pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes Oxley Act of 2002*******
|     | 
|13.2 |  | Certification of John Stinebaugh, Chief Financial Officer, Brookfield Property Group LLC, pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes Oxley Act of 2002******* 



|*       | Filed as an exhibit to Amendment No. 1 to Registration Statement on Form 20-F on June 12, 2012 and incorporated herein by reference.   
|------- | ---------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                        
|**      | Filed as an exhibit to Amendment No. 6 to Registration Statement on Form 20-F on February 1, 2013 and incorporated herein by reference.
|        |                                                                                                                                        
|***     | Filed as an exhibit to Form 6-K on April 16, 2013 and incorporated herein by reference.                                                
|        |                                                                                                                                        
|****    | Filed as an exhibit to Form 6-K on August 8, 2013 and incorporated herein by reference.                                                
|        |                                                                                                                                        
|*****   | Filed as an exhibit to Form F-4 on January 24, 2014 and incorporated herein by reference.                                              
|        |                                                                                                                                        
|******  | Filed as an exhibit to Form 6-K on March 19, 2014 and incorporated herein by reference.                                                
|        |                                                                                                                                        
|******* | Filed herewith.                                                                                                                        



The registrant hereby agrees to furnish to the SEC at its request
copies of long-term debt instruments defining the rights of holders of outstanding long-term debt that are not required to be filed
herewith.



157







SIGNATURES



The registrant hereby certifies that it
meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.



|BROOKFIELD PROPERTY PARTNERS L.P.,                         
|-----------------------------------------------------------
|by its general partner, BROOKFIELD PROPERTYPARTNERS LIMITED
|                                                           
|By:                                                        
|                                                           
|                                                           
|                                                           



Date: April 2, 2014



158







INDEX
TO FINANCIAL STATEMENTS





|                                                                                                                                                                                                | Page
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                                                                                                                |     
|Consolidated financial statements of Brookfield Property Partners L.P. as at December 31, 2013 and December 31, 2012 and for each of the years in the three-year period ended December 31, 2013 | F-2 
|                                                                                                                                                                                                |     
|Consolidated financial statements of General Growth Properties, Inc. as at December 31, 2013 and December 31, 2012 and for each of the years in the three-year period ended December 31, 2013   | F-53



F-1







BROOKFIELD PROPERTY PARTNERS L.P.



Consolidated financial statements

as at December 31,
2013 and December 31, 2012

and for the years ended

December 31, 2013, 2012 and 2011



F-2







Report
of Independent Registered Public Accounting Firm



To the Board of Directors and Partners
of Brookfield Property Partners L.P.



We have audited the accompanying consolidated
financial statements of Brookfield Property Partners L.P. and subsidiaries (the “Partnership”), which comprise the
consolidated balance sheets as at December 31, 2013 and December 31, 2012, and the consolidated statements of income, consolidated
statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flow for
each of the years in the three year period ended December 31, 2013, and the notes to the consolidated financial statements. Our
audit also included the audit of a supplemental schedule (the “Schedule”) of investment property information as at
December 31, 2013.



Management’s Responsibility for
the Consolidated Financial Statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.



Auditor’s Responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement. We were not engaged to perform an audit of the Partnership’s
internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we
have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Brookfield Property Partners L.P. and subsidiaries
as at December 31, 2013 and December 31, 2012, and their financial performance and their cash flows for each of years in the three
year period ended December 31, 2013, in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board. Also, in our opinion, the Schedule, when considered in relation to the consolidated financial statements
taken as a whole, presents fairly in all material respects the information set forth therein.



/s/ Deloitte LLP



Chartered Professional Accountants, Chartered Accountants

Licensed Public Accountants

April 2, 2014

Toronto, Canada



F-3







Brookfield Property Partners L.P.

Consolidated Balance Sheets



|(US$ Millions)                                                                                                                      |  | Note |  | Dec. 31, 2013 |        |  | Dec. 31, 2012 |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------- | ------ |  | ------------- | -
|Assets                                                                                                                              |  |      |  |               |        |  |               |  
|Non-current assets                                                                                                                  |  |      |  |               |        |  |               |  
|Investment properties                                                                                                               |  | 5    |  | $             | 34,153 |  |               | $
|Equity accounted investments                                                                                                        |  | 8    |  |               | 9,281  |  |               |  
|Participating loan interests                                                                                                        |  | 10   |  |               | 747    |  |               |  
|Other non-current assets                                                                                                            |  | 11   |  |               | 5,234  |  |               |  
|Loans and notes receivable                                                                                                          |  | 12   |  |               | 20     |  |               |  
|                                                                                                                                    |  |      |  |               | 49,435 |  |               |  
|Current assets                                                                                                                      |  |      |  |               |        |  |               |  
|Loans and notes receivable                                                                                                          |  | 12   |  |               | 608    |  |               |  
|Accounts receivable and other                                                                                                       |  | 13   |  |               | 1,035  |  |               |  
|Cash and cash equivalents                                                                                                           |  |      |  |               | 1,368  |  |               |  
|                                                                                                                                    |  |      |  |               | 3,011  |  |               |  
|Total assets                                                                                                                        |  |      |  | $             | 52,446 |  |               | $
|Liabilities and equity                                                                                                              |  |      |  |               |        |  |               |  
|Non-current liabilities                                                                                                             |  |      |  |               |        |  |               |  
|Property debt                                                                                                                       |  | 14   |  | $             | 16,520 |  |               | $
|Capital securities                                                                                                                  |  | 15   |  |               | 2,181  |  |               |  
|Other non-current liabilities                                                                                                       |  | 16   |  |               | 250    |  |               |  
|Deferred tax liability                                                                                                              |  | 17   |  |               | 1,532  |  |               |  
|                                                                                                                                    |  |      |  |               | 20,483 |  |               |  
|Current liabilities                                                                                                                 |  |      |  |               |        |  |               |  
|Property debt                                                                                                                       |  | 14   |  |               | 5,120  |  |               |  
|Capital securities                                                                                                                  |  | 15   |  |               | 188    |  |               |  
|Accounts payable and other liabilities                                                                                              |  | 18   |  |               | 1,665  |  |               |  
|                                                                                                                                    |  |      |  |               | 6,973  |  |               |  
|Total liabilities                                                                                                                   |  |      |  |               | 27,456 |  |               |  
|Equity                                                                                                                              |  |      |  |               |        |  |               |  
|Limited partners                                                                                                                    |  | 19   |  |               | 2,528  |  |               |  
|General partner                                                                                                                     |  | 19   |  |               | 4      |  |               |  
|Brookfield Asset Management Inc.                                                                                                    |  | 19   |  |               | -      |  |               |  
|Non-controlling interests attributable to:                                                                                          |  |      |  |               |        |  |               |  
|Redeemable/exchangeable and special limited partner units
    of the operating partnership held by Brookfield Asset Management Inc. |  | 20   |  |               | 11,092 |  |               |  
|Interests of others in operating subsidiaries                                                                                       |  | 20   |  |               | 11,366 |  |               |  
|Total equity                                                                                                                        |  |      |  |               | 24,990 |  |               |  
|Total liabilities and equity                                                                                                        |  |      |  | $             | 52,446 |  |               | $

See accompanying notes to the consolidated
financial statements



F-4







Brookfield Property Partners L.P.

Consolidated Statements of Income



|(US$ Millions, except per unit amounts) Year ended Dec. 31,                                                                            |  | Note |  | 2013 |       |  | 2012 |   |       | 2011 | 
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|Commercial property revenue                                                                                                            |  | 21   |  | $    | 2,910 |  |      | $ | 2,858 |      | 
|Hospitality revenue                                                                                                                    |  |      |  |      | 1,168 |  |      |   | 743   |      | 
|Investment and other revenue                                                                                                           |  | 22   |  |      | 209   |  |      |   | 167   |      | 
|Total revenue                                                                                                                          |  |      |  |      | 4,287 |  |      |   | 3,768 |      | 
|Direct commercial property expense                                                                                                     |  | 23   |  |      | 1,204 |  |      |   | 1,189 |      | 
|Direct hospitality expense                                                                                                             |  | 24   |  |      | 1,081 |  |      |   | 687   |      | 
|Interest expense                                                                                                                       |  |      |  |      | 1,088 |  |      |   | 1,020 |      | 
|Administration and other expense                                                                                                       |  | 25   |  |      | 355   |  |      |   | 205   |      | 
|Total expenses                                                                                                                         |  |      |  |      | 3,728 |  |      |   | 3,101 |      | 
|Fair value gains, net                                                                                                                  |  | 26   |  |      | 870   |  |      |   | 1,227 |      | 
|Share of net earnings from equity accounted investments                                                                                |  | 8    |  |      | 835   |  |      |   | 1,235 |      | 
|Income before income taxes                                                                                                             |  |      |  |      | 2,264 |  |      |   | 3,129 |      | 
|Income tax expense                                                                                                                     |  | 17   |  |      | 501   |  |      |   | 489   |      | 
|Net income                                                                                                                             |  |      |  | $    | 1,763 |  |      | $ | 2,640 |      | 
|Net income attributable to:                                                                                                            |  |      |  |      |       |  |      |   |       |      | 
|Limited partners(1)                                                                                                                    |  |      |  | $    | 118   |  |      | $ | -     |      | 
|General partner(1)                                                                                                                     |  |      |  |      | -     |  |      |   | -     |      | 
|Brookfield Asset Management Inc.(2)                                                                                                    |  |      |  |      | 232   |  |      |   | 1,476 |      | 
|Non-controlling interests attributable to:                                                                                             |  |      |  |      |       |  |      |   |       |      | 
|Redeemable/exchangeable
    and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.(1) |  |      |  |      | 557   |  |      |   | -     |      | 
|Interests of others in operating subsidiaries                                                                                          |  | 7    |  |      | 856   |  |      |   | 1,164 |      | 
|                                                                                                                                       |  |      |  | $    | 1,763 |  |      | $ | 2,640 |      | 
|Basic and diluted
    earnings per LP Unit(1)                                                                                          |  |      |  | $    | 1.41  |  |      |   |       |      | 

| | (1) | For the period from April 15, 2013 to December 31, 2013.
                                         See Note 3.
| | --- | -------------------------------------------------------------------------------------------------------------

| | (2) | For the periods prior to April 15, 2013. See Note 3.
| | --- | ----------------------------------------------------

See accompanying notes to the consolidated financial statements



F-5







Brookfield Property Partners L.P.

Consolidated Statements of Comprehensive
Income



|(US$ Millions) Year ended Dec. 31,                                                                                                      |  | Note |  | 2013 |       |   | 2012 |   |       | 2011 | 
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                                                                                                                        |  |      |  |      |       |   |      |   |       |      | 
|Net income                                                                                                                              |  |      |  | $    | 1,763 |   |      | $ | 2,640 |      | 
|Other comprehensive (loss) income                                                                                                       |  | 27   |  |      |       |   |      |   |       |      | 
|Items that may be reclassified to net income:                                                                                           |  |      |  |      |       |   |      |   |       |      | 
|Foreign currency translation                                                                                                            |  |      |  |      | (819  | ) |      |   | 30    |      | 
|Cash flow hedges                                                                                                                        |  |      |  |      | 159   |   |      |   | (30   | )    | 
|Available-for-sale securities                                                                                                           |  |      |  |      | -     |   |      |   | 11    |      | 
|Equity accounted investments                                                                                                            |  |      |  |      | 14    |   |      |   | (6    | )    | 
|Items that will not be reclassified to net income:                                                                                      |  |      |  |      |       |   |      |   |       |      | 
|Revaluation surplus                                                                                                                     |  |      |  |      | 183   |   |      |   | 53    |      | 
|                                                                                                                                        |  |      |  |      | (463  | ) |      |   | 58    |      | 
|Total comprehensive income                                                                                                              |  |      |  | $    | 1,300 |   |      | $ | 2,698 |      | 
|                                                                                                                                        |  |      |  |      |       |   |      |   |       |      | 
|Comprehensive income attributable to:                                                                                                   |  |      |  |      |       |   |      |   |       |      | 
|Limited partners(1)                                                                                                                     |  |      |  |      |       |   |      |   |       |      | 
|Net income                                                                                                                              |  |      |  | $    | 118   |   |      | $ | -     |      | 
|Other comprehensive (loss) income                                                                                                       |  |      |  |      | (42   | ) |      |   | -     |      | 
|                                                                                                                                        |  |      |  |      | 76    |   |      |   | -     |      | 
|General partner(1)                                                                                                                      |  |      |  |      |       |   |      |   |       |      | 
|Net income                                                                                                                              |  |      |  |      | -     |   |      |   | -     |      | 
|Other comprehensive (loss) income                                                                                                       |  |      |  |      | -     |   |      |   | -     |      | 
|                                                                                                                                        |  |      |  |      | -     |   |      |   | -     |      | 
|Brookfield Asset
    Management Inc. (2)                                                                                                |  |      |  |      |       |   |      |   |       |      | 
|Net income                                                                                                                              |  |      |  |      | 232   |   |      |   | 1,476 |      | 
|Other comprehensive (loss) income                                                                                                       |  |      |  |      | (25   | ) |      |   | 57    |      | 
|                                                                                                                                        |  |      |  |      | 207   |   |      |   | 1,533 |      | 
|Interests of others in operating subsidiaries                                                                                           |  |      |  |      |       |   |      |   |       |      | 
|Net income                                                                                                                              |  |      |  |      | 856   |   |      |   | 1,164 |      | 
|Other comprehensive (loss) income                                                                                                       |  |      |  |      | (196  | ) |      |   | 1     |      | 
|                                                                                                                                        |  |      |  |      | 660   |   |      |   | 1,165 |      | 
|Redeemable/exchangeable
    and special limited partner units  of the operating partnership held by Brookfield Asset Management Inc.(1) |  |      |  |      |       |   |      |   |       |      | 
|Net income                                                                                                                              |  |      |  |      | 557   |   |      |   | -     |      | 
|Other comprehensive (loss) income                                                                                                       |  |      |  |      | (200  | ) |      |   | -     |      | 
|                                                                                                                                        |  |      |  |      | 357   |   |      |   | -     |      | 
|Total comprehensive income                                                                                                              |  |      |  | $    | 1,300 |   |      | $ | 2,698 |      | 

| | (1) | For the period from April 15, 2013 to December 31, 2013.
                                         See Note 3.
| | --- | -------------------------------------------------------------------------------------------------------------

| | (2) | For the periods prior to April 15, 2013. See Note 3.
| | --- | ----------------------------------------------------

See accompanying notes to the consolidated financial statements



F-6







Brookfield Property Partners L.P.

Consolidated Statements of Changes in Equity





|                                                   |  |                                  |         |   |                                               |   |      |                                         |  |   | Non-controlling Interests                                                                                                         |   |  |                   |      
|-------------------------------------------------- |  | -------------------------------- | ------- | - | --------------------------------------------- | - | ---- | --------------------------------------- |  | - | --------------------------------------------------------------------------------------------------------------------------------- | - |  | ----------------- | -----
|                                                   |  | Brookfield Asset Management Inc. |         |   | Limited partners                              |   |      | General partner                         |  |   | Redeemable/exchangeable and special limited partner units of  the operating partnership held by Brookfield Asset  Management Inc. |   |  |                   |      
|(US$ Millions)                                     |  | Equity                           |         |   | Accumulated Other comprehensive (loss) income |   |      | Brookfield Asset Management Inc. equity |  |   | Capital                                                                                                                           |   |  | Retained earnings |      
|Balance as at Dec. 31, 2010                        |  | $                                | 6,899   |   |                                               | $ | 305  |                                         |  | $ | 7,204                                                                                                                             |   |  | $                 | -    
|Net income                                         |  |                                  | 2,344   |   |                                               |   | -    |                                         |  |   | 2,344                                                                                                                             |   |  |                   | -    
|Other comprehensive income (loss)                  |  |                                  | -       |   |                                               |   | (155 | )                                       |  |   | (155                                                                                                                              | ) |  |                   | -    
|Total comprehensive income (loss)                  |  |                                  | 2,344   |   |                                               |   | (155 | )                                       |  |   | 2,189                                                                                                                             |   |  |                   | -    
|Contributions                                      |  |                                  | 2,582   |   |                                               |   | -    |                                         |  |   | 2,582                                                                                                                             |   |  |                   | -    
|Distributions                                      |  |                                  | (420    | ) |                                               |   | -    |                                         |  |   | (420                                                                                                                              | ) |  |                   | -    
|Balance as at Dec. 31, 2011                        |  | $                                | 11,405  |   |                                               | $ | 150  |                                         |  | $ | 11,555                                                                                                                            |   |  | $                 | -    
|Net income                                         |  |                                  | 1,476   |   |                                               |   | -    |                                         |  |   | 1,476                                                                                                                             |   |  |                   | -    
|Other comprehensive income (loss)                  |  |                                  | -       |   |                                               |   | 57   |                                         |  |   | 57                                                                                                                                |   |  |                   | -    
|Total comprehensive income (loss)                  |  |                                  | 1,476   |   |                                               |   | 57   |                                         |  |   | 1,533                                                                                                                             |   |  |                   | -    
|Contributions                                      |  |                                  | 600     |   |                                               |   | -    |                                         |  |   | 600                                                                                                                               |   |  |                   | -    
|Distributions                                      |  |                                  | (525    | ) |                                               |   | -    |                                         |  |   | (525                                                                                                                              | ) |  |                   | -    
|Balance as at Dec. 31, 2012                        |  | $                                | 12,956  |   |                                               | $ | 207  |                                         |  | $ | 13,163                                                                                                                            |   |  | $                 | -    
|Net income                                         |  |                                  | 232     |   |                                               |   | -    |                                         |  |   | 232                                                                                                                               |   |  |                   | -    
|Other comprehensive income (loss)                  |  |                                  | -       |   |                                               |   | (25  | )                                       |  |   | (25                                                                                                                               | ) |  |                   | -    
|Total comprehensive income (loss)                  |  |                                  | 232     |   |                                               |   | (25  | )                                       |  |   | 207                                                                                                                               |   |  |                   | -    
|Contributions and equity issuances of subsidiaries |  |                                  | 147     |   |                                               |   | -    |                                         |  |   | 147                                                                                                                               |   |  |                   | (8   
|Distributions                                      |  |                                  | (230    | ) |                                               |   | -    |                                         |  |   | (230                                                                                                                              | ) |  |                   | -    
|Spin-off (Note 3)                                  |  |                                  | (13,105 | ) |                                               |   | (182 | )                                       |  |   | (13,287                                                                                                                           | ) |  |                   | 2,043
|Unit issuance                                      |  |                                  | -       |   |                                               |   | -    |                                         |  |   | -                                                                                                                                 |   |  |                   | 435  
|Balance as at Dec. 31, 2013                        |  | $                                | -       |   |                                               | $ | -    |                                         |  | $ | -                                                                                                                                 |   |  | $                 | 2,470





See accompanying notes to the consolidated financial statements



F-7







Brookfield Property Partners L.P.

Consolidated Statements of Cash Flow



|(US$ Millions) Year ended December 31,                               |  | Note |  | 2013 |        |   | 2012 |   |        | 2011 | 
|-------------------------------------------------------------------- |  | ---- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|Operating activities                                                 |  |      |  |      |        |   |      |   |        |      | 
|Net income                                                           |  |      |  | $    | 1,763  |   |      | $ | 2,640  |      | 
|Share of net earnings from equity accounted investments              |  |      |  |      | (835   | ) |      |   | (1,235 | )    | 
|Fair value gains, net                                                |  |      |  |      | (870   | ) |      |   | (1,227 | )    | 
|Deferred income tax expense                                          |  | 17   |  |      | 486    |   |      |   | 368    |      | 
|Accretion of discount on loan receivable                             |  |      |  |      | -      |   |      |   | -      |      | 
|Accretion of debt discount and transaction costs                     |  |      |  |      | 24     |   |      |   | 24     |      | 
|Depreciation and amortization                                        |  |      |  |      | 164    |   |      |   | 104    |      | 
|Initial direct leasing costs                                         |  |      |  |      | (73    | ) |      |   | (56    | )    | 
|Working capital and other                                            |  |      |  |      | (238   | ) |      |   | (13    | )    | 
|                                                                     |  |      |  |      | 421    |   |      |   | 605    |      | 
|Financing activities                                                 |  |      |  |      |        |   |      |   |        |      | 
|Property debt, issuance                                              |  |      |  |      | 5,295  |   |      |   | 2,993  |      | 
|Property debt, repayments                                            |  |      |  |      | (4,846 | ) |      |   | (2,550 | )    | 
|Other secured debt, issuance                                         |  |      |  |      | 3,480  |   |      |   | 1,563  |      | 
|Other secured debt, repayments                                       |  |      |  |      | (2,239 | ) |      |   | (1,025 | )    | 
|Capital securities issued                                            |  |      |  |      | 392    |   |      |   | -      |      | 
|Capital securities redeemed                                          |  |      |  |      | (201   | ) |      |   | (153   | )    | 
|Proceeds from equity installment receivable                          |  |      |  |      | -      |   |      |   | -      |      | 
|Non-controlling interests, issued                                    |  |      |  |      | 1,128  |   |      |   | 919    |      | 
|Non-controlling interests, purchased                                 |  |      |  |      | -      |   |      |   | -      |      | 
|Distributions to non-controlling interests in operating subsidiaries |  |      |  |      | (667   | ) |      |   | (793   | )    | 
|Contributions from parent company                                    |  | 3    |  |      | 20     |   |      |   | 617    |      | 
|Distributions to parent company                                      |  | 3    |  |      | (381   | ) |      |   | (589   | )    | 
|Distributions to limited partnership unit holders                    |  |      |  |      | (56    | ) |      |   | -      |      | 
|Distributions to general partnership unit holders                    |  |      |  |      | (3     | ) |      |   | -      |      | 
|Distributions to redeemable/exchangeable unit holders                |  |      |  |      | (253   | ) |      |   | -      |      | 
|                                                                     |  |      |  |      | 1,669  |   |      |   | 982    |      | 
|Investing activities                                                 |  |      |  |      |        |   |      |   |        |      | 
|Investment properties, proceeds of dispositions                      |  |      |  |      | 1,627  |   |      |   | 823    |      | 
|Investment properties, investments                                   |  |      |  |      | (2,340 | ) |      |   | (2,208 | )    | 
|Investment in equity accounted investments                           |  |      |  |      | (168   | ) |      |   | (608   | )    | 
|Proceeds from sale of investments                                    |  |      |  |      | 296    |   |      |   | 165    |      | 
|Financial assets, acquisitions                                       |  |      |  |      | (464   | ) |      |   | -      |      | 
|Foreign currency hedges of net investments                           |  |      |  |      | (32    | ) |      |   | (41    | )    | 
|Loans and notes receivables, collected                               |  |      |  |      | 199    |   |      |   | 1,238  |      | 
|Loans and notes receivables, advanced                                |  |      |  |      | (119   | ) |      |   | (258   | )    | 
|Loan receivable from parent company, collected                       |  |      |  |      | -      |   |      |   | -      |      | 
|Loan receivable from parent company, advanced                        |  |      |  |      | -      |   |      |   | -      |      | 
|Restricted cash and deposits                                         |  |      |  |      | 4      |   |      |   | (27    | )    | 
|Acquisition of subsidiaries, net of disposition                      |  |      |  |      | 215    |   |      |   | 140    |      | 
|Capital expenditures - development and redevelopment                 |  |      |  |      | (410   | ) |      |   | (238   | )    | 
|Capital expenditures - operating properties                          |  |      |  |      | (430   | ) |      |   | (417   | )    | 
|                                                                     |  |      |  |      | (1,622 | ) |      |   | (1,431 | )    | 
|Cash and cash equivalents                                            |  |      |  |      |        |   |      |   |        |      | 
|Change in cash and cash equivalents                                  |  |      |  |      | 468    |   |      |   | 156    |      | 
|Foreign exchange revaluation                                         |  |      |  |      | 6      |   |      |   | (3     | )    | 
|Balance, beginning of year                                           |  |      |  |      | 894    |   |      |   | 741    |      | 
|Balance, end of year                                                 |  |      |  | $    | 1,368  |   |      | $ | 894    |      | 

See accompanying notes to the consolidated
financial statements



F-8







Notes to the Consolidated Financial Statements



NOTE 1: NATURE AND
DESCRIPTION OF THE PArtnership

| | a) | Brookfield Property Partners L.P.
| | -- | ---------------------------------

Brookfield Property Partners L.P. (the
“partnership”) was established on January 3, 2013 by Brookfield Asset Management Inc. (“Brookfield” or
the “parent company”) as the primary entity through which it and its affiliates will own and operate commercial and
other income producing property on a global basis.



The partnership’s sole direct investment
is a managing general partnership unit interest in Brookfield Property L.P. (the “operating partnership”), which holds
the partnership’s interest in the commercial and other income producing property operations. Prior to August 8, 2013, the
partnership’s interest in the operating partnership was comprised solely of a limited partnership interest in class A limited
partnership units (the “Class A LP Units”) of the operating partnership (see Note 1(c)).



The partnership was formed as a limited
partnership established under the laws of Bermuda, pursuant to a limited partnership agreement dated January 3, 2013, as amended
and restated on August 8, 2013 (see Note 1(c)). The partnership is a subsidiary of Brookfield. The partnership’s limited
partnership units are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbols ‘‘BPY’’
and ‘‘BPY.UN’’, respectively.



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



| | b) | Spin-off of commercial property operations
| | -- | ------------------------------------------

On April 15, 2013, Brookfield completed
a spin-off of its commercial property operations (the “Business”) to the partnership (the “Spin-off”),
which was effected by way of a special dividend of units of the partnership to holders of Brookfield’s Class A and B limited
voting shares as of March 26, 2013. Each holder of shares received one partnership unit for approximately every 17.42 shares,
representing 44.7% of the limited partnership interest in the partnership, with Brookfield retaining units of the partnership,
redeemable/exchangeable units of the operating partnership (“Redeemable/Exchangeable Units”), and a 1% general partner
interest in the operating partnership through Brookfield Property GP L.P., an indirect wholly-owned subsidiary of Brookfield,
pursuant to the agreement dated April 10, 2013, as amended on August 8, 2013 (see Note 1(c)).



Prior to the Spin-off, Brookfield effected
a reorganization (“the reorganization”) so that the partnership’s commercial property operations, including
its office, retail, multi-family, industrial and other assets, located in the United States, Canada, Australia, Brazil and Europe,
that have historically been owned and operated, both directly and through its operating entities, by Brookfield, were acquired
by three holding entities (the “holding entities”). The holding entities which were newly formed entities under the
laws of the Province of Ontario, the State of Delaware and Bermuda, were established to hold the partnership’s interest
in the Business, and the common shares of each of the holding entities are wholly-owned by the operating partnership. In consideration,
Brookfield received (i) additional units of the partnership, (ii) Redeemable/Exchangeable Units, representing an 81.8% limited
partnership interest in the operating partnership (80.1% as at December 31, 2013 – refer to Note 19(b)), and (iii) $1.25
billion of redeemable preferred shares of one of the holding entities.



c) Amendment to the partnership and
operating partnership limited partnership agreements subsequent to Spin-off

On August 8, 2013, the partnership and
Brookfield amended the partnership agreement for the operating partnership, to make the partnership the managing general partner
of the operating partnership. As a result, the voting agreement between the partnership and Brookfield, which required Brookfield
to exercise certain of its voting rights in respect of the operating partnership’s general partner as directed by the partnership,
was terminated and related changes were made to the partnership agreement of the partnership and the Master Services Agreement
(see Note 3(c)). In conjunction with the amendment of the partnership agreement for the operating partnership, the general partner
interest in the operating partnership indirectly owned by Brookfield through Brookfield Property GP L.P., which on August 8, 2013
was renamed to Brookfield Property Special L.P. (“Property Special LP”), was transferred for a special limited partnership
interest in the operating partnership, and the limited partnership interest in class A limited partnership units in the operating
partnership held by the partnership were transferred for managing general partnership units. The amendment to the partnership
agreement for the operating partnership did not change the economic interests of the partnership and Brookfield in the operating
partnership. Accordingly, the reference to Property Special LP throughout these financial statements will refer to both Brookfield
Property GP L.P. and Property Special LP.



F-9







NOTE 2: SIGNIFICANT
ACCOUNTING POLICIES

| | a) | Basis of presentation
| | -- | ---------------------

These consolidated financial statements
of the partnership and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”).



The 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. The
accounting policies set out below have been applied consistently in all material respects. Policies not effective for the current
accounting period are described in Note 4, Future Accounting Policies.



| | b) | Continuity of interests
| | -- | -----------------------

As described above, the partnership was
established on January 3, 2013 by Brookfield and on April 15, 2013, Brookfield completed the Spin-off of the Business to the partnership.
Brookfield directly and indirectly controlled the Business prior to the Spin-off and continues to control the partnership subsequent
to the Spin-off through its interests in the partnership. As a result of this continuing common control there is insufficient
substance to justify a change in the measurement of the Business. Accordingly, the partnership has reflected the Business in its
financial position and results of operations using Brookfield’s carrying values prior to the Spin-off, excluding certain
interests in Brookfield’s Australian assets and a 2% investment in The Howard Hughes Corporation, as previously reported
by Brookfield for the same periods presented herein and which were not contributed to the partnership as part of the Spin-off
(the “non-contributed operations”).



To reflect this
continuity of interests, these consolidated financial statements provide comparative information of the Business for the periods
prior to the Spin-off, as previously recorded by Brookfield, but using IFRS standards in effect for annual periods beginning on
or after January 1, 2013, which are described below. The economic and accounting impact of contractual relationships created or
modified in conjunction with the Spin-off have been reflected prospectively from the date of the Spin-off and have not been reflected
in the results of operations or financial position of the partnership prior to April 15, 2013 as such items were in fact not created
or modified prior thereto. Accordingly, the financial information for the periods prior to April 15, 2013 is presented based on
the historical financial information for the contributed operations as previously recorded by Brookfield. For the period after
completion of the Spin-off, the results are based on the actual results of the partnership, including the adjustments associated
with the Spin-off and the execution of several new and amended agreements including management service and relationship agreements
(see Note 31). Certain of these new or amended agreements resulted in differences in the basis of accounting as recorded by Brookfield
and as recorded by the partnership. These differences are more fully described in Note 3.



Prior to April 15, 2013, intercompany
transactions between the partnership and Brookfield have been included in these financial statements and are considered to be
effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these intercompany
transactions is reflected in the consolidated balance sheets as “Equity attributable to Brookfield Asset Management Inc.”



| | c) | Basis of consolidation
| | -- | ----------------------

The consolidated financial statements
include the accounts of the partnership and its consolidated subsidiaries, which are the entities over which the partnership has
control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee. The partnership reassesses whether or
not it controls an investee if facts and circumstances indicate that there are changes in the aforementioned elements of control.



When the partnership has less than a majority
of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical
ability to direct the relevant activities of the investee unilaterally. The partnership considers all relevant facts and circumstances
in assessing whether or not the partnership’s voting rights in the investee are sufficient to give it power, including:
(i) the size of the partnership’s voting rights relative to the size and dispersion of holdings of other vote holders; (ii)
potential voting rights held by the partnership; (iii) rights arising from other contractual arrangements; and (iv) any additional
other relevant facts.



Consolidation of a subsidiary begins when
the partnership obtains control over the subsidiary and ceases when the partnership loses control over the subsidiary. Income
and expenses of subsidiaries acquired or disposed of during the year are included in the results of operations from the date the
partnership acquired control until the date the partnership ceases to control the subsidiary. When necessary, adjustments are
made to the financial statements of subsidiaries to align their policies to those of the partnership.



F-10







Net income and loss and each component
of other comprehensive income are attributed to owners of the partnership and to non-controlling interests. Non-controlling interests
in the equity of the partnership’s subsidiaries and the Redeemable/Exchangeable Units held by Brookfield are shown separately
in equity in the consolidated balance sheets. Intercompany transactions have been eliminated.



As part of the Spin-off and prior to August
8, 2013, the partnership entered into a voting agreement with Brookfield under which the partnership was indirectly assigned Brookfield’s
voting rights in Property Special LP. The partnership entered into similar arrangements with various affiliates of Brookfield,
whereby the partnership effectively gained power over of the entities with respect to which voting agreements were put in place.
Accordingly, the partnership consolidated the accounts of the operating partnership and its subsidiaries prior to August 8, 2013.



On August 8, 2013, the partnership and
Brookfield amended the partnership agreement for the operating partnership, to among other things make the partnership the managing
general partner of the operating partnership. As a result, the voting agreement between the partnership and Brookfield, which
required Brookfield to exercise certain of its voting rights in respect of the operating partnership’s general partner as
directed by the partnership, was terminated. The partnership did not amend any other voting agreements previously entered into
with various affiliates of Brookfield, such that the partnership’s power over the entities previously consolidated did not
change. In conjunction with the amendment of the partnership agreement for the operating partnership, the general partner interest
in the operating partnership indirectly owned by Brookfield was transferred for a special limited partnership interest in the
operating partnership, and the limited partnership interest in class A limited partnership units in the operating partnership
held by the partnership were transferred for managing general partner units. The managing general partner units provide the partnership
with the power to direct the relevant activities of the operating partnership. Accordingly, the partnership will continue to consolidate
the operating partnership and its subsidiaries.



| | d) | Redeemable/Exchangeable Units
| | -- | -----------------------------

Beginning on April 15, 2015, the Redeemable/Exchangeable
Units may, at the request of the holder, be redeemed in whole or in part, for cash in an amount equal to the market value of one
of the partnership’s units multiplied by the number of units to be redeemed (subject to certain adjustments). This right
is subject to the partnership’s right, at its sole discretion, to elect to acquire any unit presented for redemption in
exchange for one of the partnership’s units (subject to certain customary adjustments). If the partnership elects not to
exchange the Redeemable/Exchangeable Units for units of the partnership, Redeemable/Exchangeable Units are required to be redeemed
for cash. The Redeemable/Exchangeable Units provide the holder the direct economic benefits and exposures to the underlying performance
of the operating partnership and accordingly to the variability of the distributions of the operating partnership, whereas the
partnership’s unitholders have indirect access to the economic benefits and exposures of the operating partnership through
direct ownership interest in the partnership which owned a direct interest in the Class A LP Units of the operating partnership
prior to August 8, 2013, and a managing general partnership interest on and subsequent to August 8, 2013 (see Note 1(c)). Accordingly,
the Redeemable/Exchangeable Units have been presented within non-controlling interests in the consolidated balance sheet. The
Redeemable/Exchangeable Units do not entail a contractual obligation on the part of the partnership to deliver cash and can be
settled by the partnership, at its sole discretion, by issuing a fixed number of its own equity instruments.



| | e) | Investment properties
| | -- | ---------------------

Investment properties include operating
properties held to earn rental income and properties that are being constructed or developed for future use as investment properties.
Operating properties and development properties are recorded at fair value, determined based on available market evidence, at
the balance sheet date. Related fair value gains and losses are recorded in net income in the period in which they arise.



F-11







The cost of development properties includes
direct development costs, realty taxes and borrowing costs directly attributable to the development. Borrowing costs associated
with direct expenditures on properties under development or redevelopment are capitalized. Borrowing costs are also capitalized
on the purchase cost of a site or property acquired specifically for redevelopment in the short-term but only where activities
necessary to prepare the asset for development or redevelopment are in progress. The amount of borrowing costs capitalized is
determined first by reference to borrowings specific to the project, where relevant, and otherwise by applying a weighted average
cost of borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments. Where
borrowings are associated with specific developments, the amount capitalized is the gross cost incurred on those borrowings less
any investment income arising on their temporary investment. Borrowing costs are capitalized from the commencement of the development
until the date of practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods when
development activity is interrupted. The partnership considers practical completion to have occurred when the property is capable
of operating in the manner intended by management. Generally this occurs upon completion of construction and receipt of all necessary
occupancy and other material permits. Where the partnership has pre-leased space as of or prior to the start of the development
and the lease requires the partnership to construct tenant improvements which enhance the value of the property, practical completion
is considered to occur on completion of such improvements. Initial direct leasing costs incurred by the partnership in negotiating
and arranging tenant leases are added to the carrying amount of investment properties.



| | f) | Equity accounted investments
| | -- | ----------------------------

(i) Investments in joint
ventures

A joint venture is a joint
arrangement pursuant to which the partnership and other parties that have joint control of the arrangement have rights to the
net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require unanimous consent of the parties sharing control.



Joint venture arrangements
that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled
entities. The partnership reports its interests in jointly controlled entities using the equity method of accounting. Under the
equity method, investments in jointly controlled entities are carried in the balance sheet at cost as adjusted for the partnership’s
proportionate share of post-acquisition changes in the net assets of the joint ventures, or for post-acquisition changes in any
excess of the partnership’s carrying amount over the net assets of the joint ventures, less any identified impairment loss.
When the partnership’s share of losses of a joint venture equals or exceeds its interest in that joint venture, the partnership
discontinues recognizing its share of further losses. An additional share of losses is provided for and a liability is recognized
only to the extent that the partnership has incurred legal or constructive obligations to fund the entity or made payments on
behalf of that entity.



Where the partnership undertakes
its activities under joint venture arrangements through a direct interest in the joint venture’s assets, rather than through
the establishment of a separate entity, the partnership’s share of joint venture assets, liabilities, revenues and expenses
and other comprehensive income are recognized in the financial statements and classified according to their nature.



Where the partnership transacts
with its jointly controlled entities, unrealized profits and losses are eliminated to the extent of the partnership’s interest
in the relevant joint venture. Outstanding balances between the partnership and jointly controlled entities are not eliminated
in the balance sheet.



(ii) Investment in associates

An associate is an entity
over which the investor has significant influence but not control and that is not a subsidiary or an interest in a joint venture.
The results and assets and liabilities of associates are incorporated in the financial statements using the equity method of accounting.
Under the equity method, investments in associates are carried in the balance sheet at cost as adjusted for the partnership’s
share of post-acquisition changes in the net assets of the associates, or for post-acquisition changes in any excess of the partnership’s
carrying amount over the net assets of the associates, less any identified impairment loss. When the partnership’s share
of losses of an associate equals or exceeds its interest in that associate, the partnership discontinues recognizing its share
of further losses. An additional share of losses is provided for and a liability is recognized only to the extent that the partnership
has incurred legal or constructive obligations or made payments on behalf of that associate.



Where the partnership transacts
with its associates, profits and losses are eliminated to the extent of the partnership’s interest in the relevant associate.
Balances outstanding between the partnership and associates are not eliminated in the balance sheet.



F-12







| | g) | Interests in joint operations
| | -- | -----------------------------

A joint operation is a joint arrangement
whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities related
to the arrangement. Joint control is determined by the presence of contractually agreed sharing of control which exists only when
activities over the financial and operating decisions require unanimous consent. The partnership recognizes only its assets, liabilities
and its share of the results of operations of the joint operation in accordance with the IFRSs applicable to the particular assets,
liabilities, revenues and expenses.



When the partnership transacts with a
joint operation in which the partnership is a joint operator (such as a sale or contribution of assets), the partnership is considered
to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions
are recognized in the partnership’s consolidated financial statements only to the extent of other parties’ interests
in the joint operation.



When the partnership transacts with a
joint operation in which the partnership is a joint operator (such as a purchase of assets), the partnership does not recognize
its share of the gains and losses until it resells those assets to a third party.



| | h) | Other property, plant and equipment
| | -- | -----------------------------------

The partnership
accounts for its other property, plant and equipment using the revaluation method. Other property, plant and equipment measured
using the revaluation method is initially measured at cost and subsequently carried at its revalued amount, being the fair value
at the date of the revaluation less any subsequent accumulated depreciation and any accumulated impairment losses. Revaluations
are made on an annual basis to ensure that the carrying amount does not differ significantly from fair value. Where the carrying
amount of an asset is increased as a result of a revaluation, the increase is recognized in other comprehensive income and accumulated
in equity within the revaluation surplus reserve, unless the increase reverses a previously recognized impairment recorded through
net income, in which case that portion of the increase is recognized in net income. Where the carrying amount of an asset is decreased,
the decrease is recognized in other comprehensive income to the extent of any balance existing in revaluation surplus in respect
of the asset, with the remainder of the decrease recognized in net income.



| | i) | Loans and notes receivable
| | -- | --------------------------

Loans and notes receivable are carried
at amortized cost with interest income recognized following the effective interest method. Notes receivable purchased at a discount
are also carried at amortized cost with discounts amortized over the remaining expected life of the loan following the effective
interest method.



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. For each collateralized loan, the partnership’s finance subsidiaries perform a quarterly
review of all collateral properties underlying the loans receivable. Impairment is measured based on the present value of expected
future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral
dependent.



| | j) | Taxation
| | -- | --------

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 holding entities, and any direct or indirect corporate subsidiaries of such holding entities.



Current income tax assets and liabilities
are measured at the amount expected to be paid to tax authorities by the holding entities in respect of the partnership or directly
by the partnership’s taxable subsidiaries, net of recoveries, based on the tax rates and laws enacted or substantively enacted
at the balance sheet date.



Deferred income tax liabilities are provided
for using the liability method on temporary differences between the tax bases and carrying amounts of assets and liabilities.
Deferred income tax assets are recognized for all deductible temporary differences, and carry forward of unused tax credits and
unused tax losses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized. The carrying
amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent it is no longer probable
that the income tax asset will be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realized or the liability settled, based on the tax rates and laws that have
been enacted or substantively enacted at the balance sheet date.



Current and deferred income taxes relating
to items recognized directly in equity are also recognized directly in equity.



F-13







| | k) | Provisions
| | -- | ----------

A provision is a liability of uncertain
timing or amount. Provisions are recognized when the partnership has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably
estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a discount rate that reflects current market assessments of the time value
of money and the risks specific to the obligation. Provisions are re-measured at each balance sheet date using the current discount
rate. The increase in the provision due to passage of time is recognized as interest expense.



| | l) | Foreign currencies
| | -- | ------------------

The financial statements are presented
in U.S. dollars, which is the functional currency of the partnership and the presentation currency for the financial statements.



Assets and liabilities of subsidiaries
or equity accounted investees having a functional currency other than the U.S. dollar are translated at the rate of exchange at
the balance sheet date. Revenues and expenses are translated at average rates for the period. The resulting foreign currency translation
adjustments are recognized in other comprehensive income (“OCI”).



Cumulative foreign currency translation
gains (losses) are recognized in net income when there is a disposition or partial disposition of the foreign subsidiary.



Foreign currency transactions are translated
into the functional currency using exchange rates prevailing at the date of the transactions. At the end of each reporting period,
foreign currency denominated monetary assets and liabilities are translated to the functional currency using the prevailing rate
of exchange at the balance sheet date. Gains and losses on translation of monetary items are recognized in the statements of income,
except for those related to monetary liabilities qualifying as hedges of the partnership’s investment in foreign operations
or certain intercompany loans to or from a foreign operation for which settlement is neither planned nor likely to occur in the
foreseeable future, which are included in OCI.



| | m) | Revenue recognition
| | -- | -------------------

| | (i) | Investment properties
| | --- | ---------------------

The partnership has retained
substantially all of the risks and benefits of ownership of its investment properties and therefore accounts for leases with its
tenants as operating leases. Revenue recognition under a lease commences when the tenant has a right to use the leased asset.
Generally, this occurs on the lease inception date or, where the partnership is required to make additions to the property in
the form of tenant improvements which enhance the value of the property, upon substantial completion of those improvements. The
total amount of contractual rent to be received from operating leases is recognized on a straight-line basis over the term of
the lease; a straight-line rent receivable, which is included in the carrying amount of investment property, is recorded for the
difference between the rental revenue recorded and the contractual amount received.



Rental revenue also includes
percentage participating rents and recoveries of operating expenses, including property and capital taxes. Percentage participating
rents are recognized when tenants’ specified sales targets have been met. Operating expense recoveries are recognized in
the period that recoverable costs are chargeable to tenants.



| | (ii) | Hospitality revenue
| | ---- | -------------------

Rooms, food and beverage and
other revenue are recognized as services are provided. The partnership recognizes room revenue net of taxes and levies that are
assessed by government-related agencies. Advanced deposits are deferred and included in accounts payable and other liabilities
until services are provided to the customer. The partnership recognizes the net win from casino gaming activities (the difference
between gaming wins and losses) as gaming revenue. The partnership recognizes liabilities for funds deposited by patrons before
gaming play occurs and for chips in the patrons’ possession, both of which are included in accounts payable and other liabilities.
Revenue and expenses from tour operations include the sale of travel and leisure packages and are recognized on the day the travel
package begins. Amounts collected in advance from guests are deferred and included in accounts payable and other liabilities until
such amounts are earned.



F-14







| | (iii) | Performance and management fee revenue
| | ----- | --------------------------------------

Certain of the partnership’s
operating subsidiaries are entitled to management fees and performance fees on the management of properties for third parties.
The partnership recognizes management fees as earned. The partnership recognizes performance fees in revenue when the amount receivable
from its fund partners is determinable at the end of a contractually specified term.



| | n) | Financial instruments and hedge accounting
| | -- | ------------------------------------------

Derivative instruments are recorded in
the balance sheets at fair value, including those derivatives that are embedded in financial or non-financial contracts and which
are not closely related to the host contract.



The following summarizes the partnership’s classification
and measurement of financial assets and liabilities:



|(US$ Millions)                                                           |  | Classification        |  | Measurement
    basis(1)
|------------------------------------------------------------------------ |  | --------------------- |  | ------------------------
|Financial assets                                                         |  |                       |  |                         
|Participating loan interests                                             |  | Loans and receivables |  | Amortized cost(2)       
|Loans and notes receivables                                              |  | Loans and receivables |  | Amortized cost(2)       
|Other non-current assets                                                 |  |                       |  |                         
|Securities designated as fair value through
    profit or loss (“FVTPL”) |  | FVTPL                 |  | Fair value              
|Derivative assets                                                        |  | FVTPL                 |  | Fair value              
|Securities designated as available-for-sale
    (“AFS”)                  |  | AFS                   |  | Fair value              
|Other receivables                                                        |  | Loans and receivables |  | Amortized cost          
|Accounts receivable and other                                            |  |                       |  |                         
|Accounts receivable                                                      |  | Loans and receivables |  | Amortized cost          
|Securities designated as AFS                                             |  | AFS                   |  | Fair value              
|Restricted cash                                                          |  | Loans and receivables |  | Amortized cost          
|Cash and cash equivalents                                                |  | Loans and receivables |  | Amortized cost          
|Financial liabilities                                                    |  |                       |  |                         
|Property debt                                                            |  | Other liabilities     |  | Amortized cost(1)       
|Capital securities                                                       |  | Other liabilities     |  | Amortized cost          
|Other non-current liabilities                                            |  |                       |  |                         
|Other secured debt                                                       |  | Other liabilities     |  | Amortized cost          
|Other non-current financial liabilities                                  |  | Other liabilities     |  | Amortized cost(1)       
|Accounts payable and other liabilities                                   |  | Other liabilities     |  | Amortized cost(1)       

| | (1) | Fair
                                         value gains and losses on AFS financial assets are recognized in other comprehensive
                                         income and reclassified to net income upon sale or impairment. Fair value gains and losses
                                         on financial instruments designated as FVTPL are recognized in fair value gains, net.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Except
                                         for derivatives embedded in the related financial instruments that are classified as
                                         FVTPL.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The partnership’s subsidiaries selectively
utilize derivative financial instruments primarily to manage financial risks, including interest rate and foreign exchange risks.
Derivative financial instruments are recorded at fair value determined on a credit adjusted basis.



The partnership applies hedge accounting
to derivative financial instruments in cash flow hedging relationships, and to derivative and non-derivative financial instruments
designated as hedges of net investments in subsidiaries. Hedge accounting is discontinued prospectively when the hedge relationship
is terminated or no longer qualifies as a hedge, or when the hedging item is sold or terminated.



In cash flow hedging relationships, the
effective portion of the change in the fair value of the hedging derivative is recognized in other comprehensive income (“OCI”)
while the ineffective portion is recognized in net income. Hedging gains and losses recognized in accumulated other comprehensive
income (“AOCI”) are reclassified to net income in the periods when the hedged item affects net income. Gains and losses
on derivatives are immediately reclassified to investment and other revenue when the hedged item is sold or terminated or when
it is determined that a hedged forecasted transaction is no longer probable.



In a net investment hedging relationship,
the effective portion of foreign exchange gains and losses on the hedging instruments is recognized in OCI and the ineffective
portion is recognized in net income. The amounts recorded in AOCI are recognized in net income when there is a disposition or
partial disposition of the foreign subsidiary.



Derivative instruments are recorded in
the consolidated balance sheet at fair value, including those derivatives that are embedded in financial or non-financial contracts
and which are not closely related to the host contract. Changes in the fair value of derivative instruments, including embedded
derivatives, which are not designated as hedges for accounting purposes, are recognized in fair value gains, net or administration
expense consistent with the underlying nature and purpose of the derivative instrument.



F-15







Changes in the fair value of derivative
instruments, including embedded derivatives, that are not designated as hedges for accounting purposes are recognized in fair
value gains, net or administration expense consistent with the underlying nature and purpose of the derivative instrument.



The asset or liability relating to unrealized
gains and losses on derivative financial instruments are recorded in accounts receivable and other or accounts payable and other
liabilities, respectively.



| | o) | Goodwill
| | -- | --------

Goodwill represents the excess of the
price paid for the acquisition of a consolidated entity over the fair value of the net identifiable tangible and intangible assets
and liabilities acquired. Goodwill is allocated to the cash-generating unit to which it relates. The partnership identifies cash-generating
units as identifiable groups of assets that are largely independent of the cash inflows from other assets or group of assets.



Goodwill is evaluated for impairment annually
or more often if events or circumstances indicate there may be impairment. Impairment is determined for goodwill by assessing
if the carrying value of a 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. Impairment losses recognized in respect of a cash-generating
unit are first allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets in the
cash-generating unit. Any goodwill impairment is charged to net income in the period in which the impairment is identified. Impairment
losses on goodwill are not subsequently reversed.



| | p) | Business combinations
| | -- | ---------------------

The acquisition of businesses is accounted
for using the acquisition method. The cost of an acquisition is measured at the aggregate of the fair values, at the date of exchange,
of assets given, liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3, “Business
Combinations” (“IFRS 3”), are recognized at their fair values at the acquisition date, except for non-current
assets that are classified as held-for-sale in accordance with IFRS 5, “Non-current Assets Held for Sale and Discontinued
Operations”, which are recognized and measured at fair value, less costs to sell. The interests of non-controlling shareholders
in the acquiree are initially measured at fair value or the non-controlling interests’ proportionate share of identifiable
assets, liabilities and contingent liabilities acquired.



To the extent the fair value of consideration
paid exceeds the fair value of the net identifiable tangible and intangible assets, the excess is recorded as goodwill. To the
extent the fair value of consideration paid is less than the fair value of net identifiable tangible and intangible assets, the
excess is recognized in net income.



Where a business combination is achieved
in stages, previously held interests in the acquired entity are re-measured to fair value at the acquisition date, which is the
date control is obtained, and the resulting gain or loss, if any, is recognized in net income. Amounts arising from interests
in the acquiree prior to the acquisition date that have previously been recognized in OCI are reclassified to net income. Changes
in the partnership’s ownership interest of a subsidiary that do not result in a gain or loss of control are accounted for
as equity transactions and are recorded as a component of equity. Acquisition costs are recorded as an expense in net income as
incurred.



| | q) | Intangible assets
| | -- | -----------------

Intangible assets acquired in a business
combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date. The
partnership’s intangible assets are comprised primarily of ground and retail leases and management and franchise agreements.



Subsequent to initial recognition, intangible
assets acquired in a business combination are reported at cost less accumulated amortization (unless indefinite lived) and accumulated
impairment losses, on the same basis as intangible assets acquired separately.



| | r) | Cash and cash equivalents
| | -- | -------------------------

Cash and cash equivalents include cash
and short-term investments with original maturities of three months or less.



F-16







| | s) | Earnings per limited partnership
                                         unit
| | -- | ------------------------------------------------------------------------------

The partnership calculates basic earnings
per unit by dividing net income attributable to limited partners by the weighted average number of limited partnership units outstanding
during the period. For the purpose of calculating diluted earnings per share, the partnership adjusts net income attributable
to limited partners, and the weighted average number of limited partnership units outstanding, for the effects of all dilutive
potential limited partnership units.



| | t) | Critical judgments in
                                         applying accounting policies
| | -- | -------------------------------------------------------------------------------------------

The following are the critical judgments
that have been made in applying the partnership’s accounting policies and that have the most significant effect on the amounts
in the consolidated financial statements:



| | (i) | Investment property
| | --- | -------------------

The partnership’s accounting
policies relating to investment property are described in Note 2(e). In applying these policies, judgment is applied in determining
whether certain costs are additions to the carrying amount of the property and, for properties under development, identifying
the point at which practical completion of the property occurs and identifying the directly attributable borrowing costs to be
included in the carrying value of the development property. Judgment is also applied in determining the extent and frequency of
independent appraisals.



| | (ii) | Income taxes
| | ---- | ------------

The accounting policy relating
to income taxes is described in Note 2(j). In applying this policy judgments are made in determining the probability of whether
deductions, tax credits and tax losses can be utilized. In addition, the consolidated financial statements include estimates and
assumptions for determining the future tax rates applicable to subsidiaries and identifying the temporary difference that relate
to each subsidiary. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply during
the period when the assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively enacted
at the consolidated balance sheet dates. The partnership measures deferred income taxes associated with its investment properties
based on its specific intention with respect to each asset at the end of the reporting period. Where the partnership has a specific
intention to sell a property in the foreseeable future, deferred taxes on the building portion of the investment property are
measured based on the tax consequences following from the disposition of the property. Otherwise, deferred taxes are measured
on the basis the carrying value of the investment property will be recovered substantially through use. Judgment is required in
determining the manner in which the carrying amount of each investment property will be recovered.



The partnership also makes
judgments with respect to the taxation of gains inherent in its investments in foreign subsidiaries and joint ventures. While
the partnership believes that the recovery of its original investment in these foreign subsidiaries and joint ventures will not
result in additional taxes, certain unremitted gains inherent in those entities could be subject to foreign taxes depending on
the manner of realization.



| | (iii) | Leases
| | ----- | ------

The partnership’s policy
for revenue recognition on operating properties is described in Note 2(m)(i). In applying this policy, the partnership makes judgments
with respect to whether tenant improvements provided in connection with a lease enhance the value of the leased property which
determines whether such amounts are treated as additions to operating property as well as the point in time at which revenue recognition
under the lease commences. In addition, where a lease allows a tenant to elect to take all or a portion of any unused tenant improvement
allowance as a rent abatement, the partnership must exercise judgment in determining the extent to which the allowance represents
an inducement that is amortized as a reduction of lease revenue over the term of the lease.



The partnership also makes
judgments in determining whether certain leases, in particular those tenant leases with long contractual terms where the lessee
is the sole tenant in a property and long-term ground leases where the partnership is lessor, are operating or finance leases.
The partnership has determined that all of its leases are operating leases.



F-17







| | (iv) | Financial instruments
| | ---- | ---------------------



The partnership’s accounting
policies relating to financial instruments are described in Note 2(n). The critical judgments inherent in these policies relate
to applying the criteria set out in IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”)
to designate financial instruments as FVTPL, the assessment of the effectiveness of hedging relationships, the determination of
whether the partnership has significant influence over investees with which it has contractual relationships in addition to the
financial instrument it holds and the identification of embedded derivatives subject to fair value measurement in certain hybrid
instruments.



The partnership has determined
that, notwithstanding its indirect 22% common equity interest, it does not exercise significant influence over Canary Wharf Group
plc (“CWG”), a privately-held commercial property investment and development company in the United Kingdom, as it
is not able to elect a member of the board or otherwise influence its financial and operating decisions. Accordingly, the partnership
has designated it’s investment in CWG as FVTPL.



| | (v) | Level of control
| | --- | ----------------

The partnership's accounting
policies for assessing when an investee is consolidated are included in Note 2(c). The partnership consolidates an investee when
it controls the investee, with control existing if and only if it has power over the investee; exposure, or rights, to variable
returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the
partnership's returns.



In determining if the partnership
has power over an investee the partnership makes judgments when identifying which activities of the investee are relevant in significantly
affecting returns of the investee and the extent of the partnership's existing rights that give it the current ability to direct
the relevant activities of the investee. The partnership will also make judgments as to the amount of potential voting rights
which provide the partnership or unrelated parties voting powers, the existence of contractual relationships that provide the
partnership voting power, the ability to appoint directors and the ability of other investors to remove the partnership as a manager
or general partner. The partnership has entered into voting agreements to provide the partnership with the ability to contractually
direct the relevant activities of the investee (formally referred to as a “power” within IFRS 10, “Consolidated
Financial Statements”). In assessing if the partnership has exposure, or rights, to variable returns from its involvement
with the investee the partnership makes judgments concerning whether returns from an investee are variable and how variable those
returns are on the basis of the substance of the arrangement, the size of those returns and the size of those returns relative
to others, particularly in circumstances where the partnership’s voting interest differs from its ownership interest in
an investee. In determining if the partnership has the ability to use its power over the investee to affect the amount of the
partnership's returns, the partnership makes judgments when it is an investor as to whether it is a principal or agent and whether
another entity with decision-making rights is acting as an agent for the partnership. If the partnership determines that it is
acting as an agent, as opposed to principal, it does not control the investee.



| | (vi) | Common control transactions
| | ---- | ---------------------------

IFRS does not include specific
measurement guidance for transfers of businesses or subsidiaries between entities under common control. Accordingly, the partnership
has developed a policy to account for such transactions taking into consideration other guidance in the IFRS framework and pronouncements
of other standard-setting bodies. The partnership’s policy is to record assets and liabilities recognized as a result of
transfers of businesses or subsidiaries between entities under common control at the carrying value on the transferor’s
financial statements. Differences between the carrying amount of the consideration given or received, where the partnership is
the transferor, and the carrying amount of the assets and liabilities transferred are recorded directly in equity.



| | (vii) | Business combinations
| | ----- | ---------------------

The partnership's accounting
policies relating to business combinations are described in Note 2(p). In applying these policies, judgment is applied in determining
whether an acquisition meets the definition of a business combination or an asset acquisition by considering the nature of the
assets acquired and the processes applied to those assets, or if the integrated set of assets and activities is capable of being
conducted and managed for the purpose of providing a return to investors or other owners. The determination of whether an acquisition
meets the definition of a business results in measurement differences on initial recognition of the acquired net assets. If the
acquisition is determined to be a business combination these differences include the nature of deferred tax assets and liabilities
that may be recorded and the requirement to recognize goodwill or a bargain purchase resulting in income, as applicable, for differences
between the consideration provided and the fair value of the net assets acquired. Additionally, transaction costs incurred to
effect a business combination are required to be expensed whereas for an asset acquisition transaction costs would be capitalized
to the initial carrying amount of the acquired asset.



F-18







| | (viii) | Revaluation method
                                         for property, plant, and equipment
| | ------ | ----------------------------------------------------------------------------------------------

The partnership's accounting
policies relating to property, plant and equipment accounted for under the revaluation model are described in Note 2(h). In applying
these policies judgment is required in determining the valuation model employed and the selection of appropriate assumptions used
in estimating the fair value of assets to which the revaluation model is applicable.



| | (ix) | Investments in associates
| | ---- | -------------------------

The partnership considers
the guidance in IAS 28, “Investments in Associates” (“IAS 28”) and IAS 36, “Impairment of Assets”,
to determine if there are indicators of impairment, one of which is whether there is a significant or prolonged decline in the
fair value of an investment in an equity instrument below its cost. Accordingly, the partnership considers whether the variance
between the value of the investment as determined using the publicly-traded share price and the carrying value is an indicator
of impairment.



The partnership’s evaluation
of whether there were impairment indicators present included consideration of a number of factors as required by IAS 36 including
an evaluation of the technological, market, economic and legal environment in which General Growth Properties, Inc. (“GGP”)
operates; consideration of whether GGP was, or in the near future is expected to be, in significant financial difficulty; and
an assessment of trends in actual net cash flows or operating profit or loss of GGP. Further, with respect specifically to the
variance between the value of the investment as determined using the publicly-traded share price and the carrying value, the partnership
considers additional factors relative to this variance. This includes an analysis of the original blended cost of its investment
in GGP compared to the publicly-traded share price over the period from acquisition dates through each reporting date; the trend
in the share price of GGP as at each reporting date up to and including the current date; and an assessment of the underlying
cash flows that are expected to be derived from the operating and redevelopment properties, including the significant recovery
in property values contributing to the fair value gains recorded by GGP. Where impairment indicators exist indicating a requirement
to estimate an impairment, the partnership applies judgment in estimating the recoverable amount of its investment in GGP in accordance
with IAS 36, including estimating expected future cash flows to be received from the investment, the appropriate implied dividend
yield and costs of disposal, as well as the appropriate discount rate and the terminal capitalization rate.



| | (x) | Other critical estimates
                                         and judgments
| | --- | -------------------------------------------------------------------------------

Other critical estimates and
judgments utilized in the preparation of the partnership’s financial statements are: assessment of net recoverable amounts;
net realizable values; depreciation and amortization rates and useful lives; value of goodwill and intangible assets; and the
determination of functional currency. Critical estimates and judgments also include the determination of effectiveness of financial
hedges for accounting purposes; the likelihood and timing of anticipated transactions for hedge accounting; the fair value of
assets held as collateral and the partnership’s ability to hold financial assets, and the selection of accounting policies.



| | u) | Critical accounting estimates
                                         and assumptions
| | -- | --------------------------------------------------------------------------------------

The partnership makes estimates and assumptions
that affect the carried amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amount
of earnings for the period. Actual results could differ from estimates. The estimates and assumptions that are critical to the
determination of the amounts reported in the financial statements relate to the following:



| | (i) | Investment properties
| | --- | ---------------------

The critical estimates and
assumptions underlying the valuation of operating properties and property developments are set out in Note 5.



| | (ii) | Financial instruments
| | ---- | ---------------------

The partnership determines
the fair value of its warrants to acquire common shares of GGP, which are not traded on an active market. As such, market transactions
are used when available, and a Black-Scholes option pricing model is used, when no applicable market transactions occur, wherein
it is required to make estimates and assumptions regarding the expected future volatility of GGP’s shares and the term of
the warrants.



F-19







The
partnership also has certain financial assets and liabilities with embedded participation features related to the values of investment
properties. The fair values of these features are based on the
fair values of the related investment properties and are subject to the estimates and assumptions associated with investment properties
discussed in Note 5, Investment Properties.



The partnership holds other
financial instruments that represent equity interests in investment property entities that are measured at fair value as these
financial instruments are designated as FVTPL. Estimation of the fair value of these instruments is also subject to the estimates
and assumptions associated with investment properties.



The fair value of interest
rate caps is determined based on generally accepted pricing models using quoted market interest rates for the appropriate term.
Interest rate swaps are valued at the present value of estimated future cash flows and discounted based on applicable yield curves
derived from market interest rates.



Application of the effective
interest method to certain financial instruments involves estimates and assumptions about the timing and amount of future principal
and interest payments.



NOTE
3: The SPIN-OFF

As described above, the financial information
in these consolidated financial statements for the periods prior to April 15, 2013 is presented based on the historical financial
information for the contributed operations as previously recorded by Brookfield. For the period after completion of the Spin-off,
the results are based on the actual results of the partnership, including the adjustments associated with the Spin-off and the
execution of several new and amended agreements including management service and relationship agreements. Accordingly, net income
and comprehensive income not attributable to interests of others in operating subsidiaries has been allocated to the parent company
prior to April 15, 2013 and allocated to the limited partners, the general partner and Redeemable/Exchangeable Units on and after
April 15, 2013.



The following describes the impact of
those new or amended agreements that resulted in changes to the basis of accounting for investments as recorded by Brookfield
and as recorded by the partnership.



| | a) | Redeemable/Exchangeable
                                         Units
| | -- | ----------------------------------------------------------------------

Prior to the Spin-off, Brookfield effected
a reorganization so that the partnership’s commercial property operations, including its office, retail, multi-family, industrial
and other assets, located in the United States, Canada, Australia, Brazil and Europe, that have historically been owned and operated,
both directly and through its operating entities, by Brookfield, were acquired by the holding entities. The holding entities which
were newly formed entities under the laws of the Province of Ontario, the State of Delaware and Bermuda, were established to hold
the partnership’s interest in the Business, and the common shares of each of the holding entities are wholly-owned by the
operating partnership. In consideration, Brookfield received (i) additional units of the partnership, (ii) Redeemable/Exchangeable
Units, representing an 81.8% limited partnership interest in the operating partnership (80.1% as at December 31, 2013 –
refer to Note 19(b)), and (iii) $1.25 billion of redeemable preferred shares of one of the holding entities. The Redeemable/Exchangeable
Units enable Brookfield, at its request, to redeem the units in whole or in part in exchange for cash, subject to the partnership’s
first right to acquire such interest (in lieu of such redemption) in exchange for limited partnership units of the partnership.



The impact of the Redeemable/Exchangeable
Units has not been recorded in these consolidated financial statements prior to April 15, 2013, as the Redeemable/Exchangeable
Units were not in place prior thereto.



| | b) | Investments in Australia
| | -- | ------------------------

On the date of Spin-off, the partnership
and Brookfield entered into various agreements which resulted in the holding entities (or their wholly owned subsidiaries) having
economic interests in referenced Brookfield commercial and other real property in Australia. The interests were acquired in the
form of participating loan agreements with Brookfield, which are hybrid instruments comprising an interest bearing note, a total
return swap, and an option to acquire direct or indirect legal ownership in the properties. The participating loan interests provide
the holding entities (or their wholly owned subsidiaries) with an economic interest in the results of operations and changes in
fair value of the properties. Brookfield retains the legal title to the properties through a wholly-owned subsidiary that is not
part of the Business in order to preserve existing financing arrangements. The partnership has control or significant influence
over the properties via the participating loan interests. Accordingly, the assets, liabilities and results of the entities that
have direct ownership of such properties are consolidated or accounted for under the equity method by the holding entities (or
their wholly owned subsidiaries).



F-20







These consolidated financial statements
reflect the commercial and other real property interests in Australia owned by Brookfield as direct ownership interests prior
to April 15, 2013 and reflect the impact of the participating loan agreements thereafter.



| | c) | Other arrangements with
                                         Brookfield
| | -- | ---------------------------------------------------------------------------

The partnership entered into a Master
Services Agreement with affiliates of Brookfield (the “service providers”), to provide management services to the
partnership. Pursuant to the Master Services Agreement, the partnership pays a base management fee to the service providers equal
to $12.5 million per quarter (subject to an annual escalation by a specified inflation factor beginning on January 1, 2014). Additionally,
the operating partnership pays a quarterly equity enhancement distribution to the Property Special LP of 0.3125% of the amount
by which the partnership’s total capitalization value at the end of each quarter exceeds its total capitalization value
determined immediately following the Spin-off, subject to certain adjustments. The Property Special LP also receives incentive
distributions based on an amount by which quarterly distributions on the limited partnership units of the operating partnership
exceed specified target levels as set forth in the operating partnership’s limited partnership agreement.



The impact of the above-mentioned arrangements
with Brookfield has not been recorded in these consolidated financial statements prior to April 15, 2013, as such arrangements
were not in place prior thereto.



| | d) | Allocations by Brookfield
                                         to the partnership
| | -- | -------------------------------------------------------------------------------------

Prior to April 15, 2013, the consolidated
financial statements included expenses of Brookfield allocated to the partnership for certain functions provided by Brookfield,
including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources,
communications, ethics and compliance, shared services, employee benefits and incentives and insurance. These expenses have been
allocated to the results of operations on the basis of direct usage when identifiable, with the remainder allocated on the basis
of revenue, headcount or other measures. The partnership considers the basis on which the expenses have been allocated to be a
reasonable reflection of the utilization of services provided to, or the benefit received by the Business during the periods presented.
The allocations may not, however, reflect the expense the partnership would have incurred as an independent, publicly-traded company
for the periods presented. Subsequent to the Spin-off, the partnership performs these functions through the Master Services Agreement
with, among others, Brookfield Property Partners Limited (“BPY General Partner”) (see Note 31 for a description of
related party arrangements), and such costs have been recorded in these consolidated financial statements using actual amounts.



NOTE
4: FUTURE ACCOUNTING POLICIES

The following are the accounting policies
that the partnership expects to adopt in the future:



Levies: IFRIC 21, “Levies”
(“IFRIC 21”) addresses when an entity should recognize a liability to pay a government levy other than income taxes.
IFRIC 21 is an interpretation of IAS 37, “Provisions, Contingent Liabilities and Contingent Assets” (“IAS 37”).
IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present
obligation as a result of a past event. IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy
is the activity described in the relevant legislation that triggers the payment of the levy. IFRIC 21 is effective for annual
periods beginning on or after January 1, 2014. The partnership is currently evaluating the impact of IFRIC 21 to its consolidated
financial statements.



Financial Instruments: IFRS 9,
“Financial Instruments” (“IFRS 9”) was issued by the IASB on November 12, 2009 and will replace IAS 39,
“Financial Instruments: Recognition and Measurement” (“IAS 39”). IFRS 9 uses a single approach to determine
whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in
IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash
flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing
the multiple impairment methods in IAS 39. The IASB has not finalized a mandatory adoption date. The partnership is currently
evaluating the impact of IFRS 9 to its consolidated financial statements.



F-21







NOTE 5: INVESTMENT
PROPERTIES



|                                               |  | Dec.
    31, 2013   |        |   | Dec. 31, 2012         |  
|---------------------------------------------- |  | ------------------- | ------ | - | --------------------- | -
|(US$ Millions)                                 |  | Operatingproperties |        |   | Developmentproperties |  
|                                               |  |                     |        |   |                       |  
|Balance at beginning of year                   |  | $                   | 30,211 |   |                       | $
|Property acquisitions                          |  |                     | 4,224  |   |                       |  
|Property dispositions (1)                      |  |                     | (1,340 | ) |                       |  
|Capital expenditures                           |  |                     | 514    |   |                       |  
|Reclassification of development to operating   |  |                     | -      |   |                       |  
|Fair value gains, net                          |  |                     | 805    |   |                       |  
|Change in presentation on spin-off (2)         |  |                     | (1,421 | ) |                       |  
|Change in basis of presentation(3)             |  |                     | (175   | ) |                       |  
|Foreign currency translation and other changes |  |                     | (1,139 | ) |                       |  
|Balance at end of year                         |  | $                   | 31,679 |   |                       | $



| | (1) | Property
                                         dispositions represent fair value at time of sale, or the selling price.
| | --- | --------------------------------------------------------------------------------------------------------------------------

| | (2) | Certain
                                         investment properties have been reclassified to equity accounted investments and participating
                                         loan notes to reflect the spin-off. See note 3(b).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Certain
                                         operating and development assets have been reclassified to equity accounted investments,
                                         due to the investments being held through entities that the partnership previously consolidated
                                         which are now equity accounted investments, or due to the consolidation of previously
                                         equity accounted investments.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The partnership determines the fair value
of each operating 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. Where available, the partnership determines the fair value of investment property based on sales of similar property
in the same location and in similar condition and leasing profile. Where comparable sales do not exist the partnership considers
information from a variety of sources, including: (i) discounted cash flows based on reliable estimates of future cash flows,
supported by the terms of existing lease and other contracts, and evidence such as current market rents for similar properties
in the same location and condition, using discount rates to reflect uncertainty in the amount and timing of the cash flows; (ii)
recent prices of similar properties in less active markets, with adjustments to reflect any change in economic conditions since
the date of the observed transactions that occurred at those prices, including market rents and discount or capitalization rates;
and (iii) current prices in an active market for properties of a different nature, condition or location, including differences
in leasing and other contracts.



In certain cases, these sources will suggest
different conclusions about the fair value of an investment property. In such cases, the partnership considers the reasons for
any such differences in validating the most reliable estimate of fair value. Discounted cash flow valuations are completed by
undertaking one of two accepted market valuation 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. Fair values are primarily determined by discounting the expected future cash flows as opposed to the direct capitalization
approach. 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. In circumstances where there is low uncertainty as to the timing and amount of expected cash flows, which is primarily
due to the lease profile, maturity and the market in which the property is located, a discounted cash flow approach is applied.



Development properties under active development
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
measures its operating properties and development properties using valuations prepared by management. The partnership does not
measure its properties based on valuations prepared by external valuation professionals.



Significant unobservable inputs (Level
3) are utilized when determining the fair value of investment properties. The significant Level 3 inputs include the following:



| | (i) | Discount rate: Increases (decreases)
                                         in the discount rate will decrease (increase) the fair value of investment properties;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-22







| | (ii) | Terminal capitalization rate:
                                         Increases (decreases) in the terminal capitalization rate will decrease (increase) the
                                         fair value of investment properties; and
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Investment horizon: Increases
                                         (decreases) in the investment horizon will increase (decrease) the fair value of investment
                                         properties.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The key valuation metrics for operating
properties, including properties accounted for under the equity method, are set out in the following table on a weighted-average
basis:



|                                   |  |                         |  | Dec.
    31, 2013 |      |   | Dec. 31, 2012              | 
|---------------------------------- |  | ----------------------- |  | ----------------- | ---- | - | -------------------------- | 
|                                   |  | Primary valuationmethod |  | Discount
    rate |      |   | Terminalcapitalizationrate | 
|                                   |  |                         |  |                   |      |   |                            | 
|Office                             |  |                         |  |                   |      |   |                            | 
|United States                      |  | Discounted cash flow    |  |                   | 7.4  | % |                            | 
|Canada                             |  | Discounted cash flow    |  |                   | 6.4  | % |                            | 
|Australia                          |  | Discounted cash flow    |  |                   | 8.5  | % |                            | 
|Europe                             |  | Discounted cash flow    |  |                   | 6.7  | % |                            | 
|                                   |  |                         |  |                   |      |   |                            | 
|Retail                             |  |                         |  |                   |      |   |                            | 
|United States(1)                   |  | Discounted cash flow    |  |                   | 7.6  | % |                            | 
|Australia                          |  | Discounted cash flow    |  |                   | 10.3 | % |                            | 
|Brazil                             |  | Discounted cash flow    |  |                   | 9.0  | % |                            | 
|                                   |  |                         |  |                   |      |   |                            | 
|Multi-Family, Industrial and Other |  |                         |  |                   |      |   |                            | 
|North America                      |  | Discounted cash flow    |  |                   | 8.4  | % |                            | 
|Europe                             |  | Discounted cash flow    |  |                   | 9.9  | % |                            | 
|Australia                          |  | Discounted cash flow    |  |                   | 9.5  | % |                            | 

| | (1) | The
                                         valuation method used at December 31, 2012 was the direct capitalization method. The
                                         amounts presented as the discount rate relate to the implied capitalization rate. The
                                         terminal capitalization rate and investment horizon are not applicable. Had the direct
                                         capitalization method been used at December 31, 2013, the implied overall capitalization
                                         rate would have been 5.4%.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Operating properties with a fair value
of approximately $6.2 billion (2012 – $5.5 billion) are situated on land held under leases or other agreements largely expiring
after the year 2065. Investment properties do not include any properties held under operating leases.



The following table outlines investment
properties 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 below.



Quoted market prices represent a Level
1 valuation. When quoted market prices are not available, the partnership maximizes the use of observable inputs within valuation
models. When all significant inputs are observable, the valuation is classified as Level 2. Valuations that require the significant
use of unobservable inputs are considered Level 3.



|(US$ Millions) As at December 31, 2013 |  | Level 1 |   |  | Level 2 |   |   | Level 3 | 
|-------------------------------------- |  | ------- | - |  | ------- | - | - | ------- | 
|Investment properties                  |  |         |   |  |         |   |   |         | 
|Operating properties                   |  | $       | - |  |         | $ | - |         | 
|Development properties                 |  |         | - |  |         |   | - |         | 



There were no transfers between Level
1 and Level 2 during the year.



During the year ended December 31, 2013,
the partnership capitalized a total of $490 million (2012 — $318 million) of costs related to development properties. Included
in this amount is $420 million (2012 — $251 million) of construction and related costs and $70 million (2012 — $67
million) of borrowing costs capitalized. The weighted average interest rate used for the capitalization of borrowing costs to
development properties for the year ended December 31, 2013 is 5.4% (2012 — 6.2%).



Investment properties with a fair value
of $29.4 billion (2012 – $25.7 billion) are pledged as security for property debt.



F-23







NOTE
6: Business acquisitions and combinations

The partnership accounts for business
combinations using the acquisition method of accounting, 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.



In June 2013, the partnership and certain
institutional partners, through a fund sponsored by Brookfield, acquired a 95% interest in Gazeley Limited (formerly EZW Gazeley
Limited) (“Gazeley”), a specialist developer of large scale logistics warehouses and distribution parks in key strategic
locations across the UK, Western Europe and China, for total consideration of $370 million.



In October 2013, the partnership, through
a subsidiary, acquired Industrial Developments International Inc. (“IDI”), which owns and operates a high quality
industrial portfolio, for total consideration of $595 million.



In
October 2013, the partnership, through DTLA Holdings LLC (“DTLA”), a subsidiary of BPY, completed the acquisition
of MPG Office Trust, Inc. (“MPG”), an owner and operator of office properties in Los Angeles, for $443 million.
DTLA is a fund established to invest in downtown Los Angeles office properties
that is controlled by Brookfield Office Properties Inc. (“BPO”), through its approximately 47.3% equity interest and
the powers it has as manager of the fund. The remaining equity in the fund of approximately 52.7% is held by institutional partners.
BPO and its institutional partners contributed cash and the Los Angeles assets previously held by BPO’s U.S. Office Fund,
with the exception of Marina Towers, to DTLA. DTLA now indirectly owns both BPO’s existing downtown Los Angeles office assets
and all of the assets of MPG.



In addition, during October of 2013, the
partnership acquired an additional 50% interest in 125 Old Broad Street in London for cash consideration of $128 million, bringing
its ownership in the commercial property to 100%. Prior to the acquisition date, 125 Old Broad Street was accounted for within
investments in joint ventures under the equity method of accounting with a carrying value of $136 million.



As a result of all current year acquisitions,
the partnership recorded $129 million of revenue and $67 million in net income from operations. Total revenue and net income,
including fair value changes that would have been recorded if these acquisitions had occurred at the beginning of the year, would
have been $408 million and $106 million, respectively.



The following table summarizes the balance
sheet impact of significant acquisitions during 2013 that resulted in consolidation:



|(US$ Millions)                         |  | MPG |        |   | IDI |   |      | Gazeley |  |   | 125 Old Broad Street |   |  | Other |      |   | Total |  
|-------------------------------------- |  | --- | ------ | - | --- | - | ---- | ------- |  | - | -------------------- | - |  | ----- | ---- | - | ----- | -
|Cash and cash equivalents              |  | $   | 156    |   |     | $ | 28   |         |  | $ | 40                   |   |  | $     | -    |   |       | $
|Accounts receivable and other          |  |     | 46     |   |     |   | 9    |         |  |   | 16                   |   |  |       | 26   |   |       |  
|Investment properties                  |  |     | 1,817  |   |     |   | 525  |         |  |   | 484                  |   |  |       | 460  |   |       |  
|Intangible assets                      |  |     | -      |   |     |   | -    |         |  |   | 20                   |   |  |       | -    |   |       |  
|Other non-current assets               |  |     | -      |   |     |   | 374  |         |  |   | 25                   |   |  |       | -    |   |       |  
|Total assets                           |  |     | 2,019  |   |     |   | 936  |         |  |   | 585                  |   |  |       | 486  |   |       |  
|Less:                                  |  |     |        |   |     |   |      |         |  |   |                      |   |  |       |      |   |       |  
|Accounts payable and other liabilities |  |     | (45    | ) |     |   | (46  | )       |  |   | (45                  | ) |  |       | (23  | ) |       |  
|Commercial property debt               |  |     | (1,531 | ) |     |   | (261 | )       |  |   | (119                 | ) |  |       | (207 | ) |       |  
|Non-controlling interests(1)           |  |     | -      |   |     |   | (34  | )       |  |   | (21                  | ) |  |       | -    |   |       |  
|Equity                                 |  | $   | 443    |   |     | $ | 595  |         |  | $ | 400                  |   |  | $     | 256  |   |       | $
|                                       |  |     |        |   |     |   |      |         |  |   |                      |   |  |       |      |   |       |  
|Consideration (2)                      |  | $   | 443    |   |     | $ | 595  |         |  | $ | 370                  |   |  | $     | 256  |   |       | $



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

| | (2) | Aggregate
                                         of equity and non-controlling interests net to the partnership.
| | --- | ------------------------------------------------------------------------------------------------------------------



F-24







NOTE 7: INVESTMENTS IN SUBSIDIARIES

The following table presents the partnership’s
material subsidiaries at the end of the reporting period:



|                                                                    |  | Jurisdiction of |  | Economic Interest |        |   | Voting Interest      | 
|------------------------------------------------------------------- |  | --------------- |  | ----------------- | ------ | - | -------------------- | 
|(US$ Millions)                                                      |  | Formation       |  | Dec.
    31, 2013 |        |   | Dec.
    31, 2012(1) | 
|Holding entities                                                    |  |                 |  |                   |        |   |                      | 
|Brookfield
    Property L.P.(2)                                     |  | Bermuda         |  |                   | 19     | % |                      | 
|Brookfield BPY Retail Holdings II Inc.                              |  | Ontario         |  |                   | 19     | % |                      | 
|BPY Bermuda Holdings Limited                                        |  | Bermuda         |  |                   | 19     | % |                      | 
|BPY Bermuda Holdings II Limited                                     |  | Bermuda         |  |                   | 19     | % |                      | 
|Brookfield BPY Holdings Inc.                                        |  | Ontario         |  |                   | 19     | % |                      | 
|Real estate entities                                                |  |                 |  |                   |        |   |                      | 
|Brookfield Office Properties Inc.                                   |  | Canada          |  |                   | 49     | % |                      | 
|Brookfield BPY Holdings (Australia) ULC                             |  | Canada          |  |                   | 100    | % |                      | 
|DS4 Holdings Limited                                                |  | Barbados        |  |                   | 100    | % |                      | 
|Sigma Tower Holdings LLC                                            |  | United States   |  |                   | 100    | % |                      | 
|Brookfield Brazil Retail Fundo de Investimento
    em Participações |  | Brazil          |  |                   | 35     | % |                      | 
|Multi-family(6)                                                     |  | Various         |  |                   | 13%-52 | % |                      | 
|Industrial(6)                                                       |  | Various         |  |                   | 28%-40 | % |                      | 
|Other(6)                                                            |  | Various         |  |                   | 12%-82 | % |                      | 



|(1) | Represents the economic and voting interests
    as previously presented by Brookfield prior to the Spin-off (see Note 3).                                                                                                                                                                                                                                                                     
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | BPY holds all managing general partner units of Brookfield Property
    L.P. and therefore has the power to direct the relevant activities and affairs of Brookfield Property L.P. The managing general
    partner units represent 19.0% of the total number of Brookfield Property L.P. units.                                                                                               
|(3) | Our indirect interest in BPO consists of 49.2% of the outstanding
    common shares and 97.2% of the outstanding voting preferred shares, together representing an aggregate voting interest of
    approximately 50.5% at December 31, 2013.                                                                                                                                                  
|(4) | Our Australian platform consists of our economic interest in
    certain of our Australian properties not held through BPO. This economic interest is held in the form of participating loan
    agreements with Brookfield (see Note 3(b)).                                                                                                                                                   
|(5) | We hold our economic interest in these assets primarily through
    limited partnership interests in Brookfield-sponsored private funds. By their nature, limited partnership interests do not
    have any voting rights. The partnership has entered into voting agreements to provide the partnership with the ability to
    contractually direct the relevant activities of the investees.
|(6) | Our economic interest set forth above is reflected as a range
    because our multi-family, industrial and other portfolios are primarily held through Brookfield-sponsored private funds, in
    which we hold varying interests.                                                                                                                                                             



The table below shows details of non-wholly
owned subsidiaries of the partnership that have material non-controlling interests:





|                                                                |  | Jurisdiction of |  | Proportion
    of economic interests held bynon-controlling interests |        |   | Profit (loss)
    allocated to non-controlling interests |  |        | Non-controlling
    interests | 
|--------------------------------------------------------------- |  | --------------- |  | --------------------------------------------------------------------- | ------ | - | -------------------------------------------------------- |  | ------ | ----------------------------- | 
|(US$ Millions)                                                  |  | Formation       |  | Dec.
    31, 2013                                                     |        |   | Dec. 31, 2012(1)                                         |  |        | Dec.
    31, 2013             | 
|Brookfield Office Properties Inc.                               |  | Canada          |  |                                                                       | 51     | % |                                                          |  | 50     | %                             | 
|Brookfield Brazil Retail Fundo de Investimento em Participações |  | Brazil          |  |                                                                       | 65     | % |                                                          |  | 65     | %                             | 
|IDI Realty, LLC(2)                                              |  | United States   |  |                                                                       | 72     | % |                                                          |  | 67     | %                             | 
|BREF ONE, LLC                                                   |  | United States   |  |                                                                       | 67     | % |                                                          |  | 67     | %                             | 
|Gazeley Limited(3)                                              |  | United Kingdom  |  |                                                                       | 72     | % |                                                          |  | n/a    |                               | 
|BSREP Australia Trust                                           |  | Australia       |  |                                                                       | n/a    |   |                                                          |  | 80     | %                             | 
|Other                                                           |  |                 |  |                                                                       | 18%-88 | % |                                                          |  | 18%-87 | %                             | 
|Total                                                           |  |                 |  |                                                                       |        |   |                                                          |  |        |                               | 





|(1) | Represents the proportion of ownership interests
    held by non-controlling interests and related profit (loss) and non-controlling interests as previously presented by Brookfield
    prior to the Spin-off (see Note 3).                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Information for the year ended and as at December 31, 2012 relates
    to Verde Realty Operating Partnership, L.P. ("Verde"). In October 2013, we acquired IDI through Verde and are in
    the process of integrating both companies. Both investments were made through the Brookfield Strategic Real Estate Partners
    fund, in which the partnership is the lead investor.
|(3) | Gazeley was acquired through the Brookfield Strategic Real Estate
    Partners fund, in which the partnership is the lead investor.                                                                                                                                                                                                                                             



F-25







Summarized financial information in respect
of each of the partnership’s subsidiaries that has material non-controlling interests is set out below. The summarized financial
information below represents amount before intercompany eliminations.



|                                             |  | Brookfield Office Properties |        |  | Brookfield Brazil Retail Fundo de Investimento
    em Participações |   |        | IDI Realty, Inc. |  |   | Gazeley Limited |  
|-------------------------------------------- |  | ---------------------------- | ------ |  | ------------------------------------------------------------------- | - | ------ | ---------------- |  | - | --------------- | -
|(US$ Millions) As at and for the year ended  |  | Dec. 31, 2013                |        |  | Dec. 31, 2012                                                       |   |        | Dec. 31, 2013    |  |   | Dec. 31, 2012   |  
|Current assets                               |  | $                            | 1,237  |  |                                                                     | $ | 1,128  |                  |  | $ | 115             |  
|Non-current assets                           |  |                              | 29,654 |  |                                                                     |   | 26,351 |                  |  |   | 1,936           |  
|Total assets                                 |  |                              | 30,891 |  |                                                                     |   | 27,479 |                  |  |   | 2,051           |  
|Current liabilities                          |  |                              | 3,364  |  |                                                                     |   | 2,930  |                  |  |   | 38              |  
|Non-current liabilities                      |  |                              | 13,709 |  |                                                                     |   | 11,585 |                  |  |   | 749             |  
|Total liabilities                            |  |                              | 17,073 |  |                                                                     |   | 14,515 |                  |  |   | 787             |  
|Equity attributable to owners of the company |  |                              | 12,333 |  |                                                                     |   | 11,431 |                  |  |   | 328             |  
|Non-controlling interests                    |  |                              | 1,485  |  |                                                                     |   | 1,533  |                  |  |   | 936             |  
|Revenue                                      |  |                              | 2,304  |  |                                                                     |   | 2,195  |                  |  |   | 142             |  
|Net income                                   |  |                              | 1,222  |  |                                                                     |   | 1,468  |                  |  |   | 44              |  
|Net income attributable to:                  |  |                              |        |  |                                                                     |   |        |                  |  |   |                 |  
|Owners of the company                        |  |                              | 1,091  |  |                                                                     |   | 1,287  |                  |  |   | 6               |  
|Non-controlling interests                    |  |                              | 131    |  |                                                                     |   | 181    |                  |  |   | 39              |  
|Total comprehensive income attributable to:  |  |                              |        |  |                                                                     |   |        |                  |  |   |                 |  
|Owners of the company                        |  |                              | 827    |  |                                                                     |   | 1,338  |                  |  |   | (11             | )
|Non-controlling interests                    |  |                              | 86     |  |                                                                     |   | 197    |                  |  |   | (9              | )
|                                             |  |                              | 913    |  |                                                                     |   | 1,535  |                  |  |   | (20             | )
|Dividends paid to non-controlling interests  |  | $                            | 221    |  |                                                                     | $ | 210    |                  |  | $ | -               |  



Given that BPO is a publicly listed entity
subject to independent governance, the partnership has no direct access to the assets of this subsidiary. Certain of the partnership’s
subsidiaries are subject to restrictions over the extent to which they can remit funds to the partnership in the form of cash
dividends, or repayment of loans and advances as a result of borrowing arrangements, regulatory restrictions and other contractual
requirements.



NOTE 8: Equity Accounted
INVESTMENTS

The partnership has investments in joint
arrangements that are joint ventures, and also has investments in associates. Details of the partnership’s investments in
joint ventures and associates, which have been accounted for following the equity method, are as follows:



|                                          |  |                              |  | Principal Place |  | Proportion
    of Ownership Interests/ VotingRights Held by the Partnership |        |   | Carrying Value       | 
|----------------------------------------- |  | ---------------------------- |  | --------------- |  | --------------------------------------------------------------------------- | ------ | - | -------------------- | 
|(US$ Millions)                            |  | Principal Activity           |  | of Business     |  | Dec.
    31, 2013                                                           |        |   | Dec.
    31, 2012(1) | 
|Joint Ventures                            |  |                              |  |                 |  |                                                                             |        |   |                      | 
|245 Park Avenue, New York                 |  | Property holding company     |  | United States   |  |                                                                             | 51     | % |                      | 
|Grace Building, New York                  |  | Property holding company     |  | United States   |  |                                                                             | 50     | % |                      | 
|450 West 33rd Street, New York            |  | Property holding company     |  | United States   |  |                                                                             | 75     | % |                      | 
|E&Y Complex, Sydney                       |  | Property holding company     |  | Australia       |  |                                                                             | 50     | % |                      | 
|Other                                     |  | Various                      |  | Various         |  |                                                                             | 13%-83 | % |                      | 
|                                          |  |                              |  |                 |  |                                                                             |        |   |                      | 
|Associates                                |  |                              |  |                 |  |                                                                             |        |   |                      | 
|GGP(2,3)                                  |  | Real Estate Investment Trust |  | United States   |  |                                                                             | 28     | % |                      | 
|Rouse Properties,
    Inc. (“Rouse”)(2,3) |  | Real Estate Investment Trust |  | United States   |  |                                                                             | 39     | % |                      | 
|Other                                     |  | Various                      |  | Various         |  |                                                                             | 24%-42 | % |                      | 
|                                          |  |                              |  |                 |  |                                                                             |        |   |                      | 
|Total                                     |  |                              |  |                 |  |                                                                             |        |   |                      | 



|(1) | Represents proportion of
    ownership interest as previously presented by Brookfield prior to the Spin-off. See Note 3.                                                                                                                                                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | In November 2013, the partnership acquired an incremental interest
    of common shares and warrants of GGP and common shares of Rouse for total consideration of $1,431 million (comprised of the
    issuance of $435 million of limited partnership units to institutional investors and $996 million of Redemption-Exchange units
    to Brookfield (see Notes 19 and 31), increasing the partnership's net economic interest in GGP and Rouse to 28% and 39%, respectively.
|(3) | The 23% and 43% ownership interests at December 31, 2012 relate
    to the partnership's consolidated ownership in GGP and Rouse, respectively, which includes the interests of fund investors
    controlled by the partnership and which are required to be consolidated in the partnership's financial statements. The partnership's
    net economic interests in GGP and Rouse were 21% and 36%, respectively.                                                             



Other jointly controlled entities hold
individual operating properties and property developments that the partnership owns together with co-owners where the strategic
financial and operating decisions require approval of the co-owners.



F-26







In the fourth quarter of 2013, the partnership
recorded $290 million of fair values gains within share of net earnings from equity accounted investments from its investment
in GGP which was a result of its redevelopments progressing ahead of projections and an increase in budgeted net operating income
across the portfolio. Since a significant portion of goodwill recorded on the acquisition of 11% of GGP’s common shares
in 2011 was associated with the redevelopment options within the portfolio, the partnership recorded a $249 million impairment
of goodwill resulting in a carrying value of $6.0 billion for the partnership’s interest in GGP. Management reviewed the
carrying value of its investment in GGP, including the embedded goodwill, for impairment in consideration of, among other factors,
the prolonged period of variance between the value of the investment as determined using the publicly-traded share price and the
carrying value of the investment. Management also reviewed the operating performance and financial condition of GGP, including
the status of the redevelopment properties portfolio, to which a portion of the embedded goodwill was ascribed on initial acquisition
of the partnership’s investment in GGP.  The partnership recorded $397 million of fair value gains in the year ended
December 31, 2013, including fair value gains related to the redevelopment properties. Management gave consideration to the impact
of the fair value gains recorded and considered whether the amount of fair value gains represented a realization of an amount
of the initial value ascribed to goodwill, related to such redevelopment properties on initial acquisition of the investment,
which is embedded within the carrying value of the investment. Management determined that, based on the fair value gains recorded
in fiscal 2013, a portion of the carrying value related to the embedded goodwill ascribed to these redevelopment properties was
realized and management estimated the recoverable amount to be the value in use of the investment in GGP discounting the expected
cash flows to be received in the form of dividends plus the disposition value of the investment and accordingly recognized an
impairment loss, included within share of net earnings from equity accounted investments in the consolidated statement of income,
on its investment in GGP for the year ended December 31, 2013.



The fair value of the common shares of
GGP consolidated by the partnership based on the trading price of GGP common stock as of December 31, 2013 is $5.1 billion (December 31,
2012 - $4.2 billion). The fair value of the common shares of Rouse held by the partnership based on the trading price of Rouse
common stock as of December 31, 2013 is $430 million (December 31, 2012 - $358 million). There are no published prices for the
partnership’s other equity accounted investments.



The following table presents the change
in the balance of investments in associates and equity accounted joint ventures:



|(US$ Millions)                             |  | Dec. 31, 2013 |        |   | Dec. 31, 2012 |  
|------------------------------------------ |  | ------------- | ------ | - | ------------- | -
|Balance at beginning of year               |  | $             | 8,038  |   |               | $
|Additions, net of disposals                |  |               | 1,386  |   |               |  
|Acquisitions through business combinations |  |               | 346    |   |               |  
|Share of net income, net of impairments    |  |               | 835    |   |               |  
|Share of other comprehensive income        |  |               | -      |   |               |  
|Distributions received                     |  |               | (236   | ) |               |  
|Foreign exchange                           |  |               | (29    | ) |               |  
|Change in basis of presentation(1)         |  |               | (1,025 | ) |               |  
|Other                                      |  |               | (34    | ) |               |  
|Balance at end of year                     |  | $             | 9,281  |   |               | $



|(1) | Reflects certain equity accounted investments
    that were reclassified to participating loan notes to reflect the Spin-off (see Note 3). In addition, reflects changes in
    the ownership interests in GGP and Rouse as a result of changes to the ownership structure which previously included the interests
    of certain fund investors controlled and consolidated by the partnership.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following tables present the gross
assets and liabilities and gross income of the partnership’s investments in joint ventures associates and associates:



|                               |  | Dec. 31, 2013  |       |  | Dec. 31, 2012           |  
|------------------------------ |  | -------------- | ----- |  | ----------------------- | -
|(US$ Millions)                 |  | Current Assets |       |  | Non-current 
    Assets |  
|Joint Ventures                 |  |                |       |  |                         |  
|245 Park Avenue, New York      |  | $              | 20    |  |                         | $
|450 West 33rd Street, New York |  |                | 59    |  |                         |  
|Grace Building, New York       |  |                | 15    |  |                         |  
|Bourke Place Trust, Sydney     |  |                | -     |  |                         |  
|Darling Park Complex, Sydney   |  |                | -     |  |                         |  
|E&Y Complex, Sydney            |  |                | 2     |  |                         |  
|Other                          |  |                | 283   |  |                         |  
|                               |  |                | 379   |  |                         |  
|Investments in Associates      |  |                |       |  |                         |  
|GGP                            |  |                | 1,132 |  |                         |  
|Rouse                          |  |                | 99    |  |                         |  
|Other                          |  |                | 85    |  |                         |  
|                               |  |                | 1,316 |  |                         |  
|Total                          |  | $              | 1,695 |  |                         | $

F-27







|                               |  | Year
    ended Dec. 31, 2013 |      
|------------------------------ |  | ---------------------------- | -----
|(US$ Millions)                 |  | Revenue                      |      
|Joint Ventures                 |  |                              |      
|245 Park Avenue, New York      |  | $                            | 145  
|450 West 33rd Street, New York |  |                              | 48   
|Grace Building, New York       |  |                              | 100  
|Bourke Place Trust, Sydney     |  |                              | 11   
|Darling Park Complex, Sydney   |  |                              | 26   
|E&Y Complex, Sydney            |  |                              | 44   
|Other                          |  |                              | 189  
|                               |  |                              | 563  
|Investments in Associates      |  |                              |      
|GGP                            |  |                              | 3,079
|Rouse                          |  |                              | 263  
|Other                          |  |                              | 496  
|                               |  |                              | 3,838
|Total                          |  | $                            | 4,401



|                               |  | Year ended Dec. 31,
    2012 |      
|------------------------------ |  | ---------------------------- | -----
|(US$ Millions)                 |  | Revenue                      |      
|Joint Ventures                 |  |                              |      
|245 Park Avenue, New York      |  | $                            | 144  
|450 West 33rd Street, New York |  |                              | 51   
|Grace Building, New York       |  |                              | 100  
|Bourke Place Trust, Sydney     |  |                              | 5    
|Darling Park Complex, Sydney   |  |                              | 106  
|E&Y Complex, Sydney            |  |                              | 45   
|Other                          |  |                              | 315  
|                               |  |                              | 766  
|Investments in Associates      |  |                              |      
|GGP                            |  |                              | 3,102
|Rouse                          |  |                              | 258  
|Other                          |  |                              | 548  
|                               |  |                              | 3,908
|Total                          |  | $                            | 4,674



|                               |  | Year ended Dec. 31, 2011 |      
|------------------------------ |  | ------------------------ | -----
|(US$ Millions)                 |  | Revenue                  |      
|Joint Ventures                 |  |                          |      
|245 Park Avenue, New York      |  | $                        | 130  
|450 West 33rd Street, New York |  |                          | 35   
|Grace Building, New York       |  |                          | 38   
|Bourke Place Trust, Sydney     |  |                          | 51   
|Darling Park Complex, Sydney   |  |                          | 98   
|E&Y Complex, Sydney            |  |                          | 53   
|Other                          |  |                          | 1,031
|                               |  |                          | 1,436
|Investments in Associates      |  |                          |      
|GGP                            |  |                          | 3,353
|Other                          |  |                          | 520  
|                               |  |                          | 3,873
|Total                          |  | $                        | 5,309





F-28







Certain of the partnership’s investment
in associates are subject to restrictions over the extent to which they can remit funds to the partnership in the form of the
cash dividends or repayment of loans and advances as a result of borrowing arrangements, regulatory restrictions and other contractual
requirements.



Note 9: INVestments
in Joint Operations

The partnership’s interests in the
following properties are subject to joint control and, accordingly, the partnership has recorded its share of the assets, liabilities,
revenue and expenses of the properties in these consolidated financial statements:



|                                                  |  |                      |  | Place of Incorporationand Principal Place of |  | Proportion of Economic Interests Held by thePartnership |   
|------------------------------------------------- |  | -------------------- |  | -------------------------------------------- |  | ------------------------------------------------------- | --
|Name of Entity and Name of Property               |  | Principal Activity   |  | Business                                     |  | Dec.
    31, 2013                                       |   
|Brookfield Place – Retail & Parking               |  | Property             |  | Toronto                                      |  |                                                         | 56
|Brookfield Place III                              |  | Development property |  | Toronto                                      |  |                                                         | 54
|Exchange Tower                                    |  | Property             |  | Toronto                                      |  |                                                         | 50
|First Canadian Place(2)                           |  | Property             |  | Toronto                                      |  |                                                         | 25
|151 Yonge Street                                  |  | Property             |  | Toronto                                      |  |                                                         | 25
|2 Queen Street East                               |  | Property             |  | Toronto                                      |  |                                                         | 25
|Bankers Hall                                      |  | Property             |  | Calgary                                      |  |                                                         | 50
|Bankers Court                                     |  | Property             |  | Calgary                                      |  |                                                         | 50
|Bankers West Parkade                              |  | Development property |  | Calgary                                      |  |                                                         | 50
|Suncor Energy Centre                              |  | Property             |  | Calgary                                      |  |                                                         | 50
|Fifth Avenue Place                                |  | Property             |  | Calgary                                      |  |                                                         | 50
|Place de Ville I                                  |  | Property             |  | Ottawa                                       |  |                                                         | 25
|Place de Ville II                                 |  | Property             |  | Ottawa                                       |  |                                                         | 25
|Jean Edmonds Towers                               |  | Property             |  | Ottawa                                       |  |                                                         | 25
|300 Queen Street                                  |  | Development property |  | Ottawa                                       |  |                                                         | 25
|KPMG Tower(3)                                     |  | Property             |  | Sydney                                       |  |                                                         | 50
|World Square Retail(3)                            |  | Property             |  | Sydney                                       |  |                                                         | 50
|52 Goulburn Street(3)                             |  | Property             |  | Sydney                                       |  |                                                         | 50
|235 St Georges Terrace(3)                         |  | Property             |  | Perth                                        |  |                                                         | 50
|108 St Georges Terrace(3)                         |  | Property             |  | Perth                                        |  |                                                         | 50
|Shopping Patio Paulista                           |  | Property             |  | São Paulo                                    |  |                                                         | 60
|Shopping Patio Paulista - Expansion               |  | Development property |  | São Paulo                                    |  |                                                         | 44
|Shopping Mogi                                     |  | Property             |  | São Paulo                                    |  |                                                         | 63
|Shopping Patio Higienópolis                       |  | Property             |  | São Paulo                                    |  |                                                         | 25
|Shopping Patio Higienópolis - Expansion           |  | Development property |  | São Paulo                                    |  |                                                         | 32
|Shopping Cidade                                   |  | Property             |  | Belo Horizonte                               |  |                                                         | 50
|Shopping Raposo                                   |  | Property             |  | São Paulo                                    |  |                                                         | 60
|West Shopping                                     |  | Property             |  | São Paulo                                    |  |                                                         | 45
|Shopping Patio Higienópolis - Co-Invest           |  | Development property |  | São Paulo                                    |  |                                                         | 5 
|Shopping Patio Higienópolis Expansion - Co-Invest |  | Property             |  | São Paulo                                    |  |                                                         | 6 



|(1) | Represents the economic
    interests as previously presented by Brookfield prior to the Spin-off. See Note 3.                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | First Canadian Place in Toronto is subject to a ground lease
    with respect to 50% of the land on which the property is situated. At the expiry of the ground lease, the other land owner
    will have the option to acquire, for a nominal amount, an undivided 50% beneficial interest in the property.   
|(3) | The partnership exercises joint control over these jointly controlled
    assets through a participating loan agreement with Brookfield that is convertible by the partnership at any time into a direct
    equity interest in the entities that have a direct co-ownership interest in the underlying assets.



NOTE 10: 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 classified as loans and receivables and accounted for at amortized cost. The instruments, which are receivable
from a wholly-owned subsidiary of Brookfield, 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.



F-29







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



|(US$ Millions)                     |  |                        |      |  |          |               |               |   |     |                      | 
|---------------------------------- |  | ---------------------- | ---- |  | -------- | ------------- | ------------- | - | --- | -------------------- | 
|Name of Property                   |  | Participation Interest |      |  | Maturity |               | Dec. 31, 2013 |   |     | Dec.
    31, 2012(1) | 
|Darling Park Complex, Sydney       |  |                        | 30%  |  |          | Sep. 26, 2020 |               | $ | 161 |                      | 
|IAG House, Sydney                  |  |                        | 50%  |  |          | Sep. 26, 2020 |               |   | 110 |                      | 
|NAB House, Sydney                  |  |                        | 25%  |  |          | Sep. 26, 2020 |               |   | 105 |                      | 
|Bourke Place Trust, Melbourne      |  |                        | 43%  |  |          | Sep. 26, 2020 |               |   | 174 |                      | 
|Jessie Street, Sydney              |  |                        | 100% |  |          | Feb. 1, 2023  |               |   | 130 |                      | 
|Fujitsu Centre, Sydney             |  |                        | 100% |  |          | Feb. 1, 2023  |               |   | 30  |                      | 
|Infrastructure House, Canberra     |  |                        | 100% |  |          | Feb. 1, 2023  |               |   | 37  |                      | 
|Total participating loan interests |  |                        |      |  |          |               |               | $ | 747 |                      | 

| | (1) | Reflects
                                         the participating loan notes as outstanding effective firm date of Spin-off (see Note
                                         3(b)).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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. The carrying value of the embedded derivative at December 31, 2013 was $56 million (December
31, 2012 – $48 million). For year ended December 31, 2013, the partnership recognized interest income of $40 million (2012
– nil) on the participating loan interests and fair value gains on the associated embedded derivative of $19 million (2012
– nil).



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



|(US$ Millions)          |  | Dec. 31, 2013 |       |  | Dec. 31, 2012 |  
|----------------------- |  | ------------- | ----- |  | ------------- | -
|Non-current assets      |  | $             | 2,678 |  |               | $
|Current assets          |  |               | 53    |  |               |  
|Total assets            |  |               | 2,731 |  |               |  
|Non-current liabilities |  |               | 363   |  |               |  
|Current liabilities     |  |               | 660   |  |               |  
|Total liabilities       |  |               | 1,023 |  |               |  
|Net assets              |  | $             | 1,708 |  |               | $



|(US$ Millions) Year end Dec. 31,      |  | 2013 |      |   | 2012 |   |   | 2011 | 
|------------------------------------- |  | ---- | ---- | - | ---- | - | - | ---- | 
|Revenue                               |  | $    | 237  |   |      | $ | - |      | 
|Expense                               |  |      | (116 | ) |      |   | - |      | 
|Earnings before fair value gains, net |  |      | 121  |   |      |   | - |      | 
|Fair value gains, net                 |  |      | 59   |   |      |   | - |      | 
|Net earnings                          |  | $    | 180  |   |      | $ | - |      | 



NOTE 11: other NON-CURRENT
ASSETS

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



|(US$ Millions)              |  | Dec. 31, 2013 |       |  | Dec. 31, 2012 |  
|--------------------------- |  | ------------- | ----- |  | ------------- | -
|Hotel operating assets      |  | $             | 2,432 |  |               | $
|Securities designated FVTPL |  |               | 1,068 |  |               |  
|Derivative assets           |  |               | 868   |  |               |  
|Securities designated AFS   |  |               | 124   |  |               |  
|Goodwill                    |  |               | 120   |  |               |  
|Intangible assets           |  |               | 326   |  |               |  
|Other                       |  |               | 296   |  |               |  
|Other non-current assets    |  | $             | 5,234 |  |               | $



Hotel operating assets are presented on
a cost basis net of accumulated fair value changes and accumulated depreciation. Accumulated fair value changes include unrealized
revaluations of property, plant and equipment using the revaluation method, which are recorded in revaluation surplus as a component
of equity, as well as unrealized impairment losses recorded in net income. The partnership determines the fair value for these
assets by discounting the expected future cash flows using internal valuations. The partnership also obtained valuations prepared
by external valuation professionals as at December 31, 2013 to assist in determining fair value, but external valuations are not
necessarily indicative of fair value, and accordingly are used as another data point management to ultimately conclude on the
fair value estimate determined. The hotel operating assets are pledged as collateral for the property debt at their respective
properties.



F-30







Significant unobservable inputs (Level
3) are utilized when determining the fair value of hotel properties. The significant Level 3 inputs include the following:



| | (i) | Discount rate: Increases (decreases)
                                         in the discount rate will decrease (increase) the fair value of investment properties;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | Terminal capitalization rate:
                                         Increases (decreases) in the terminal capitalization rate will decrease (increase) the
                                         fair value of investment properties; and
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Investment horizon: Increases
                                         (decreases) in the investment horizon will increase (decrease) the fair value of investment
                                         properties.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Key valuation assumptions included a weighted
average discount rate of 10.5% (2012 – 9.9%), terminal capitalization rate of 7.6% (2012 – 7.5%), and investment horizon
of 7 years (2012 – 5 years).



The table below presents the change to
the components of the hotel operating asset value from the beginning of the year:



|(US$ Millions)                          |  | Dec. 31, 2013 |       |   | Dec. 31, 2012 |  
|--------------------------------------- |  | ------------- | ----- | - | ------------- | -
|Cost                                    |  |               |       |   |               |  
|Balance at the beginning of the year    |  | $             | 3,129 |   |               | $
|Additions, net of disposals             |  |               | 133   |   |               |  
|Additions through business combinations |  |               | -     |   |               |  
|Foreign exchange translation            |  |               | (85   | ) |               |  
|Change
    in basis of presentation (1) |  |               | (608  | ) |               |  
|                                        |  |               | 2,569 |   |               |  
|Accumulated fair value changes          |  |               |       |   |               |  
|Balance at the beginning of the year    |  |               | 1     |   |               |  
|Increase from revaluation               |  |               | 138   |   |               |  
|Provision for impairment                |  |               | (7    | ) |               |  
|Disposals                               |  |               | (3    | ) |               |  
|                                        |  |               | 129   |   |               |  
|Accumulated depreciation                |  |               |       |   |               |  
|Balance at the beginning of the year    |  |               | (160  | ) |               |  
|Depreciation                            |  |               | (125  | ) |               |  
|Change
    in basis of presentation (1) |  |               | 19    |   |               |  
|                                        |  |               | (266  | ) |               |  
|Total
    hotel operating assets        |  | $             | 2,432 |   |               | $



| | (1) | Certain
                                         hotel operating assets in Australia, which are held through an entity which was previously
                                         consolidated by the partnership through to September 29, 2013, have been reclassified
                                         to equity accounted investments as of September 30, 2013.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Included in equity securities designated
as FVTPL is our indirect 22% common equity interest in CWG, a privately held commercial property investment and development company
in the United Kingdom.



Derivative assets include the carrying
amount of warrants to purchase shares of common stock of GGP with a carrying amount of $868 million (December 31, 2012 - $538
million). The fair value of the warrants as December 31, 2013 was determined using a Black-Scholes option pricing model, assuming
a 3.9 year term (December 31, 2012 - 4.9 year term), 51% volatility (December 31, 2012 - 48% volatility), and a risk free interest
rate of 1.49% (December 31, 2012 - 0.72%).



Securities designated as AFS include $105
million (December 31, 2012 - $105 million) representing the partnership’s common and preferred equity interest in an office
property in Washington, D.C. which is pledged as security for a loan payable to the issuer of $92 million (December 31, 2012 -
$92 million) recognized in other non-current liabilities. Also included in securities designated as AFS are commercial mortgage-backed
securities with an estimated fair value of nil (December 31, 2012 - $34 million) and securities with a fair value of $19 million
(December 31, 2012 - $69 million).



Goodwill represents a portfolio premium
recognized in connection with the historical purchase of the partnership’s Brazilian retail assets.



Intangible assets are presented on a cost
basis net of accumulated amortization and impairment losses. They primarily represent the trademark and licensing assets we acquired
as part of our acquisitions of Paradise Island Holdings Limited (“Atlantis”) and BREF HR, LLC. (“Hard Rock”).
As of December 31, 2013, the amount of accumulated amortization was $43 million (December 31, 2012, - $26 million).



F-31







Included in other non-current assets is
a $89 million (December 31, 2012 - $148 million) receivable upon the earlier of the exercise by the partnership, or BPO, a 51%
owned subsidiary of the partnership, of their options to acquire direct ownership of certain properties in the Australian portfolio
from a subsidiary of Brookfield on the maturity of the related loans.



NOTE 12: LOANS AND
NOTES RECEIVABLE

Loans and notes receivable reside primarily in the partnership’s
real estate finance funds and are generally secured by commercial and other income producing real property.



|(US$ Millions)             |  | Interest Rate                 |  | Maturity Date                    |  | Dec. 31, 2013 |     |  | Dec. 31, 2012 |  
|-------------------------- |  | ----------------------------- |  | -------------------------------- |  | ------------- | --- |  | ------------- | -
|Fixed rate                 |  | 2.50% to 7.00%                |  | On sale                          |  | $             | 21  |  |               | $
|Variable rate              |  | US LIBOR plus 1.40% to 11.00% |  | On demand to 2014 and completion |  |               | 607 |  |               |  
|                           |  |                               |  |                                  |  | $             | 628 |  |               | $
|                           |  |                               |  |                                  |  |               |     |  |               |  
|Current                    |  |                               |  | On demand to 2014                |  | $             | 608 |  |               | $
|Non-current(1)             |  |                               |  | On completion/sale               |  |               | 20  |  |               |  
|Loans and notes receivable |  |                               |  |                                  |  | $             | 628 |  |               | $



| | (1) | See Note 31 for related party disclosures.
| | --- | ------------------------------------------



Included in loans and notes receivable
is $558 million (December 31, 2012 - $82 million) of loans receivable in Euros of €407 million (December 31, 2012 - €62 million).
Loans receivable of nil (December 31, 2012 - $102 million) have been pledged as collateral for borrowings under credit facilities.



A summary of secured loans and notes receivable
by collateral asset class is as follows:



|                     |  | Dec. 31, 2013                |     |  | Dec. 31, 2012             | 
|-------------------- |  | ---------------------------- | --- |  | ------------------------- | 
|(US$ Millions)       |  | Unpaid Principal
    Balance |     |  | Percentageof Portfolio(1) | 
|Asset Class          |  |                              |     |  |                           | 
|Hotel                |  | $                            | 85  |  |                           | 
|Office               |  |                              | 497 |  |                           | 
|Industrial           |  |                              | 29  |  |                           | 
|Retail               |  |                              | -   |  |                           | 
|Total collateralized |  | $                            | 611 |  |                           | 

| | (1) | Represents percentage of collateralized loans.
| | --- | ----------------------------------------------



NOTE 13: ACCounts
RECEIVABLE AND OTHER

The components of accounts receivable and other are as follows:



|(US$ Millions)                |  | Dec. 31, 2013 |       |  | Dec. 31, 2012 |  
|----------------------------- |  | ------------- | ----- |  | ------------- | -
|Accounts receivable(1)        |  | $             | 386   |  |               | $
|Restricted cash               |  |               | 337   |  |               |  
|Other current assets          |  |               | 312   |  |               |  
|Accounts receivable and other |  | $             | 1,035 |  |               | $

| | (1) | See Note 31 for related party disclosures.
| | --- | ------------------------------------------



Restricted cash relates to cash and deposits
that are considered restricted when they are subject to contingent rights of third parties.



F-32







NOTE 14: Property
Debt

Property debt includes the following:



|                                                        |  | Dec. 31, 2013              |     |   | Dec. 31, 2012 |  
|------------------------------------------------------- |  | -------------------------- | --- | - | ------------- | -
|(US$ Millions)                                          |  | Weighted Average 
    Rate |     |   | Debt Balance  |  
|Unsecured facilities                                    |  |                            |     |   |               |  
|Brookfield Office Properties' revolving facility        |  |                            | 3.5 | % |               | $
|Brookfield Canada Office Properties' revolving facility |  |                            | -   |   |               |  
|Brookfield Office Properties' senior unsecured notes    |  |                            | 4.2 | % |               |  
|Brookfield Property Partners' credit facility           |  |                            | 3.0 | % |               |  
|                                                        |  |                            |     |   |               |  
|Funds subscription credit facility                      |  |                            | 1.8 | % |               |  
|                                                        |  |                            |     |   |               |  
|Secured property debt                                   |  |                            |     |   |               |  
|Fixed rate                                              |  |                            | 5.1 | % |               |  
|Variable rate                                           |  |                            | 3.9 | % |               |  
|Property debt                                           |  |                            |     |   |               | $
|                                                        |  |                            |     |   |               |  
|Current                                                 |  |                            |     |   |               | $
|Non-current                                             |  |                            |     |   |               |  
|Property debt                                           |  |                            |     |   |               | $



Property debt includes foreign currency
denominated debt payable in the functional currencies of the borrowing subsidiaries. Property debt by currency is as follows:



|                   |  | Dec.
    31, 2013 |        |  | Dec.
    31, 2012  |   
|------------------ |  | ----------------- | ------ |  | ------------------ | --
|(Millions)         |  | U.S.
    Dollars  |        |  | Local
    Currency |   
|U.S. dollars       |  | $                 | 15,047 |  |                    | $ 
|Canadian dollars   |  |                   | 2,845  |  |                    | C$
|Australian dollars |  |                   | 1,711  |  |                    | A$
|Brazilian reais    |  |                   | 743    |  |                    | R$
|British pounds     |  |                   | 1,021  |  |                    | £ 
|Euros              |  |                   | 273    |  |                    | € 
|Property
    debt  |  | $                 | 21,640 |  |                    |   



NOTE 15: CAPITAL
SECURITIES

The partnership has the following capital
securities outstanding:



|(US$ Millions)                                |  | Shares Outstanding |            |  | Cumulative Dividend Rate |  |                                                            | Dec. 31, 2013 |  |   | Dec. 31, 2012 | 
|--------------------------------------------- |  | ------------------ | ---------- |  | ------------------------ |  | ---------------------------------------------------------- | ------------- |  | - | ------------- | 
|Class B Junior Preferred Shares               |  |                    | 30,000,000 |  |                          |  | 5.75                                                       | %             |  | $ | 750           | 
|Class C Junior Preferred Shares               |  |                    | 20,000,000 |  |                          |  | 6.75                                                       | %             |  |   | 500           | 
|Class AAA Series E (1)                        |  |                    | 8,000,000  |  |                          |  | 70%
                                         of bank prime |               |  |   | -             | 
|Class AAA Series F                            |  |                    | -          |  |                          |  | 6.00                                                       | %             |  |   | -             | 
|Class AAA Series G                            |  |                    | 4,400,000  |  |                          |  | 5.25                                                       | %             |  |   | 110           | 
|Class AAA Series H                            |  |                    | 8,000,000  |  |                          |  | 5.75                                                       | %             |  |   | 188           | 
|Class AAA Series J                            |  |                    | 8,000,000  |  |                          |  | 5.00                                                       | %             |  |   | 188           | 
|Class AAA Series K                            |  |                    | 6,000,000  |  |                          |  | 5.20                                                       | %             |  |   | 142           | 
|Capital Securities
    - Fund Subsidiaries(2) |  |                    | -          |  |                          |  | -                                                          |               |  |   | 491           | 
|Capital securities                            |  |                    |            |  |                          |  |                                                            |               |  | $ | 2,369         | 
|                                              |  |                    |            |  |                          |  |                                                            |               |  |   |               | 
|Current                                       |  |                    |            |  |                          |  |                                                            |               |  | $ | 188           | 
|Non-current                                   |  |                    |            |  |                          |  |                                                            |               |  |   | 2,181         | 
|Capital securities                            |  |                    |            |  |                          |  |                                                            |               |  | $ | 2,369         | 



| | (1) | The
                                         Class AAA series E capital securities are owned by the partnership. The partnership has
                                         an offsetting loan receivable against these securities earning an interest at 108% of
                                         bank prime.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The
                                         Capital Securities - Fund Subsidiaries represent the equity interests in DTLA held by
                                         co-investors in the fund which have been classified as a liability, rather than as non-controlling
                                         interest, due to the fact that on October 15, 2023, and on every fifth anniversary thereafter,
                                         the holders of these interests can cause DTLA to redeem their interests in the fund for
                                         cash equivalent to the fair value of the interests.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-33







On January 31, 2013, BPO redeemed all
of the outstanding Class AAA Series F shares for cash of C$25.00 per share plus accrued and unpaid dividends thereon of C$0.1233
per share, representing a total redemption price of C$25.1233 per share.



Capital securities includes $518 million
(December 31, 2012 – $756 million) repayable in Canadian dollars of C$550 million (December 31, 2012 – C$750 million).



Cumulative preferred dividends are
payable quarterly, as and when declared by the boards of directors of Brookfield BPY Holdings Inc. and BPO, as applicable, on
the last business day of March, June, September and December. On January 30, 2013 the Board of Directors of BPO declared quarterly
dividends payable for the Class AAA Series G, H, J and K preferred shares.



The $750 million of Class B Junior and
$500 million of Class C Junior redeemable preferred shares of one of the holding entities are held by Brookfield were issued as
partial consideration for the Business acquired by the partnership. The Class B preferred shares are entitled to receive a cumulative
preferential dividend equal to 5.75% of their redemption value as and when declared by the board of directors of the holding entity
until the fifth anniversary of their issuance. After the fifth anniversary of their issuance the Class B preferred shares will
be entitled to receive a cumulative preferential dividend equal to 5.0% plus the prevailing yield for 5-year U.S. Treasury Notes.
The holding entity may redeem the Class B preferred shares at any time and must redeem all of the outstanding Class B preferred
shares on the tenth anniversary of their issuance. Brookfield will have a right of retraction following the fifth anniversary
of the issuance of the Class B preferred shares. The Class C preferred shares are entitled to receive a cumulative preferential
dividend equal to 6.75% of their redemption value as and when declared by the board of directors of the holding entity. The holding
entity may redeem the Class C preferred shares at any time and must redeem all of the outstanding Class C preferred shares on
the seventh anniversary of their issuance. Brookfield will have a right of retraction following the third anniversary of the issuance
of the Class C preferred shares. The Class B and Class C preferred shares will be entitled to vote with the common shares of the
holding entity and each class of preferred shares will have an aggregate of 1% of the votes to be cast in respect of the holding
entity.



The redemption terms of capital securities
are as follows:



|                   |  | Redemption Date(1) |  | Redemption
    Price(2) |       | BPO’s Option(3) |                   | Holder’s Option(4) |                   
|------------------ |  | ------------------ |  | ----------------------- | ----- | --------------- | ----------------- | ------------------ | ------------------
|Class AAA Series E |  | Retractable at par |  |                         | ―     |                 | —                 |                    | —                 
|Class AAA Series G |  | June 30, 2011      |  | US$                     | 26.00 |                 | June 30, 2011     |                    | September 30, 2015
|Class AAA Series H |  | December 31, 2011  |  | C$                      | 26.00 |                 | December 31, 2011 |                    | December 31, 2015 
|Class AAA Series J |  | June 30, 2010      |  | C$                      | 26.00 |                 | June 30, 2010     |                    | December 31, 2014 
|Class AAA Series K |  | December 31, 2012  |  | C$                      | 26.00 |                 | December 31, 2012 |                    | December 31, 2016 

| | (1) | Subject to applicable
                                         law and rights of BPO, BPO may, on or after the dates specified above, redeem Class AAA
                                         preferred shares for cash as follows: the Series G at a price of US$26.00, if redeemed
                                         during the 12 months commencing June 30, 2011 and decreasing by US$0.33 each 12-month
                                         period thereafter to a price per share of US$25.00 if redeemed on or after June 30, 2014;
                                         the Series H at a price of C$26.00, if redeemed during the 12 months commencing December
                                         31, 2011 and decreasing by C$0.33 each 12-month period thereafter to a price per share
                                         of C$25.00 if redeemed on or after December 31, 2014; the Series J at a price of C$26.00
                                         if redeemed during the 12 months commencing June 30, 2010 and decreasing by C$0.25 each
                                         12-month period thereafter to a price per share of C$25.00 if redeemed on or after June
                                         30, 2014; the Series K at a price of C$26.00 if redeemed during the 12 months commencing
                                         December 31, 2012 and decreasing by C$0.33 each 12-month period thereafter to a price
                                         per share of C$25.00 if redeemed on or after December 31, 2015.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Subject to applicable
                                         law and rights of BPO, BPO may purchase Class AAA preferred shares for cancellation at
                                         the lowest price or prices at which, in the opinion of the Board of Directors of BPO,
                                         such shares are obtainable.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Subject to the
                                         approval of the Toronto Stock Exchange, BPO may, on or after the dates specified above,
                                         convert the Class AAA, Series G, H, J and K into common shares of BPO. The Class AAA,
                                         Series G, H, J and K preferred shares may be converted into that number of common shares
                                         determined by dividing the then-applicable redemption price by the greater of C$2.00
                                         (Series G - US$2.00) or 95% of the weighted average trading price of common shares at
                                         such time.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Subject to BPO’s
                                         right to redeem or find substitute purchasers, the holder may, on or after the dates
                                         specified above, convert Class AAA, Series G, H, J and K preferred shares into that number
                                         of common shares determined by dividing the then-applicable redemption price by the greater
                                         of C$2.00 (Series G - US$2.00) or 95% of the weighted average trading price of common
                                         shares at such time.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



BPO also has $491 million of capital securities
outstanding at December 31, 2013 (December 31, 2012 – nil), which represent the amount of common equity related to the other
non-controlling shareholders’ interests in DTLA.



F-34







NOTE
16: OTHER NON-CURRENT LIABILITIES

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



|(US$ Millions)                          |  | Dec. 31, 2013 |     |  | Dec. 31, 2012 |  
|--------------------------------------- |  | ------------- | --- |  | ------------- | -
|Other secured debt                      |  | $             | -   |  |               | $
|Other non-current financial liabilities |  |               | 250 |  |               |  
|Other non-current liabilities           |  | $             | 250 |  |               | $



NOTE 17: 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 partnership’s corporate subsidiaries and for the impact of deferred tax assets and liabilities related to
such subsidiaries.



The sources of deferred income tax balances are as follows:



|(US$ Millions)                  |  | Dec. 31, 2013 |        |   | Dec. 31, 2012 |  
|------------------------------- |  | ------------- | ------ | - | ------------- | -
|Deferred income tax assets      |  |               |        |   |               |  
|Non-capital losses (Canada)     |  | $             | 103    |   |               | $
|Capital losses (Canada)         |  |               | 100    |   |               |  
|Net operating losses (U.S.)     |  |               | 69     |   |               |  
|Non-capital losses (foreign)    |  |               | 6      |   |               |  
|Deferred financing costs        |  |               | 20     |   |               |  
|Foreign currency                |  |               | 4      |   |               |  
|Other                           |  |               | 10     |   |               |  
|                                |  |               | 312    |   |               |  
|Deferred income tax liabilities |  |               |        |   |               |  
|Properties                      |  |               | (1,404 | ) |               |  
|Investments in associates       |  |               | (437   | ) |               |  
|Other                           |  |               | (3     | ) |               |  
|                                |  |               | (1,844 | ) |               |  
|Net deferred
    tax liability  |  | $             | (1,532 | ) |               | $



The deferred tax balance movements are
as follows:





|                               |  |               |        |   | Recognized in |   |      |       | 
|------------------------------ |  | ------------- | ------ | - | ------------- | - | ---- | ----- | 
|(US$ Millions)                 |  | Dec. 31, 2012 |        |   | Income        |   |      | Other | 
|Deferred tax assets            |  | $             | 348    |   |               | $ | 5    |       | 
|Deferred tax liabilities       |  |               | (1,321 | ) |               |   | (492 | )     | 
|Net deferred
    tax liability |  | $             | (973   | ) |               | $ | (487 | )     | 





The Other category primarily relates to adjustments made to
the partnership’s equity related to the tax restructuring which occurred as part of the Spin-off.



The aggregate amount of temporary differences with investments
in subsidiaries for which deferred tax liabilities have not been recognized as of December 31, 2013 is approximately $4 billion.



The deferred tax not recognized is as follows:



|(US$ Millions)                      |  | Dec. 31, 2013 |     |  | Dec. 31, 2012 |  
|----------------------------------- |  | ------------- | --- |  | ------------- | -
|Deferred income tax assets          |  |               |     |  |               |  
|Net operating losses (U.S.)         |  | $             | 30  |  |               | $
|Net operating losses (foreign)      |  |               | 443 |  |               |  
|Net deferred
    tax not recognized |  | $             | 473 |  |               | $



F-35







The holding entities and their Canadian
subsidiaries have deferred tax assets of $103 million (December 31, 2012 – $127 million) related to non-capital losses that
expire over the next 20 years, and $100 million (December 31, 2012– $115 million) related to capital losses that have no
expiry. The holding entities and their U.S. subsidiaries have gross net operating losses of $99 million (December 31, 2012 –
$38 million) that expire over the next 20 years and foreign gross unused tax losses of $449 million which do not expire.



The major components of income tax expense include the following:



|(US$ Millions) Year ended Dec. 31, |  | 2013 |     |  | 2012 |   |     | 2011 | 
|---------------------------------- |  | ---- | --- |  | ---- | - | --- | ---- | 
|Current income tax                 |  | $    | 14  |  |      | $ | 121 |      | 
|Deferred income tax                |  |      | 487 |  |      |   | 368 |      | 
|Income tax
    expense             |  | $    | 501 |  |      | $ | 489 |      | 



An investment entity which was acquired
during 2013 utilized a pre-acquisition expense, not recognized during purchase accounting to offset post-acquisition gains. In
addition, an investment subsidiary utilized previously unrecognized losses to offset current year taxable income.



|Year ended Dec. 31,                                          |  | 2013 |    |   | 2012 |  |     | 2011 | 
|------------------------------------------------------------ |  | ---- | -- | - | ---- |  | --- | ---- | 
|Statutory income tax rate                                    |  |      | 29 | % |      |  | 27  | %    | 
|Increase (decrease) in rate resulting from:                  |  |      |    |   |      |  |     |      | 
|Portion of income not subject to tax                         |  |      | (3 | ) |      |  | (12 | )    | 
|International operations subject to different tax rates      |  |      | (5 | ) |      |  | 4   |      | 
|Non-controlling interests in income of flow-through entities |  |      | (6 | ) |      |  | 1   |      | 
|Change in basis of accounting of investments in associates   |  |      | 6  |   |      |  | -   |      | 
|Other                                                        |  |      | 1  |   |      |  | (4  | )    | 
|Effective income
    tax rate                                |  |      | 22 | % |      |  | 16  | %    | 



As the partnership is not subject to tax,
the above reconciliation has been prepared using a blended statutory rate for jurisdictions where the holding entities and any
direct or indirect corporate subsidiaries of such holding entities operate. For the 2012 and 2011 information, the applicable
Canadian blended Federal and Provincial tax rate of Brookfield is used as the statutory income tax rate since the information
for periods prior to the Spin-off is presented in accordance with the continuity of interests (see Note 2(b)).



NOTE 18: ACCOUNTS
PAYABLE AND other liabilities

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



|(US$ Millions)                           |  | Dec. 31, 2013 |       |  | Dec. 31, 2012 |  
|---------------------------------------- |  | ------------- | ----- |  | ------------- | -
|Accounts payable and accrued liabilities |  | $             | 1,541 |  |               | $
|Other secured debt                       |  |               | -     |  |               |  
|Other liabilities                        |  |               | 124   |  |               |  
|Accounts payable and other liabilities   |  | $             | 1,665 |  |               | $



NOTE 19: Equity

The partnership’s capital structure
is comprised of four classes of partnership units: limited and general partnership units, Redeemable/Exchangeable Units of the
operating partnership, and special limited partner units of the operating partnership. Prior to the Spin-off, equity otherwise
not attributable to interests of others in operating subsidiaries has been allocated to the parent company.



| | a) | Limited and General Partnership equity
| | -- | --------------------------------------

Limited partnership units entitle the
holder to their proportionate share of distributions.



General partnership units entitle the
holder the right to govern the financial and operating policies of the partnership. The general partnership units are entitled
to a 1% general partnership interest, equity enhancement distributions and incentive distributions from the operating partnership.
Equity enhancement distributions are equal to 0.3125% of the amount by which the partnership’s total capitalization value
exceeds the initial market capitalization of the partnership immediately following the Spin-off, subject to certain adjustments.
Incentive distributions are calculated in increments based on the amount by which quarterly distributions on the limited partnership
units of the operating partnership exceed specified target levels as set forth in the partnership’s limited partnership
agreement.



F-36







Each limited partnership unit entitles
the holder thereof to one vote for the purposes of any approval at a meeting of limited partners, provided that Redeemable/Exchangeable
Unitholders will only be entitled to a maximum number of votes in respect of the Redeemable/Exchangeable Units equal to 49% of
the total voting power of all outstanding units.



There are no units reserved for issue
under options or other contacts.



General partnership units and limited
partnership units outstanding are as follows:



|                                                                         |  | General partnership units |     |  | Limited partnership units |  |   | Total | 
|------------------------------------------------------------------------ |  | ------------------------- | --- |  | ------------------------- |  | - | ----- | 
|(Thousands of units)                                                     |  | 2013                      |     |  | 2012                      |  |   | 2013  | 
|Outstanding at beginning of year                                         |  |                           | -   |  |                           |  | - |       | 
|Issued on Spin-off                                                       |  |                           | 139 |  |                           |  | - |       | 
|Issued on November 1, 2013 for the acquisition of incremental GGP shares |  |                           | -   |  |                           |  | - |       | 
|Outstanding at end of year                                               |  |                           | 139 |  |                           |  | - |       | 



| | b) | Redeemable/Exchangeable Units
| | -- | -----------------------------

The Redeemable/Exchangeable Units are
non-voting limited partnership interests in the operating partnership and have the same economic attributes in all respects with
the partnership’s class A limited partner units, as renamed managing general partner units effective August 8, 2013 (see
Note 1(c)), in the operating partnership, except for the redemption right described below. Beginning on April 15, 2015, the Redeemable/Exchangeable
Units may, at the request of the holder, be redeemed in whole or in part, for cash in an amount equal to the market value of one
of the partnership’s limited partnership units multiplied by the number of units to be redeemed (subject to certain adjustments).
This right is subject to the partnership’s right, at its sole discretion, to elect to acquire any unit presented for redemption
in exchange for one of the partnership’s limited partnership units (subject to certain customary adjustments). If the partnership
elects not to exchange the Redeemable/Exchangeable Units for limited partnership units of the partnership, the Redeemable/Exchangeable
Units are required to be redeemed for cash. The Redeemable/Exchangeable Units provide the holder the direct economic benefits
and exposures to the underlying performance of the partnership and accordingly to the variability of the distributions of the
operating partnership, whereas the partnership’s unitholders have indirect access to the economic benefits and exposures
of the operating partnership through direct ownership interest in the partnership which owns a direct interest in the managing
general partner units of the operating partnership. In November 2013, Brookfield decreased their ownership interest in their limited
partnership interests in the operating partnership from 81.8% to 80.1% as a result of the partnership’s issuance of Redeemable/Exchangeable
Units to Brookfield (see Note 31) and limited partnership units to institutional investors on the acquisition of additional GGP
shares and warrants and Rouse shares.



Redeemable/Exchangeable Units outstanding
are as follows:



|                                                                          |  | Redeemable/ Exchangeable Units |        
|------------------------------------------------------------------------- |  | ------------------------------ | -------
|(Thousands of units)                                                      |  | 2013                           |        
|Outstanding at beginning of year                                          |  |                                | -      
|Issued on Spin-off                                                        |  |                                | 381,329
|Issued on November 15, 2013 for the acquisition of incremental GGP shares |  |                                | 51,320 
|Outstanding at end of year                                                |  |                                | 432,649



| | c) | Special limited partner units of operating partnership
| | -- | ------------------------------------------------------

Property Special LP served as the general
partner of the operating partnership and had sole authority for the management and control of the operating partnership until
the reorganization which was effected on August 8, 2013 (see Note 1(c)). The general partner of Property Special LP is Brookfield
Property General Partner Limited (“General Partner”), a corporation owned indirectly by Brookfield and previously
controlled by the partnership through to August 8, 2013, through the General Partner, pursuant to the voting agreement. Property
Special LP is entitled to receive equity enhancement distributions and incentive distributions from the operating partnership
as a result of its ownership of the special limited partner unit interests in the operating partnership.



F-37







On August 8, 2013, the partnership and
Brookfield amended the partnership agreement for the operating partnership, to among other things make the partnership the managing
general partner of the operating partnership (see Note 1(c)). This change simplified the governance structure of the partnership
and more clearly delineated the partnership’s governance, rights and power over the relevant activities in respect of the
operating partnership. As a result, the Voting Agreement between the partnership and Brookfield, which required Brookfield to
exercise certain of its voting rights in respect of the operating partnership’s general partner, Property Special LP, as
directed by the partnership, was terminated and related changes were made to the partnership agreement of the partnership and
the Master Services Agreement.



Prior to August 8, 2013, Property Special
LP held 1% general partner units and as part of the reorganization effected on August 8, 2013 these units were transferred to
be 1% special limited partner units (see Note 1(c)). Property Special LP is entitled to the same distributions and the nature
and voting rights of the special limited partner units are the same as the class A limited partner units. The managing general
partner units held by the partnership continue to entitle the holder thereof to one vote for the purposes of any approval at a
meeting of limited partners.



There were 4,759,997 special limited partner
units outstanding at December 31, 2013.



| | d) | Distributions
| | -- | -------------

For the period from April 15, 2013, the
date of the Spin-off, to December 31, 2013 distributions to general partners, limited partners and holders of the Redeemable/Exchangeable
and special limited partner units of the operating partnership were nil, $56 million and $257 million, respectively, or $0.6277
per unit.



| | e) | Earnings per unit
| | -- | -----------------

Earnings per unit reflect net income attributable
to the limited partners of the partnership for the period from April 15, 2013 to December 31, 2013 of $118 million. There are
no dilutive instruments outstanding. Earnings per unit have been presented effective for the period from the date of the Spin-off
on April 15, 2013, as this is the date of legal entitlement of earnings to the limited partnership unitholders (see Note 3).



NOTE 20: NON-CONTROLLING INTERESTS

Non-controlling interests consists of the following:



|(US$ Millions)                                                                                                    |  | Dec. 31, 2013 |        |  | Dec. 31, 2012 |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ |  | ------------- | -
|Redeemable/Exchangeable and special limited partner units of the operating
    partnership held by     Brookfield |  | $             | 11,092 |  |               | $
|Preferred shares held by Brookfield                                                                               |  |               | 25     |  |               |  
|Preferred equity  of subsidiaries                                                                                 |  |               | 1,614  |  |               |  
|Non-controlling interests in subsidiaries                                                                         |  |               | 9,727  |  |               |  
|Interests of others in operating subsidiaries                                                                     |  |               | 11,366 |  |               |  
|Non-controlling interests                                                                                         |  | $             | 22,458 |  |               | $



Non-controlling interests in subsidiaries
consists of the following:



|                                                                |  |                                   |  | Proportion of economic interests held by
    non-
    controlling interests |        |   |                      | 
|--------------------------------------------------------------- |  | --------------------------------- |  | --------------------------------------------------------------------------- | ------ | - | -------------------- | 
|(US$ Millions)                                                  |  | Principal Place of Business       |  | Dec. 31, 2013                                                               |        |   | Dec.
    31, 2012(1) | 
|Brookfield Office Properties Inc.                               |  | U.S., Canada, Australia, UK       |  |                                                                             | 51     | % |                      | 
|Brookfield Brazil Retail Fundo de Investimento em Participações |  | Brazil                            |  |                                                                             | 65     | % |                      | 
|IDI Realty, LLC                                                 |  | United States                     |  |                                                                             | 72     | % |                      | 
|BREF ONE, LLC                                                   |  | U.S., Bahamas                     |  |                                                                             | 67     | % |                      | 
|Gazeley Limited                                                 |  | UK, Germany, France, Italy, Spain |  |                                                                             | 72     | % |                      | 
|BSREP Australia Trust                                           |  | Australia                         |  |                                                                             | n/a    |   |                      | 
|Other                                                           |  | Various                           |  |                                                                             | 18%-88 | % |                      | 
|Non-controlling interests in subsidiaries                       |  |                                   |  |                                                                             |        |   |                      | 

| | (1) | Represents
                                         the economic interests as previously presented by Brookfield prior to the Spin-off (see
                                         Note 3).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In connection with the Spin-off, Brookfield
provided a total of $25 million of working capital to the holding entities by subscribing for $5 million of preferred shares in
one of the holding entities and in each of the four wholly-owned subsidiaries of other holding entities (see Note 7 for the holding
entities). The preferred shares are entitled to receive a cumulative preferential cash dividend equal to $1.25 million per year
as and when declared by the board of the directors of the applicable entity and are redeemable at the option of the applicable
entity at any time after the twentieth anniversary of their issuance.



F-38







NOTE 21: COMMERCIAL PROPERTY REVENUE

The components of commercial property revenue are as follows:



|(US$ Millions)              |  | 2013 |       |  | 2012 |   |       | 2011 | 
|--------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|Base rent                   |  | $    | 2,573 |  |      | $ | 2,423 |      | 
|Straight-line rent          |  |      | 107   |  |      |   | 96    |      | 
|Lease termination           |  |      | 5     |  |      |   | 21    |      | 
|Other                       |  |      | 225   |  |      |   | 318   |      | 
|Commercial property revenue |  | $    | 2,910 |  |      | $ | 2,858 |      | 



NOTE 22: INVESTMENT AND OTHER REVENUE

The components of investment and other revenue are as follows:



|(US$ Millions)               |  | 2013 |     |  | 2012 |   |     | 2011 | 
|---------------------------- |  | ---- | --- |  | ---- | - | --- | ---- | 
|Fee revenue                  |  | $    | 50  |  |      | $ | 51  |      | 
|Dividend income              |  |      | 19  |  |      |   | 47  |      | 
|Interest income              |  |      | 44  |  |      |   | 70  |      | 
|Participating loan notes     |  |      | 40  |  |      |   | -   |      | 
|Other                        |  |      | 56  |  |      |   | (1  | )    | 
|Investment and other revenue |  | $    | 209 |  |      | $ | 167 |      | 



NOTE 23: DIRECT COMMERCIAL PROPERTY EXPENSE

The components of direct commercial property expense are as
follows:



|(US$ Millions)                     |  | 2013 |       |  | 2012 |   |       | 2011 | 
|---------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|Employee compensation and benefits |  | $    | 98    |  |      | $ | 93    |      | 
|Property maintenance               |  |      | 587   |  |      |   | 543   |      | 
|Real estate taxes                  |  |      | 385   |  |      |   | 371   |      | 
|Ground rents                       |  |      | 33    |  |      |   | 29    |      | 
|Other                              |  |      | 101   |  |      |   | 153   |      | 
|Direct commercial property expense |  | $    | 1,204 |  |      | $ | 1,189 |      | 



The partnership leases properties under
operating leases generally with lease terms of between 1 and 15 years, with options to extend up to a further 5 years. Minimum
rental commitments on non-cancellable tenant operating leases are as follows:



|(US$ Millions)                               |  | Dec. 31, 2013 |        |  | Dec 31, 2012 |  
|-------------------------------------------- |  | ------------- | ------ |  | ------------ | -
|Not later than 1 year                        |  | $             | 1,765  |  |              | $
|Later than 1 year and no longer than 5 years |  |               | 6,195  |  |              |  
|Later than 5 years                           |  |               | 8,306  |  |              |  
|                                             |  | $             | 16,266 |  |              | $



Direct commercial property expense for
the year ended December 31, 2013 includes $27 million (2012 — $27 million) representing rent expense associated with operating
leases for land on which certain of the partnership's operating properties are situated. The partnership does not have an option
to purchase the leased land at the expiry of the lease periods. Future minimum lease payments under these arrangements are as
follows:



|(US$ Millions)                               |  | Dec. 31, 2013 |       |  | Dec 31, 2012 |  
|-------------------------------------------- |  | ------------- | ----- |  | ------------ | -
|Not later than 1 year                        |  | $             | 30    |  |              | $
|Later than 1 year and no longer than 5 years |  |               | 108   |  |              |  
|Later than 5 years                           |  |               | 1,486 |  |              |  
|                                             |  | $             | 1,624 |  |              | $



F-39







NOTE 24: DIRECT HOSPITALITY EXPENSE

The components of direct hospitality expense are as follows:



|(US$ Millions)                                      |  | 2013 |       |  | 2012 |   |     | 2011 | 
|--------------------------------------------------- |  | ---- | ----- |  | ---- | - | --- | ---- | 
|Employee compensation and benefits                  |  | $    | 357   |  |      | $ | 248 |      | 
|Marketing and advertising                           |  |      | 48    |  |      |   | 35  |      | 
|Cost of food, beverage, and retail goods sold       |  |      | 80    |  |      |   | 60  |      | 
|Maintenance and utilities                           |  |      | 96    |  |      |   | 71  |      | 
|Depreciation and amortization of real estate assets |  |      | 124   |  |      |   | 49  |      | 
|Other                                               |  |      | 376   |  |      |   | 224 |      | 
|Direct hospitality expense                          |  | $    | 1,081 |  |      | $ | 687 |      | 



NOTE 25: ADMINISTRATION AND OTHER EXPENSE

The components of administration expense are as follows:



|(US$ Millions)                                          |  | 2013 |     |   | 2012 |   |     | 2011 | 
|------------------------------------------------------- |  | ---- | --- | - | ---- | - | --- | ---- | 
|Employee compensation and benefits                      |  | $    | 133 |   |      | $ | 96  |      | 
|Depreciation and amortization of non-real estate assets |  |      | 38  |   |      |   | 55  |      | 
|Fund asset management fees                              |  |      | 69  |   |      |   | -   |      | 
|Management fee                                          |  |      | 36  |   |      |   | -   |      | 
|Foreign exchange                                        |  |      | (11 | ) |      |   | 2   |      | 
|Other                                                   |  |      | 90  |   |      |   | 52  |      | 
|Administration and other expense                        |  | $    | 355 |   |      | $ | 205 |      | 



NOTE 26: FAIR VALUE
GAINS, Net

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



|(US$ Millions) Year ended Dec. 31, |  | 2013 |      |   | 2012 |   |       | 2011 | 
|---------------------------------- |  | ---- | ---- | - | ---- | - | ----- | ---- | 
|Investment properties              |  | $    | 948  |   |      | $ | 1,337 |      | 
|Financial instruments              |  |      | 89   |   |      |   | 20    |      | 
|Other fair value losses            |  |      | (167 | ) |      |   | (130  | )    | 
|Fair values gains, net             |  | $    | 870  |   |      | $ | 1,227 |      | 



F-40







NOTE 27: OTHER COMPREHENSIVE
INCOME (LOSS)

Other comprehensive income consists of the following:



|(US$ Millions)                                                                                                                                                      |  | 2013 |      |   | 2012 |   |     | 2011 | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | --- | ---- | 
|Items that may be reclassified to net income:                                                                                                                       |  |      |      |   |      |   |     |      | 
|Foreign currency translation                                                                                                                                        |  |      |      |   |      |   |     |      | 
|Unrealized foreign currency translation (losses) in respect of
    foreign operations                                                                               |  | $    | (854 | ) |      | $ | 58  |      | 
|Gains
    (losses) on hedges of net investments in foreign operations, net of income taxes for 2013 of $3 million (2012 - $(1) million;
    2011 - $(8) million)(1) |  |      | 35   |   |      |   | (28 | )    | 
|                                                                                                                                                                    |  |      | (819 | ) |      |   | 30  |      | 
|Cash flow hedges                                                                                                                                                    |  |      |      |   |      |   |     |      | 
|Gains (losses) on derivatives designated as cash flow hedges, net of income
    taxes for 2013 of $45 million (2012 – $(28) million;  2011 - $(32) million)         |  |      | 148  |   |      |   | (37 | )    | 
|Reclassification of losses on derivatives designated as
    cash flow hedges, net of income taxes for 2013 of $3 million (2012 - $3 million; 2011 - $1 million)     |  |      | 11   |   |      |   | 7   |      | 
|                                                                                                                                                                    |  |      | 159  |   |      |   | (30 | )    | 
|Available-for-sale securities                                                                                                                                       |  |      |      |   |      |   |     |      | 
|Change in unrealized gains on available-for-sale securities,
    net of income taxes for 2013 of nil  (2012 - nil; 2011 - nil)                                      |  |      | -    |   |      |   | 11  |      | 
|                                                                                                                                                                    |  |      | -    |   |      |   | 11  |      | 
|Equity accounted investments                                                                                                                                        |  |      |      |   |      |   |     |      | 
|Share of unrealized foreign currency translation (losses) in respect of
    foreign operations, net of income taxes for 2013 of $11 million (2012 - nil; 2011-nil)  |  |      | 14   |   |      |   | (6  | )    | 
|                                                                                                                                                                    |  |      | 14   |   |      |   | (6  | )    | 
|Items that will not be reclassified to net income:                                                                                                                  |  |      |      |   |      |   |     |      | 
|Revaluation surplus, net of taxes of nil (2012 - nil;
    2011 - nil)                                                                                               |  |      | 183  |   |      |   | 53  |      | 
|Other comprehensive income (loss)                                                                                                                                   |  | $    | (463 | ) |      | $ | 58  |      | 

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



NOTE 28: 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.



The partnership’s operating subsidiaries
have also agreed to indemnify its directors and certain of its 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 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.



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. A specific litigation, with a judgment amount of $56 million (A$63 million), is being pursued against one of the
partnership’s subsidiaries related to security on a defaulted loan. Management has determined that the most probable cash
outflow related to the litigation being pursued against the company is $24 million (A$27 million), which has been fully provided
for in the partnership’s financial statements. The partnership anticipates this specific litigation will be settled in 2014.



The partnership, through its 50% interest
in London Wall Place LP, has a £125 million commitment in respect of obligations under an agreement for underlease relating
to 1 London Wall Place December 31, 2013.



At December 31, 2013, the partnership
has commitments totaling approximately C$200 million for the development of Bay Adelaide East in Toronto and Brookfield Place
East Tower in Calgary and approximately A$250 million for the development of Brookfield Place Perth Tower 2.



F-41







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
and named windstorm).



In the second quarter of 2013, Brookfield
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.



NOTE
29: CAPITAL MANAGEMENT AND LIQUIDITY

The capital of the partnership consists
of property debt, capital securities, other secured debt and equity.



The partnership’s objectives when
managing this capital are to maintain an appropriate balance between holding a sufficient amount of capital to support its operations
and to reduce its weighted average cost of capital and improve the returns on equity through value enhancement initiatives and
the consistent monitoring of the balance between debt and equity financing of the subsidiaries. As at December 31, 2013, the recorded
values of capital in the financial statements totaled $49 billion (December 2012 - $45 billion). Its principal liquidity needs
for the next year are to:



| | • | fund recurring expenses;
| | - | ------------------------

| | • | meet debt service requirements;
| | - | -------------------------------

| | • | fund those capital expenditures
                                         deemed mandatory, including tenant improvements;
| | - | -------------------------------------------------------------------------------------------------------------------------

| | • | fund development costs not
                                         covered under construction loans;
| | - | -----------------------------------------------------------------------------------------------------

| | • | fund investing activities
                                         which could include discretionary capital expenditures;
| | - | --------------------------------------------------------------------------------------------------------------------------

| | • | fund property acquisitions;
                                         and
| | - | ------------------------------------------------------------------------

| | • | fund distributions to unitholders.
| | - | ----------------------------------



Most of the partnership’s borrowings
are in the form of long-term asset-specific financings with recourse only to the specific assets. Limiting recourse to specific
assets ensures that poor performance within one area does not compromise the partnership’s ability to finance the balance
of its operations.



The partnership’s operating subsidiaries
are subject to limited covenants in respect of their corporate debt and are in full compliance with all such covenants at December
31, 2013. The partnership’s operating subsidiaries are also in compliance with all covenants and other capital requirements
related to regulatory or contractual obligations of material consequence to the partnership.



The partnership’s strategy is to
satisfy its liquidity needs in respect of the partnership using the partnership’s cash on hand, cash flows generated from
operating activities and provided by financing activities, as well as proceeds from asset sales. The operating subsidiaries of
the partnership also generate liquidity by accessing capital markets on an opportunistic basis.



The partnership’s principal liquidity
needs for periods beyond the next year are for scheduled debt maturities, distributions, recurring and non-recurring capital expenditures,
development costs and potential property acquisitions. The partnership plans to meet these needs with one or more of: cash flows
from operations; construction loans; creation of new funds; proceeds from sales of assets; proceeds from sale of non-controlling
interests in subsidiaries; and credit facilities and refinancing opportunities.

F-42









The table below present’s the partnership’s
contractual obligations as of December 31, 2013 and 2012:



|(US$ Millions)                        |  |       |        |  | Payments Due By Period |   |       |             | 
|------------------------------------- |  | ----- | ------ |  | ---------------------- | - | ----- | ----------- | 
|As at Dec. 31, 2013                   |  | Total |        |  | Less than 1 Year       |   |       | 2 - 3 Years | 
|Property debt                         |  | $     | 21,640 |  |                        | $ | 5,120 |             | 
|Capital securities                    |  |       | 2,369  |  |                        |   | 188   |             | 
|Other financial liabilities           |  |       | 1,915  |  |                        |   | 1,665 |             | 
|Interest expense(1) on the following: |  |       |        |  |                        |   |       |             | 
|Property debt                         |  |       | 4,127  |  |                        |   | 983   |             | 
|Capital securities                    |  |       | 673    |  |                        |   | 110   |             | 
|Interest rate swaps                   |  |       | 1      |  |                        |   | -     |             | 



|(1) | Represents aggregate interest expense expected
    to be paid over the term of the obligations. Variable interest rate payments have been calculated based on current rates.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE
30: FINANCIAL INSTRUMENTS

| | (a) | Derivatives and hedging activities
| | --- | ----------------------------------

The partnership and its subsidiaries 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 uses the following derivative instruments to manage these risks:



| | • | Foreign currency forward contracts
                                         to hedge exposures to Canadian dollar, Australian dollar, British pound and Euro denominated
                                         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;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | Interest rate caps to hedge
                                         interest rate risk on certain variable rate debt; and
| | - | --------------------------------------------------------------------------------------------------------------------------

| | • | Total return swaps on BPO’s
                                         shares to economically hedge exposure to variability in its share price under its deferred
                                         share unit plan.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

As at December 31, 2013, the partnership
had derivatives representing a notional amount of $1,552 million in place to fix rates on forecasted fixed rate financings with
maturities between 2024 and 2026 at rates between 2.3% and 4.7%. As at December 31, 2012, the partnership had derivatives representing
a notional amount of $1,377 million in place to fix rates on forecasted fixed rate financings with a maturity between 2023 and
2025 at rates between 2.1% and 4.7%. The hedged forecasted fixed rate financings are denominated in U.S. Dollars and Canadian
Dollars.



As at December 31, 2013, the partnership
had derivatives with a notional amount of $4,188 million in place to fix rates on existing variable rate debt at between 0.6%
and 5.9% for debt maturities between 2014 and 2020. As at December 31, 2012, the partnership had derivatives with a notional amount
of $5,034 million in place to fix rates on existing variable rate debt at between 0.6% and 10.5% for debt maturities between 2013
and 2017. The hedged variable rate debts are denominated in U.S. Dollars, British Pounds and Australian Dollars.



The fair value of the partnership’s
outstanding interest rate derivative positions as at December 31, 2013 is a loss of $61 million (December 31, 2012 — loss
of $273 million). For the years ended December 31, 2013, 2012 and 2011, the amount of hedge ineffectiveness recorded in interest
expense in connection with the partnership’s interest rate hedging activities was not significant.



F-43







Foreign currency hedging

The partnership has derivatives designated
as net investment hedges of the partnership’s investments in foreign subsidiaries. As at December 31, 2013, the partnership
had hedged a notional amount of £770 million at rates between £0.61/$ and £0.65/$ using foreign currency forward
contracts maturing between May 2014 and November 2014. As at December 31, 2012, the partnership had designated a notional amount
of £45 million at £0.62/$ using foreign currency forward contracts maturing June 30, 2013. In addition, as at December
31, 2013, the partnership had hedged a notional amount of €550 million (December 31, 2012 — nil) at rates between €0.73/$
and €0.74/$ using foreign currency forward contracts maturing between August and December 2014. The partnership had also
hedged, as at December 31, 2013, a notional amount of AU$ 535 million (December 31, 2012 — nil) at rates between AU$1.06/$
and AU$1.12/$ using foreign currency forward contracts maturing between March and November 2014.



The fair value of the partnership’s
outstanding foreign currency forwards as at December 31, 2013 is a loss of $27 million (December 31, 2012 — nil).



In addition, as of December 31, 2013,
the partnership had designated C$900 million (December 31, 2012 — C$1,100 million) of Canadian dollar financial liabilities
as hedges against the partnership’s net investment in Canadian operations.



Other derivatives

The following other derivatives have been
entered into to manage financial risks and have not been designated as hedges for accounting purposes.



At December 31, 2013, BPO had a total
return swap under which BPO received the return on a notional amount of 1.4 million BPO common shares in connection with its deferred
share unit plan. The fair value of the total return swap at December 31, 2013 was $1 million (December 31, 2012 — gain of
$1 million) and a $5 million gain in connection with the total return swap was recognized in general and administrative expense
in the year ended December 31, 2013 (2012 — gain of $1 million, 2011 – gain of $2 million).



At December 31, 2013, the partnership
had interest rate cap contracts outstanding with a notional amount of $3,553 million, at rates between 2.5% and 4.5% and expiring
between 2014 and 2016. As at December 31, 2012, the partnership had interest rate cap contracts outstanding with a notional amount
of $3,564 million, at rates between 1.2% and 4.5% and expiring between 2013 and 2016. The fair value of these contracts at December
31, 2013 was nil (December 31, 2012 — nil). In addition as of December 31, 2013, the partnership had interest rate swaps
with a notional amount of $37 million (December 31, 2012 — nil), with interest rates between 0.8% and 1.4% maturing between
2017 and 2020. The fair value of these contracts as at December 31, 2013 was nil (December 31, 2012 — nil).



| | (b) | Measurement and classification
                                         of financial instruments
| | --- | ------------------------------------------------------------------------------------------------

Fair value is the amount that willing
parties would accept to exchange a financial instrument based on the current market for instruments with the same risk, principal
and remaining maturity. The fair value of interest bearing financial assets and liabilities is determined by discounting the contractual
principal and interest payments at estimated current market interest rates for the instrument. Current market rates are determined
by reference to current benchmark rates for a similar term and current credit spreads for debt with similar terms and risk.



F-44







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 financial statements:



|                                        |  |                       |  |                   |  | Dec. 31, 2013  |        |  | Dec. 31, 2012 |  
|--------------------------------------- |  | --------------------- |  | ----------------- |  | -------------- | ------ |  | ------------- | -
|(US$ Millions)                          |  | Classification        |  | Measurement basis |  | Carrying value |        |  | Fair value    |  
|Financial assets                        |  |                       |  |                   |  |                |        |  |               |  
|Participating loan interests            |  | Loans and receivables |  | Amortized cost(1) |  | $              | 747    |  |               | $
|Loans and notes receivable              |  | Loans and receivables |  | Amortized cost    |  |                | 628    |  |               |  
|Other non-current assets                |  |                       |  |                   |  |                |        |  |               |  
|Securities designated as FVTPL          |  | FVTPL                 |  | Fair Value        |  |                | 1,068  |  |               |  
|Derivative assets                       |  | FVTPL                 |  | Fair Value        |  |                | 868    |  |               |  
|Securities designated as AFS            |  | AFS                   |  | Fair Value        |  |                | 124    |  |               |  
|Other receivables                       |  | Loans and receivables |  | Amortized cost    |  |                | 95     |  |               |  
|Accounts receivable and other           |  |                       |  |                   |  |                |        |  |               |  
|Other receivables                       |  | Loans and receivables |  | Amortized cost    |  |                | 1,035  |  |               |  
|Cash and cash equivalents               |  | Loans and receivables |  | Amortized cost    |  |                | 1,368  |  |               |  
|                                        |  |                       |  |                   |  | $              | 5,933  |  |               | $
|Financial liabilities                   |  |                       |  |                   |  |                |        |  |               |  
|Property debt                           |  | Other liabilities     |  | Amortized cost(2) |  | $              | 21,640 |  |               | $
|Capital securities                      |  | Other liabilities     |  | Amortized cost    |  |                | 2,369  |  |               |  
|Other non-current liabilities           |  |                       |  |                   |  |                |        |  |               |  
|Other secured debt                      |  | Other liabilities     |  | Amortized cost    |  |                | -      |  |               |  
|Other non-current financial liabilities |  | Other liabilities     |  | Amortized cost(3) |  |                | 250    |  |               |  
|Accounts payable and other liabilities  |  | Other liabilities     |  | Amortized cost(4) |  |                | 1,665  |  |               |  
|                                        |  |                       |  |                   |  | $              | 25,924 |  |               | $

| | (1) | Includes
                                         embedded derivatives classified as FVTPL and measured at fair value of $56 million (2012
                                         - $48 million).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes
                                         embedded derivatives classified as FVTPL and measured at fair value of nil (2012 - $54
                                         million).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Includes
                                         embedded derivatives classified as FVTPL and measured at fair value of nil (2012 - $98
                                         million).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Includes
                                         embedded derivatives classified as FVTPL and measured at fair value of $128 million (2012
                                         - $248 million).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Fair value hierarchy

The partnership values instruments carried
at fair value using quoted market prices, where available. Quoted market prices represent a Level 1 valuation. When quoted market
prices are not available, the partnership maximizes the use of observable inputs within valuation models. When all significant
inputs are observable, the valuation is classified as Level 2. Valuations that require the significant use of unobservable inputs
are considered Level 3.



Fair values determined using valuation
models require the use of assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining
those assumptions, the partnership looks primarily to external readily observable market inputs such as interest rate yield curves,
currency rates, and price and rate volatilities, as applicable. In limited circumstances, the partnership uses input parameters
that are not based on observable market data and believes that using alternative assumptions will not result in significantly
different fair values.



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



|                                                   |  | Dec. 31, 2013 |   |  | Dec. 31, 2012 |  
|-------------------------------------------------- |  | ------------- | - |  | ------------- | -
|(US$ Millions)                                     |  | Level 1       |   |  | Level 2       |  
|Financial assets                                   |  |               |   |  |               |  
|Participating loan interests – embedded derivative |  | $             | - |  |               | $
|Other non-current assets                           |  |               |   |  |               |  
|Securities designated as FVTPL                     |  |               | - |  |               |  
|Securities designated as AFS                       |  |               | - |  |               |  
|Derivative assets                                  |  |               | - |  |               |  
|                                                   |  | $             | - |  |               | $
|Financial liabilities                              |  |               |   |  |               |  
|Property debt                                      |  | $             | - |  |               | $
|Other non-current liabilities                      |  |               | - |  |               |  
|Accounts payable and other liabilities             |  |               | - |  |               |  
|                                                   |  | $             | - |  |               | $



F-45







There
have been no transfers during the period between levels. The table
below summarizes the valuation techniques and inputs of Level 2 assets:



|Type
    of asset/liability        |  | Valuation
    technique(s)                                                                                                                                                  
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Foreign currency forward contracts |  | Discounted cash flow model – forward exchange rates (from
    observable forward exchange rates at the end of the reporting period) and discounted at a credit adjusted rate
|Interest rate contracts            |  | Discounted cash flow model – forward interest rates (from
    observable yield curves) and applicable credit spreads discounted at a credit adjusted rate                   



The table below summarizes the valuation techniques and inputs
of Level 3 assets:



|Type
    of asset/liability |  | Valuation
    technique(s) |  | Significant
    unobservable input(s)                                                                  |  | Relationship
    of unobservable input(s) to fair value                                    
|--------------------------- |  | -------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------
|Investment in common shares |  | Net asset valuation        |  | Forward exchange rates (from observable forward exchange rates
    at the end of the reporting period) |  | Increases (decreases) in the forward exchange rate would increase
    (decrease) fair value
|                            |  |                            |  | Discount rate                                                                                          |  | Decreases (increases) in the discount rate would increase (decrease)
    fair value        
|Warrants                    |  | Black-Scholes model        |  | Volatility                                                                                             |  | Increases (decreases) in volatility would increase (decrease) fair
    value               



A reconciliation of fair value measurements in Level 3 is presented
below:



|                                                   |  | Dec. 31, 2013    |       |   | Dec. 31, 2012         |  
|-------------------------------------------------- |  | ---------------- | ----- | - | --------------------- | -
|(US$ Millions)                                     |  | Financial Assets |       |   | Financial Liabilities |  
|Balance at beginning of year                       |  | $                | 1,709 |   |                       | $
|Acquisitions                                       |  |                  | 353   |   |                       |  
|Dispositions                                       |  |                  | (85   | ) |                       |  
|Fair value gains (losses), net and OCI             |  |                  | 149   |   |                       |  
|Reclassification (to) and from consolidated assets |  |                  | (10   | ) |                       |  
|Balance at end of year                             |  | $                | 2,116 |   |                       | $



| | (c) | Market risk
| | --- | -----------

Interest rate risk

The partnership faces interest rate risk
on its variable rate financial assets and liabilities. In addition, there is interest rate risk associated with the partnership's
fixed rate debt due to the expected requirement to refinance such debt in the year of maturity. The following table outlines the
impact on interest expense of a 100 basis point increase or decrease in interest rates on the partnership's variable rate assets
and liabilities and fixed rate debt maturing within one year:



|(US$ Millions)                                   |  | Dec. 31, 2013 |     |  | Dec. 31, 2012 |  
|------------------------------------------------ |  | ------------- | --- |  | ------------- | -
|Variable rate property debt                      |  |               | 112 |  |               |  
|Fixed rate property debt due within
    one year |  |               | 8   |  |               |  
|Total                                            |  | $             | 120 |  |               | $



The partnership manages interest rate
risk by primarily entering into fixed rate operating property debt and staggering the maturities of its mortgage portfolio over
a 10-year horizon when the market permits. The partnership also makes use of interest rate derivatives to manage interest rate
risk on specific variable rate debts and on anticipated refinancing of fixed rate debt.



F-46







Foreign currency risk

The partnership is structured such that
its foreign operations are primarily conducted by entities with a functional currency which is the same as the economic environment
in which the operations take place. As a result, the net income impact of currency risk associated with financial instruments
is limited as its financial assets and liabilities are generally denominated in the functional currency of the subsidiary that
holds the financial instrument. However, the partnership is exposed to foreign currency risk on the net assets of its foreign
currency denominated operations. The partnership's exposures to foreign currencies and the sensitivity of net income and other
comprehensive income, on a pre-tax basis, to a 10% change in the exchange rates relative to the US dollar is summarized below:



|                  |  | Dec.
    31, 2013                                                                     |       |  | Dec.
    31, 2012 |   |      | Dec.
    31, 2011 | 
|----------------- |  | ------------------------------------------------------------------------------------- | ----- |  | ----------------- | - | ---- | ----------------- | 
|(Millions)        |  | Equity
    aftersubtractingnon-
controllinginterests ofothers inoperatingsubsidiaries |       |  | OCI               |   |      | NetIncome         | 
|Canadian Dollar   |  | C$                                                                                    | 631   |  |                   | $ | (59  | )                 | 
|Australian Dollar |  | A$                                                                                    | 1,716 |  |                   |   | (154 | )                 | 
|British Pound     |  | £                                                                                     | 998   |  |                   |   | (165 | )                 | 
|Euro              |  | €                                                                                     | 161   |  |                   |   | (31  | )                 | 
|Brazilian Real    |  | R$                                                                                    | 1,046 |  |                   |   | (45  | )                 | 
|Total             |  |                                                                                       |       |  |                   | $ | (454 | )                 | 



Equity price risk

The partnership faces equity price risk
in connection with a total return swap under which it receives the returns on a notional 1,411,579 of BPO’s common shares.
A $1 increase or decrease in BPO’s share price would result in a $1 million gain or loss being recognized in administration
and other expense.



The partnership also faces equity price
risk related to its indirect 22% common equity interest in CWG. A $1 increase or decrease in CWG’s share price would result
in a $141 million gain or loss being recognized in fair value gains.



| | (d) | Credit risk
| | --- | -----------

The partnership's maximum exposure to
credit risk associated with financial assets is equivalent to the carrying value of each class of financial assets as separately
presented in loans and notes receivable, other non-current assets, accounts receivables and other, and cash and cash equivalents.



Credit risk arises on loans and notes
receivables in the event that borrowers default on the repayment to the partnership. The partnership mitigates this risk by attempting
to ensure that adequate security has been provided in support of such loans and notes.



Credit risk related to accounts receivable
arises from the possibility that tenants may be unable to fulfill their lease commitments. The partnership mitigates this risk
through diversification, ensuring that borrowers meet minimum credit quality requirements and by ensuring that its tenant mix
is diversified and by limiting its exposure to any one tenant. The partnership maintains a portfolio that is diversified by property
type so that exposure to a business sector is lessened.



Currently no one tenant represents more
than 10% of operating property revenue.



The majority of the partnership's trade
receivables are collected within 30 days. The balance of accounts receivable and loans and notes receivable past due is not significant.



NOTE 31: RELATED
PARTIES

In the normal course of operations, the
partnership entered into the transactions below with related parties on market terms. These transactions have been measured at
fair value and are recognized in the consolidated financial statements.



The immediate parent of the partnership
is the managing general partner. The ultimate parent of the partnership is Brookfield. Other related parties of the partnership
represent its subsidiaries and operating entities.



F-47







The partnership issued $996 million of Redeemable/Exchangeable
Units to Brookfield as a portion of the consideration in respect of the acquisition of additional common shares and warrants of
GGP and common shares of Rouse in November 2013 (see Note 19 (b)).



Transactions with other related parties

Since Spin-off, the partnership had a
management agreement with its service providers, wholly-owned subsidiaries of Brookfield.



Pursuant to the Master Services Agreement,
on a quarterly basis, the partnership pays a base management fee, referred to as the base management fee, to the service providers
equal to $12.5 million per quarter ($50 million annually). The base management fee for the period of April 15, 2013 through December
31, 2013 was $35.5 million.



Additionally, the partnership pays a quarterly
equity enhancement distribution to the Property Special LP of 0.3125% of the amount by which the operating partnership’s
total capitalization value at the end of each quarter exceeds its total capitalization value immediately following the Spin-off,
subject to certain adjustments. For purposes of calculating the equity enhancement distribution, the capitalization of the partnership
is equal to the volume weighted average of the closing prices of the partnership’s units on the New York Stock Exchange
(or other exchange or market where the partnership’s units are principally traded) 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’s interest in the partnership into 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. The equity enhancement distribution from Spin-off (April 15, 2013) to December 31, 2013
was nil.



During the period of April 15, 2013 through
December 31, 2013, $29 million was reimbursed at cost to the service providers of the partnership. These amounts represent third
party costs that were paid for by Brookfield on behalf of the partnership relating to Spin-off expenses, general and administrative
expenses, and acquisition related expenses of the partnership. These expenses were charged to the partnership from Brookfield
at cost.



The following table summarizes transactions
with related parties:



|(US$ Millions) Balances outstanding as at                                     |  | Dec. 31, 2013 |     |  | Dec. 31, 2012 |  
|----------------------------------------------------------------------------- |  | ------------- | --- |  | ------------- | -
|Participating loan interests                                                  |  | $             | 747 |  |               | $
|Loans and notes receivable (1)                                                |  |               | 293 |  |               |  
|Receivables and other assets                                                  |  |               | 11  |  |               |  
|Capitalized construction profits payable to Brookfield  Asset Management Inc. |  |               | -   |  |               |  
|Property debt payable                                                         |  |               | 341 |  |               |  
|Other liabilities                                                             |  |               | 98  |  |               |  



|(US$ Millions) Year ended Dec. 31,           |  | 2013 |     |  | 2012 |   |    | 2011 | 
|-------------------------------------------- |  | ---- | --- |  | ---- | - | -- | ---- | 
|Commercial property revenue(2)               |  | $    | 7   |  |      | $ | 10 |      | 
|Interest and other income                    |  |      | 52  |  |      |   | 40 |      | 
|Interest expense on commercial property debt |  |      | 12  |  |      |   | 4  |      | 
|Administration expense (3)                   |  |      | 147 |  |      |   | 51 |      | 
|Management fees paid                         |  |      | 130 |  |      |   | 21 |      | 
|Management fees received                     |  |      | -   |  |      |   | -  |      | 

(1) Includes $128 million receivable from Brookfield
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 notes.

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

(3) Amounts paid to Brookfield and its subsidiaries
for administrative services.



F-48







NOTE 32: Payroll
Expense

The partnership has no employees or directors;
therefore the partnership does not remunerate key management personnel. Key decision makers of the partnership are all employees
of the ultimate parent company who provide management services under the Master Services Agreement.



Throughout the year, the managing general
partner in its capacity as the partnership’s general partner incurs director fees, a portion of which are charged to the
partnership in accordance with the limited partnership agreement. Less than $1 million in director fees were incurred during the
year ended December 31, 2013 (2012 – n/a, 2011 – n/a).



NOTE 33: SEGMENTED
INFORMATION

The partnership has three operating segments
which are independently reviewed and managed by the chief operating decision maker (“CODM”), who is identified as
the chief executive officer of the service providers of the partnership. The operating segments are office, retail, and multi-family,
industrial and other located in the North America, Australia, Brazil and Europe.



The CODM measures and evaluates segment
performance based on equity, net operating income (“NOI”), and funds from operations (“FFO”). NOI and
FFO do not have standardized meanings prescribed by IFRS and therefore may differ from similar metrics used by other companies.
The partnership defines these measures as follows:



| | · | NOI:
                                         means revenues from commercial and hospitality operations of consolidated properties
                                         less direct commercial property and hospitality expenses, with the exception of depreciation
                                         and amortization of real estate assets.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | FFO:
                                         means income, including equity accounted income, before realized gains (losses) on real
                                         estate property, fair value gains (losses) (including equity accounted fair value gains
                                         (losses)), depreciation and amortization of real estate assets, income tax expense (benefit),
                                         and less non-controlling interests.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following summary presents segmented financial information
for the partnership’s principal geographic areas of business:



|                                           |  | Total assets  |        |  | Total liabilities |   |        | Equity after subtracting non-
    controlling interests of others in operating subsidiaries | 
|------------------------------------------ |  | ------------- | ------ |  | ----------------- | - | ------ | ------------------------------------------------------------------------------------------- | 
|(US$ Millions)                             |  | Dec. 31, 2013 |        |  | Dec. 31, 2012     |   |        | Dec. 31, 2013                                                                               | 
|Office                                     |  |               |        |  |                   |   |        |                                                                                             | 
|United States
    (1)                      |  | $             | 19,373 |  |                   | $ | 16,247 |                                                                                             | 
|Canada (2)                                 |  |               | 5,144  |  |                   |   | 5,262  |                                                                                             | 
|Australia (3)                              |  |               | 4,547  |  |                   |   | 5,811  |                                                                                             | 
|Europe                                     |  |               | 2,769  |  |                   |   | 2,063  |                                                                                             | 
|Developments                               |  |               | 2,033  |  |                   |   | 1,531  |                                                                                             | 
|Unallocated (4)                            |  |               | -      |  |                   |   | -      |                                                                                             | 
|                                           |  |               | 33,866 |  |                   |   | 30,914 |                                                                                             | 
|Retail                                     |  |               |        |  |                   |   |        |                                                                                             | 
|United States (5)                          |  |               | 7,311  |  |                   |   | 5,757  |                                                                                             | 
|Australia                                  |  |               | 129    |  |                   |   | 231    |                                                                                             | 
|Brazil                                     |  |               | 2,052  |  |                   |   | 2,287  |                                                                                             | 
|                                           |  |               | 9,492  |  |                   |   | 8,275  |                                                                                             | 
|Multi-Family, Industrial
    and Other (6) |  |               | 9,050  |  |                   |   | 8,492  |                                                                                             | 
|Corporate                                  |  |               | 38     |  |                   |   | -      |                                                                                             | 
|                                           |  | $             | 52,446 |  |                   | $ | 47,681 |                                                                                             | 



|(1) | Equity after subtracting non-controlling interests
    of others in operating subsidiaries is net of non-controlling interests of $1,134 million (2012 - $705 million).                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Equity after subtracting non-controlling interests
    of others in operating subsidiaries is net of non-controlling interests of $488 million (2012 - $512 million).                                    
|(3) | Equity after subtracting non-controlling interests
    of others in operating subsidiaries is net of non-controlling interests of $130 million (2012 - $123 million).                                    
|(4) | Unallocated liabilities include corporate debt and
    capital securities. Equity after subtracting non-controlling interests of others in operating subsidiaries includes non-controlling
    interests.
|(5) | During 2013, the partnership recorded an impairment
    loss of $249 million on its investment in GGP. See Note 8.                                                                                       
|(6) | Operations in North America, Europe, Australia,
    and Brazil.                                                                                                                                          



F-49







|(US$ Millions)                            |  | Total revenue |       |  | NOI  |   |       | FFO(1) | 
|----------------------------------------- |  | ------------- | ----- |  | ---- | - | ----- | ------ | 
|Year ended Dec. 31,                       |  | 2013          |       |  | 2012 |   |       | 2011   | 
|Office                                    |  |               |       |  |      |   |       |        | 
|United
    States (2)                     |  | $             | 1,482 |  |      | $ | 1,418 |        | 
|Canada (3)                                |  |               | 555   |  |      |   | 598   |        | 
|Australia                                 |  |               | 426   |  |      |   | 460   |        | 
|Europe (4)                                |  |               | 91    |  |      |   | 77    |        | 
|Unallocated (5)                           |  |               | -     |  |      |   | -     |        | 
|                                          |  |               | 2,554 |  |      |   | 2,553 |        | 
|Retail                                    |  |               |       |  |      |   |       |        | 
|United States                             |  |               | -     |  |      |   | -     |        | 
|Australia                                 |  |               | 16    |  |      |   | 17    |        | 
|Brazil                                    |  |               | 142   |  |      |   | 143   |        | 
|Europe                                    |  |               | -     |  |      |   | -     |        | 
|                                          |  |               | 158   |  |      |   | 160   |        | 
|Multi-Family, Industrial
    and Other(6) |  |               | 1,575 |  |      |   | 1,055 |        | 
|Corporate                                 |  |               | -     |  |      |   | -     |        | 
|                                          |  | $             | 4,287 |  |      | $ | 3,768 |        | 



|(1) | FFO represents interests attributable to LP units
    and REUs (defined as Redeemable/Exchangeable and special limited partner units of the operating partnership). The interests
    attributable to REUs are presented as non-controlling interests in the condensed consolidated statements of income.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | 2013 FFO include equity accounted income of $63
    million (2012 - $79 million, 2011 - $172 million) and is net of non-controlling interests of $28 million (2012 - $29 million,
    2011 - $53 million).                                                                                               
|(3) | 2013 FFO is net of non-controlling
    interests of $23 million (2012 - $65 million, 2011 - $23 million).                                                                                                                                                                                                
|(4) | 2013 FFO include a dividend of $14 million from CWG (2012 -
    $40 million, 2011 - $16 million).                                                                                                                                                                                                        
|(5) | FFO primarily include unallocated interest expense, and non-controlling
    interest.                                                                                                                                                                                                                    
|(6) | Operations primarily in North America with interests
    in Europe and Australia.                                                                                                                                                                                                                        



The following table provides a reconciliation of revenue, NOI
and FFO to net income before non-controlling interests in subsidiaries for the years ended December 31, 2013, 2012 and 2011:



|(US$ Millions)                                                                             |  | 2013 |        |   | 2012 |   |        | 2011 | 
|------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|Commercial property revenue                                                                |  | $    | 2,910  |   |      | $ | 2,858  |      | 
|Hospitality revenue                                                                        |  |      | 1,168  |   |      |   | 743    |      | 
|Direct commercial property expense                                                         |  |      | (1,204 | ) |      |   | (1,189 | )    | 
|Direct hospitality expense                                                                 |  |      | (1,081 | ) |      |   | (687   | )    | 
|Depreciation and
    amortization of real estate assets (1)                                |  |      | 124    |   |      |   | 49     |      | 
|NOI                                                                                        |  |      | 1,917  |   |      |   | 1,774  |      | 
|Investment and other revenue                                                               |  |      | 209    |   |      |   | 167    |      | 
|Share of equity accounted income excluding fair value gains                                |  |      | 435    |   |      |   | 427    |      | 
|Interest expense                                                                           |  |      | (1,088 | ) |      |   | (1,020 | )    | 
|Administration and other expense                                                           |  |      | (355   | ) |      |   | (205   | )    | 
|Non-controlling interests of others in operating subsidiaries in funds from
    operations |  |      | (536   | ) |      |   | (512   | )    | 
|FFO (2)                                                                                    |  |      | 582    |   |      |   | 631    |      | 
|Depreciation and amortization of real
    estate assets (1)                                |  |      | (124   | ) |      |   | (49    | )    | 
|Fair value gains, net                                                                      |  |      | 870    |   |      |   | 1,227  |      | 
|Share of equity accounted fair value gains                                                 |  |      | 414    |   |      |   | 808    |      | 
|Income tax expense                                                                         |  |      | (501   | ) |      |   | (489   | )    | 
|Share of equity accounted income tax expense                                               |  |      | (14    | ) |      |   | -      |      | 
|Non-controlling interests of others in operating subsidiaries in income
    tax expense    |  |      | (320   | ) |      |   | (652   | )    | 
|Net income before non-controlling interests of others in operating subsidiaries            |  |      | 907    |   |      |   | 1,476  |      | 
|Non-controlling interests of others in operating subsidiaries                              |  |      | 856    |   |      |   | 1,164  |      | 
|Net income                                                                                 |  | $    | 1,763  |   |      | $ | 2,640  |      | 



| | (1) | Depreciation
                                         and amortization of real estate assets is a component of direct hospitality expense that
                                         is added back to NOI and is deducted in the net income calculation.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | FFO
                                         represents interests attributable to LP units and REUs (defined as Redeemable/Exchangeable
                                         and special limited partner units of the operating partnership). The interests attributable
                                         to REUs are presented as non-controlling interests in the condensed consolidated statements
                                         of income.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-50







The following summary presents financial
information by the partnership’s principal geographic regions in which it operates:



|               |  | Total revenue for the year ended Dec.
    31, |       |  | Total non-current assets 
    as at |  
|-------------- |  | --------------------------------------------- | ----- |  | ----------------------------------- | -
|(US$ Millions) |  | 2013                                          |       |  | 2012                                |  
|United States  |  | $                                             | 2,833 |  |                                     | $
|Canada         |  |                                               | 566   |  |                                     |  
|Australia      |  |                                               | 606   |  |                                     |  
|Brazil         |  |                                               | 143   |  |                                     |  
|Europe         |  |                                               | 139   |  |                                     |  
|               |  | $                                             | 4,287 |  |                                     | $



NOTE 34: Supplemental
cash flow information

The following table presents the cash interest and taxes
paid for the years ended December 31, 2013, 2012 and 2011:



|(US$ Millions)     |  | 2013 |     |  | 2012 |   |     | 2011 | 
|------------------ |  | ---- | --- |  | ---- | - | --- | ---- | 
|Cash taxes paid    |  | $    | 114 |  |      | $ | 96  |      | 
|Cash interest paid |  |      | 995 |  |      |   | 906 |      | 



NOTE 35: SUBSEQUENT
EVENTS

On
January 8, 2014, the BPO upsized its corporate revolving credit facility from $695 million to $1 billion through a syndicate of
lending institutions led by Deutsche Bank AG, RBC Capital Markets and Citigroup Global Markets Inc. The upsized floating-rate
credit facility holds a four-year term with two six-month extension options. The facility also features an accordion option through
which BPO can draw an additional $250 million at the consent of the lenders.



On
February 10, 2014, GGP announced the acquisition of 27,624,282 of its common shares from affiliates of Pershing Square Capital
Management, L.P. at $20.12 per share for total consideration of approximately $566 million. The transaction reduced GGP’s
total diluted common shares outstanding to approximately 937 million shares.



In
February 2014, the partnership funded its portion of a $500 million investment of preferred equity in China Xintiandi (“CXTD”),
a wholly-owned entity of Hong Kong listed developer Shui On Land. CXTD owns Shui On Land’s premier portfolio of office and
retail assets in Shanghai.



On
February 12, 2014, the partnership announced the commencement of its exchange offer to acquire any or all of the
common shares of BPO that it does not currently own (the “Offer”). Under the terms of the Offer, each BPO
shareholder can elect to receive consideration per BPO common share of either 1.0 limited partnership unit of the partnership
of $20.34 in cash, subject in each case to pro-ration based on a maximum number of the partnership’s limited
partnership units and maximum cash consideration equating to 67% and 33%, respectively, of the total number of BPO common
shares subject to the Offer. As of March 31, 2014, Brookfield Office Properties shareholders tendered 220 million common
shares pursuant to the Offer and extended the Offer until March 31, 2014. The partnership will now own, directly or indirectly,
89% of the issued and outstanding common shares of BPO on a fully-diluted basis.



On
March 18, 2014 we entered into a new credit facility (collectively, the “BPY Credit Facility”), consisting of a
$1.5 billion term acquisition credit facility to fund the Offer (the “Acquisition Credit Facility”) and a $1
billion revolving facility to be used to replace our existing revolving credit facilities, to fund a portion of the
additional cash required to complete the Offer and any second-step transaction up to a limit of $366 million and for general
corporate and operating purposes.



Borrowings
under the BPY Credit Facility will be subject to certain customary conditions for loan facilities of this type. Interest under
the BPY Credit Facility is payable, at the option of borrowers thereunder, either at a base rate plus 1.25% or a LIBOR-based rate
plus 2.25%. The BPY Credit Facility will have a term of two years, with a one-year extension at our option for up to $1.5 billion
of commitments subject to the satisfaction of certain conditions and the payment of extension fees. The BPY Credit Facility may
be prepaid, in whole or in part (subject to minimums and increments), at any time and without bonus or penalty. We will be required
to reduce the aggregate principal amount outstanding under the Acquisition Credit Facility to $500 million or less prior to the
second anniversary of the facility, and such reduction is required to exercise the one-year extension option. Subject to certain
exceptions and limitations, we will be required to cause a specified percentage (based on the amount outstanding under the Acquisition
Credit Facility) of the net proceeds that we receive from certain future asset sales and debt issuances to be applied to repay
the Acquisition Credit Facility. Any portion of such net sale and financing proceeds that is not required to be repaid to the
lenders in the first instance and is not reinvested within a specified time period, must similarly be used to repay the Acquisition
Credit Facility. Our operating entities are subject to limited covenants in respect of their corporate debt and were in compliance
with all such covenants as of December 31, 2013. Our operating subsidiaries are also in compliance with all covenants and other
capital requirements related to regulatory or contractual obligations of material consequence to us.



NOTE 36: APPROVAL
OF FINANCIAL STATEMENTS

These consolidated financial statements
were approved by the Board of Directors of the partnership and authorized for issue on February 3, 2014.



F-51







SCHEDULE III – SUPPLEMENTAL SCHEDULE
OF INVESTMENT PROPERTY INFORMATION



The table below presents the number of
operating properties, the related fair value, debt, weighted average year of acquisition and weighted average year of construction
by segment as of December 31, 2013.



|                                   |  |                      |     |  | Fair Value (1) |   |        | Debt(2)        |  |   | Weighted Average Year of |  |  | Weighted Average Year |     
|---------------------------------- |  | -------------------- | --- |  | -------------- | - | ------ | -------------- |  | - | ------------------------ |  |  | --------------------- | ----
|                                   |  | Number of properties |     |  | (US$ millions) |   |        | (US$ millions) |  |   | Acquisition(3)           |  |  | of Construction(3)    |     
|Office Properties                  |  |                      |     |  |                |   |        |                |  |   |                          |  |  |                       |     
|United States                      |  |                      | 83  |  |                | $ | 16,651 |                |  | $ | 8,614                    |  |  |                       | 2004
|Canada                             |  |                      | 27  |  |                |   | 4,856  |                |  |   | 2,214                    |  |  |                       | 1999
|Australia                          |  |                      | 20  |  |                |   | 3,315  |                |  |   | 1,653                    |  |  |                       | 2009
|Europe                             |  |                      | 5   |  |                |   | 1,660  |                |  |   | 1,035                    |  |  |                       | 2007
|                                   |  |                      | 135 |  |                |   | 26,482 |                |  |   | 13,516                   |  |  |                       | 2004
|Retail Properties                  |  |                      |     |  |                |   |        |                |  |   |                          |  |  |                       |     
|Brazil                             |  |                      | 8   |  |                |   | 1,735  |                |  |   | 636                      |  |  |                       | 2000
|Australia                          |  |                      | 2   |  |                |   | 128    |                |  |   | 58                       |  |  |                       | 2007
|                                   |  |                      | 10  |  |                |   | 1,863  |                |  |   | 694                      |  |  |                       | 2000
|Multi-family, Industrial and Other |  |                      |     |  |                |   |        |                |  |   |                          |  |  |                       |     
|United States                      |  |                      | 195 |  |                |   | 2,884  |                |  |   | 1,593                    |  |  |                       | 2011
|Europe                             |  |                      | 20  |  |                |   | 361    |                |  |   | 142                      |  |  |                       | 2013
|Canada                             |  |                      | 3   |  |                |   | 89     |                |  |   | 69                       |  |  |                       | 2007
|                                   |  |                      | 218 |  |                |   | 3,334  |                |  |   | 1,804                    |  |  |                       | 2011
|Total                              |  |                      | 363 |  |                | $ | 31,679 |                |  | $ | 16,014                   |  |  |                       | 2005





| | (1) | Excludes
                                         development properties with a fair value of $2,474 million in the United States, Australia,
                                         Canada, Europe, and Brazil.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Excludes
                                         debt related to development properties in the amount of $709 million, unsecured and corporate
                                         facilities of $2,092 million and debt on hotel assets of $2,825 million.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Weighted
                                         against the current fair value of the properties.
| | --- | ---------------------------------------------------------------------------------------------------



F-52







GENERAL GROWTH PROPERTIES, INC.



Consolidated financial statements of General
Growth Properties, Inc. as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013



F-53







REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Stockholders of
General Growth Properties, Inc.
Chicago, Illinois



We have audited the accompanying consolidated balance sheets
of General Growth Properties, Inc. and subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related
consolidated statements of operations and comprehensive income (loss), equity, and cash flows for each of the three years in the
period ended December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of GGP/Homart
II L.L.C. and GGP-TRS L.L.C., the Company's investments in which are accounted for by use of the equity method, as of December
31, 2012 and for each of the two years in the period ended December 31, 2012. The Company's equity of $700,568,000 in GGP/Homart
II L.L.C.'s net assets as of December 31, 2012, and equity of $9,315,000 and $(4,740,000) in GGP/Homart II L.L.C.'s net income
(loss) for the years ended December 31, 2012 and 2011, respectively, are included in the accompanying financial statements. The
Company's equity of $242,802,000 in GGP-TRS L.L.C.'s net assets as of December 31, 2012, and equity of $6,133,000 and $(4,620,000)
in GGP-TRS L.L.C.'s net income (loss) for the years ended December 31, 2012 and 2011, respectively, are included in the accompanying
financial statements. The financial statements of GGP/Homart II L.L.C. and GGP-TRS L.L.C. were audited by other auditors related
to the periods listed above whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included
for such companies, is based on the reports of the other auditors and the procedures that we considered necessary in the circumstances
with respect to the inclusion of the Company's equity investments and equity method income in the accompanying consolidated financial
statements taking into consideration the basis adjustments of the equity method investments which resulted from the application
of the acquisition method of accounting in connection with the Company’s emergence from bankruptcy in 2010.



We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.



In our opinion, based on our audits and the reports of the other
auditors, the consolidated financial statements present fairly, in all material respects, the financial position of General Growth
Properties, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the
United States of America.



We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December
31, 2013, based on the criteria established in Internal Control— Integrated Framework (1992) issued by the Committee
of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2014 expressed an unqualified opinion
on the Company's internal control over financial reporting.



/s/ Deloitte & Touche LLP



Chicago,
IllinoisFebruary 21, 2014



F-54







Independent Auditors’
Report



The Members

GGP/Homart II L.L.C.:



We have audited the accompanying consolidated
financial statements of GGP/Homart II L.L.C. and its subsidiaries (the Company), which comprise the consolidated balance sheet
as of December 31, 2012, and the related consolidated statements of operations and comprehensive income, changes in capital,
and cash flows for each of the years in the two-year period ended December 31, 2012, and the related notes to the consolidated
financial statements.



Management’s Responsibility
for the Financial Statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles;
this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.



Auditors’ Responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America and in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.



We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of GGP/Homart II L.L.C. and its subsidiaries
as of December 31, 2012, and the results of their operations and their cash flows for each of the years in the two-year period
ended December 31, 2012, in accordance with U.S. generally accepted accounting principles.



KPMG LLP



Chicago, Illinois

February 28, 2013



F-55







Independent Auditors’
Report



The Members

GGP-TRS L.L.C.:



We have audited the accompanying consolidated
financial statements of GGP-TRS L.L.C. and its subsidiaries (the Company), which comprise the consolidated balance sheet as
of December 31, 2012, and the related consolidated statements of operations, changes in members’ capital, and cash flows
for each of the years in the two-year period ended December 31, 2012, and the related notes to the consolidated financial
statements.



Management’s Responsibility
for the Financial Statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles;
this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.



Auditors’ Responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America and in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.



We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of GGP-TRS L.L.C. and its subsidiaries
as of December 31, 2012, and the results of their operations and their cash flows for each of the years in the two-year period
ended December 31, 2012, in accordance with U.S. generally accepted accounting principles.



KPMG LLP



Chicago, Illinois

February 28, 2013



F-56







GENERAL GROWTH PROPERTIES, INC.



(Dollars in thousands, except per share
amounts)



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                            |  | December 31, 2013                                          |            |   | December 31, 2012 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------- | ---------- | - | ----------------- | -
|                                                                                                                                                                                                            |  | (Dollars in thousands, except share and per share amounts) |           
|Assets:                                                                                                                                                                                                     |  |                                                            |            |   |                   |  
|Investment in real estate:                                                                                                                                                                                  |  |                                                            |            |   |                   |  
|Land                                                                                                                                                                                                        |  | $                                                          | 4,320,597  |   |                   | $
|Buildings and equipment                                                                                                                                                                                     |  |                                                            | 18,270,748 |   |                   |  
|Less accumulated depreciation                                                                                                                                                                               |  |                                                            | (1,884,861 | ) |                   |  
|Construction in progress                                                                                                                                                                                    |  |                                                            | 406,930    |   |                   |  
|Net property and equipment                                                                                                                                                                                  |  |                                                            | 21,113,414 |   |                   |  
|Investment in and loans to/from Unconsolidated Real Estate Affiliates                                                                                                                                       |  |                                                            | 2,407,698  |   |                   |  
|Net investment in real estate                                                                                                                                                                               |  |                                                            | 23,521,112 |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                   |  |                                                            | 577,271    |   |                   |  
|Accounts and notes receivable, net                                                                                                                                                                          |  |                                                            | 478,899    |   |                   |  
|Deferred expenses, net                                                                                                                                                                                      |  |                                                            | 189,452    |   |                   |  
|Prepaid expenses and other assets                                                                                                                                                                           |  |                                                            | 995,569    |   |                   |  
|Total assets                                                                                                                                                                                                |  | $                                                          | 25,762,303 |   |                   | $
|                                                                                                                                                                                                            |  |                                                            |            |   |                   |  
|Liabilities:                                                                                                                                                                                                |  |                                                            |            |   |                   |  
|Mortgages, notes and loans payable                                                                                                                                                                          |  | $                                                          | 15,672,437 |   |                   | $
|Investment in Unconsolidated Real Estate Affiliates                                                                                                                                                         |  |                                                            | 17,405     |   |                   |  
|Accounts payable and accrued expenses                                                                                                                                                                       |  |                                                            | 989,367    |   |                   |  
|Dividend payable                                                                                                                                                                                            |  |                                                            | 134,476    |   |                   |  
|Deferred tax liabilities                                                                                                                                                                                    |  |                                                            | 24,667     |   |                   |  
|Tax indemnification liability                                                                                                                                                                               |  |                                                            | 303,586    |   |                   |  
|Junior subordinated notes                                                                                                                                                                                   |  |                                                            | 206,200    |   |                   |  
|Warrant liability                                                                                                                                                                                           |  |                                                            | -          |   |                   |  
|Total liabilities                                                                                                                                                                                           |  |                                                            | 17,348,138 |   |                   |  
|                                                                                                                                                                                                            |  |                                                            |            |   |                   |  
|Redeemable noncontrolling interests:                                                                                                                                                                        |  |                                                            |            |   |                   |  
|Preferred                                                                                                                                                                                                   |  |                                                            | 131,881    |   |                   |  
|Common                                                                                                                                                                                                      |  |                                                            | 97,021     |   |                   |  
|Total redeemable noncontrolling interests                                                                                                                                                                   |  |                                                            | 228,902    |   |                   |  
|                                                                                                                                                                                                            |  |                                                            |            |   |                   |  
|Commitments and Contingencies                                                                                                                                                                               |  |                                                            | -          |   |                   |  
|                                                                                                                                                                                                            |  |                                                            |            |   |                   |  
|Equity:                                                                                                                                                                                                     |  |                                                            |            |   |                   |  
|Common stock: 11,000,000,000 shares authorized, $0.01 par value, 966,998,908 issued, 911,194,605 outstanding as of December 31, 2013, and 939,049,318 shares issued and outstanding as of December 31, 2012 |  |                                                            | 9,395      |   |                   |  
|Preferred Stock:                                                                                                                                                                                            |  |                                                            |            |   |                   |  
|500,000,000 shares authorized, $.01 par value, 10,000,000 shares issued and outstanding as of December 31, 2013 and none issued and outstanding as of December 31, 2012                                     |  |                                                            | 242,042    |   |                   |  
|Additional paid-in capital                                                                                                                                                                                  |  |                                                            | 11,372,443 |   |                   |  
|Retained earnings (accumulated deficit)                                                                                                                                                                     |  |                                                            | (2,915,723 | ) |                   |  
|Accumulated other comprehensive loss                                                                                                                                                                        |  |                                                            | (38,173    | ) |                   |  
|Common stock in treasury, at cost, 28,345,108 shares as of December 31, 2013 and none as of December 31, 2012                                                                                               |  |                                                            | (566,863   | ) |                   |  
|Total stockholders' equity                                                                                                                                                                                  |  |                                                            | 8,103,121  |   |                   |  
|Noncontrolling interests in consolidated real estate affiliates                                                                                                                                             |  |                                                            | 82,142     |   |                   |  
|Total equity                                                                                                                                                                                                |  |                                                            | 8,185,263  |   |                   |  
|Total liabilities and equity                                                                                                                                                                                |  | $                                                          | 25,762,303 |   |                   | $



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



F-57







GENERAL GROWTH PROPERTIES, INC.



(Dollars in thousands, except per share
amounts)



CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)





|                                                                                                                                                                                                                             |  | Years Ended December 31,                         |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ---------
|                                                                                                                                                                                                                             |  | 2013                                             |          
|                                                                                                                                                                                                                             |  | (Dollars in thousands, except per share amounts) |          
|Revenues:                                                                                                                                                                                                                    |  |                                                  |          
|Minimum rents                                                                                                                                                                                                                |  | $                                                | 1,588,883
|Tenant recoveries                                                                                                                                                                                                            |  |                                                  | 723,634  
|Overage rents                                                                                                                                                                                                                |  |                                                  | 56,212   
|Management fees and other corporate revenues                                                                                                                                                                                 |  |                                                  | 68,792   
|Other                                                                                                                                                                                                                        |  |                                                  | 89,866   
|Total revenues                                                                                                                                                                                                               |  |                                                  | 2,527,387
|                                                                                                                                                                                                                             |  |                                                  |          
|Expenses:                                                                                                                                                                                                                    |  |                                                  |          
|Real estate taxes                                                                                                                                                                                                            |  |                                                  | 243,941  
|Property maintenance costs                                                                                                                                                                                                   |  |                                                  | 71,334   
|Marketing                                                                                                                                                                                                                    |  |                                                  | 26,214   
|Other property operating costs                                                                                                                                                                                               |  |                                                  | 352,466  
|Provision for doubtful accounts                                                                                                                                                                                              |  |                                                  | 4,068    
|Property management and other costs                                                                                                                                                                                          |  |                                                  | 164,777  
|General and administrative                                                                                                                                                                                                   |  |                                                  | 49,237   
|Provision for impairment                                                                                                                                                                                                     |  |                                                  | 18,361   
|Depreciation and amortization                                                                                                                                                                                                |  |                                                  | 764,830  
|Total expenses                                                                                                                                                                                                               |  |                                                  | 1,695,228
|Operating income                                                                                                                                                                                                             |  |                                                  | 832,159  
|                                                                                                                                                                                                                             |  |                                                  |          
|Interest income                                                                                                                                                                                                              |  |                                                  | 7,699    
|Interest expense                                                                                                                                                                                                             |  |                                                  | (736,560 
|Loss on foreign currency                                                                                                                                                                                                     |  |                                                  | (7,312   
|Warrant liability adjustment                                                                                                                                                                                                 |  |                                                  | (40,546  
|Gains from changes in control of investment properties                                                                                                                                                                       |  |                                                  | 219,784  
|Loss on extinguishment of debt                                                                                                                                                                                               |  |                                                  | (36,479  
|Income (loss) before income taxes, equity in income of Unconsolidated Real Estate Affiliates, discontinued operations and allocation to noncontrolling interests                                                             |  |                                                  | 238,745  
|Benefit from (provision for) income taxes                                                                                                                                                                                    |  |                                                  | (345     
|Equity in income of Unconsolidated Real Estate Affiliates                                                                                                                                                                    |  |                                                  | 58,919   
|Equity in income of Unconsolidated
    Real Estate Affiliates - gain (loss) on investment (includes ($109.9 million) accumulated other comprehensive loss
    reclassifications for net foreign currency translation losses) |  |                                                  | 9,837    
|Income (loss) from continuing operations                                                                                                                                                                                     |  |                                                  | 307,156  
|Discontinued operations:                                                                                                                                                                                                     |  |                                                  |          
|Loss from discontinued operations, including gains (losses) on dispositions                                                                                                                                                  |  |                                                  | (15,851  
|Gain on extinguishment of debt                                                                                                                                                                                               |  |                                                  | 25,894   
|Discontinued operations, net                                                                                                                                                                                                 |  |                                                  | 10,043   
|Net income (loss)                                                                                                                                                                                                            |  |                                                  | 317,199  
|Allocation to noncontrolling interests                                                                                                                                                                                       |  |                                                  | (14,671  
|Net income (loss) attributable to General Growth Properties, Inc.                                                                                                                                                            |  |                                                  | 302,528  
|Preferred Stock dividends                                                                                                                                                                                                    |  |                                                  | (14,078  
|Net income (loss) attributable to common stockholders                                                                                                                                                                        |  | $                                                | 288,450  
|                                                                                                                                                                                                                             |  |                                                  |          
|Basic Earnings (Loss) Per Share:                                                                                                                                                                                             |  |                                                  |          
|Continuing operations                                                                                                                                                                                                        |  | $                                                | 0.30     
|Discontinued operations                                                                                                                                                                                                      |  |                                                  | 0.01     
|Total basic earnings (loss) per share                                                                                                                                                                                        |  | $                                                | 0.31     
|                                                                                                                                                                                                                             |  |                                                  |          
|Diluted Earnings (Loss) Per Share:                                                                                                                                                                                           |  |                                                  |          
|Continuing operations                                                                                                                                                                                                        |  | $                                                | 0.30     
|Discontinued operations                                                                                                                                                                                                      |  |                                                  | 0.01     
|Total diluted earnings (loss) per share                                                                                                                                                                                      |  | $                                                | 0.31     
|                                                                                                                                                                                                                             |  |                                                  |          
|Comprehensive Income (Loss), Net:                                                                                                                                                                                            |  |                                                  |          
|Net income (loss)                                                                                                                                                                                                            |  | $                                                | 317,199  
|Other comprehensive income (loss):                                                                                                                                                                                           |  |                                                  |          
|Foreign currency translation (year ended December 31, 2013 includes reclassification of ($109.9 million) accumulated other comprehensive loss into Net income attributable to common stockholders)                           |  |                                                  | 49,644   
|Unrealized gains on available-for-sale securities                                                                                                                                                                            |  |                                                  | (70      
|Other comprehensive income (loss)                                                                                                                                                                                            |  |                                                  | 49,574   
|Comprehensive income (loss)                                                                                                                                                                                                  |  |                                                  | 366,773  
|Comprehensive loss allocated to noncontrolling interests                                                                                                                                                                     |  |                                                  | (15,064  
|Comprehensive income (loss) attributable to General Growth Properties, Inc.                                                                                                                                                  |  |                                                  | 351,709  
|Preferred stock dividends                                                                                                                                                                                                    |  |                                                  | (14,078  
|Comprehensive income (loss), net, attributable to common stockholders                                                                                                                                                        |  | $                                                | 337,631  



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



F-58







GENERAL GROWTH PROPERTIES, INC.



(Dollars in thousands, except per share
amounts)



CONSOLIDATED STATEMENTS OF EQUITY



|                                                                                 |  | Common Stock |       |   | Preferred Stock |   |         | Additional Paid-In Capital |  |   | Retained Earnings (Accumulated Deficit) |   |  | Accumulated Other Comprehensive Income (Loss) |            |   | Common Stock in Treasury |   |         | Noncontrolling Interests in Consolidated Real Estate Affiliates |  |   | Total Equity |  
|-------------------------------------------------------------------------------- |  | ------------ | ----- | - | --------------- | - | ------- | -------------------------- |  | - | --------------------------------------- | - |  | --------------------------------------------- | ---------- | - | ------------------------ | - | ------- | --------------------------------------------------------------- |  | - | ------------ | -
|Balance at January 1, 2011                                                       |  | $            | 9,419 |   |                 | $ | -       |                            |  | $ | 10,681,586                              |   |  | $                                             | (612,075   | ) |                          | $ | 172     |                                                                 |  | $ | -            |  
|                                                                                 |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Net loss                                                                         |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | (313,172   | ) |                          |   |         |                                                                 |  |   |              |  
|Distributions to noncontrolling interests in consolidated Real Estate Affiliates |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Issuance of common stock - payment of dividend (22,256,121 common
    shares)    |  |              | 223   |   |                 |   |         |                            |  |   | (244                                    | ) |  |                                               | 21         |   |                          |   |         |                                                                 |  |   |              |  
|Restricted stock grants, net of forfeitures ((341,895) common shares)            |  |              | (3    | ) |                 |   |         |                            |  |   | 11,578                                  |   |  |                                               | (307       | ) |                          |   |         |                                                                 |  |   |              |  
|Stock option grants, net of forfeitures (121,439 common shares)                  |  |              | 1     |   |                 |   |         |                            |  |   | 834                                     |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Purchase and cancellation of common shares ((35,833,537) common shares)          |  |              | (358  | ) |                 |   |         |                            |  |   | (398,590                                | ) |  |                                               | (154,562   | ) |                          |   |         |                                                                 |  |   |              |  
|Cash dividends reinvested (DRIP) in stock (7,225,345 common shares)              |  |              | 71    |   |                 |   |         |                            |  |   | 115,292                                 |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Other comprehensive loss                                                         |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   | (47,945 | )                                                               |  |   |              |  
|Cash distributions declared ($0.40 per share)                                    |  |              |       |   |                 |   |         |                            |  |   | (16                                     | ) |  |                                               | (376,824   | ) |                          |   |         |                                                                 |  |   |              |  
|Cash redemptions for common units in excess of carrying value                    |  |              |       |   |                 |   |         |                            |  |   | (648                                    | ) |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Fair value adjustment for noncontrolling interest in Operating Partnership       |  |              |       |   |                 |   |         |                            |  |   | (4,474                                  | ) |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Dividend for RPI Spin-off                                                        |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | (426,650   | ) |                          |   |         |                                                                 |  |   |              |  
|                                                                                 |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Balance at December 31, 2011                                                     |  | $            | 9,353 |   |                 | $ | -       |                            |  | $ | 10,405,318                              |   |  | $                                             | (1,883,569 | ) |                          | $ | (47,773 | )                                                               |  | $ | -            |  
|                                                                                 |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Net loss                                                                         |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | (481,233   | ) |                          |   |         |                                                                 |  |   |              |  
|Distributions to noncontrolling interests in consolidated Real Estate Affiliates |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Restricted stock grants, net of forfeitures ((85,452) common shares)             |  |              | (1    | ) |                 |   |         |                            |  |   | 8,888                                   |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Employee stock purchase program (98,076 common shares)                           |  |              | 1     |   |                 |   |         |                            |  |   | 1,604                                   |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Stock option grants, net of forfeitures (617,842 common shares)                  |  |              | 6     |   |                 |   |         |                            |  |   | 19,853                                  |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Cash dividends reinvested (DRIP) in stock (3,111,365 common shares)              |  |              | 33    |   |                 |   |         |                            |  |   | 48,490                                  |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Other comprehensive loss                                                         |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   | (39,581 | )                                                               |  |   |              |  
|Cash distributions declared ($0.42 per share)                                    |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | (394,029   | ) |                          |   |         |                                                                 |  |   |              |  
|Cash redemptions for common units in excess of carrying value                    |  |              |       |   |                 |   |         |                            |  |   | (1,083                                  | ) |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Fair value adjustment for noncontrolling interest in Operating Partnership       |  |              |       |   |                 |   |         |                            |  |   | (50,623                                 | ) |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Dividend for RPI Spin-off                                                        |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | 26,044     |   |                          |   |         |                                                                 |  |   |              |  
|                                                                                 |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Balance at December 31, 2012                                                     |  | $            | 9,392 |   |                 | $ | -       |                            |  | $ | 10,432,447                              |   |  | $                                             | (2,732,787 | ) |                          | $ | (87,354 | )                                                               |  | $ | -            |  
|                                                                                 |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Net income                                                                       |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | 302,528    |   |                          |   |         |                                                                 |  |   |              |  
|Issuance of Preferred Stock, net of issuance costs                               |  |              |       |   |                 |   | 242,042 |                            |  |   | -                                       |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Distributions to noncontrolling interests in consolidated Real Estate Affiliates |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Restricted stock grants, net of forfeitures (18,444 common shares)               |  |              | -     |   |                 |   | -       |                            |  |   | 8,340                                   |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Employee stock purchase program (135,317 common shares)                          |  |              | -     |   |                 |   |         |                            |  |   | 2,708                                   |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Stock option grants, net of forfeitures (344,670 common shares)                  |  |              | 3     |   |                 |   |         |                            |  |   | 35,995                                  |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Treasury stock purchases (28,345,108 common shares)                              |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   | (566,863     | )
|Cash dividends reinvested (DRIP) in stock (28,852 common shares)                 |  |              | -     |   |                 |   | -       |                            |  |   | 613                                     |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Other comprehensive loss before reclassifications                                |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   | (60,680 | )                                                               |  |   |              |  
|Amounts reclassified from Accumulated Other Comprehensive Loss                   |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   | 109,861 |                                                                 |  |   |              |  
|Cash distributions declared ($0.51 per share)                                    |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | (471,386   | ) |                          |   |         |                                                                 |  |   |              |  
|Cash distributions on Preferred Stock                                            |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               | (14,078    | ) |                          |   |         |                                                                 |  |   |              |  
|Fair value adjustment for noncontrolling interest in Operating Partnership       |  |              |       |   |                 |   |         |                            |  |   | (3,173                                  | ) |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Common stock warrants                                                            |  |              |       |   |                 |   |         |                            |  |   | 895,513                                 |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|                                                                                 |  |              |       |   |                 |   |         |                            |  |   |                                         |   |  |                                               |            |   |                          |   |         |                                                                 |  |   |              |  
|Balance at December 31, 2013                                                     |  | $            | 9,395 |   |                 | $ | 242,042 |                            |  | $ | 11,372,443                              |   |  | $                                             | (2,915,723 | ) |                          | $ | (38,173 | )                                                               |  | $ | (566,863     | )



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



F-59







GENERAL GROWTH PROPERTIES, INC.



(Dollars in thousands, except per share
amounts)



CONSOLIDATED STATEMENTS
OF CASH FLOWS



|                                                                                         |  | Year Ended December 31, |           
|---------------------------------------------------------------------------------------- |  | ----------------------- | ----------
|                                                                                         |  | 2013                    |           
|                                                                                         |  | (Dollars in thousands)  |           
|Cash Flows provided by Operating Activities:                                             |  |                         |           
|Net income (loss)                                                                        |  | $                       | 317,199   
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                         |           
|Equity in income of Unconsolidated Real Estate Affiliates                                |  |                         | (58,919   
|Equity in income of Unconsolidated Real Estate Affiliates
    - gain on investment, net  |  |                         | (9,837    
|Distributions received from Unconsolidated Real Estate Affiliates                        |  |                         | 53,592    
|Provision for doubtful accounts                                                          |  |                         | 4,095     
|Depreciation and amortization                                                            |  |                         | 773,255   
|Amortization/write-off of deferred finance costs                                         |  |                         | 9,453     
|Accretion/write-off of debt market rate adjustments                                      |  |                         | 9,698     
|Amortization of intangibles other than in-place leases                                   |  |                         | 84,229    
|Straight-line rent amortization                                                          |  |                         | (49,780   
|Deferred income taxes                                                                    |  |                         | (3,847    
|Gain (loss) on dispositions, net                                                         |  |                         | 811       
|Gains from changes in control of investment properties                                   |  |                         | (219,784  
|Gain on extinguishment of debt                                                           |  |                         | (25,894   
|Provisions for impairment                                                                |  |                         | 30,936    
|Warrant liability adjustment                                                             |  |                         | 40,546    
|Net changes:                                                                             |  |                         |           
|Accounts and notes receivable                                                            |  |                         | (5,615    
|Prepaid expenses and other assets                                                        |  |                         | 25,273    
|Deferred expenses                                                                        |  |                         | (44,877   
|Restricted cash                                                                          |  |                         | 16,894    
|Accounts payable and accrued expenses                                                    |  |                         | (80,902   
|Other, net                                                                               |  |                         | 23,005    
|Net cash provided by operating activities                                                |  |                         | 889,531   
|                                                                                         |  |                         |           
|Cash Flows provided by (used in) Investing Activities:                                   |  |                         |           
|Acquisition of real estate and property additions                                        |  |                         | (465,566  
|Development of real estate and property improvements                                     |  |                         | (516,906  
|Proceeds from sales of investment properties and Unconsolidated Real Estate Affiliates   |  |                         | 1,006,357 
|Contributions to Unconsolidated Real Estate Affiliates                                   |  |                         | (87,909   
|Distributions received from Unconsolidated Real Estate Affiliates in excess of income    |  |                         | 222,053   
|Increase (decrease) in restricted cash                                                   |  |                         | 8,831     
|Other, net                                                                               |  |                         | -         
|Net cash provided by (used in) investing activities                                      |  |                         | 166,860   
|                                                                                         |  |                         |           
|Cash Flows used in Financing Activities:                                                 |  |                         |           
|Proceeds from refinancing/issuance of mortgages, notes and loans payable                 |  |                         | 5,501,047 
|Principal payments on mortgages, notes and loans payable                                 |  |                         | (5,155,453
|Deferred finance costs                                                                   |  |                         | (20,548   
|Net proceeds from issuance of Preferred Stock                                            |  |                         | 242,042   
|Purchase of Warrants                                                                     |  |                         | (633,229  
|Treasury stock purchases                                                                 |  |                         | (566,863  
|Purchase and cancellation of common shares                                               |  |                         | -         
|Cash distributions paid to common stockholders                                           |  |                         | (447,195  
|Cash distributions reinvested (DRIP) in common stock                                     |  |                         | 614       
|Cash distributions paid to preferred stockholders                                        |  |                         | (10,093   
|Cash distributions and redemptions paid to holders of common units                       |  |                         | (36,894   
|Other, net                                                                               |  |                         | 22,637    
|Net cash used in financing activities                                                    |  |                         | (1,103,935
|                                                                                         |  |                         |           
|Net change in cash and cash equivalents                                                  |  |                         | (47,544   
|Cash and cash equivalents at beginning of year                                           |  |                         | 624,815   
|Cash and cash equivalents at end of year                                                 |  | $                       | 577,271   



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



F-60







GENERAL GROWTH PROPERTIES, INC.



(Dollars in thousands, except per share
amounts)



CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)



|                                                                                                                                                 |  | Year Ended December 31, |        
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | -------
|                                                                                                                                                 |  | 2013                    |        
|                                                                                                                                                 |  | (Dollars in thousands)  |        
|Supplemental Disclosure of Cash Flow Information:                                                                                                |  |                         |        
|Interest paid                                                                                                                                    |  | $                       | 834,155
|Interest capitalized                                                                                                                             |  |                         | 11,210 
|Income taxes paid                                                                                                                                |  |                         | 6,313  
|Reorganization items paid                                                                                                                        |  |                         | -      
|Third party property exchange                                                                                                                    |  |                         | -      
|Accrued capital expenditures included in accounts payable and accrued expenses                                                                   |  |                         | 103,988
|Non-Cash Transactions:                                                                                                                           |  |                         |        
|Notes receivable related to sale of investment property and Aliansce                                                                             |  |                         | 151,127
|Gain on investment in Unconsolidated Real Estate Affiliates                                                                                      |  |                         | 9,837  
|Amendment of warrant agreement                                                                                                                   |  |                         | 895,513
|Debt payoffs via deeds in-lieu                                                                                                                   |  |                         | -      
|Non-Cash Sale of Regional Mall                                                                                                                   |  |                         |        
|Assets                                                                                                                                           |  |                         | 71,881 
|Liabilities and equity                                                                                                                           |  |                         | (71,881
|Rouse Properties, Inc. Dividend:                                                                                                                 |  |                         |        
|Non-cash dividend for RPI Spin-off                                                                                                               |  |                         | -      
|Non-Cash Distribution of RPI Spin-off:                                                                                                           |  |                         |        
|Assets                                                                                                                                           |  |                         | -      
|Liabilities and equity                                                                                                                           |  |                         | -      
|Non-Cash Sale of Property to RPI:                                                                                                                |  |                         |        
|Assets                                                                                                                                           |  |                         | -      
|Liabilities and equity                                                                                                                           |  |                         | -      
|Non-Cash Sale of Property to HHC:                                                                                                                |  |                         |        
|Assets                                                                                                                                           |  |                         | -      
|Liabilities and equity                                                                                                                           |  |                         | -      
|Non-Cash Acquisition of The Oaks and Westroads                                                                                                   |  |                         |        
|Assets (Consolidated)                                                                                                                            |  |                         | -      
|Liabilities and equity (Consolidated)                                                                                                            |  |                         | -      
|Decrease in assets and liabilities resulting from the contribution of two wholly owned malls into two newly-formed unconsolidated joint ventures |  |                         |        
|Assets                                                                                                                                           |  |                         | -      
|Liabilities and equity                                                                                                                           |  |                         | -      
|Non-Cash Acquisition of Quail Springs
    - Refer to Note 3                                                                                      |  |                         |        
|Non-Cash Sale of The Grand Canal
    Shoppes and The Shoppes at The Palazzo - Refer to Note 3                                                    |  |                         |        



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



F-61







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE 1       ORGANIZATION



General Growth Properties, Inc. (“GGP”
or the “Company”), a Delaware corporation, was organized in July 2010 and is a self-administered and self-managed real
estate investment trust, referred to as a “REIT”. GGP is the successor registrant, by merger, on November 9, 2010 to
GGP Inc. GGP, Inc. had filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code (“Chapter 11”)
in the Southern District of New York on April 16, 2009 and emerged from bankruptcy, pursuant to a plan of reorganization (the “Plan”)
on November 9, 2010, the (“Effective Date”). In these notes, the terms “we,” “us” and “our”
refer to GGP and its subsidiaries or, in certain contexts, GGP, Inc. and its subsidiaries.



The Plan was based on the agreements (collectively,
as amended and restated, the “Investment Agreements”) with REP Investments LLC, an affiliate of Brookfield Asset Management
Inc. (including certain of its affiliates, “Brookfield”), an affiliate of Fairholme Funds, Inc. (“Fairholme”)
and an affiliate of Pershing Square Capital Management, L.P. (“Pershing Square” and together with Brookfield and Fairholme,
the “Plan Sponsors”), pursuant to which GGP, Inc. would be divided into two companies, GGP and The Howard Hughes Corporation
(“HHC”), and the Plan Sponsors would invest in the Company’s standalone emergence plan.  In addition, GGP,
Inc. entered into an investment agreement with Teachers Retirement System of Texas (“Texas Teachers”) to purchase shares
of GGP common stock.  The Plan Sponsors also entered into an agreement with affiliates of the Blackstone Group (“Blackstone”)
whereby Blackstone subscribed for equity in GGP.



On the Effective Date, the Plan Sponsors,
Blackstone and Texas Teachers owned a majority of the outstanding common stock of GGP.  In addition, 120 million warrants
(the “Warrants”) to purchase our common stock were issued to the Plan Sponsors and Blackstone (Note 9).



GGP, through its subsidiaries and affiliates,
is an owner and operator of retail properties. As of December 31, 2013, we are the owner, either entirely or with joint venture
partners of 120 regional malls. In addition to regional malls, as of December 31, 2013, we owned 13 strip/other retail properties,
as well as six stand-alone office buildings. All material operations are within the United States and no customer or tenant accounts
for more than 5% of our consolidated revenues.



Substantially all of our business is conducted
through GGP Limited Partnership (the “Operating Partnership” or “GGPLP”). GGPLP owns an interest in the
properties that are part of the consolidated financial statements of GGP. As of December 31, 2013, GGP held approximately a 99%
common equity ownership (without giving effect to the potential conversion of the Preferred Units, as defined below) of the Operating
Partnership, while the remaining 1% was held by limited partners and certain previous contributors of properties to the Operating
Partnership.



The Operating Partnership has common units
of limited partnership (“Common Units”), which are redeemable for cash or, at our option, shares of GGP common stock.
It also has preferred units of limited partnership interest (“Preferred Units”), of which, certain Preferred Units
can be converted into Common Units and then redeemed for cash or, at our option, shares of GGP common stock (“Convertible
Preferred Units”) (Note 11).



In addition to holding ownership interests
in various joint ventures, the Operating Partnership generally conducts its operations through General Growth Management, Inc.
(“GGMI”) and General Growth Services, Inc. (“GGSI”). GGMI and GGSI are taxable REIT subsidiaries (“TRS”s),
which provide management, leasing, and other services for a majority of our Unconsolidated Real Estate Affiliates (defined below).
GGMI and GGSI provide various services, including business development, tenant coordination, marketing, and strategic partnership
services at substantially all of our Consolidated Properties, as defined below. GGSI also serves as a contractor to GGMI for these
services.



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



F-62







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE 2       SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES



Principles of Consolidation and Basis
of Presentation

The accompanying consolidated financial
statements include the accounts of GGP, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated
joint ventures, the noncontrolling partner’s share of the assets, liabilities and operations of the joint ventures (generally
computed as the joint venture partner’s ownership percentage) is included in noncontrolling interests in consolidated real
estate affiliates as permanent equity of the Company. Intercompany balances and transactions have been eliminated.



We operate in a single reportable segment
which includes the operation, development and management of retail and other rental properties, primarily regional malls. 
Our portfolio is targeted to a range of market sizes and consumer tastes. Each of our operating properties is considered a separate
operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete
financial information is available. We do not distinguish or group our consolidated operations based on geography, size or type.
Our operating properties have similar economic characteristics and provide similar products and services to our tenants. Further,
all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues.
As a result, the Company’s operating properties are aggregated into a single reportable segment.



Reclassifications

Certain prior period amounts included in
the Consolidated Statements of Operations and Comprehensive Income (Loss) and related footnotes associated with properties we have
disposed of have been reclassified to discontinued operations for all periods presented (Note 4).



Properties

Real estate assets are stated at cost less
any provisions for impairments. Expenditures for significant betterments and improvements are capitalized. Maintenance and repairs
are charged to expense when incurred. Construction and improvement costs incurred in connection with the development of new properties
or the redevelopment of existing properties are capitalized. Real estate taxes, interest costs, and internal costs associated with
leasing and development overhead incurred during construction periods are capitalized. Capitalization is based on qualified expenditures
and interest rates. Capitalized real estate taxes, interest costs, and internal costs associated with leasing and development overhead
are amortized over lives which are consistent with the related assets.



Pre-development costs, which generally
include legal and professional fees and other third-party costs directly related to the construction assets, are capitalized as
part of the property being developed. In the event a development is no longer deemed to be probable of occuring, the capitalized
costs are expensed (see also our impairment policies in this note below).



We periodically review the estimated useful
lives of our properties, and may adjust them as necessary. The estimated useful lives of our properties range from 10-45 years.



Depreciation or amortization expense is
computed using the straight-line method based upon the following estimated useful lives:



|                           |  | Years                                          
|-------------------------- |  | -----------------------------------------------
|Buildings and improvements |  | 10 - 45                                        
|Equipment and fixtures     |  | 3 - 20                                         
|Tenant improvements        |  | Shorter of useful life or applicable lease term



Acquisitions of Operating Properties
(Note 3)

Acquisitions of properties are accounted
for utilizing the acquisition method of accounting and, accordingly, the results of operations of acquired properties have been
included in the results of operations from the respective dates of acquisition. Estimates of future cash flows and other valuation
techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment, assumed
debt liabilities and identifiable intangible assets and liabilities such as amounts related to in-place tenant leases, acquired
above and below-market tenant and ground leases, and tenant relationships. No significant value had been ascribed to tenant relationships.



F-63







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



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



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



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



The gross asset balances of the in-place
value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.



|                        |  | Gross Asset |         |  | Accumulated Amortization |   |          | Net Carrying Amount | 
|----------------------- |  | ----------- | ------- |  | ------------------------ | - | -------- | ------------------- | 
|As of December 31, 2013 |  |             |         |  |                          |   |          |                     | 
|Tenant leases:          |  |             |         |  |                          |   |          |                     | 
|In-place value          |  | $           | 797,311 |  |                          | $ | (420,370 | )                   | 
|As of December 31, 2012 |  |             |         |  |                          |   |          |                     | 
|Tenant leases:          |  |             |         |  |                          |   |          |                     | 
|In-place value          |  | $           | 972,495 |  |                          | $ | (423,492 | )                   | 



The above-market tenant leases and below-market
ground leases are included in Prepaid expenses and other assets (Note 14); the below-market tenant leases, above-market ground
leases and above-market headquarters office lease are included in Accounts payable and accrued expenses (Note 15) in our Consolidated
Balance Sheets.



Amortization/accretion of all intangibles,
including the intangibles in Note 14 and Note 15, had the following effects on our Income (loss) from continuing operations:



|                                                       |  | Year Ended December 31, |         
|------------------------------------------------------ |  | ----------------------- | --------
|                                                       |  | 2013                    |         
|Amortization/accretion effect on continuing operations |  | $                       | (242,221



Future amortization/accretion of these
intangibles is estimated to decrease results from continuing operations as follows:



|Year |  | Amount |        
|---- |  | ------ | -------
|2014 |  | $      | 177,935
|2015 |  |        | 145,417
|2016 |  |        | 113,360
|2017 |  |        | 85,112 
|2018 |  |        | 55,527 



F-64







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



Investments in Unconsolidated Real Estate
Affiliates (Note 6)

We account for investments in joint ventures
where we own a non-controlling joint interest using the equity method. Under the equity method, the cost of our investment is adjusted
for our share of the earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition, increased by our contributions
and reduced by distributions received.



To determine the method of accounting for
partially owned joint ventures, we evaluate the characteristics of associated entities and determine whether an entity is a variable
interest entity (“VIE”) and, if so, determine which party is primary beneficiary by analyzing whether we have both
the power to direct the entity’s significant economic activities and the obligation to absorb potentially significant losses
or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the nature
of the entity’s operations, future cash flow projections, the entity’s financing and capital structure, and contractual
relationship and terms. We consolidate a VIE when we have determined that we are the primary beneficiary.



Primary risks associated with our VIEs
include the potential of funding the entities’ debt obligations or making additional contributions to fund the entities’
operations.



Generally, the operating agreements with
respect to our Unconsolidated Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance
with our ownership percentages. Therefore, we generally also share in the profit and losses, cash flows and other matters relating
to our Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. Except for Retained Debt
(as described in Note 7), differences between the carrying amount of our investment in the Unconsolidated Real Estate Affiliates
and our share of the underlying equity of our Unconsolidated Real Estate Affiliates are typically amortized over lives ranging
from five to 45 years. When cumulative distributions exceed our investment in the joint venture, the investment is reported as
a liability in our consolidated financial statements. The liability is limited to our maximum potential obligation to fund contractual
obligations, including recourse related to certain debt obligations.



Partially owned, non-variable interest
joint ventures over which we have controlling financial interest are consolidated in our consolidated financial statements. In
determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions,
kick-out rights and substantive participating rights. Partially owned joint ventures where we do not have a controlling financial
interest, but have the ability to exercise significant influence, are accounted for using the equity method.



We continually analyze and assess reconsideration
events, including changes in the factors mentioned above, to determine if the consolidation treatment remains appropriate. Decisions
regarding consolidation of partially owned entities frequently require significant judgment by our management.



Cash and Cash Equivalents

Highly-liquid investments with initial
maturities of three months or less are classified as cash equivalents, excluding amounts restricted by certain lender and other
agreements.



Leases

Our leases, in which we are the lessor
or lessee, are substantially all accounted for as operating leases. Leases in which we are the lessor that transfer substantially
all the risks and benefits of ownership to tenants are considered finance leases and the present values of the minimum lease payments
and the estimated residual values of the leased properties, if any, are accounted for as receivables.  Leases in which we
are the lessee that transfer substantially all the risks and benefits of ownership to us are considered capital leases and the
present values of the minimum lease payments are accounted for as assets and liabilities.



Tenant improvements, either paid directly
or in the form of construction allowances paid to tenants, are capitalized as Building and equipment and depreciated over the shorter
of the useful life or the applicable lease term.



F-65







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



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



Deferred Expenses

Deferred expenses primarily consist of
leasing commissions and related costs and are amortized using the straight-line method over the life of the leases. Deferred expenses
also include financing fees we incurred in order to obtain long-term financing and are amortized as interest expense over the terms
of the respective financing agreements using the straight-line method, which approximates the effective interest method.



Revenue Recognition and Related Matters

Minimum rents are recognized on a straight-line
basis over the terms of the related operating leases, including the effect of any free rent periods. Minimum rents also include
lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination
dates, as well as, accretion related to above and below-market tenant leases on acquired properties and properties that were recorded
at fair value at the Effective Date. The following is a summary of amortization of straight-line rent, net amortization /accretion
related to above and below-market tenant leases and termination income, which is included in Minimum rents:



|                                                                   |  | Year Ended December 31, |        
|------------------------------------------------------------------ |  | ----------------------- | -------
|                                                                   |  | 2013                    |        
|Amortization of straight-line rent                                 |  | $                       | 49,504 
|Net amortization/accretion of above and below-market tenant leases |  |                         | (69,311
|Lease termination income                                           |  |                         | 10,888 



The following is a summary of straight-line
rent receivables, which are included in Accounts and notes receivable, net in our Consolidated Balance Sheets and are reduced for
allowances and amounts doubtful of collection:



|                                    |  | December 31, 2013 |         |  | December 31, 2012 |  
|----------------------------------- |  | ----------------- | ------- |  | ----------------- | -
|Straight-line rent receivables, net |  | $                 | 188,291 |  |                   | $



Overage rent is paid by a tenant when the
tenant’s sales exceed an agreed upon minimum amount and is recognized on an accrual basis once tenant sales exceed contractual
tenant lease thresholds and is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the
lease.



Tenant recoveries are established in the
leases or computed based upon a formula related to real estate taxes, insurance and other property operating expenses and are generally
recognized as revenues in the period the related costs are incurred.



We provide an allowance for doubtful accounts
against the portion of accounts receivable, including straight-line rents, which is estimated to be uncollectible. Such allowances
are reviewed periodically based upon our recovery experience. The following table summarizes the changes in allowance for doubtful
accounts:



|                                                            |  | 2013 |         |   | 2012 |   |         | 2011 | 
|----------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- | 
|Balance as of January 1,                                    |  | $    | 24,692  |   |      |   | 32,859  |      | 
|Provision for doubtful accounts (1)                         |  |      | 5,948   |   |      |   | 7,444   |      | 
|Provisions for doubtful accounts in discontinued operations |  |      | 857     |   |      |   | 791     |      | 
|Write-offs                                                  |  |      | (13,605 | ) |      |   | (16,402 | )    | 
|Balance as of December 31,                                  |  | $    | 17,892  |   |      | $ | 24,692  |      | 



(1) Excludes recoveries of $2.1 million and $3.4 million for the years ended December 31, 2013 and 2012, respectively.



F-66







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



Management Fees and Other Corporate Revenues

Management fees and other corporate revenues
primarily represent management and leasing fees, development fees, financing fees, and fees for other ancillary services performed
for the benefit of certain of the Unconsolidated Real Estate Affiliates. Management fees are reported at 100% of the revenue earned
from the joint venture in Management fees and other corporate revenues on our Consolidated Statements of Operations and Comprehensive
Income (Loss). Our share of the management fee expense incurred by the Unconsolidated Real Estate Affiliates is reported within
Equity in income of Unconsolidated Real Estate Affiliates on our Consolidated Statements of Operations and Comprehensive Income
(Loss) and in Property management and other costs in the Condensed Combined Statements of Income in Note 6. The following table
summarizes the management fees from affiliates and our share of the management fee expense:



|                                    |  | Year Ended December 31, |        
|----------------------------------- |  | ----------------------- | -------
|                                    |  | 2013                    |        
|Management fees from affiliates     |  | $                       | 68,681 
|Management fee expense              |  |                         | (25,551
|Net management fees from affiliates |  | $                       | 43,130 



Income Taxes (Note 8)

We expect to distribute 100% of our taxable
capital gains and taxable ordinary income to shareholders annually. If, with respect to any taxable year, we fail to maintain our
qualification as a REIT and cannot correct such failure, we would not be allowed to deduct distributions to shareholders in computing
our taxable income and federal income tax. If any of our REIT subsidiaries fail to qualify as a REIT, such failure could result
in our loss of REIT status. If we lose our REIT status, corporate level income tax, including any applicable alternative minimum
tax, would apply to our taxable income at regular corporate rates. As a result, the amount available for distribution to holders
of equity securities that would otherwise receive dividends would be reduced for the year or years involved, and we would no longer
be required to make distributions. In addition, unless we were entitled to relief under the relevant statutory provisions, we would
be disqualified from treatment as a REIT for four subsequent taxable years.



Deferred income taxes are accounted for
using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences
of events that have been included in the financial statements or tax returns and are recorded primarily by certain of our taxable
REIT subsidiaries. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected
to reverse. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance
is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. An
increase or decrease in the valuation allowance that results from a change in circumstances, and which causes a change in our judgment
about the realizability of the related deferred tax asset, is included in the current tax provision. In 2010, GGP experienced a
change in control, as a result of the transactions undertaken to emerge from bankruptcy, pursuant to Section 382 of the Internal
Revenue Code that could limit the benefit of deferred tax assets. In addition, we recognize and report interest and penalties,
if necessary, related to uncertain tax positions within our provision for income tax expense.



Impairment

Operating properties

We regularly review our consolidated properties
for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real
estate property net operating income, significant decreases in occupancy percentage, debt maturities, management’s intent
with respect to the properties and prevailing market conditions.



If an indicator of potential impairment
exists, the property is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows.
Although the carrying amount may exceed the estimated fair value of certain properties, a real estate asset is only considered
to be impaired when its carrying amount cannot be recovered through estimated future undiscounted cash flows. To the extent an
impairment provision is determined to be necessary, the excess of the carrying amount of the property over its estimated fair value
is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of
the asset group. The adjusted carrying amount, which represents the new cost basis of the property, is depreciated over the remaining
useful life of the property.



F-67







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



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



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



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



During the year ended December 31, 2013,
we recorded an $18.4 million impairment charge in continuing operations of our Consolidated Statements of Operations and Comprehensive
Income (Loss). This impairment charge related to an operating property that was transferred to a special servicer. Subsequent to
December 31, 2013, we sold this property in a lender directed sale in full satisfaction of the related debt for an amount less
than the carrying value. Accordingly, we recorded an impairment charge of $18.4 million, resulting in a net book value of $12 million,
which is less than the carrying value of the non-recourse debt of $78.7 million. We recorded a gain on extinguishment of debt of
approximately $67 million in the first quarter of 2014. During the year ended December 31, 2013, we recorded $12.6 million of impairment
charges in discontinued operations of our Consolidated Statement of Operations and Comprehensive Income (Loss), which related to
four operating properties.



During the year ended December 31, 2012,
we recorded a $32.1 million impairment charge in continuing operations of our Consolidated Statements of Operations and Comprehensive
Income (Loss). This impairment charge related to an operating property and was recorded because the estimated fair value of the
property, based on our discounted cash flow analysis, was less than the carrying value of the property. During the year ended December
31, 2012, we recorded $76.6 million of impairment charges in discontinued operations of our Consolidated Statement of Operations
and Comprehensive Income (Loss), which related to eight operating properties.



During the year ended December 31, 2011,
we recorded a $0.9 million impairment charge in continuing operations of our Consolidated Statements of Operations and Comprehensive
Income (Loss). This impairment charge related to an operating property. During the year ended December 31, 2011, we recorded $67.5
million of impairment charges in discontinued operations of our Consolidated Statement of Operations and Comprehensive Income (Loss),
which related to two operating properties and one non-income producing asset.



Investment in Unconsolidated Real Estate Affiliates

A series of operating losses of an investee
or other factors may indicate that an other-than-temporary decline in value of our investment in an Unconsolidated Real Estate
Affiliate has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated for valuation declines
below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we perform for such joint
ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary
declines with respect to the carrying values of our Unconsolidated Real Estate Affiliates. No impairments related to our investments
in Unconsolidated Real Estate Affiliates were recognized for the years ended December 31, 2013, 2012, and 2011.



Property Management and Other and General
and Administrative Costs

Property management and other costs represent
regional and home office costs and include items such as corporate payroll, rent for office space, supplies and professional fees,
which represent corporate overhead costs not generated at the properties.  General and administrative costs represent the
costs to run the public company and include payroll and other costs for executives, audit fees, professional fees and administrative
fees related to the public company.



Fair Value Measurements (Note 5)

The accounting principles for fair value
measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers
include:



F-68







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



| | · | Level 1 - defined as observable inputs
such as quoted prices for identical assets or liabilities in active markets;
| | - | -------------------------------------------------------------------------------------------------------------------

| | · | Level 2 - defined as inputs other than
quoted prices in active markets that are either directly or indirectly observable; and
| | - | -----------------------------------------------------------------------------------------------------------------------------

| | · | Level 3 - defined as unobservable inputs
in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



The impairment section above includes a
discussion of all impairments recognized during the year ended December 31, 2013, 2012 and 2011, which were based on Level 2 inputs.
Note 5 includes a discussion of properties measured at fair value on a non-recurring basis using Level 2 and Level 3 inputs and
the fair value of debt, which is estimated on a recurring basis using Level 2 and Level 3 inputs. Note 9 includes a discussion
of our outstanding warrants, which were measured at fair value using Level 3 inputs until the warrant agreement was amended on
March 28, 2013. Note 11 includes a discussion of certain redeemable noncontrolling interests that are measured at fair value using
Level 1 inputs.



Use of Estimates

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



NOTE 3       ACQUISITIONS
AND JOINT VENTURE ACTIVITY



During the year ended December 31, 2013,
we acquired four retail properties for total consideration of $396.3 million, which included cash of $355.0 million and the assumption
of debt of $41.3 million. The four retail properties acquired include a 50% interest in a portfolio comprised of two properties
in the Union Square area of San Francisco, which is accounted for as an Unconsolidated Real Estate Affiliate (Note 6). The following
table summarizes the allocation of the purchase price to the net assets acquired at the date of acquisition. These allocations
were based on the relative fair values of the assets acquired and liabilities assumed.



|Investment in real estate, including intangible assets and liabilities |  | $ | 314,750 | 
|---------------------------------------------------------------------- |  | - | ------- | 
|Investment in Unconsolidated Real Estate Affiliate                     |  |   | 39,774  | 
|Net working capital                                                    |  |   | 515     | 
|Net assets acquired                                                    |  | $ | 355,039 | 



On June 28, 2013, we acquired the
remaining 50% interest in Quail Springs Mall, from our joint venture partner, for total consideration of $90.5 million, which included
$55.5 million of cash and the assumption of the remaining 50% of debt of $35.0 million.  The investment property was previously
recorded under the equity method of accounting and is now consolidated.  The acquisition resulted in a remeasurement of the
net assets acquired to fair value and as such, we recorded Gains from changes in control of investment properties of $19.8 million
for the year ended December 31, 2013, as the fair value of the net assets acquired was greater than our investment in the Unconsolidated
Real Estate Affiliate and the cash paid to acquire our joint venture partner’s interest.  The table below summarizes
the gain calculation:



F-69







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



|Total fair value of net assets acquired                   |  | $ | 110,893 |  
|--------------------------------------------------------- |  | - | ------- | -
|Previous investment in Quail Springs Mall                 |  |   | (35,610 | )
|Cash paid to acquire our joint venture partner's interest |  |   | (55,507 | )
|Gains from changes in control of investment properties    |  | $ | 19,776  |  



The following table summarizes the allocation of the purchase
price to the net assets acquired at the date of acquisition.  These allocations were based on the relative fair values of
the assets acquired and liabilities assumed.



|Investment in real estate, including intangible assets and liabilities |  | $ | 186,627 |  
|---------------------------------------------------------------------- |  | - | ------- | -
|Fair value of debt                                                     |  |   | (77,204 | )
|Net working capital                                                    |  |   | 1,470   |  
|Net assets acquired                                                    |  | $ | 110,893 |  



On May 16, 2013, we formed a joint
venture with TIAA-CREF Global Investments, LLC (“TIAACREF”) that holds 100% of The Grand Canal Shoppes and The Shoppes
at The Palazzo.  We received $411.5 million in cash, net of debt assumed of $311.9 million, and TIAACREF received a 49.9%
economic interest in the joint venture.  We recorded Gains from changes in control of investment properties of $200.0 million
on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2013, as a result
of this transaction.  We are the general partner, however we account for the joint venture under the equity method of accounting
because we share control over major decisions with TIAACREF and TIAACREF has substantive participating rights.  The table
below summarizes the gain calculation:



|Cash received from joint venture partner                                                             |  | $ | 411,476  |  
|---------------------------------------------------------------------------------------------------- |  | - | -------- | -
|Proportionate share of previous investment in The Grand Canal Shoppes and The Shoppes at The Palazzo |  |   | (211,468 | )
|Gains from changes in control of investment properties                                               |  | $ | 200,008  |  



On April 5, 2012, we acquired the remaining
49% interest in The Oaks and Westroads, from our joint venture partner for total consideration of $191.1 million, which included
$98.3 million of cash and the assumption of the remaining 49% of debt of $92.8 million. The investment properties were previously
recorded under the equity method of accounting and are now consolidated.  The acquisition resulted in a remeasurement of the
net assets acquired to a fair value of $200.3 million. Prior to this transaction, our investment in The Oaks and Westroads had
a carrying value of $83.5 million. We recorded Gains from changes in control of investment properties of $18.5 million for the
year ended December 31, 2012, as the fair value of the net assets acquired was greater than our investment in the Unconsolidated
Real Estate Affiliate and the cash paid to acquire the joint venture partner’s interest.



Our acquisition of the remaining interests
in Quail Springs Mall and the formation of the joint venture with TIAACREF constitute the Gains from changes in control of investment
properties for the year ended December 31, 2013.  Our acquisition of The Oaks and Westroads in 2012 represent the Gains
from changes in control of investment properties for the year ended December 31, 2012.  These amounts are recognized
for their respective year on our Consolidated Statements of Operations and Comprehensive Income (Loss).



On April 17, 2012, we acquired 11 Sears
anchor pads (including fee interests in five anchor pads and long-term leasehold interests in six anchor pads) for the purpose
of redevelopment or remerchandising. Total consideration paid was $270.0 million, which was all cash. Of the total purchase price,
$212.0 million for the leasehold interests was recorded in construction in progress, as the buy-out costs were necessary costs
related to redevelopment projects at these properties, and $58.0 million for the fee interests was recorded in land and building
in our Consolidated Balance Sheets as of December 31, 2012.



F-70







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE
4      DISPOSITIONS, Discontinued Operations AND GAINS (LOSSES) ON DISPOSITIONS OF INTERESTS IN OPERATING
PROPERTIES



All of our dispositions of consolidated
operating properties for which there is no continuing involvement, for all periods presented, are included in discontinued operations
in our Consolidated Statements of Operations and Comprehensive Income (Loss) and are summarized in the table below. Gains on disposition
and gains on debt extinguishment are recorded in the Consolidated Statements of Comprehensive Income (Loss) in the period the property
is disposed.



During 2013, we sold our interests in six
retail properties for total consideration of $142.6 million, which reduced our property level debt by $143.6 million. Additionally,
one property, which was previously transferred to a special servicer, was sold in a lender-directed sale in full satisfaction of
the debt. This resulted in a gain on debt extinguishment of $25.9 million and a reduction of property-level debt of $96.9 million.



On January 12, 2012, we completed the RPI
Spin-Off, a 30-mall portfolio. The RPI Spin-Off was accomplished through a special dividend of the common stock of RPI to holders
of GGP common stock as of December 30, 2011.



In addition, during 2012, we sold our interests
in assets including an office portfolio, three office properties, 11 strip /other retail centers, seven regional malls and an anchor
box for total cash proceeds of $394.5 million, and reduced our property level debt by $320.6 million.



The following table summarizes the operations
of the properties included in discontinued operations.



|                                               |  | Year Ended December 31, |        
|---------------------------------------------- |  | ----------------------- | -------
|                                               |  | 2013                    |        
|                                               |  |                         |        
|Retail and other revenue                       |  | $                       | 31,205 
|Total revenues                                 |  |                         | 31,205 
|Retail and other operating expenses            |  |                         | 24,905 
|Provisions for impairment                      |  |                         | 12,575 
|Total expenses                                 |  |                         | 37,480 
|Operating loss                                 |  |                         | (6,275 
|Interest expense, net                          |  |                         | (8,759 
|Provision for income taxes                     |  |                         | -      
|(Losses) gains on dispositions                 |  |                         | (817   
|Net income (loss) from operations              |  |                         | (15,851
|Gain on debt extinguishment                    |  |                         | 25,894 
|Net income (loss) from discontinued operations |  | $                       | 10,043 



NOTE 5       FAIR
VALUE



Fair Value of Certain Operating Properties

The following table summarizes certain
of our assets that are measured at fair value on a nonrecurring basis as a result of impairment charges recorded as of December
31, 2013 and 2012.



|                               |  | Total Fair Value Measurement |         |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |   |   | Significant Other Observable Inputs (Level 2) |  |   | Significant Unobservable Inputs (Level 3) | 
|------------------------------ |  | ---------------------------- | ------- |  | -------------------------------------------------------------- | - | - | --------------------------------------------- |  | - | ----------------------------------------- | 
|Year Ended December 31, 2013   |  |                              |         |  |                                                                |   |   |                                               |  |   |                                           | 
|Investments in real estate (1) |  | $                            | 12,000  |  |                                                                | $ | - |                                               |  | $ | 12,000                                    | 
|Year Ended December 31, 2012   |  |                              |         |  |                                                                |   |   |                                               |  |   |                                           | 
|Investments in real estate (1) |  | $                            | 112,829 |  |                                                                | $ | - |                                               |  | $ | 12,070                                    | 



(1) Refer to Note 2 for more information regarding impairment.



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



F-71







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



The following table sets forth quantitative
information about the unobservable inputs of our Level 3 real estate, which are recorded at fair value during the year ended December
31, 2012.



|Unobservable Quantative Input |  | Range        
|----------------------------- |  | -------------
|Discount rates                |  | 9.0% to 10.0%
|Terminal capitalization rates |  | 9.0% to 10.0%



Fair Value of Financial Instruments

The fair values of our financial instruments
approximate their carrying amount in our consolidated financial statements except for debt. Management’s estimates of fair
value are presented below for our debt as of December 31, 2013 and 2012.



|                   |  | December 31, 2013      |            |  | December 31, 2012     |  
|------------------ |  | ---------------------- | ---------- |  | --------------------- | -
|                   |  | Carrying
    Amount(1) |            |  | Estimated Fair
 Value |  
|Fixed-rate debt    |  | $                      | 13,919,820 |  |                       | $
|Variable-rate debt |  |                        | 1,752,617  |  |                       |  
|                   |  | $                      | 15,672,437 |  |                       | $



(1)    Includes market rate
adjustments of $0.9 million and $(23.3) million as of December 31, 2013 and 2012, respectively.



The fair value of our Junior Subordinated
Notes approximates their carrying amount as of December 31, 2013 and 2012. We estimated the fair value of mortgages, notes and
other loans payable using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the
property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current London Interbank
Offered Rate ("LIBOR"), U.S. treasury obligation interest rates and on the discounted estimated future cash payments
to be made on such debt. The discount rates estimated reflect our judgment as to what the approximate current lending rates for
loans or groups of loans with similar maturities and assume that the debt is outstanding through maturity. We have utilized market
information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates
that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment
restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any such debt could be realized
by immediate settlement of the obligation.



F-72







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE 6        UNCONSOLIDATED
REAL ESTATE AFFILIATES



Following is summarized financial information
for all of our Unconsolidated Real Estate Affiliates.



|                                                                                            |  | December 31, 2013      |            |   | December 31, 2012 |  
|------------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ----------------- | -
|                                                                                            |  | (Dollars in thousands) |           
|Condensed Combined Balance Sheets
    - Unconsolidated Real Estate Affiliates               |  |                        |            |   |                   |  
|Assets:                                                                                     |  |                        |            |   |                   |  
|Land                                                                                        |  | $                      | 1,046,354  |   |                   | $
|Buildings and equipment                                                                     |  |                        | 8,670,976  |   |                   |  
|Less accumulated depreciation                                                               |  |                        | (2,301,054 | ) |                   |  
|Construction in progress                                                                    |  |                        | 46,339     |   |                   |  
|Net property and equipment                                                                  |  |                        | 7,462,615  |   |                   |  
|Investments in unconsolidated joint ventures                                                |  |                        | -          |   |                   |  
|Net investment in real estate                                                               |  |                        | 7,462,615  |   |                   |  
|Cash and cash equivalents                                                                   |  |                        | 260,405    |   |                   |  
|Accounts and notes receivable, net                                                          |  |                        | 187,533    |   |                   |  
|Deferred expenses, net                                                                      |  |                        | 254,949    |   |                   |  
|Prepaid expenses and other assets                                                           |  |                        | 147,182    |   |                   |  
|Total assets                                                                                |  | $                      | 8,312,684  |   |                   | $
|                                                                                            |  |                        |            |   |                   |  
|Liabilities and Owners' Equity:                                                             |  |                        |            |   |                   |  
|Mortgages, notes and loans payable                                                          |  | $                      | 6,503,686  |   |                   | $
|Accounts payable, accrued expenses and other liabilities                                    |  |                        | 324,620    |   |                   |  
|Cumulative effect of foreign currency translation ("CFCT")                                  |  |                        | (22,896    | ) |                   |  
|Owners' equity, excluding CFCT                                                              |  |                        | 1,507,274  |   |                   |  
|Total liabilities and owners' equity                                                        |  | $                      | 8,312,684  |   |                   | $
|                                                                                            |  |                        |            |   |                   |  
|Investment In and Loans To/From Unconsolidated Real Estate Affiliates, Net:                 |  |                        |            |   |                   |  
|Owners' equity                                                                              |  | $                      | 1,484,378  |   |                   | $
|Less: joint venture partners' equity                                                        |  |                        | (760,804   | ) |                   |  
|Plus: excess investment/basis differences                                                   |  |                        | 1,666,719  |   |                   |  
|Investment in and loans to/from Unconsolidated Real Estate Affiliates, net                  |  | $                      | 2,390,293  |   |                   | $
|                                                                                            |  |                        |            |   |                   |  
|Reconciliation - Investment In and
    Loans To/From Unconsolidated Real Estate Affiliates: |  |                        |            |   |                   |  
|Asset - Investment in and loans to/from Unconsolidated
    Real Estate Affiliates           |  | $                      | 2,407,698  |   |                   | $
|Liability - Investment in
    Unconsolidated Real Estate Affiliates                         |  |                        | (17,405    | ) |                   |  
|Investment in and loans to/from Unconsolidated Real Estate Affiliates, net                  |  | $                      | 2,390,293  |   |                   | $



F-73







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



|                                                                                    |  | Year Ended December 31, 2013 |           |   | Year Ended December 31, 2012 |   |           | Year Ended December 31, 2011 | 
|----------------------------------------------------------------------------------- |  | ---------------------------- | --------- | - | ---------------------------- | - | --------- | ---------------------------- | 
|Condensed Combined Statements of
    Income - Unconsolidated Real Estate Affiliates |  |                              |           |   |                              |   |           |                              | 
|Revenues:                                                                           |  |                              |           |   |                              |   |           |                              | 
|Minimum rents                                                                       |  | $                            | 770,999   |   |                              | $ | 713,552   |                              | 
|Tenant recoveries                                                                   |  |                              | 327,750   |   |                              |   | 297,567   |                              | 
|Overage rents                                                                       |  |                              | 32,500    |   |                              |   | 25,794    |                              | 
|Other                                                                               |  |                              | 34,007    |   |                              |   | 32,758    |                              | 
|Total revenues                                                                      |  |                              | 1,165,256 |   |                              |   | 1,069,671 |                              | 
|                                                                                    |  |                              |           |   |                              |   |           |                              | 
|Expenses:                                                                           |  |                              |           |   |                              |   |           |                              | 
|Real estate taxes                                                                   |  |                              | 104,453   |   |                              |   | 95,643    |                              | 
|Property maintenance costs                                                          |  |                              | 35,100    |   |                              |   | 38,277    |                              | 
|Marketing                                                                           |  |                              | 15,981    |   |                              |   | 16,573    |                              | 
|Other property operating costs                                                      |  |                              | 160,439   |   |                              |   | 153,006   |                              | 
|Provision for doubtful accounts                                                     |  |                              | 1,480     |   |                              |   | 1,937     |                              | 
|Property management and other costs(1)                                              |  |                              | 52,932    |   |                              |   | 48,724    |                              | 
|General and administrative                                                          |  |                              | 2,333     |   |                              |   | 1,660     |                              | 
|Depreciation and amortization                                                       |  |                              | 279,713   |   |                              |   | 260,262   |                              | 
|Total expenses                                                                      |  |                              | 652,431   |   |                              |   | 616,082   |                              | 
|                                                                                    |  |                              |           |   |                              |   |           |                              | 
|Operating income                                                                    |  |                              | 512,825   |   |                              |   | 453,589   |                              | 
|Interest income                                                                     |  |                              | 1,431     |   |                              |   | 746       |                              | 
|Interest expense                                                                    |  |                              | (287,716  | ) |                              |   | (279,756  | )                            | 
|Provision for income taxes                                                          |  |                              | (316      | ) |                              |   | (935      | )                            | 
|Equity in income of unconsolidated joint ventures                                   |  |                              | -         |   |                              |   | -         |                              | 
|Income from continuing operations                                                   |  |                              | 226,224   |   |                              |   | 173,644   |                              | 
|Net income from disposed investment                                                 |  |                              | 26,889    |   |                              |   | 50,942    |                              | 
|Allocation to noncontrolling interests                                              |  |                              | 1         |   |                              |   | (74       | )                            | 
|Net income attributable to the ventures                                             |  | $                            | 253,114   |   |                              | $ | 224,512   |                              | 
|                                                                                    |  |                              |           |   |                              |   |           |                              | 
|Equity In Income of Unconsolidated Real Estate Affiliates:                          |  |                              |           |   |                              |   |           |                              | 
|Net income attributable to the ventures                                             |  | $                            | 253,114   |   |                              | $ | 224,512   |                              | 
|Joint venture partners' share of income                                             |  |                              | (140,193  | ) |                              |   | (131,047  | )                            | 
|Amortization of capital or basis differences                                        |  |                              | (54,002   | ) |                              |   | (38,481   | )                            | 
|Equity in income of Unconsolidated Real Estate Affiliates                           |  | $                            | 58,919    |   |                              | $ | 54,984    |                              | 



| | (1) | Includes management fees charged to the unconsolidated joint ventures by GGMI, GGSI and GGPLP.
| | --- | ----------------------------------------------------------------------------------------------



The Unconsolidated Real Estate Affiliates
represents our investments in real estate joint ventures that are not consolidated. We hold interests in 20 domestic joint ventures,
comprising 31 U.S. regional malls and 5 strip/other retail centers, and one joint venture in Brazil. Generally, we share in the
profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance
with our respective ownership percentages. We manage most of the properties owned by these joint ventures. As we have joint control
of these ventures with our venture partners, we account for these joint ventures under the equity method.



On November 18, 2013, we sold a portion
of our interest in a joint venture, which resulted in our recognition of a gain of $10.1 million. The $10.1 million gain is recognized
within Equity in income of Unconsolidated Real Estate Affiliates – gain on investment on our Consolidated Statements of Operations
and Comprehensive Income (Loss).



Aliansce Shopping Centers S.A. (“Aliansce”)

On September 30, 2013, we closed on the
sale of our investment in Aliansce Shopping Centers, S.A. (“Aliansce”) to Canada Pension Plan Investment Board and
Rique Empreendimentos e Participacoes Ltda. (“Rique”), which includes a member of Aliansce management. The sale of
the stock resulted in a loss of $3.7 million on our investment in the Unconsolidated Real Estate Affiliate, including the realization
of accumulated foreign currency translation losses and a note receivable issued to Rique. The note receivable is recorded in Accounts
and notes receivable on the Consolidated Balance Sheets at December 31, 2013. The note receivable is denominated in Brazilian Reais,
bears interest at an effective interest rate of approximately 14%, is collateralized by shares of common stock of Aliansce, and
requires annual principal and interest payments over the five year term. We recognize the impact of changes in the exchange rate
on the note receivable as Loss on foreign currency in our Consolidated Statements of Operations and Comprehensive Income (Loss).



F-74







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



The table below summarizes the loss calculation:



|Cash received from acquirers                                 |  | $ | 446,322  |  
|------------------------------------------------------------ |  | - | -------- | -
|Note receivable from Rique                                   |  |   | 151,127  |  
|GGP's investment in Aliansce                                 |  |   | (491,325 | )
|Accumulated foreign currency translation adjustment realized |  |   | (109,861 | )
|Loss on sale of Aliansce                                     |  | $ | (3,737   | )



As of December 31, 2013, we still hold
a 35% noncontrolling interest in a large regional mall, Shopping Leblon, in Rio de Janeiro, Brazil which is accounted for under
the equity method.



Unconsolidated Mortgages, Notes and
Loans Payable and Retained Debt

Our proportionate share of the mortgages,
notes and loans payable of the unconsolidated joint ventures was $3.2 billion as of December 31, 2013 and $3.1 billion as of December
31, 2012, including Retained Debt (as defined below). There can be no assurance that the Unconsolidated Properties will be able
to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us
and/or our partners will be sufficient to repay such loans.



We have debt obligations in excess of our
pro rata share of the debt for one of our Unconsolidated Real Estate Affiliates (“Retained Debt”). This Retained Debt
represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our pro rata share of the non-recourse
mortgage indebtedness. The proceeds of the Retained Debt which were distributed to us are included as a reduction in our investment
in Unconsolidated Real Estate Affiliates. We had retained debt of $90.6 million at one property as of December 31, 2013, and $91.8
million as of December 31, 2012. We are obligated to contribute funds on an ongoing basis, as needed, to our Unconsolidated Real
Estate Affiliates in amounts sufficient to pay debt service on such Retained Debt. If we do not contribute such funds, our distributions
from such Unconsolidated Real Estate Affiliates, or our interest in, could be reduced to the extent of such deficiencies. As of
December 31, 2013, we do not anticipate an inability to perform on our obligations with respect to Retained Debt.



NOTE 7       MORTGAGES,
NOTES AND LOANS PAYABLE



Mortgages, notes and loans payable and
the weighted-average interest rates are summarized as follows:



|                                                     |  | December 31,
    2013(1) |            |  | Weighted-Average
    Interest Rate(2) |  |      | December 31,
    2012(3) |  |   | Weighted-Average
    Interest Rate(2) | 
|---------------------------------------------------- |  | ------------------------ | ---------- |  | ------------------------------------- |  | ---- | ------------------------ |  | - | ------------------------------------- | 
|Fixed-rate debt:                                     |  |                          |            |  |                                       |  |      |                          |  |   |                                       | 
|Collateralized mortgages, notes and loans payable    |  | $                        | 13,907,029 |  |                                       |  | 4.55 | %                        |  | $ | 14,225,011                            | 
|Corporate and other unsecured loans                  |  |                          | 12,791     |  |                                       |  | 4.41 | %                        |  |   | 729,590                               | 
|Total fixed-rate debt                                |  |                          | 13,919,820 |  |                                       |  | 4.55 | %                        |  |   | 14,954,601                            | 
|Variable-rate debt:                                  |  |                          |            |  |                                       |  |      |                          |  |   |                                       | 
|Collateralized mortgages, notes and loans payable(4) |  |                          | 1,700,817  |  |                                       |  | 2.61 | %                        |  |   | 1,012,265                             | 
|Corporate revolver                                   |  |                          | 51,800     |  |                                       |  | 1.74 | %                        |  |   | -                                     | 
|Total variable-rate debt                             |  |                          | 1,752,617  |  |                                       |  | 2.59 | %                        |  |   | 1,012,265                             | 
|                                                     |  |                          |            |  |                                       |  |      |                          |  |   |                                       | 
|Total Mortgages, notes and loans payable             |  | $                        | 15,672,437 |  |                                       |  | 4.33 | %                        |  | $ | 15,966,866                            | 
|                                                     |  |                          |            |  |                                       |  |      |                          |  |   |                                       | 
|Junior Subordinated Notes                            |  | $                        | 206,200    |  |                                       |  | 1.69 | %                        |  | $ | 206,200                               | 

(1) Includes net $0.9 million of debt market
rate adjustments.

(2) Represents the weighted-average interest rates
on our principal balances, excluding the effects of deferred finance costs.

(3) Includes net ($23.3) million of debt market rate
adjustments.

(4) Properties provide mortgage collateral as guarantors.
$1.5 billion of the balance is cross-collateralized.



Collateralized Mortgages, Notes and
Loans Payable

As of December 31, 2013, $20.4 billion
of land, buildings and equipment (before accumulated depreciation) and construction in progress have been pledged as collateral
for our mortgages, notes and loans payable. Certain of these consolidated secured loans, representing $1.6 billion of debt, are
cross-collateralized with other properties. Although a majority of the $15.6 billion of fixed and variable rate collateralized
mortgages, notes and loans payable are non-recourse, $1.6 billion of such mortgages, notes and loans payable are recourse to the
Company as guarantees on secured financings. In addition, certain mortgage loans contain other credit enhancement provisions which
have been provided by GGP. Certain mortgages, notes and loans payable may be prepaid but are generally subject to a prepayment
penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.



F-75







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



During the year ended December 31, 2013,
we refinanced consolidated mortgage notes totaling $5.0 billion related to 36 properties with net proceeds of $1.3 billion. The
prior loans had a weighted-average term-to-maturity of 2.7 years, and a weighted-average interest rate of 4.9%. The new loans have
a weighted-average term-to-maturity of 8.3 years, and a weighted-average interest rate of 3.5%.



Of the refinanced debt, $1.5 billion relates
to a corporate loan initially secured by cross-collateralized mortgages on 16 properties with a weighted-average interest rate
of LIBOR + 2.50% and a term-to-maturity of 3.0 years (with 2 one-year options). The prior loans were secured by 16 properties and
had a weighted-average interest rate of 3.98% and a term-to-maturity of 3.3 years. During the year ended December 31, 2013, we
expensed financing fees of $6.6 million associated with this loan in Loss on extinguishment of debt on our Consolidated Statements
of Operations and Comprehensive Income (Loss), and we capitalized $9.5 million as deferred financing costs within Deferred expenses,
net on our Consolidated Balance Sheets.



Corporate and Other Unsecured Loans

We have certain unsecured debt obligations,
the terms of which are described below:



|                                               |  | December 31,
    2013(2) |        |  | Weighted-Average Interest Rate |  |      | December 31,
    2012(3) |  |   | Weighted-Average Interest Rate | 
|---------------------------------------------- |  | ------------------------ | ------ |  | ------------------------------ |  | ---- | ------------------------ |  | - | ------------------------------ | 
|Unsecured debt:                                |  |                          |        |  |                                |  |      |                          |  |   |                                | 
|Unsecured Corporate Bonds - 2010
    Indenture |  | $                        | -      |  |                                |  | -    |                          |  | $ | 608,688                        | 
|HHC Note(1)                                    |  |                          | 13,179 |  |                                |  | 4.41 | %                        |  |   | 19,347                         | 
|Unsecured Corporate Bonds - 1995 Indenture     |  |                          | -      |  |                                |  | -    |                          |  |   | 91,786                         | 
|Corporate revolver                             |  |                          | 51,800 |  |                                |  | 1.74 | %                        |  |   | -                              | 
|Total unsecured debt                           |  | $                        | 64,979 |  |                                |  | 2.28 | %                        |  | $ | 719,821                        | 



| | (1) | Matures in December 2015.
| | --- | -------------------------

| | (2) | Excludes a market rate discount of $0.4 million that decreases the total amount that appears outstanding in our Consolidated
Balance Sheets. The rate discount amortizes as an addition to interest expense over the life of the loan.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Excludes a net market rate premium of $9.8 million that increases the total amount that appears outstanding in our Consolidated
Balance Sheets. The market rate premium amortizes as a reduction to interest expense over the life of the respective loan.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On February 14, 2013, the Company
redeemed $91.8 million of the 5.38% unsecured corporate bonds due November 26, 2013. The bonds were redeemed in cash
at the "Make-Whole Price", as defined in the applicable indenture, plus accrued and unpaid interest up to, but excluding,
the redemption date. We incurred debt extinguishment costs of $3.5 million in connection with the redemption, which is recorded
within Loss on extinguishment of debt on our Consolidated Statements of Operations and Comprehensive Income (Loss).



On May 1, 2013, the Company redeemed $608.7
million of the 6.75% unsecured corporate bonds due November 9, 2015. The bonds were redeemed in cash at the “Make-Whole Price”,
as defined in the applicable indenture, plus accrued and unpaid interest up to, but excluding, the redemption date. We incurred
debt extinguishment costs of $20.5 million in connection with the redemption, which is recorded within Loss on extinguishment of
debt on our Consolidated Statements of Operations and Comprehensive Income (Loss).



The unsecured corporate bonds had covenants,
including ratios of secured debt-to-gross assets and total debt-to-gross assets that governed our ability to incur debt for certain
assets. As a result of the redemptions of the unsecured corporate bonds, the Company and related assets are no longer subject to
the unsecured corporate bonds’ covenants.



Our revolving credit facility (the “Facility”)
as amended on October 23, 2013, provides for revolving loans of up to $1.0 billion. The Facility has an uncommitted accordion feature
for a total facility of up to $1.5 billion. The Facility is scheduled to mature in October 2018 and is unsecured. Borrowings under
the Facility bear interest at a rate equal to LIBOR plus 132.5 to 195 basis points, which is determined by the Company’s
leverage level. The Facility contains certain restrictive covenants which limit material changes in the nature of our business
conducted, including but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional
indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal
periods. In addition, we are required not to exceed a maximum net debt-to-value ratio, a maximum leverage ratio and a minimum net
cash interest coverage ratio; we are not aware of any instances of non-compliance with such covenants as of December 31, 2013.
$51.8 million was outstanding on the Facility, as of December 31, 2013.



F-76







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



Junior Subordinated Notes

GGP Capital Trust I, a Delaware statutory
trust (the “Trust”) and a wholly-owned subsidiary of GGPLP, completed a private placement of $200.0 million of trust
preferred securities (“TRUPS”) in 2006. The Trust also issued $6.2 million of Common Securities to GGPLP. The Trust
used the proceeds from the sale of the TRUPS and Common Securities to purchase $206.2 million of floating rate Junior Subordinated
Notes of GGPLP due 2041. Distributions on the TRUPS are equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from
the date of original issuance. The TRUPS mature on April 30, 2041, but may be redeemed beginning on April 30, 2011 if the Trust
exercises its right to redeem a like amount of Junior Subordinated Notes. The Junior Subordinated Notes bear interest at LIBOR
plus 1.45% and are fully recourse to the Company. Though the Trust is a wholly-owned subsidiary of GGPLP, we are not
the primary beneficiary of the Trust and, accordingly, it is not consolidated for accounting purposes.  We have recorded
the Junior Subordinated Notes as a liability and our common equity interest in the Trust as prepaid expenses and other assets in
our Consolidated Balance Sheets as of December 31, 2013 and December 31, 2012.



Letters of Credit and Surety Bonds

We had outstanding letters of credit and
surety bonds of $19.4 million as of December 31, 2013 and $21.7 million as of December 31, 2012. These letters of credit and bonds
were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.



We are not aware of any instances of non-compliance
with our financial covenants related to our mortgages, notes and loans payable as of December 31, 2013 with the exception of one
property transferred to a special servicer which is currently in default.



NOTE 8       INCOME
TAXES



We have elected to be taxed as a REIT under
the Internal Revenue Code. We intend to maintain REIT status. To qualify as a REIT, the Company must meet a number of organizational
and operational requirements, including requirements to distribute at least 90% of our taxable ordinary income and to either distribute
taxable capital gains to stockholders, or pay corporate income tax on the undistributed capital gains. In addition, the Company
is required to meet certain asset and income tests.



As a REIT, we will generally not be subject
to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a
REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates (including any applicable alternative
minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT,
we may be subject to certain state and local taxes on our income or property, and to Federal income and excise taxes on our undistributed
taxable income. Generally, we are currently open to audit by the Internal Revenue Service for the years ended December 31, 2010
through 2013 and are open to audit by state taxing authorities for the years ended December 31, 2009 through 2013.



The provision for income taxes for the
years ended December 31, 2013, 2012, and 2011 are as follows:



|                                   |  | December 31, 2013 |        |   | December 31, 2012 |   |       | December 31, 2011 | 
|---------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ----- | ----------------- | 
|Current                            |  | $                 | 3,855  |   |                   | $ | 5,036 |                   | 
|Deferred                           |  |                   | (3,510 | ) |                   |   | 4,055 |                   | 
|Total from Continuing Operations   |  |                   | 345    |   |                   |   | 9,091 |                   | 
|                                   |  |                   |        |   |                   |   |       |                   | 
|Current                            |  |                   | -      |   |                   |   | 23    |                   | 
|Deferred                           |  |                   | -      |   |                   |   | -     |                   | 
|Total from Discontinued Operations |  |                   | -      |   |                   |   | 23    |                   | 
|                                   |  |                   |        |   |                   |   |       |                   | 
|Total                              |  | $                 | 345    |   |                   | $ | 9,114 |                   | 



Realization of a deferred tax benefit is
dependent upon generating sufficient taxable income in future periods. Our TRS net operating loss carryforwards of $20.0 million
are currently scheduled to expire in subsequent years through 2033. Our capital loss carryforwards of $6.6 million are scheduled
to expire in 2016. Substantially all of these attributes are limited under Section 382 of the Code and are subject to valuation
allowances. All of the REIT net operating loss carryforward amounts are subject to annual limitations under Section 382 of the
Code, although it is not expected that there will be a significant impact.



F-77







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



Each TRS and certain REIT entities subject
to state income taxes is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax
assets (liabilities) are summarized as follows:



|                               |  | December 31, 2013 |         |   | December 31, 2012 |   |         | December 31, 2011 | 
|------------------------------ |  | ----------------- | ------- | - | ----------------- | - | ------- | ----------------- | 
|Total deferred tax assets      |  | $                 | 16,077  |   |                   | $ | 17,778  |                   | 
|Valuation allowance            |  |                   | (15,171 | ) |                   |   | (16,876 | )                 | 
|Net deferred tax assets        |  |                   | 906     |   |                   |   | 902     |                   | 
|Total deferred tax liabilities |  |                   | (24,667 | ) |                   |   | (28,174 | )                 | 
|Net deferred tax liabilities   |  | $                 | (23,761 | ) |                   | $ | (27,272 | )                 | 



Due to the uncertainty of the realization
of certain tax carryforwards, we have established valuation allowances on those deferred tax assets that we do not reasonably expect
to realize. Deferred tax assets that we believe have only a remote possibility of realization have not been recorded.



The tax effects of temporary differences
and carryforwards included in the net deferred tax liabilities as of December 31, 2013 and December 31, 2012 are summarized as
follows:



|                                                                             |  | December 31, 2013 |         |   | December 31, 2012 |   |         | December 31, 2011 | 
|---------------------------------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | - | ------- | ----------------- | 
|Operating loss and tax credit carryforwards                                  |  | $                 | 15,477  |   |                   | $ | 15,051  |                   | 
|Other TRS property, primarily differences in basis of assets and liabilities |  |                   | (24,067 | ) |                   |   | (25,447 | )                 | 
|Valuation allowance                                                          |  |                   | (15,171 | ) |                   |   | (16,876 | )                 | 
|Net deferred tax liabilities                                                 |  | $                 | (23,761 | ) |                   | $ | (27,272 | )                 | 



We had unrecognized tax benefits recorded
pursuant to uncertain tax positions of $5.1 million and $5.4 million as of December 31, 2013 and December 31, 2012 respectively,
excluding interest, all of which would impact our effective tax rate.  We do not expect significant increases or decreases
in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2013.



NOTE 9        WARRANTS



Pursuant to the terms of the Investment
Agreements, the Plan Sponsors and Blackstone were issued 120,000,000 warrants (the “Warrants”) to purchase common stock
of GGP with an initial weighted average exercise price of $10.63. Each Warrant was originally recorded as a liability, as the holders
of the Warrants could have required GGP to settle such Warrants in cash upon certain changes of control events. The Warrants were
fully vested upon issuance. Each Warrant has a term of seven years and expires on November 9, 2017. Below is a summary of the Warrants
initially received by the Plan Sponsors and Blackstone.



|Initial Warrant Holder |  | Number of Warrants |             |  | Initial Exercise Price |  
|---------------------- |  | ------------------ | ----------- |  | ---------------------- | -
|Brookfield             |  |                    | 57,500,000  |  |                        | $
|Blackstone - B (2)     |  |                    | 2,500,000   |  |                        |  
|Fairholme (2)          |  |                    | 41,070,000  |  |                        |  
|Pershing Square (1)    |  |                    | 16,430,000  |  |                        |  
|Blackstone - A (2)     |  |                    | 2,500,000   |  |                        |  
|                       |  |                    | 120,000,000 |  |                        |  



(1) On December 31, 2012, the Pershing Square Warrants
were purchased by the Brookfield Investor.

(2) On January 28, 2013, the Fairholme and Blackstone Warrants
(A and B) were purchased by GGP.



F-78







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



The Brookfield Warrants and the Blackstone
Warrants (A and B) were immediately exercisable, while the Fairholme Warrants and the Pershing Square Warrants were exercisable
(for the initial 6.5 years from the issuance) only upon 90 days prior notice, but there is no obligation to exercise
at any point from the end of the 90 day notification period through maturity.



The exercise prices of the Warrants are
subject to adjustment for future dividends, stock dividends, distribution of assets, stock splits or reverse splits of our common
stock or certain other events. In accordance with the agreement, these calculations adjust both the exercise price and the number
of shares issuable for the 120,000,000 Warrants that were initially issued to the Plan Sponsors. During 2012 and 2013, the number
of shares issuable upon exercise of the outstanding Warrants changed as follows:



|                  |  |                    |             |  | Exercise Price                        |  
|----------------- |  | ------------------ | ----------- |  | ------------------------------------- | -
|Record Date       |  | Issuable Shares(1) |             |  | Brookfield and
    Blackstone - B (2) |  
|April 16, 2012    |  |                    | 132,372,000 |  |                                       | $
|July 16, 2012     |  |                    | 133,116,000 |  |                                       |  
|October 15, 2012  |  |                    | 133,884,000 |  |                                       |  
|December 14, 2012 |  |                    | 134,640,000 |  |                                       |  
|April 16, 2013    |  |                    | 83,443,178  |  |                                       |  
|July 16, 2013     |  |                    | 83,945,892  |  |                                       |  
|October 15, 2013  |  |                    | 84,507,750  |  |                                       |  
|December 13, 2013 |  |                    | 85,084,392  |  |                                       |  



| | (1) | Issuable shares as of April 16, 2013 exlcude the Fairholme and Blackstone A and B warrants purchased by GGPLP.
| | --- | --------------------------------------------------------------------------------------------------------------

| | (2) | On January 28, 2013, the Fairholme and Blackstone Warrants (A and B) were purchased by GGPLP.
| | --- | ---------------------------------------------------------------------------------------------

| | (3) | On December 31, 2012, the Pershing Square Warrants were purchased by the Brookfield Investor.
| | --- | ---------------------------------------------------------------------------------------------



On December 31, 2012, Brookfield acquired
all of the 16,430,000 Warrants held by Pershing Square for a purchase price of approximately $272 million. At the time of
purchase, the Pershing Square Warrants were exercisable into approximately 10 million common shares of the Company at a weighted-average
exercise price of approximately $9.36 per share, assuming net share settlement (i.e. receive shares in common stock equivalent
to the intrinsic value of the warrant at the time of exercise). In connection with the transaction, Brookfield and Pershing Square
are required to abide by certain undertakings outlined in their Warrant Purchase Agreement dated December 31, 2012, filed on the
same date.



On January 28, 2013, GGPLP acquired the
41,070,000 Warrants held by Fairholme and the 5,000,000 Warrants held by Blackstone for an aggregate purchase price of approximately
$633 million. At the time of purchase, the GGPLP Warrants were exercisable into approximately 27 million common shares of the Company
at a weighted-average exercise price of approximately $9.37 per share, assuming net share settlement. On March 26, 2013, GGPLP
exercised its warrants and was issued approximately 27.5 million shares of GGP’s common stock, under net share settlement
(See Note 12 for further discussion).



As a result of the transactions occurring
on December 31, 2012, and January 28, 2013, Brookfield now owns or manages on behalf of third parties all of the outstanding
Warrants. Brookfield has the option for 57,500,000 Warrants to either full share settle (i.e. deliver cash for the exercise price
of the Warrants in the amount of approximately $618 million in exchange for approximately 65,000,000 shares of common stock) or
net share settle. The remaining 16,430,000 Warrants owned or managed by Brookfield must be net share settled. As of December 31,
2013, the remaining Warrants are exercisable into approximately 46 million common shares of the Company, at a weighted-average
exercise price of approximately $9.29 per share. Due to their ownership of Warrants, Brookfield’s potential ownership of
the Company may change as a result of payments of dividends and changes in our stock price.



On March 28, 2013, we amended the warrant
agreement to replace the right of warrant holders to receive cash from the Company under a change of control to the right to, instead,
receive shares of the Company, changing the method of settlement. This amendment results in the classification of the Warrants
as a component of permanent equity on our Consolidated Balance Sheets. Prior to the amendment, the Warrants were classified as
a liability, due to the cash settlement feature, and marked to fair value, with changes in fair value recognized in earnings. As
a result of the amendment, the fair value was determined as of March 28, 2013 with the change in fair value recognized in our Consolidated
Statements of Operations and Comprehensive Income (Loss) and the determined fair value was reclassified to equity.



F-79







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



The estimated fair value of the Warrants
was $895.5 million as of March 28, 2013 and $1.5 billion as of December 31, 2012. The fair value of the Warrants was estimated
using the Black Scholes option pricing model using our stock price, the Warrant term, and Level 3 inputs (Note 2).  As discussed
above, the modification of the warrant agreement resulted in the classification of the Warrants as equity as of March 28, 2013.
From December 31, 2012 through March 28, 2013, changes in the fair value of the Warrants were recognized in earnings. An increase
in GGP’s common stock price or in the expected volatility of the Warrants would increase the fair value; whereas, a decrease
in GGP’s common stock price or an increase in the lack of marketability would decrease the fair value.



The following table summarizes the change in fair value of the
Warrants which is measured on a recurring basis using Level 3 inputs:



|                              |  | Year Ended December 31, |          
|----------------------------- |  | ----------------------- | ---------
|                              |  | 2013                    |          
|Balance as of January 1,      |  | $                       | 1,488,196
|Warrant liability adjustment  |  |                         | 40,546   
|Purchase of Warrants by GGPLP |  |                         | (633,229 
|Reclassification to equity    |  |                         | (895,513 
|Balance as of December 31,    |  | $                       | -        



The following table summarizes the estimated
fair value of the Warrants and significant observable and unobservable inputs used in the valuation as of March 28, 2013 and December
31, 2012:



|                                   |  | March 28, 2013 |           |    | December 31, 2012 |  
|---------------------------------- |  | -------------- | --------- | -- | ----------------- | -
|Fair value of Warrants             |  | $              | 895,513   |    |                   | $
|Observable Inputs                  |  |                |           |    |                   |  
|GGP stock price per share          |  | $              | 19.88     |    |                   | $
|Warrant term                       |  |                | 4.62      |    |                   |  
|Unobservable Inputs                |  |                |           |    |                   |  
|Expected volatility                |  |                | 30        | %  |                   |  
|Range of values considered         |  |                | (15% - 65 | %) |                   |  
|Discount for lack of marketability |  |                | 3         | %  |                   |  
|Range of values considered         |  |                | (3% - 7   | %) |                   |  



NOTE 10     RENTALS
UNDER OPERATING LEASES



We receive rental income from the leasing
of retail and other space under operating leases. The minimum future rentals based on operating leases of our Consolidated Properties
as of December 31, 2013 are as follows:



|Year       |  | Amount |          
|---------- |  | ------ | ---------
|2014       |  | $      | 1,381,256
|2015       |  |        | 1,261,589
|2016       |  |        | 1,118,800
|2017       |  |        | 976,692  
|2018       |  |        | 833,062  
|Subsequent |  |        | 2,764,500
|           |  | $      | 8,335,899



Minimum future rentals exclude amounts
which are payable by certain tenants based upon a percentage of their gross sales or as reimbursement of operating expenses and
amortization of above and below-market tenant leases. Such operating leases are with a variety of tenants, the majority of which
are national and regional retail chains and local retailers, and consequently, our credit risk is concentrated in the retail industry.

F-80







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE 11     EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS



Allocation to Noncontrolling Interests

Noncontrolling interests consists of the
redeemable interests related to our common and preferred Operating Partnership units and the noncontrolling interest in our consolidated
joint ventures. The following table reflects the activity included in the allocation to noncontrolling interests.



|                                                                                                                            |  | Year Ended December 31, |        
|--------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | -------
|                                                                                                                            |  | 2013                    |        
|Distributions to preferred Operating Partnership units                                                                      |  | $                       | (9,287 
|Net (income) loss allocation to noncontrolling interests in operating partnership from continuing operations (common units) |  |                         | (2,281 
|Net (income) loss allocated to noncontrolling interest in consolidated real estate affiliates                               |  |                         | (3,103 
|Allocation to noncontrolling interests                                                                                      |  |                         | (14,671
|                                                                                                                            |  |                         |        
|Other comprehensive loss allocated to noncontrolling interests                                                              |  |                         | (393   
|Comprehensive loss allocated to noncontrolling interests                                                                    |  | $                       | (15,064



Redeemable Noncontrolling Interests

The minority interest related to the Common
and Preferred Units of the Operating Partnership are presented as redeemable noncontrolling interests in our Consolidated Balance
Sheets since it is possible we could be required, under certain events outside of our control, to redeem the securities for cash
by the holders of the securities.



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



The common redeemable noncontrolling interests
have been recorded at fair value for all periods presented. One tranche of preferred redeemable noncontrolling interests has been
recorded at fair value, while the other tranches of preferred redeemable noncontrolling interests have been recorded at carrying
value.



Generally, the holders of the Common Units
share in any distributions by the Operating Partnership with our common stockholders. However, the Operating Partnership agreement
permits distributions solely to GGP if such distributions were required to allow GGP to comply with the REIT distribution requirements
or to avoid the imposition of excise tax. Under certain circumstances, the conversion rate for each Common Unit is required to
be adjusted to give effect to stock distributions. If the holders had requested redemption of the Common Units as of December 31,
2013, the aggregate amount of cash we would have paid would have been $131.9 million.



The Operating Partnership issued Convertible
Preferred Units that are convertible into Common Units of the Operating Partnership at the rates below (subject to adjustment).
The holder may convert the Convertible Preferred Units into Common Units of the Operating Partnership at any time, subject to certain
restrictions. The Common Units are convertible into common stock at a one-to-one ratio at the current stock price.



F-81







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



|             |  | Number of Common Units for each Preferred Unit |         |  | Number of Contractual Convertible Preferred Units Outstanding as of December 31, 2013 |  |           | Converted Basis to Common Units Outstanding as of December 31, 2013 |  |  | Conversion Price |  |  | Redemption Value |         
|------------ |  | ---------------------------------------------- | ------- |  | ------------------------------------------------------------------------------------- |  | --------- | ------------------------------------------------------------------- |  |  | ---------------- |  |  | ---------------- | --------
|Series B (1) |  |                                                | 3.00000 |  |                                                                                       |  | 1,279,632 |                                                                     |  |  | 3,991,540        |  |  | $                | 16.66670
|Series D     |  |                                                | 1.50821 |  |                                                                                       |  | 532,750   |                                                                     |  |  | 803,499          |  |  |                  | 33.15188
|Series E     |  |                                                | 1.29836 |  |                                                                                       |  | 502,658   |                                                                     |  |  | 652,631          |  |  |                  | 38.51000
|             |  |                                                |         |  |                                                                                       |  |           |                                                                     |  |  |                  |  |  |                  |         



| | (1) | The conversion price of Series B preferred units is lower than the GGP December 31, 2013 closing common stock price
of $20.07. Therefore, a common stock price of $20.07 is used to calculate the Series B redemption value.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table reflects the activity
of the redeemable noncontrolling interests for the years ended December 31, 2013, 2012, and 2011.



|Balance at January 1, 2011                                                  |  | $ | 232,364 |  
|--------------------------------------------------------------------------- |  | - | ------- | -
|Net loss                                                                    |  |   | (2,212  | )
|Distributions                                                               |  |   | (5,879  | )
|Redemption of operating partnership units                                   |  |   | (4,615  | )
|Other comprehensive loss                                                    |  |   | (337    | )
|Fair value adjustment for noncontrolling interests in Operating Partnership |  |   | 4,474   |  
|Balance at December 31, 2011                                                |  | $ | 223,795 |  
|                                                                            |  |   |         |  
|Balance at January 1, 2012                                                  |  | $ | 223,795 |  
|Net loss                                                                    |  |   | (3,498  | )
|Distributions                                                               |  |   | (2,850  | )
|Redemption of operating partnership units                                   |  |   | (2,730  | )
|Dividend for RPI Spin-Off                                                   |  |   | 3,137   |  
|Other comprehensive loss                                                    |  |   | (258    | )
|Fair value adjustment for noncontrolling interests in Operating Partnership |  |   | 50,623  |  
|Balance at December 31, 2012                                                |  | $ | 268,219 |  
|                                                                            |  |   |         |  
|Balance at January 1, 2013                                                  |  | $ | 268,219 |  
|Net income                                                                  |  |   | 2,281   |  
|Distributions                                                               |  |   | (3,275  | )
|Redemption of operating partnership units (1)                               |  |   | (41,889 | )
|Other comprehensive income                                                  |  |   | 393     |  
|Fair value adjustment for noncontrolling interests in Operating Partnership |  |   | 3,173   |  
|Balance at December 31, 2013                                                |  | $ | 228,902 |  










| | (1) | Operating partnership unit holders redeemed 1,756,521 units in 2013.
| | --- | --------------------------------------------------------------------



F-82







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



Common Stock Dividend and Purchase of
Common Stock

Our Board of Directors declared common
stock dividends during 2013 and 2012 as follows:



|Declaration Date |  | Record Date |  | Payment Date     |  | Dividend Per Share |     
|---------------- |  | ----------- |  | ---------------- |  | ------------------ | ----
|2013             |  |             |  |                  |  |                    |     
|October 28       |  | December 13 |  | January 2, 2014  |  |                    | 0.14
|July 29          |  | October 15  |  | October 29, 2013 |  |                    | 0.13
|May 10           |  | July 16     |  | July 30, 2013    |  |                    | 0.12
|February 4       |  | April 16    |  | April 30, 2013   |  |                    | 0.12
|2012             |  |             |  |                  |  |                    |     
|November 20      |  | December 14 |  | January 4, 2013  |  |                    | 0.11
|July 31          |  | October 15  |  | October 29, 2012 |  |                    | 0.11
|April 26         |  | July 16     |  | July 30, 2012    |  |                    | 0.10
|February 23      |  | April 16    |  | April 30, 2012   |  |                    | 0.10



Distributions paid on our common stock
and their tax status, as sent to our shareholders, is presented in the following table. The tax status of GGP distributions in
2013, 2012, and 2011 may not be indicative of future periods.



|                           |  | Year Ended December 31, |      
|-------------------------- |  | ----------------------- | -----
|                           |  | 2013                    |      
|Ordinary income            |  | $                       | 0.330
|Return of capital          |  |                         | -    
|Qualified dividends        |  |                         | -    
|Capital gain distributions |  |                         | 0.290
|Distributions per share    |  | $                       | 0.620



Our Dividend
Reinvestment Plan (“DRIP”) provides eligible holders of GGP’s common stock with a convenient method of increasing
their investment in the Company by reinvesting all or a portion of cash dividends in additional shares of common stock. Eligible
stockholders who enroll in the DRIP on or before the fourth business day preceding the record date for a dividend payment will
be able to have that dividend reinvested. As a result of the DRIP elections, 28,852 shares were issued during the year ended December
31, 2013 and 3,111,365 shares were issued during theyear ended December 31, 2012.



Preferred Stock



On February 13, 2013, we issued, in a public offering,
10,000,000 shares of 6.375% Series A Cumulative Perpetual Preferred Stock (the “Preferred Stock”) at a price
of $25.00 per share, resulting in net proceeds of $242.0 million after issuance costs.  The Preferred Stock is recorded net
of issuance costs within equity on our Consolidated Balance Sheets, and accrues a quarterly dividend at an annual rate of 6.375%. 
The dividend is paid in arrears in preference to dividends on our common stock, and reduces net income available to common stockholders,
and therefore, earnings per share.



The Preferred Stock does not have a stated maturity date but
we may redeem the Preferred Stock after February 12, 2018, for $25.00 per share plus all accrued and unpaid dividends. 
We may redeem the Preferred Stock prior to February 12, 2018, in limited circumstances that preserve ownership limits and/or
our status as a REIT, as well as during certain circumstances surrounding a change of control.  Upon certain circumstances
surrounding a change of control, holders of Preferred Stock may elect to convert each share of their Preferred Stock into a number
of shares of GGP common stock equivalent to $25.00 plus accrued and unpaid dividends, but not to exceed a cap of 2.4679 common
shares (subject to certain adjustments related to GGP common share splits, subdivisions, or combinations).



Our Board of Directors declared preferred stock dividends during
2013 as follows:



|Declaration Date |  | Record Date  |  | Payment Date    |  | Dividend Per Share |       
|---------------- |  | ------------ |  | --------------- |  | ------------------ | ------
|2013             |  |              |  |                 |  |                    |       
|October 28       |  | December 13  |  | January 2, 2014 |  | $                  | 0.3984
|July 29          |  | September 13 |  | October 1, 2013 |  |                    | 0.3984
|May 10           |  | June 14      |  | July 1, 2013    |  |                    | 0.3984
|March 4          |  | March 15     |  | April 1, 2013   |  |                    | 0.2125



F-83







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE 12     EARNINGS
PER SHARE



Basic earnings per share (“EPS”)
is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. 
Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially
dilutive common shares.  The dilutive effect of the Warrants are computed using the “if-converted” method and
the dilutive effect of options and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation
plans), is computed using the “treasury” method.



Information related to our EPS calculations is summarized as
follows:



|                                                                               |  | Year Ended December 31, |        
|------------------------------------------------------------------------------ |  | ----------------------- | -------
|                                                                               |  | 2013                    |        
|Numerators - Basic:                                                            |  |                         |        
|Income (loss) from continuing operations                                       |  | $                       | 307,156
|Preferred Stock dividend                                                       |  |                         | (14,078
|Allocation to noncontrolling interests                                         |  |                         | (14,602
|Income (loss) from continuing operations - net of
    noncontrolling interests |  |                         | 278,476
|                                                                               |  |                         |        
|Discontinued operations                                                        |  |                         | 10,043 
|Allocation to noncontrolling interests                                         |  |                         | (69    
|Discontinued operations - net of noncontrolling
    interests                  |  |                         | 9,974  
|                                                                               |  |                         |        
|Net income (loss)                                                              |  |                         | 317,199
|Preferred Stock dividend                                                       |  |                         | (14,078
|Allocation to noncontrolling interests                                         |  |                         | (14,671
|Net income (loss) attributable to common stockholders                          |  | $                       | 288,450
|                                                                               |  |                         |        
|Numerators - Diluted:                                                          |  |                         |        
|Income (loss) from continuing operations - net of
    noncontrolling interests |  | $                       | 278,476
|Exclusion of warrant adjustment                                                |  |                         | -      
|Diluted income (loss) from continuing operations                               |  | $                       | 278,476
|                                                                               |  |                         |        
|Net income (loss) attributable to common stockholders                          |  | $                       | 288,450
|Exclusion of Warrant adjustment                                                |  |                         | -      
|Diluted net income (loss) attributable to common stockholders                  |  | $                       | 288,450
|                                                                               |  |                         |        
|Denominators:                                                                  |  |                         |        
|Weighted-average number of common shares outstanding - basic                   |  |                         | 930,643
|Effect of dilutive securities                                                  |  |                         | 3,425  
|Weighted-average number of common shares
    outstanding - diluted             |  |                         | 934,068
|                                                                               |  |                         |        
|Anti-dilutive Securities:                                                      |  |                         |        
|Effect of Preferred Units                                                      |  |                         | 5,506  
|Effect of Common Units                                                         |  |                         | 6,434  
|Effect of Stock Options                                                        |  |                         | -      
|Effect of Warrants                                                             |  |                         | 46,724 
|                                                                               |  |                         | 58,664 



Options were anti-dilutive for the years
ended December 31, 2012 and December 31, 2011 periods presented because of net losses, and, as such, their effect has not been
included in the calculation of diluted net loss per share.  For the year ended December 31, 2013 dilutive options are included
in the denominator of EPS. In addition, potentially dilutive shares related to the Warrants for the years ended December 31, 2013
and December 31, 2012 have been excluded from the denominator in the computation of diluted EPS because they are also anti-dilutive. 
In 2011, dilutive shares related to the Warrants are included in the denominator of EPS because they are dilutive. Outstanding
Common Units have also been excluded from the diluted earnings per share calculation because including such Common Units would
also require that the share of GGPLP income attributable to such Common Units be added back to net income therefore resulting in
no effect on EPS.



F-84







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



During the year ended December 31, 2013,
GGPLP repurchased 28,345,108 shares of GGP’s common stock for $566.9 million, and these shares are presented as Common stock
in treasury, at cost, on our Consolidated Balance Sheets. Accordingly, these shares have been excluded from the calculation of
EPS. In addition, GGPLP was issued 27,459,195 shares of GGP common stock on March 26, 2013, as a result of GGPLP’s purchase
and subsequent exercising of the Fairholme and Blackstone Warrants (Note 9). These shares are presented as issued, but not outstanding
on our Consolidated Balance Sheets. Accordingly, these shares have been excluded from the calculation of EPS.



As a result of these transactions, GGPLP
owns 55,804,303 shares of GGP common stock as of December 31, 2013.



NOTE 13     STOCK-BASED
COMPENSATION PLANS



Incentive Stock Plans

The General Growth Properties, Inc. 2010
Equity Plan (the ‘‘Equity Plan’’) which remains in effect after the Effective Date, reserved for issuance
of 4% of GGP outstanding shares on a fully diluted basis as of the Effective Date. The Equity Plan provides for grants of nonqualified
stock options, incentive stock options, stock appreciation rights, restricted stock, other stock-based awards and performance-based
compensation (collectively, ‘‘the Awards’’). Directors, officers and other employees of GGP’s and
its subsidiaries and affiliates are eligible for Awards. The Equity Plan is not subject to the Employee Retirement Income Security
Act of 1974, as amended. No participant may be granted more than 4,000,000 shares, or the equivalent dollar value of such shares,
in any year. Options granted under the Equity Plan will be designated as either nonqualified stock options or incentive stock options.
An option granted as an incentive stock option will, to the extent it fails to qualify as an incentive stock option, be treated
as a nonqualified option. The exercise price of an option may not be less than the fair value of a share of GGP’s common
stock on the date of grant. The term of each option will be determined prior to the date of grant, but may not exceed ten years.



Stock Options

The following tables summarize stock option
activity for the Equity Plan for GGP for the years ended December 31, 2013, 2012 and 2011:



|                                                              |  | 2013   |            |   | 2012                            |   |       | 2011   | 
|------------------------------------------------------------- |  | ------ | ---------- | - | ------------------------------- | - | ----- | ------ | 
|                                                              |  | Shares |            |   | Weighted Average Exercise Price |   |       | Shares | 
|Stock options Outstanding at January 1,                       |  |        | 9,692,499  |   |                                 | $ | 13.59 |        | 
|Granted                                                       |  |        | 12,740,784 |   |                                 |   | 19.97 |        | 
|Exercised                                                     |  |        | (339,723   | ) |                                 |   | 14.33 |        | 
|Forfeited                                                     |  |        | (488,969   | ) |                                 |   | 16.27 |        | 
|Expired                                                       |  |        | (39,310    | ) |                                 |   | 14.35 |        | 
|Stock options Outstanding at December 31,                     |  |        | 21,565,281 |   |                                 | $ | 17.28 |        | 
|Intrinsic value of exercised options in period (in millions): |  |        |            |   |                                 | $ | 4.9   |        | 



The weighted average remaining contractual
term of nonvested awards as of December 31, 2013 was 1.0 year.



|                                     |  | Stock Options Outstanding |            |  | Stock Options Exercisable                                    | 
|------------------------------------ |  | ------------------------- | ---------- |  | ------------------------------------------------------------ | 
|Range of Exercise Prices             |  | Shares                    |            |  | Weighted Average
    Remaining  Contractual Term (in  years) | 
|$8.00 - $12.00                       |  |                           | 2,000,000  |  |                                                              | 
|$13.00 - $17.00                      |  |                           | 6,996,034  |  |                                                              | 
|$18.00 - $22.00                      |  |                           | 12,569,247 |  |                                                              | 
|Total                                |  |                           | 21,565,281 |  |                                                              | 
|Intrinsic value ($20.07 stock price) |  | $                         | 60,167     |  |                                                              | 



Stock options under the Equity Plan generally
vest in 20% increments annually from one year from the grant date. Options under certain previous equity plans were replaced under
the Plan with options, fully vested, in GGP common stock.



The weighted-average fair value of stock
options as of the grant date was $5.11 for stock options granted during the year ended December 31, 2013 and $4.59 for stock options
granted during the year ended December 31, 2011.



Restricted Stock

Pursuant to the Equity Plan, GGP and GGP
Inc. made restricted stock grants to certain employees and non-employee directors. The vesting terms of these grants are specific
to the individual grant. The vesting terms varied in that a portion of the shares vested either immediately or on the first anniversary
and the remainder vested in equal annual amounts over the next two to five years. Participating employees were required to remain
employed for vesting to occur (subject to certain exceptions in the case of retirement). Shares that did not vest were forfeited.
Dividends are paid on restricted stock and are not returnable, even if the underlying stock does not ultimately vest.



F-85







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



The following table summarizes restricted
stock activity for the respective grant year ended December 31, 2013, December 31, 2012 and December 31, 2011:



|                                                                        |  | 2013   |           |   | 2012                                   |   |       | 2011   | 
|----------------------------------------------------------------------- |  | ------ | --------- | - | -------------------------------------- | - | ----- | ------ | 
|                                                                        |  | Shares |           |   | Weighted Average Grant Date Fair Value |   |       | Shares | 
|Nonvested restricted stock grants outstanding as of beginning of period |  |        | 1,426,338 |   |                                        | $ | 14.07 |        | 
|Granted                                                                 |  |        | 37,352    |   |                                        |   | 19.97 |        | 
|Canceled                                                                |  |        | (164,970  | ) |                                        |   | 15.69 |        | 
|Vested                                                                  |  |        | (55,796   | ) |                                        |   | 15.15 |        | 
|Nonvested restricted stock grants outstanding as of end of period       |  |        | 1,242,924 |   |                                        | $ | 13.99 |        | 
|Vested fair value (in millions):                                        |  |        |           |   |                                        | $ | 3.4   |        | 



Other Required Disclosures

Historical data, such as the past performance
of our common stock and the length of service by employees, is used to estimate expected life of the stock options and our restricted
stock and represents the period of time the options or grants are expected to be outstanding. The weighted average estimated values
of options granted were based on the following assumptions:



|                            |  | Year Ended December 31, |      
|--------------------------- |  | ----------------------- | -----
|                            |  | 2013                    |      
|Risk-free interest rate (*) |  |                         | 1.71 
|Dividend yield (*)          |  |                         | 2.52 
|Expected volatility         |  |                         | 32.32
|Expected life (in years)    |  |                         | 6.5  



(*) Weighted average



Compensation expense related to stock-based
compensation plans is summarized in the following table:



|                                                            |  | Year Ended December 31, |       
|----------------------------------------------------------- |  | ----------------------- | ------
|                                                            |  | 2013                    |       
|Stock options - Property management and
    other     costs |  | $                       | 5,104 
|Stock options - General and administrative                  |  |                         | 10,178
|Restricted stock - Property management and other
    costs  |  |                         | 1,504 
|Restricted stock - General and
    administrative           |  |                         | 6,230 
|Total                                                       |  | $                       | 23,016



Unrecognized compensation expense as of
December 31, 2013 is as follows:



|Year |  | Amount |       
|---- |  | ------ | ------
|2014 |  | $      | 23,935
|2015 |  |        | 20,335
|2016 |  |        | 16,057
|2017 |  |        | 15,492
|2018 |  |        | 3,420 
|     |  |        | 79,239



These amounts may be impacted by future
grants, changes in forfeiture estimates or vesting terms, and actual forfeiture rates which differ from estimated forfeitures.



F-86







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE 14     PREPAID
EXPENSES AND OTHER ASSETS



The following table summarizes the significant components of
Prepaid expenses and other assets.



|                                                  |  | December 31, 2013 |           |  | December 31, 2012        |  
|------------------------------------------------- |  | ----------------- | --------- |  | ------------------------ | -
|                                                  |  | Gross Asset       |           |  | Accumulated Amortization |  
|Intangible assets:                                |  |                   |           |  |                          |  
|Above-market tenant leases, net                   |  | $                 | 1,022,398 |  |                          | $
|Below-market ground leases, net                   |  |                   | 164,017   |  |                          |  
|Real estate tax stabilization agreement, net      |  |                   | 111,506   |  |                          |  
|Total intangible assets                           |  | $                 | 1,297,921 |  |                          | $
|                                                  |  |                   |           |  |                          |  
|Remaining Prepaid expenses and other assets:      |  |                   |           |  |                          |  
|Security and escrow deposits                      |  |                   |           |  |                          |  
|Prepaid expenses                                  |  |                   |           |  |                          |  
|Other non-tenant receivables                      |  |                   |           |  |                          |  
|Deferred tax, net of valuation allowances         |  |                   |           |  |                          |  
|Other                                             |  |                   |           |  |                          |  
|Total remaining Prepaid expenses and other assets |  |                   |           |  |                          |  
|Total Prepaid expenses and other assets           |  |                   |           |  |                          |  



NOTE 15     ACCOUNTS
PAYABLE AND ACCRUED EXPENSES



The following table summarizes the significant components of
Accounts payable and accrued expenses.



|                                                      |  | December 31, 2013 |         |  | December 31, 2012     |  
|----------------------------------------------------- |  | ----------------- | ------- |  | --------------------- | -
|                                                      |  | Gross Liability   |         |  | Accumulated Accretion |  
|Intangible liabilities:                               |  |                   |         |  |                       |  
|Below-market tenant leases, net                       |  | $                 | 622,710 |  |                       | $
|Above-market headquarters office leases, net          |  |                   | 15,268  |  |                       |  
|Above-market ground leases, net                       |  |                   | 9,756   |  |                       |  
|Total intangible liabilities                          |  | $                 | 647,734 |  |                       | $
|                                                      |  |                   |         |  |                       |  
|Remaining Accounts payable and accrued expenses:      |  |                   |         |  |                       |  
|Accrued interest                                      |  |                   |         |  |                       |  
|Accounts payable and accrued expenses                 |  |                   |         |  |                       |  
|Accrued real estate taxes                             |  |                   |         |  |                       |  
|Deferred gains/income                                 |  |                   |         |  |                       |  
|Accrued payroll and other employee liabilities        |  |                   |         |  |                       |  
|Construction payable                                  |  |                   |         |  |                       |  
|Tenant and other deposits                             |  |                   |         |  |                       |  
|Insurance reserve liability                           |  |                   |         |  |                       |  
|Capital lease obligations                             |  |                   |         |  |                       |  
|Conditional asset retirement obligation liability     |  |                   |         |  |                       |  
|Uncertain tax position liability                      |  |                   |         |  |                       |  
|Other                                                 |  |                   |         |  |                       |  
|Total remaining Accounts payable and accrued expenses |  |                   |         |  |                       |  
|Total Accounts payable and accrued expenses           |  |                   |         |  |                       |  



NOTE 16     ACCUMULATED OTHER COMPREHENSIVE
LOSS



Components of accumulated other comprehensive
loss as of December 31, 2013 and 2012 are as follows:



|                                                  |  | December 31, 2013 |         |   | December 31, 2012 |  
|------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | -
|Net unrealized gains on financial instruments     |  | $                 | 124     |   |                   | $
|Foreign currency translation                      |  |                   | (38,297 | ) |                   |  
|Unrealized gains on available-for-sale securities |  |                   | -       |   |                   |  
|                                                  |  | $                 | (38,173 | ) |                   | $



NOTE 17     LITIGATION



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



F-87







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



Urban Litigation

In October 2004, certain limited partners
(the "Urban Plaintiffs") of Urban Shopping Centers, L.P. ("Urban") filed a lawsuit against Urban's general
partner, Head Acquisition, L.P. ("Head"), as well as TRCLP, Simon Property Group, Inc., Westfield America, Inc.,
and various of their affiliates, including Head's general partners (collectively, the "Urban Defendants"), in Circuit
Court in Cook County, Illinois. GGP Inc., GGPLP and other affiliates were later included as Urban Defendants. The lawsuit alleges,
among other things, that the Urban Defendants breached the Urban partnership agreement, unjustly enriched themselves through misappropriation
of partnership opportunities, failed to grow the partnership, breached their fiduciary duties, and tortiously interfered with several
contractual relationships. The plaintiffs seek relief in the form of unspecified monetary damages and equitable relief requiring,
among other things, the Urban Defendants, including GGP, Inc. and its affiliates, to engage in certain future transactions through
the Urban Partnership.  On June 24, 2013, the court held oral argument on the parties’ cross-motions for partial summary
judgment. The court rendered its decisions on these motions on November 7, 2013, affirming certain of the motions for plaintiffs
and the co-defendants and denying others. A trial date has been scheduled for May 2014. While the parties have entered into discussions
regarding potential settlement terms, it is not possible to determine whether such discussions will ultimately result in a settlement
acceptable to all parties.



As a result of our consideration of the
risks associated with this matter, the uncertainty regarding the outcome of the settlement discussions, as well as discussions
with counsel, the Company has concluded that we cannot reasonably estimate a possible range of potential loss related to the Urban
Plaintiffs’ lawsuit due to the broad spectrum of monetary and non-monetary remedies that may result from the outcome of the
matter and the difficulty in calculating and allocating damages (if any) among the defendants.  Therefore, no liability has
been accrued and no range of loss has been disclosed in the accompanying consolidated financial statements as of and for the year
ended December 31, 2013.



John Schreiber, one of our former directors,
serves on the board of directors of, and is an investor in, an entity that is a principal investor in the Urban Plaintiffs, and
is himself an investor in the Urban Plaintiffs and, therefore, has a financial interest in the outcome of the litigation that may
be adverse to us.



Default Interest

Pursuant to the Plan, the Company cured
and reinstated that certain note (the “Homart Note”) in the original principal amount of $254.0 million between GGPLP
and The Comptroller of the State of New York as Trustee of the Common Retirement Fund (“CRF”) by payment in cash of
accrued interest at the contractual non-default rate.   CRF, however, contended that the Company’s bankruptcy caused
the Company to default under the Homart Note and, therefore, post-petition interest accrued under the Homart Note at the contractual
default rate was due for the period June 1, 2009 until November 9, 2010.  On June 16, 2011, the United States Bankruptcy Court
for the Southern District of New York (the “Bankruptcy Court”) ruled in favor of CRF, and, on June 22, 2011, the Company
elected to satisfy the Homart Note in full by paying CRF the outstanding default interest and principal amount on the Homart Note
totaling $246.0 million.  As a result of the ruling, the Company incurred and paid $11.7 million of default interest expense
during the year ended December 31, 2011. The Company appealed the Bankruptcy Court’s order and reserved its right to recover
the payment of default interest.  On March 13, 2013, the parties reached a settlement. In exchange for the Company’s
dismissal of its appeal, CRF waived all claims to attorneys’ fees.



Pursuant to the Plan, the Company agreed
to pay to the holders of claims (the “2006 Lenders”) under a revolving and term loan facility (the “2006 Credit
Facility”) the principal amount of their claims outstanding of approximately $2.6 billion plus post-petition interest at
the contractual non-default rate. However, the 2006 Lenders asserted that they were entitled to receive interest at the contractual
default rate. In July 2011, the Bankruptcy Court ruled in favor of the 2006 Lenders. The Company had accrued $96.1 million as of
December 31, 2012. The Company appealed the Bankruptcy Court ruling, and on March 13, 2013, the parties reached a settlement. In
exchange for the Company’s dismissal of its appeal, and a payment by the Company of $97.4 million, the 2006 Lenders waived
all claim to attorneys’ fees.



F-88







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



Tax Indemnification Liability

Pursuant to the Investment Agreements,
GGP has indemnified HHC from and against 93.75% of any and all losses, claims, damages, liabilities and reasonable expenses to
which HHC and its subsidiaries become subject, in each case solely to the extent directly attributable to MPC Taxes (as defined
in the Investment Agreements) in an amount up to $303.8 million.  Under certain circumstances, we agreed to be responsible
for interest or penalties attributable to such MPC Taxes in excess of the $303.8 million.  The IRS disagrees with the method
used to report gains for income tax purposes that are the subject of the MPC taxes. As a result of this disagreement, The Howard
Hughes Company, LLC and Howard Hughes Properties, Inc. filed petitions in the United States Tax Court on May 6, 2011, contesting
this liability for the 2007 and 2008 years and a trial was held in early November 2012.  The Internal Revenue Service has
opened an audit for these two taxpayers for 2009 through 2011 with respect to MPC Taxes.  The outcome of this Tax Court decision
will impact the timing of the payment of the MPC taxes to HHC. We anticipate the Tax Court’s decision in 2014. We have accrued
$303.6 million as of December 31, 2013 and $303.8 million as of December 31, 2012 related to the tax indemnification liability.
In addition, we have accrued $21.6 million of interest related to the tax indemnification liability in accounts payable and accrued
expenses on our Consolidated Balance Sheets as of December 31, 2013, and December 31, 2012.  As a result of our consideration
of the risks associated with this matter, as well as discussions with counsel, the Company believes that the aggregate liability
recorded of $325.2 million represents management’s best estimate of our liability as of December 31, 2013 and that the probability
that we will incur a loss in excess of this amount is remote.  Depending on the outcome of the Tax Court litigation, it is
possible that we may make potentially significant payments on the tax indemnification liability in the next twelve months. We do
not expect that these payments will exceed the tax indemnification liability accrued as of December 31, 2013.



NOTE 18     COMMITMENTS AND CONTINGENCIES



We lease land
or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event
of a proposed sale of the property by the landlord. Rental payments are expensed as incurred and have, to the extent applicable,
been straight-lined over the term of the lease. The following is a summary of our contractual rental expense as presented in our
Consolidated Statements of Operations and Comprehensive Income (Loss):



|                                                                                                                                                 |  | Year Ended December 31, |       
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------
|                                                                                                                                                 |  | 2013                    |       
|Contractual rent expense, including participation rent                                                                                           |  | $                       | 13,568
|Contractual rent expense, including participation rent and excluding amortization of above and below-market ground leases and straight-line rent |  |                         | 8,750 



See Note 8 and
Note 17 for our obligations related to uncertain tax positions and for disclosure of additional contingencies.



The following table summarizes the contractual
maturities of our long-term commitments. Long-term debt and ground leases include the related acquisition accounting fair value
adjustments:



|                                      |  | 2014 |         |  | 2015 |   |         | 2016 |  |   | 2017      |  |  | 2018 |         |  | Subsequent/ Other |   |           | Total | 
|------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | --------- |  |  | ---- | ------- |  | ----------------- | - | --------- | ----- | 
|Mortgages, notes and loans payable(1) |  | $    | 392,982 |  |      | $ | 836,291 |      |  | $ | 1,033,884 |  |  | $    | 887,418 |  |                   | $ | 1,928,647 |       | 
|Retained debt-principal               |  |      | 1,445   |  |      |   | 1,527   |      |  |   | 1,598     |  |  |      | 1,702   |  |                   |   | 1,798     |       | 
|Purchase obligations                  |  |      | 138,798 |  |      |   | -       |      |  |   | -         |  |  |      | -       |  |                   |   | -         |       | 
|Ground lease payments                 |  |      | 5,902   |  |      |   | 5,912   |      |  |   | 5,911     |  |  |      | 5,941   |  |                   |   | 5,859     |       | 
|Junior Subordinated Notes(2)          |  |      | -       |  |      |   | -       |      |  |   | -         |  |  |      | -       |  |                   |   | -         |       | 
|Tax indemnification liability(3)      |  |      | -       |  |      |   | -       |      |  |   | -         |  |  |      | -       |  |                   |   | -         |       | 
|Uncertain tax position liability(4)   |  |      | -       |  |      |   | -       |      |  |   | -         |  |  |      | -       |  |                   |   | -         |       | 
|Total                                 |  | $    | 539,127 |  |      | $ | 843,730 |      |  | $ | 1,041,393 |  |  | $    | 895,061 |  |                   | $ | 1,936,304 |       | 



| | (1) | The $51.8 million outstanding on the revolving credit facility as of December 31, 2013 is included in 2014.
| | --- | -----------------------------------------------------------------------------------------------------------

| | (2) | The $206.2 million of Junior Subordinated Notes are due in 2041, but may be redeemed any time after April 30, 2011.
As we do not expect to redeem the notes prior to maturity, they are included in the consolidated debt maturing subsequent to 2018.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The outcome of the Tax Court’s decision will impact the timing of the payment. We anticipate the Tax Court's decision in 2014 (Note 17).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The uncertain income tax liability for which reasonable estimates about the timing of payments cannot be made is disclosed
within the Subsequent/Other column.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 19     SUBSEQUENT
EVENTS



On February 14,
2014, we sold one operating property under a lender directed sale in full satisfaction of the related debt. The sale resulted in
a Gain on extinguishment of debt of approximately $67 million in the first quarter of 2014.



On February 10,
2014, GGP acquired 27,624,282 shares of its common stock from Pershing Square for approximately $556 million.



F-89







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



NOTE 20      QUARTERLY
FINANCIAL INFORMATION (UNAUDITED)



Quarterly data for the year ended December
31, 2013 and 2012 is summarized in the table below. Figures presented below have been adjusted for discontinued operations (Note
4), and include the impact of Provisions for impairment (Note 2), the Warrant liability adjustment (Note 9), and Gains from changes
in control of investment properties (Note 3) in continuing operations.



|                                                             |  | 2013          |        
|------------------------------------------------------------ |  | ------------- | -------
|                                                             |  | First
Quarter |        
|Total revenues                                               |  | $             | 629,109
|Operating income                                             |  |               | 198,473
|Income (loss) from continuing operations                     |  |               | (27,719
|Income (loss) from discontinued operations                   |  |               | 18,983 
|Net income (loss) income attributable to common shareholders |  |               | (13,651
|Basic Earnings (Loss) Per Share:                             |  |               |        
|Continuing operations                                        |  |               | (0.03  
|Discontinued operations                                      |  |               | 0.02   
|Diluted Earnings (Loss) Per Share:                           |  |               |        
|Continuing operations                                        |  |               | (0.03  
|Discontinued operations                                      |  |               | 0.02   
|Dividends declared per share                                 |  |               | 0.12   
|Weighted-average shares outstanding:                         |  |               |        
|Basic                                                        |  |               | 939,271
|Diluted                                                      |  |               | 939,271



|                                                             |  | 2012          |         
|------------------------------------------------------------ |  | ------------- | --------
|                                                             |  | First
Quarter |         
|Total revenues                                               |  | $             | 589,082 
|Operating income                                             |  |               | 164,547 
|Loss from continuing operations                              |  |               | (182,202
|Income (loss) from discontinued operations                   |  |               | (12,047 
|Net income (loss) income attributable to common shareholders |  |               | (197,615
|Basic Earnings (Loss) Per Share: 1                           |  |               |         
|Continuing operations                                        |  |               | (0.20   
|Discontinued operations                                      |  |               | (0.01   
|Diluted Earnings (Loss) Per Share: 1                         |  |               |         
|Continuing operations                                        |  |               | (0.20   
|Discontinued operations                                      |  |               | (0.01   
|Dividends declared per share                                 |  |               | 0.10    
|Weighted-average shares outstanding:                         |  |               |         
|Basic                                                        |  |               | 937,274 
|Diluted                                                      |  |               | 937,274 



| | 1 | Earnings (loss) per share for the quarters do not add up
to annual earnings per share due to the issuance of additional common stock during the year.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



F-90







GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share
amounts)



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Stockholders of
General Growth Properties, Inc.
Chicago, Illinois



We have audited the consolidated balance sheets of General Growth
Properties, Inc. and subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related consolidated statements
of operations and comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December
31, 2013 and the Company's internal control over financial reporting as of December 31, 2013, and have issued our reports thereon
dated February 21, 2014; such reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial
statement schedule of the Company listed in the Index to Consolidated Financial Statements and Consolidated Financial Statement
Schedule on pages F-1 of this Form 10-K. This consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement
schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.



/s/ Deloitte & Touche LLP



Chicago,
IllinoisFebruary 21, 2014



F-91











GENERAL GROWTH PROPERTIES, INC.



SCHEDULE III – REAL ESTATE AND
ACCUMULATED DEPRECIATION

DECEMBER 31, 2013

(Dollars in thousands)



|                             |  |                      |  |                 |           |  |                    |   |         |                               |  |  | Costs Capitalized                |  |  | Gross Amounts at Which     |        |   |      |   |                 |                            |  |  
|---------------------------- |  | -------------------- |  | --------------- | --------- |  | ------------------ | - | ------- | ----------------------------- |  |  | -------------------------------- |  |  | -------------------------- | ------ | - | ---- | - | --------------- | -------------------------- |  | -
|                             |  |                      |  |                 |           |  | Acquistion Cost(b) |   |         | Subsequent
    to Acquisition |  |  | Carriedat
    Close of Period(c) |  |  |                            |        |   |      |   | Life Upon Which
|Name of Center               |  | Location             |  | Encumbrances(a) |           |  | Land               |   |         | Buildings and Improvements    |  |  | Land                             |  |  | Buildings and Improvements |        |   | Land |   |                 | Buildings and Improvements |  |  
|Ala Moana Center             |  | Honolulu, HI         |  |                 | 1,400,000 |  |                    | $ | 571,836 |                               |  |  | 1,738,740                        |  |  | $                          | 954    |   |      | $ | 12,357          |                            |  | $
|Apache Mall                  |  | Rochester, MN        |  |                 | 97,851    |  |                    |   | 17,738  |                               |  |  | 116,663                          |  |  |                            | -      |   |      |   | 1,836           |                            |  |  
|Augusta Mall                 |  | Augusta, GA          |  |                 | 170,000   |  |                    |   | 25,450  |                               |  |  | 137,376                          |  |  |                            | -      |   |      |   | 6,177           |                            |  |  
|Baybrook Mall                |  | Friendswood, TX      |  |                 | 261,771   |  |                    |   | 76,527  |                               |  |  | 288,241                          |  |  |                            | -      |   |      |   | 3,200           |                            |  |  
|Bayside Marketplace          |  | Miami, FL            |  |                 | 1,269     |  |                    |   | -       |                               |  |  | 198,396                          |  |  |                            | -      |   |      |   | 2,607           |                            |  |  
|Beachwood Place              |  | Beachwood, OH        |  |                 | 218,222   |  |                    |   | 59,156  |                               |  |  | 196,205                          |  |  |                            | -      |   |      |   | 2,222           |                            |  |  
|Bellis Fair                  |  | Bellingham, WA       |  |                 | 91,223    |  |                    |   | 14,122  |                               |  |  | 102,033                          |  |  |                            | -      |   |      |   | 20,337          |                            |  |  
|Boise Towne Square           |  | Boise, ID            |  |                 | 144,442   |  |                    |   | 44,182  |                               |  |  | 163,118                          |  |  |                            | -      |   |      |   | 6,893           |                            |  |  
|Brass Mill Center            |  | Waterbury, CT        |  |                 | 101,588   |  |                    |   | 31,496  |                               |  |  | 99,107                           |  |  |                            | -      |   |      |   | 658             |                            |  |  
|Coastland Center             |  | Naples, FL           |  |                 | 127,479   |  |                    |   | 24,470  |                               |  |  | 166,038                          |  |  |                            | -      |   |      |   | 1,295           |                            |  |  
|Columbia Mall                |  | Columbia, MO         |  |                 | -         |  |                    |   | 7,943   |                               |  |  | 107,969                          |  |  |                            | (154   | ) |      |   | (1,141          | )                          |  |  
|Columbiana Centre            |  | Columbia, SC         |  |                 | -         |  |                    |   | 22,178  |                               |  |  | 125,061                          |  |  |                            | -      |   |      |   | (994            | )                          |  |  
|Coral Ridge Mall             |  | Coralville, IA       |  |                 | 113,714   |  |                    |   | 20,178  |                               |  |  | 134,515                          |  |  |                            | 2,219  |   |      |   | 14,367          |                            |  |  
|Coronado Center              |  | Albuquerque, NM      |  |                 | 148,020   |  |                    |   | 28,312  |                               |  |  | 153,526                          |  |  |                            | 4,545  |   |      |   | 20,815          |                            |  |  
|Crossroads Center            |  | St. Cloud, MN        |  |                 | 105,941   |  |                    |   | 15,499  |                               |  |  | 103,077                          |  |  |                            | -      |   |      |   | 877             |                            |  |  
|Cumberland Mall              |  | Atlanta, GA          |  |                 | 160,000   |  |                    |   | 36,913  |                               |  |  | 138,795                          |  |  |                            | -      |   |      |   | 4,284           |                            |  |  
|Deerbrook Mall               |  | Humble, TX           |  |                 | 148,302   |  |                    |   | 36,761  |                               |  |  | 133,448                          |  |  |                            | -      |   |      |   | 2,307           |                            |  |  
|Eastridge Mall               |  | Casper, WY           |  |                 | -         |  |                    |   | 5,484   |                               |  |  | 36,756                           |  |  |                            | -      |   |      |   | 6,762           |                            |  |  
|Eastridge Mall               |  | San Jose, CA         |  |                 | 151,512   |  |                    |   | 30,368  |                               |  |  | 135,317                          |  |  |                            | (3,127 | ) |      |   | 1,879           |                            |  |  
|Fashion Place                |  | Murray, UT           |  |                 | 226,730   |  |                    |   | 24,068  |                               |  |  | 232,456                          |  |  |                            | 2,079  |   |      |   | 52,076          |                            |  |  
|Fashion Show                 |  | Las Vegas, NV        |  |                 | 839,913   |  |                    |   | 564,310 |                               |  |  | 627,327                          |  |  |                            | 8,635  |   |      |   | 47,263          |                            |  |  
|Four Seasons Town Centre     |  | Greensboro, NC       |  |                 | 86,894    |  |                    |   | 17,259  |                               |  |  | 126,570                          |  |  |                            | -      |   |      |   | 3,529           |                            |  |  
|Fox River Mall               |  | Appleton, WI         |  |                 | 180,808   |  |                    |   | 42,259  |                               |  |  | 217,932                          |  |  |                            | -      |   |      |   | 3,341           |                            |  |  
|Glenbrook Square             |  | Fort Wayne, IN       |  |                 | 153,041   |  |                    |   | 30,965  |                               |  |  | 147,002                          |  |  |                            | 2,444  |   |      |   | 15,066          |                            |  |  
|Governor's Square            |  | Tallahassee, FL      |  |                 | 72,912    |  |                    |   | 18,289  |                               |  |  | 123,088                          |  |  |                            | -      |   |      |   | 1,716           |                            |  |  
|Grand Teton Mall             |  | Idaho Falls, ID      |  |                 | -         |  |                    |   | 13,066  |                               |  |  | 59,658                           |  |  |                            | -      |   |      |   | 957             |                            |  |  
|Greenwood Mall               |  | Bowling Green, KY    |  |                 | 63,000    |  |                    |   | 12,459  |                               |  |  | 85,370                           |  |  |                            | -      |   |      |   | 2,435           |                            |  |  
|Hulen Mall                   |  | Fort Worth, TX       |  |                 | 129,657   |  |                    |   | 8,665   |                               |  |  | 112,252                          |  |  |                            | -      |   |      |   | 14,560          |                            |  |  
|Jordan Creek Town Center     |  | West Des Moines, IA  |  |                 | 220,000   |  |                    |   | 54,663  |                               |  |  | 262,608                          |  |  |                            | (226   | ) |      |   | 3,024           |                            |  |  
|Lakeside Mall                |  | Sterling Heights, MI |  |                 | 151,162   |  |                    |   | 36,993  |                               |  |  | 130,460                          |  |  |                            | -      |   |      |   | 2,225           |                            |  |  
|Lynnhaven Mall               |  | Virginia Beach, VA   |  |                 | 210,590   |  |                    |   | 54,628  |                               |  |  | 219,013                          |  |  |                            | (90    | ) |      |   | 10,139          |                            |  |  
|Mall of Louisiana            |  | Baton Rouge, LA      |  |                 | 223,440   |  |                    |   | 88,742  |                               |  |  | 319,097                          |  |  |                            | -      |   |      |   | (36             | )                          |  |  
|Mall St. Matthews            |  | Louisville, KY       |  |                 | 186,662   |  |                    |   | 42,014  |                               |  |  | 155,809                          |  |  |                            | (5,981 | ) |      |   | 7,973           |                            |  |  
|Market Place Shopping Center |  | Champaign, IL        |  |                 | 113,425   |  |                    |   | 21,611  |                               |  |  | 111,515                          |  |  |                            | -      |   |      |   | 2,035           |                            |  |  
|Mayfair Mall                 |  | Wauwatosa, WI        |  |                 | -         |  |                    |   | 84,473  |                               |  |  | 352,140                          |  |  |                            | (79    | ) |      |   | (1,342          | )                          |  |  
|Meadows Mall                 |  | Las Vegas, NV        |  |                 | 162,936   |  |                    |   | 30,275  |                               |  |  | 136,846                          |  |  |                            | -      |   |      |   | 764             |                            |  |  
|Mondawmin Mall               |  | Baltimore, MD        |  |                 | -         |  |                    |   | 19,707  |                               |  |  | 63,348                           |  |  |                            | -      |   |      |   | 15,141          |                            |  |  
|Newgate Mall                 |  | Ogden, UT            |  |                 | 58,000    |  |                    |   | 17,856  |                               |  |  | 70,318                           |  |  |                            | -      |   |      |   | 7,665           |                            |  |  
|North Point Mall             |  | Alpharetta, GA       |  |                 | 250,000   |  |                    |   | 57,900  |                               |  |  | 228,517                          |  |  |                            | -      |   |      |   | 9,045           |                            |  |  
|North Star Mall              |  | San Antonio, TX      |  |                 | 332,135   |  |                    |   | 91,135  |                               |  |  | 392,422                          |  |  |                            | -      |   |      |   | 5,249           |                            |  |  
|Northridge Fashion Center    |  | Northridge, CA       |  |                 | 241,431   |  |                    |   | 66,774  |                               |  |  | 238,023                          |  |  |                            | -      |   |      |   | 27,440          |                            |  |  
|NorthTown Mall               |  | Spokane, WA          |  |                 | -         |  |                    |   | 12,310  |                               |  |  | 108,857                          |  |  |                            | -      |   |      |   | 393             |                            |  |  
|Oak View Mall                |  | Omaha, NE            |  |                 | 81,709    |  |                    |   | 20,390  |                               |  |  | 107,216                          |  |  |                            | -      |   |      |   | 324             |                            |  |  
|Oakwood Center               |  | Gretna, LA           |  |                 | -         |  |                    |   | 21,105  |                               |  |  | 74,228                           |  |  |                            | -      |   |      |   | 17,714          |                            |  |  
|Oakwood Mall                 |  | Eau Claire, WI       |  |                 | -         |  |                    |   | 13,786  |                               |  |  | 92,114                           |  |  |                            | -      |   |      |   | 4,399           |                            |  |  
|Oglethorpe Mall              |  | Savannah, GA         |  |                 | 150,000   |  |                    |   | 27,075  |                               |  |  | 157,100                          |  |  |                            | -      |   |      |   | (154            | )                          |  |  
|Oxmoor Center                |  | Louisville, KY       |  |                 | 91,796    |  |                    |   | -       |                               |  |  | 117,814                          |  |  |                            | -      |   |      |   | 9,275           |                            |  |  
|Paramus Park                 |  | Paramus, NJ          |  |                 | 93,390    |  |                    |   | 31,320  |                               |  |  | 102,054                          |  |  |                            | -      |   |      |   | 4,323           |                            |  |  
|Park City Center             |  | Lancaster, PA        |  |                 | 190,317   |  |                    |   | 42,451  |                               |  |  | 195,409                          |  |  |                            | -      |   |      |   | 1,788           |                            |  |  
|Park Place                   |  | Tucson, AZ           |  |                 | 192,764   |  |                    |   | 61,907  |                               |  |  | 236,019                          |  |  |                            | -      |   |      |   | 1,185           |                            |  |  
|Peachtree Mall               |  | Columbus, GA         |  |                 | 79,859    |  |                    |   | 13,855  |                               |  |  | 92,143                           |  |  |                            | -      |   |      |   | 1,787           |                            |  |  
|Pecanland Mall               |  | Monroe, LA           |  |                 | 90,000    |  |                    |   | 12,943  |                               |  |  | 73,231                           |  |  |                            | -      |   |      |   | 7,301           |                            |  |  
|Pembroke Lakes Mall          |  | Pembroke Pines, FL   |  |                 | 260,000   |  |                    |   | 64,883  |                               |  |  | 254,910                          |  |  |                            | -      |   |      |   | (9,947          | )                          |  |  
|Pioneer Place                |  | Portland, OR         |  |                 | -         |  |                    |   | -       |                               |  |  | 97,096                           |  |  |                            | -      |   |      |   | 2,475           |                            |  |  
|Prince Kuhio Plaza           |  | Hilo, HI             |  |                 | 44,695    |  |                    |   | -       |                               |  |  | 52,373                           |  |  |                            | -      |   |      |   | 3,953           |                            |  |  
|Providence Place             |  | Providence, RI       |  |                 | 408,991   |  |                    |   | -       |                               |  |  | 400,893                          |  |  |                            | -      |   |      |   | 5,433           |                            |  |  
|Provo Towne Centre           |  | Provo, UT            |  |                 | 48,321    |  |                    |   | 17,027  |                               |  |  | 75,871                           |  |  |                            | 943    |   |      |   | (9,647          | )                          |  |  



F-92











GENERAL GROWTH PROPERTIES, INC.



SCHEDULE III – REAL ESTATE AND
ACCUMULATED DEPRECIATION

DECEMBER 31, 2013

(Dollars in thousands)



|                                              |  |                    |  |                 |            |  |                    |   |           |                            |  |   | Costs Capitalized Subsequent to |  |  | Gross Amounts at Which Carried at |         |   |      |   |                 |                            |  |  
|--------------------------------------------- |  | ------------------ |  | --------------- | ---------- |  | ------------------ | - | --------- | -------------------------- |  | - | ------------------------------- |  |  | --------------------------------- | ------- | - | ---- | - | --------------- | -------------------------- |  | -
|                                              |  |                    |  |                 |            |  | Acquistion Cost(b) |   |           | Acquisition                |  |   | Close of Period(c)              |  |  |                                   |         |   |      |   | Life Upon Which
|Name of Center                                |  | Location           |  | Encumbrances(a) |            |  | Land               |   |           | Buildings and Improvements |  |   | Land                            |  |  | Buildings and Improvements        |         |   | Land |   |                 | Buildings and Improvements |  |  
|                                              |  |                    |  |                 |            |  |                    |   |           |                            |  |   |                                 |  |  |                                   |         |   |      |   |                 |                            |  |  
|Quail Springs Mall                            |  | Oklahoma City, OK  |  |                 | 74,751     |  |                    |   | 40,523    |                            |  |   | 149,571                         |  |  |                                   | -       |   |      |   | 322             |                            |  |  
|Red Cliffs Mall                               |  | St. George, UT     |  |                 | -          |  |                    |   | 6,811     |                            |  |   | 33,930                          |  |  |                                   | -       |   |      |   | 1,248           |                            |  |  
|Ridgedale Center                              |  | Minnetonka, MN     |  |                 | 154,737    |  |                    |   | 39,495    |                            |  |   | 151,090                         |  |  |                                   | 1,108   |   |      |   | 4,910           |                            |  |  
|River Hills Mall                              |  | Mankato, MN        |  |                 | -          |  |                    |   | 16,207    |                            |  |   | 85,608                          |  |  |                                   | -       |   |      |   | 1,656           |                            |  |  
|Rivertown Crossings                           |  | Grandville, MI     |  |                 | 163,323    |  |                    |   | 47,790    |                            |  |   | 181,770                         |  |  |                                   | -       |   |      |   | 2,685           |                            |  |  
|Rogue Valley Mall                             |  | Medford, OR        |  |                 | 55,000     |  |                    |   | 9,042     |                            |  |   | 61,558                          |  |  |                                   | -       |   |      |   | 1,813           |                            |  |  
|Sooner Mall                                   |  | Norman, OK         |  |                 | -          |  |                    |   | 9,902     |                            |  |   | 69,570                          |  |  |                                   | -       |   |      |   | 2,172           |                            |  |  
|Spokane Valley Mall                           |  | Spokane, WA        |  |                 | 61,498     |  |                    |   | 16,817    |                            |  |   | 100,209                         |  |  |                                   | -       |   |      |   | (7,996          | )                          |  |  
|Staten Island Mall                            |  | Staten Island, NY  |  |                 | 272,089    |  |                    |   | 102,227   |                            |  |   | 375,612                         |  |  |                                   | -       |   |      |   | 1,064           |                            |  |  
|Stonestown Galleria                           |  | San Francisco, CA  |  |                 | 180,000    |  |                    |   | 65,962    |                            |  |   | 203,043                         |  |  |                                   | -       |   |      |   | 7,887           |                            |  |  
|The Crossroads                                |  | Portage, MI        |  |                 | 100,000    |  |                    |   | 20,261    |                            |  |   | 95,463                          |  |  |                                   | 1,110   |   |      |   | 2,478           |                            |  |  
|The Gallery At Harborplace                    |  | Baltimore, MD      |  |                 | 89,212     |  |                    |   | 15,930    |                            |  |   | 112,117                         |  |  |                                   | -       |   |      |   | 5,281           |                            |  |  
|The Maine Mall                                |  | South Portland, ME |  |                 | 191,599    |  |                    |   | 36,205    |                            |  |   | 238,067                         |  |  |                                   | -       |   |      |   | 10,366          |                            |  |  
|The Mall In Columbia                          |  | Columbia, MD       |  |                 | 350,000    |  |                    |   | 124,540   |                            |  |   | 479,171                         |  |  |                                   | -       |   |      |   | 4,348           |                            |  |  
|The Oaks Mall                                 |  | Gainesville, FL    |  |                 | 136,504    |  |                    |   | 21,954    |                            |  |   | 173,353                         |  |  |                                   | -       |   |      |   | (3,327          | )                          |  |  
|The Parks at Arlington                        |  | Arlington, TX      |  |                 | 259,409    |  |                    |   | 19,807    |                            |  |   | 299,708                         |  |  |                                   | 49      |   |      |   | 11,508          |                            |  |  
|The Shoppes at Buckland                       |  | Manchester, CT     |  |                 | 126,887    |  |                    |   | 35,180    |                            |  |   | 146,474                         |  |  |                                   | -       |   |      |   | (1,302          | )                          |  |  
|The Shops At Fallen Timbers                   |  | Maumee, OH         |  |                 | -          |  |                    |   | 3,785     |                            |  |   | 31,771                          |  |  |                                   | (16     | ) |      |   | 2,005           |                            |  |  
|The Shops At La Cantera                       |  | San Antonio, TX    |  |                 | 162,858    |  |                    |   | 80,016    |                            |  |   | 350,737                         |  |  |                                   | -       |   |      |   | 25,168          |                            |  |  
|The Streets At SouthPoint                     |  | Durham, NC         |  |                 | 260,000    |  |                    |   | 66,045    |                            |  |   | 242,189                         |  |  |                                   | -       |   |      |   | (211            | )                          |  |  
|The Woodlands Mall                            |  | The Woodlands, TX  |  |                 | 259,727    |  |                    |   | 84,889    |                            |  |   | 349,315                         |  |  |                                   | 2,291   |   |      |   | 2,310           |                            |  |  
|Town East Mall                                |  | Mesquite, TX       |  |                 | 160,270    |  |                    |   | 9,928     |                            |  |   | 168,555                         |  |  |                                   | -       |   |      |   | 3,465           |                            |  |  
|Tucson Mall                                   |  | Tucson, AZ         |  |                 | 246,000    |  |                    |   | 2,071     |                            |  |   | 193,815                         |  |  |                                   | -       |   |      |   | 92,832          |                            |  |  
|Tysons Galleria                               |  | McLean, VA         |  |                 | 323,641    |  |                    |   | 90,317    |                            |  |   | 351,005                         |  |  |                                   | -       |   |      |   | 3,016           |                            |  |  
|Valley Plaza Mall                             |  | Bakersfield, CA    |  |                 | 240,000    |  |                    |   | 38,964    |                            |  |   | 211,930                         |  |  |                                   | -       |   |      |   | (1,112          | )                          |  |  
|Visalia Mall                                  |  | Visalia, CA        |  |                 | 74,000     |  |                    |   | 11,912    |                            |  |   | 80,185                          |  |  |                                   | -       |   |      |   | 1,129           |                            |  |  
|Westlake Center                               |  | Seattle, WA        |  |                 | 4,255      |  |                    |   | 19,055    |                            |  |   | 129,295                         |  |  |                                   | (14,819 | ) |      |   | (93,252         | )                          |  |  
|Westroads Mall                                |  | Omaha, NE          |  |                 | 154,181    |  |                    |   | 32,776    |                            |  |   | 184,253                         |  |  |                                   | -       |   |      |   | 3,439           |                            |  |  
|White Marsh Mall                              |  | Baltimore, MD      |  |                 | 190,000    |  |                    |   | 43,880    |                            |  |   | 177,194                         |  |  |                                   | 4,125   |   |      |   | 5,631           |                            |  |  
|Willowbrook                                   |  | Wayne, NJ          |  |                 | 360,000    |  |                    |   | 110,660   |                            |  |   | 419,822                         |  |  |                                   | -       |   |      |   | 626             |                            |  |  
|Woodbridge Center                             |  | Woodbridge, NJ     |  |                 | 183,303    |  |                    |   | 67,825    |                            |  |   | 242,744                         |  |  |                                   | -       |   |      |   | 21,577          |                            |  |  
|Office, other and construction in progress(e) |  |                    |  |                 | 1,969,481  |  |                    |   | 199,339   |                            |  |   | 783,305                         |  |  |                                   | 18,696  |   |      |   | 392,428         |                            |  |  
|                                              |  |                    |  |                 |            |  |                    |   |           |                            |  |   |                                 |  |  |                                   |         |   |      |   |                 |                            |  |  
|Total                                         |  |                    |  | $               | 15,878,637 |  |                    | $ | 4,295,891 |                            |  | $ | 17,795,909                      |  |  | $                                 | 24,706  |   |      | $ | 881,769         |                            |  | $



F-93











GENERAL GROWTH PROPERTIES, INC.
NOTES TO SCHEDULE III
(Dollars in thousands)



| | (a) | See description of mortgages, notes and other loans payable in Note 7 of Notes to Consolidated Financial Statements.
| | --- | --------------------------------------------------------------------------------------------------------------------

| | (b) | Acquisition for individual properties represents historical cost at the end of the month acquired.
| | --- | --------------------------------------------------------------------------------------------------

| | (c) | The aggregate cost of land, buildings and improvements for federal income tax purposes is approximately $11.1 billion
(unaudited).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------

| | (d) | Depreciation is computed based upon the following estimated useful lives:
| | --- | -------------------------------------------------------------------------



|                           |  | Years                                          
|-------------------------- |  | -----------------------------------------------
|Buildings and improvements |  | 10-45                                          
|Equipment and fixtures     |  | 3-20                                           
|Tenant improvements        |  | Shorter of useful life or applicable lease term



| | (e) | Office and other retail properties, as well as properties that
                                         have been de-leased for redevelopment.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



Reconciliation of Real Estate



|                               |  | 2013 |            |   | 2012 |   |            | 2011 | 
|------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | ---- | 
|(In thousands)                 |  |      |            |   |      |   |            |      | 
|Balance at beginning of period |  | $    | 23,461,858 |   |      | $ | 24,597,501 |      | 
|Additions                      |  |      | 1,049,417  |   |      |   | 1,034,439  |      | 
|Impairments                    |  |      | (18,361    | ) |      |   | (131,156   | )    | 
|Dispositions and write-offs    |  |      | (1,494,639 | ) |      |   | (2,038,926 | )    | 
|Balance at end of period       |  | $    | 22,998,275 |   |      | $ | 23,461,858 |      | 



Reconciliation of Accumulated Depreciation



|                               |  | 2013 |           |   | 2012 |   |           | 2011 | 
|------------------------------ |  | ---- | --------- | - | ---- | - | --------- | ---- | 
|(In thousands)                 |  |      |           |   |      |   |           |      | 
|Balance at beginning of period |  | $    | 1,440,301 |   |      | $ | 974,185   |      | 
|Depreciation expense           |  |      | 737,565   |   |      |   | 775,768   |      | 
|Dispositions and write-offs    |  |      | (293,005  | ) |      |   | (309,652  | )    | 
|Balance at end of period       |  | $    | 1,884,861 |   |      | $ | 1,440,301 |      | 





F-94