##### 



Managements Discussion and Analysis of the Financial Results OVERVIEW
Brookfield is a publicly-traded North American commercial real estate company listed on both
the New York and Toronto stock exchanges under the symbol BPO. At December 31, 2004, the book value
of Brookfields assets was $8.5 billion, 90% of which was invested in premier office properties.
The company generated $501 million of funds from operations and gains or $2.93 per share in 2004. The following discussion and analysis is intended to provide readers with an assessment of
Brookfields performance over the past three years as well as the companys financial position and
future prospects. It should be read in conjunction with the audited consolidated financial
statements and appended notes which are included on page 38 of this report. Much of the discussion
of operating performance is based on funds from operations for reasons discussed on page 15. The
company also provides a full reconciliation to net income and an assessment of its performance on
the same basis. Additional information, including the companys Annual Information Form, is
available on the companys Web site at www.brookfieldproperties.com, or on www.sedar.com or
www.sec.gov. OPERATING STRATEGY
Brookfields strategy is to own, develop and manage premier commercial properties in downtown
locations of select cities in North America. Brookfields portfolio consists of 46 properties and
development sites, predominantly office buildings, comprising 46 million square feet of rentable
area and development capacity. The commercial property portfolio is focused in seven North American
cities, with New York, Boston, Washington, D.C., Toronto and Calgary comprising 86% of the
portfolio net operating income. Brookfield intends to continue its strategy of concentrating its
operations within a select number of supply constrained markets with attractive tenant bases in
order to maintain a meaningful presence and build on the strength of the companys tenant
relationships within these markets. Additionally, Brookfield operates ancillary real estate service businesses which focus on enhancing
the value and returns from the core commercial property business through high-quality tenant
service and amenities. Brookfield currently manages directly and with a joint venture partner in
excess of 150 million square feet of space across North America. This includes the companys own
commercial properties, properties managed for institutional investors and third party managed
properties. This scale provides Brookfield with the platform to deliver superior service to tenants
across the portfolio. Brookfield also operates a development business including a number of low-cost commercial
development sites in Toronto and Manhattan. In addition, the company owns a land development and
housing operation. OPERATING RESULTS All figures are expressed in US dollars unless otherwise noted. Brookfields financial results
are as follows: (Millions, except per share amounts)
    
    2004
    
    
    2003
    
    
    2002Continuing operations(1)Funds from operationsExcluding lease termination income and gains
    
    $
    442
    
    
    $
    361
    
    
    $
    322Including lease termination income and gains
    
    
    501
    
    
    
    460
    
    
    
    374Funds from operations per share  dilutedExcluding lease termination income and gains
    
    $
    2.55
    
    
    $
    2.15
    
    
    $
    1.87Including lease termination income and gains
    
    
    2.93
    
    
    
    2.78
    
    
    
    2.18Net incomeExcluding lease termination income and gains
    
    $
    206
    
    
    $
    209
    
    
    $
    194Including lease termination income and gains
    
    
    242
    
    
    
    279
    
    
    
    236Earnings per share  diluted
    
    
    1.28
    
    
    
    1.63
    
    
    
    1.34Common share dividends per share
    
    
    0.62
    
    
    
    2.50
    (2)
    
    
    0.40Balance sheet dataCommercial properties
    
    $
    6,693
    
    
    $
    6,297
    
    
    $
    5,661Total assets
    
    
    8,491
    
    
    
    8,097
    
    
    
    7,450Capital base
    
    
    3,254
    
    
    
    2,997
    
    
    
    2,433
   (1)
    
    Excludes the assets, liabilities and results
of operations of Brookfield Homes Corporation(2)
    
    Includes the distribution of Brookfield Homes Corporation
valued at $2.00 per common share 14




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##### 



On January 6, 2003, the company distributed all of the common shares of Brookfield Homes to
common shareholders of record on January 2, 2003. Common shareholders received one common share of
Brookfield Homes for each five common shares of Brookfield held on the date of record, and the
transaction was recorded as a distribution to shareholders at the carried value of the companys
investment in Brookfield Homes. Consequently, the companys results for the year 2002 and prior
periods include the results of Brookfield Homes which have been classified as a discontinued
operation. See Discontinued Operations section for further discussion. Historically, Brookfields accounting policy has been to record revenues in accordance with
the actual payments received under the terms of the companys leases, which typically increase over
time, and to record depreciation on a sinking-fund basis. However, commencing January 1, 2004,
accounting standards require both straight-line rent recognition and straight-line depreciation.
This change resulted in additional revenue of $22 million and additional depreciation of $58
million before the effect of income taxes for the year ended December 31, 2004. See Note 2 of the
consolidated financial statements for further discussion. FUNDS FROM OPERATIONS
Funds from operations (FFO) is defined as net income prior to extraordinary items, non-cash
items and depreciation and amortization of capital assets. While Brookfield believes that FFO is
the most relevant measure to analyze real estate as commercial properties generally appreciate
rather than depreciate, the company believes that both FFO and net income are relevant measures.
The company computes FFO in accordance with the definition provided by the Canadian Institute of
Public and Private Real Estate Companies (CIPPREC) in Canada. FFO does not represent cash
generated from operating activities determined in accordance with Generally Accepted Accounting
Principles (GAAP) in the United States or Canada and should not be considered as an alternative
to GAAP measures. Brookfields strong tenant base, pro-active leasing strategies and gains on sales of partial
interests in the companys core office portfolio contributed to an increase in funds from
operations and gains of 9% to $501 million in 2004, compared with $460 million in 2003. Excluding
lease termination income and gains, funds from continuing operations increased 19% to $2.55 per
share during year 2004 (12% or $2.41 per share excluding straight-line rent) compared with $2.15
per share in 2003. After providing for preferred share dividends, Brookfields FFO per diluted share, including and
excluding lease termination income and gains, is as follows: Including Lease Termination
    
    
    
    Excluding Lease TerminationIncome and Gains
    
    
    
    Income and Gains(Millions, except per share amounts)
    
    2004
    
    
    2003
    
    
    2002
    
    
    
    2004
    
    
    2003
    
    
    2002Funds from continuing operations
    
    $
    501
    
    
    $
    460
    
    
    $
    374
    
    
    
    $
    442
    
    
    $
    361
    
    
    $
    322Preferred share dividends
    
    
    (41
    )
    
    
    (20
    )
    
    
    (19
    )
    
    
    
    (41
    )
    
    
    (20
    )
    
    
    (19
    )$
    460
    
    
    $
    440
    
    
    $
    355
    
    
    
    $
    401
    
    
    $
    341
    
    
    $
    303Weighted average shares outstanding
    
    
    157.1
    
    
    
    158.6
    
    
    
    162.3
    
    
    
    
    157.1
    
    
    
    158.6
    
    
    
    162.3FFO per share
    
    $
    2.93
    
    
    $
    2.78
    
    
    $
    2.18
    
    
    
    $
    2.55
    
    
    $
    2.15
    
    
    $
    1.87
 The 2004 results included lease termination income of $60 million, or $0.38 per share, in
conjunction with the termination of a previously existing lease and the commencement of a new lease
at One World Financial Center in New York. The 2003 gains related to the sale of a 49% interest in
245 Park Avenue in New York totaling $100 million, or $0.63 per share. The 2002 gains related to
the sale of 50% interests in Exchange Tower in Toronto and Bankers Hall in Calgary, totaling $60
million or $0.31 per share. 15




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##### 



FUNDS FROM OPERATIONS AND NET INCOME
A summary of the components of Brookfields funds from operations and net income are as
follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Total revenue and gains
    
    $
    1,442
    
    
    $
    1,363
    
    
    $
    1,372Net operating incomeCommercial property operations
    
    $
    743
    
    
    $
    697
    
    
    $
    660Development and residential operations
    
    
    42
    
    
    
    31
    
    
    
    22Interest and other income
    
    
    47
    
    
    
    62
    
    
    
    48832
    
    
    
    790
    
    
    
    730Unallocated costs
    
    
    331
    
    
    
    330
    
    
    
    356Funds from continuing operations and gains
    
    
    501
    
    
    
    460
    
    
    
    374Depreciation and amortization
    
    
    143
    
    
    
    79
    
    
    
    80Taxes and other non-cash items
    
    
    116
    
    
    
    102
    
    
    
    58Net income before discontinued operations
    
    
    242
    
    
    
    279
    
    
    
    236Net income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    44Net income
    
    $
    242
    
    
    $
    279
    
    
    $
    280Funds from operations per share  dilutedContinuing operations  excluding lease termination income and gains
    
    $
    2.55
    
    
    $
    2.15
    
    
    $
    1.87Lease termination income and gains
    
    
    0.38
    
    
    
    0.63
    
    
    
    0.31Discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.45$
    2.93
    
    
    $
    2.78
    
    
    $
    2.63Net income per share  dilutedContinuing operations  excluding lease termination income and gains
    
    $
    1.06
    
    
    $
    1.19
    
    
    $
    1.09Lease termination income and gains
    
    
    0.22
    
    
    
    0.44
    
    
    
    0.25Discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.27$
    1.28
    
    
    $
    1.63
    
    
    $
    1.61
 COMMERCIAL PROPERTY OPERATIONS Total commercial property operations contributed $743 million of net operating income and
gains in 2004, a 7% increase over 2003 net operating income of $697 million. The increase is due to
the contribution from 300 Madison Avenue in New York, 1625 Eye Street, 701 9th Street and Potomac
Tower in Washington, D.C. and an increment of $22 million of straight-line rent during 2004 due to
a change in accounting policy. See Note 2 of the consolidated financial statements for further
discussion of the change in accounting policy. The contribution from the commercial property
operations is as follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Operating income from current properties
    
    $
    683
    
    
    $
    597
    
    
    $
    600Lease termination income and gains
    
    
    60
    
    
    
    100
    
    
    
    60Total
    
    $
    743
    
    
    $
    697
    
    
    $
    660
 COMPONENTS OF COMMERCIAL PROPERTY NET OPERATING INCOME The components of commercial property net operating income are as follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Rental revenue
    
    $
    1,074
    
    
    $
    976
    
    
    $
    943Property operating costs
    
    
    391
    
    
    
    379
    
    
    
    343Net operating income excluding lease termination income and gains
    
    
    683
    
    
    
    597
    
    
    
    600Lease termination income and gains
    
    
    60
    
    
    
    100
    
    
    
    60Net operating income
    
    $
    743
    
    
    $
    697
    
    
    $
    660
 Net operating income growth is comprised of contractual increases on in-place leases, rental
increases achieved on in-place rents when re-leased, lease-up of vacancies, acquisitions net of
dispositions, and straight-line rental income. 16




---



##### 



The growth in net operating income in each of the past three years is as follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Net operating income excluding lease termination income and gains, prior year
    
    $
    597
    
    
    $
    600
    
    
    $
    617(a) Contractual increases on in-place leases
    
    
    7
    
    
    
    16
    
    
    
    17(b) Rental increases achieved on in-place rents when re-leased
    
    
    3
    
    
    
    10
    
    
    
    8(c) Lease-up of vacancies
    
    
    1
    
    
    
    3
    
    
    
    5(d) Acquisitions, net of dispositions
    
    
    53
    
    
    
    (32
    )
    
    
    (47
    )(e) Straight-line rental income
    
    
    22
    
    
    
    
    
    
    
    683
    
    
    
    597
    
    
    
    600(f) Lease termination income and gains
    
    
    60
    
    
    
    100
    
    
    
    60Net operating income, end of year
    
    $
    743
    
    
    $
    697
    
    
    $
    660
 (a) Contractual increases on in-place leases Brookfields leases generally have clauses which provide for the collection of rental revenues in
amounts that increase every five years, with these increases negotiated at the signing of the
lease. The high-credit quality of tenants in the companys portfolio in general lowers the risk of
not realizing these increases. During the year ended December 31, 2004, net operating income
increased $7 million due to contractual increases, compared with $16 million in 2003 and $17
million in 2002. (b) Rental increases achieved on in-place rents when re-leased During 2004, higher rental rates on the re-leasing of space in the portfolio contributed $3 million
of increased net operating income over 2003. At December 31, 2004, average in-place net rents
throughout the portfolio increased to $23 per square foot compared with $22 per square foot at
December 31, 2003 and $21 per square foot at December 31, 2002. The company was able to marginally increase its in-place net rental rate, largely as result of
re-leasing initiatives which were completed at an average rental uplift of $3 per square foot on
space leased in 2001 and significant re-leasing initiatives over the past three years at equivalent
rental rates. Average market net rent was $25 per square foot in 2004, an increase of $1 over $24
per square foot in 2003. 
The following table shows the average in-place rents and estimated current
market rents for similar space in each of the companys markets: Gross
    
    
    Avg.
    
    
    Avg.
    
    
    Avg.Leaseable Area
    
    
    Lease Term
    
    
    In-place Net Rent
    
    
    Market Net Rent(000s Sq. Ft.)
    
    
    (Years)
    
    
    ($ per Sq. Ft.)
    
    
    ($ per Sq. Ft.)New York, New YorkMidtown Manhattan
    
    
    2,786
    
    
    
    20
    
    
    $
    38
    
    
    $
    52Downtown Manhattan
    
    
    8,435
    
    
    
    9
    
    
    
    32
    
    
    
    25Boston, Massachusetts
    
    
    2,163
    
    
    
    5
    
    
    
    30
    
    
    
    32Washington, D.C.
    
    
    1,557
    
    
    
    16
    
    
    
    29
    
    
    
    38Toronto, Ontario
    
    
    6,790
    
    
    
    7
    
    
    
    20
    
    
    
    21Calgary, Alberta
    
    
    6,331
    
    
    
    9
    
    
    
    13
    
    
    
    18Denver, Colorado
    
    
    3,017
    
    
    
    4
    
    
    
    14
    
    
    
    15Minneapolis, Minnesota
    
    
    3,008
    
    
    
    8
    
    
    
    9
    
    
    
    13Other
    
    
    927
    
    
    
    12
    
    
    
    9
    
    
    
    15Total*
    
    
    35,014
    
    
    
    10
    
    
    $
    23
    
    
    $
    25
   *
    
    Excludes developments (c) Lease-up of vacancies Contribution to net operating income from lease-ups was $1 million in 2004 compared with $3 million
in 2003 and $5 million in 2002. Contributions from vacancy lease-ups were greater in 2003 due to
vacancies leased in properties acquired in 2000. Brookfields total portfolio occupancy rate at
December 31, 2004 increased to 95.2% from 94.1% at December 31, 2003. Brookfields occupancy rate
in primary markets of New York, Boston, Washington, D.C., Toronto and Calgary remains consistent at
97.3% at December 31, 2004 compared with December 31, 2003. The contribution to net operating
income from vacancy lease up is expected to increase in the future as properties previously
acquired or developed with vacancies are leased up. 17




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##### 



A summary of current and historical occupancy levels for the past three years is as follows: Dec. 31, 2004
    
    
    Dec. 31, 2003
    
    
    Dec. 31, 2002Total
    
    
    %
    
    
    Total
    
    
    %
    
    
    Total
    
    
    %(Thousands of square feet)
    
    Square Feet
    
    
    Leased
    
    
    Square Feet
    
    
    Leased
    
    
    Square Feet
    
    
    LeasedNew York, New York
    
    
    11,221
    
    
    
    98.2
    
    
    
    11,262
    
    
    
    97.7
    
    
    
    10,113
    
    
    
    97.6Boston, Massachusetts
    
    
    2,163
    
    
    
    96.8
    
    
    
    2,163
    
    
    
    97.7
    
    
    
    2,163
    
    
    
    97.4Washington, D.C.
    
    
    1,557
    
    
    
    93.2
    
    
    
    570
    
    
    
    52.8
    
    
    
    
    
    
    
    Toronto, Ontario
    
    
    6,790
    
    
    
    95.3
    
    
    
    6,884
    
    
    
    96.1
    
    
    
    6,883
    
    
    
    96.3Calgary, Alberta
    
    
    6,331
    
    
    
    98.4
    
    
    
    7,454
    
    
    
    97.6
    
    
    
    7,570
    
    
    
    97.1Denver, Colorado
    
    
    3,017
    
    
    
    85.4
    
    
    
    3,017
    
    
    
    82.9
    
    
    
    3,017
    
    
    
    90.1Minneapolis, Minnesota
    
    
    3,008
    
    
    
    85.8
    
    
    
    3,008
    
    
    
    74.1
    
    
    
    3,008
    
    
    
    84.5Other
    
    
    927
    
    
    
    90.5
    
    
    
    1,281
    
    
    
    90.5
    
    
    
    1,515
    
    
    
    97.1Total*
    
    
    35,014
    
    
    
    95.2
    
    
    
    35,639
    
    
    
    94.1
    
    
    
    34,269
    
    
    
    95.5New York/Boston/Washington/Toronto/Calgary
    
    
    28,062
    
    
    
    97.3
    
    
    
    28,333
    
    
    
    97.3
    
    
    
    26,729
    
    
    
    97.1Denver/Minneapolis/Other
    
    
    6,952
    
    
    
    86.2
    
    
    
    7,306
    
    
    
    80.4
    
    
    
    7,540
    
    
    
    89.3Total*
    
    
    35,014
    
    
    
    95.2
    
    
    
    35,639
    
    
    
    94.1
    
    
    
    34,269
    
    
    
    95.5
   *
    
    Excludes developments During 2004, Brookfield leased 3.6 million square feet of space, approximately four times the
amount of space contractually expiring. This includes two million square feet of new leases and 1.6
million square feet of renewals. In 2004, Brookfield signed the largest lease in Canada, a 331,000
square foot lease renewal with CIBC at Atrium on Bay in Toronto, and participated in two of the six
largest new office leases in the United States, consisting of an 800,000 square foot sublease to
PricewaterhouseCoopers at 300 Madison Avenue and a 460,000 square foot new lease to Cadwalader,
Wickersham & Taft at One World Financial Center in New York. The details of Brookfields leasing
activities for 2004 are as follows: December 31, 2003
    
    
    
    2004 Activities
    
    

    December 31, 2004Expiring
    
    
    
    
    
    
    LeasingAccelerated
    
    
    Net Rent
    
    
    
    
    
    
    Net Rent
    
    
    Acq.(Thousands of square feet)
    
    GLA(1)
    
    
    Leased
    
    
    
    Expiries
    
    
    Expiries
    
    
    per Sq. Ft.-$
    
    
    Leasing
    
    
    per Sq. Ft.-$
    
    
    (Disp.)
    
    
    
    GLA(1)
    
    
    LeasedNew York, New YorkMidtown
    
    
    2,834
    
    
    
    2,787
    
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    (59
    )
    
    
    
    2,786
    
    
    
    2,749Lower Manhattan
    
    
    8,428
    
    
    
    8,226
    
    
    
    
    (171
    )
    
    
    (527
    )
    
    
    
    
    
    
    730
    
    
    
    
    
    
    
    18
    
    
    
    
    8,435
    
    
    
    8,276Boston, Massachusetts
    
    
    2,163
    
    
    
    2,120
    
    
    
    
    (37
    )
    
    
    (106
    )
    
    
    
    
    
    
    126
    
    
    
    
    
    
    
    
    
    
    
    
    2,163
    
    
    
    2,103Washington, D.C.
    
    
    570
    
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    986
    
    
    
    
    1,557
    
    
    
    1,490Toronto, Ontario
    
    
    6,884
    
    
    
    6,649
    
    
    
    
    (224
    )
    
    
    (1,011
    )
    
    
    
    
    
    
    1,198
    
    
    
    
    
    
    
    (90
    )
    
    
    
    6,790
    
    
    
    6,522Calgary, Alberta
    
    
    7,454
    
    
    
    7,301
    
    
    
    
    (69
    )
    
    
    (279
    )
    
    
    
    
    
    
    354
    
    
    
    
    
    
    
    (1,060
    )
    
    
    
    6,331
    
    
    
    6,247Denver, Colorado
    
    
    3,017
    
    
    
    2,594
    
    
    
    
    (99
    )
    
    
    (145
    )
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    2
    
    
    
    
    3,017
    
    
    
    2,657Minneapolis. Minnesota
    
    
    3,008
    
    
    
    2,363
    
    
    
    
    (193
    )
    
    
    (23
    )
    
    
    
    
    
    
    507
    
    
    
    
    
    
    
    1
    
    
    
    
    3,008
    
    
    
    2,655Other
    
    
    1,281
    
    
    
    1,185
    
    
    
    
    (85
    )
    
    
    (80
    )
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    (310
    )
    
    
    
    927
    
    
    
    863Total
    
    
    35,639
    
    
    
    33,614
    
    
    
    
    (878
    )
    
    
    (2,246
    )
    
    $
    19
    (2)
    
    
    3,584
    
    
    $
    17
    (2)
    
    
    (512
    )
    
    
    
    35,014
    
    
    
    33,562
   (1)
    
    Excludes developments(2)
    
    Expiring and leasing net rates per square foot exclude the Cadwalader Wickersham &
Taft transaction (d) Acquisitions, net of dispositions The value created in Brookfields mature commercial properties provides the company with the
opportunity to generate additional gains and capital in order to reinvest in other assets at higher
returns. The acquisition of properties in Washington, D.C. and the completion of the development
project at 300 Madison Avenue in New York, net of dispositions, as well as the net leasing fee
realized upon the successful completion of the sublease of 800,000 square feet to
PricewaterhouseCoopers at 300 Madison Avenue in New York, contributed an additional $53 million of
net operating income in 2004. The sale of properties reduced net operating income by $32 million in
2003 and $47 million in 2002. In 2003, Brookfield sold a 49% interest in 245 Park Avenue in New York based on a property
valuation of $894 million for gross proceeds of $438 million resulting in a $100 million gain. In
addition, Brookfield completed the development of 300 Madison Avenue during the last quarter of
2003. This 1.2 million square foot property located in Midtown Manhattan is fully leased for 30
years to CIBC World Markets. In 2002, Brookfield sold partial interests in two of its core
properties, Exchange Tower in Toronto and Bankers Hall in Calgary, resulting in gains totaling $60
million. 18




---



##### 



(e) Straight-line rental income As a result of adopting CICA Handbook section 1100, Generally Accepted Accounting Principles,
commencing January 1, 2004, the company recognized an additional $22 million of straight-line
rental income in 2004. This adoption was on a prospective basis, and therefore no adjustments were
made to prior periods. See Note 2 to the consolidated financial statements for further discussion. (f) Lease termination income and gains During the first quarter of 2004, the company earned lease termination income of $60 million from
the cancellation of an existing lease and replacement with a new 460,000 square foot lease at One
World Financial Center in New York. The 2003 gain of $100 million was attributed to the sale of a
49% interest in 245 Park Avenue in New York and the gain of $60 million generated in 2002 related
to the sale of partial interests in Exchange Tower in Toronto and Bankers Hall in Calgary. While
these events are opportunistic and difficult to predict, the dynamic tenant base which is typical
of the companys buildings should provide Brookfield with similar opportunities in the future. TENANT RELATIONSHIPS An important characteristic of Brookfields portfolio is the strong credit quality of its
tenants. Special attention is directed at credit quality in order to ensure the long-term
sustainability of rental revenues through economic cycles. The tenant profile on average represents
an A credit rating. Major tenants with over 600,000 square feet of space in the portfolio include
Merrill Lynch, CIBC, JPMorgan Chase, RBC Financial Group, Petro-Canada and Imperial Oil. The
following list shows the largest tenants by leasable area in Brookfields portfolio and their
respective lease commitments: Primary
    
    Year of
    
    
    000s
    
    
    % of
    
    
    CreditTenant
    
    Location
    
    Expiry(1)
    
    
    Sq. Ft.(2)
    
    
    Sq. Ft. (2)
    
    
    Rating(3)RatedMerrill Lynch
    
    New York/Toronto
    
    
    2013
    
    
    
    4,363
    
    
    
    12.5
    %
    
    A+CIBC/CIBC World Markets
    
    New York/Toronto/Calgary
    
    
    2028
    
    
    
    1,979
    
    
    
    5.7
    %
    
    A+JPMorgan Chase
    
    New York
    
    
    2021
    
    
    
    1,011
    
    
    
    2.9
    %
    
    A+RBC Financial Group
    
    Five major markets
    
    
    2019
    
    
    
    958
    
    
    
    2.7
    %
    
    AA-Petro-Canada
    
    Calgary
    
    
    2013
    
    
    
    848
    
    
    
    2.4
    %
    
    BBBTarget Corporation (Dayton Hudson Corporation)
    
    Minneapolis
    
    
    2013
    
    
    
    752
    
    
    
    2.1
    %
    
    A+Imperial Oil
    
    Calgary
    
    
    2011
    
    
    
    633
    
    
    
    1.8
    %
    
    AAATalisman Energy
    
    Calgary
    
    
    2015
    
    
    
    426
    
    
    
    1.2
    %
    
    BBB+Pepco Holdings Inc.
    
    Washington, D.C.
    
    
    2028
    
    
    
    364
    
    
    
    1.0
    %
    
    BBB+Teachers Insurance Annuity Association
    
    Denver
    
    
    2008
    
    
    
    323
    
    
    
    0.9
    %
    
    AAADow Jones & Company
    
    New York
    
    
    2014
    
    
    
    323
    
    
    
    0.9
    %
    
    A-Canadian Natural Resources
    
    Calgary
    
    
    2011
    
    
    
    277
    
    
    
    0.8
    %
    
    BBB+Goldman Sachs
    
    New York
    
    
    2015
    
    
    
    274
    
    
    
    0.8
    %
    
    A+Lehman Brothers
    
    New York
    
    
    2010
    
    
    
    253
    
    
    
    0.7
    %
    
    A+Anadarko Canada Corporation
    
    Calgary
    
    
    2011
    
    
    
    235
    
    
    
    0.7
    %
    
    Baa1EnCana Corporation
    
    Calgary
    
    
    2013
    
    
    
    232
    
    
    
    0.7
    %
    
    A-Bank of Nova Scotia
    
    New York
    
    
    2014
    
    
    
    230
    
    
    
    0.7
    %
    
    AA-Bell West/Bell Canada
    
    Calgary/Toronto
    
    
    2011
    
    
    
    226
    
    
    
    0.6
    %
    
    ASovereign Bank/Fleet National Bank
    
    Boston
    
    
    2008
    
    
    
    213
    
    
    
    0.6
    %
    
    AA-TD Canada Trust
    
    Toronto/Calgary
    
    
    2009
    
    
    
    211
    
    
    
    0.6
    %
    
    A+Other investment grade
    
    Various
    
    Various
    
    
    3,938
    
    
    
    11.3
    %
    
    BBB- or higher18,069
    
    
    
    51.6
    %UnratedCadwalader, Wickersham & Taft LLP
    
    New York
    
    
    2024
    
    
    
    456
    
    
    
    1.3
    %
    
    Cleary, Gottlieb, Steen & Hamilton
    
    New York
    
    
    2012
    
    
    
    446
    
    
    
    1.3
    %
    
    Goodwin Procter
    
    Boston
    
    
    2016
    
    
    
    360
    
    
    
    1.0
    %
    
    Wellington Management
    
    Boston
    
    
    2011
    
    
    
    344
    
    
    
    1.0
    %
    
    National Assoc. of Securities Dealers (NASD)
    
    New York/Denver
    
    
    2021
    
    
    
    277
    
    
    
    0.8
    %
    
    Major League Baseball
    
    New York
    
    
    2012
    
    
    
    109
    
    
    
    0.3
    %
    
    Total
    
    
    
    
    
    
    
    
    20,061
    
    
    
    57.3
    %
   (1)
    
    Weighted average based on square feet(2)
    
    Prior to considering partnership interests in partially-owned
properties(3)
    
    From Standard & Poors, Moodys or Dominion Bond Rating
Service (DBRS) 19




---



##### 



Brookfields strategy is to sign long-term leases in order to mitigate risk and reduce overall
retenanting costs in the portfolio. The company typically commences discussions with tenants
regarding their space requirements well in advance of the contractual expiration, and while each
market is different, the majority of the companys leases, when signed, extend between 10 and
20-year terms. As a result of this strategy, approximately 5% of Brookfields leases mature
annually. 
Following is a breakdown of lease maturities by market with associated in-place rental
rates: New York/Boston/
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denver/Minneapolis/Total Portfolio
    
    
    
    Washington, D.C.
    
    
    
    Toronto/Calgary
    
    
    
    OtherNet
    
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    
    Net000s
    
    
    
    
    
    
    Rate per
    
    
    
    000s
    
    
    
    
    
    
    Rate per
    
    
    
    000s
    
    
    
    
    
    
    Rate per
    
    
    
    000s
    
    
    
    
    
    
    Rate perYear of Expiry
    
    Sq. Ft.
    
    
    %
    
    
    Sq. Ft.-$
    
    
    
    Sq. Ft.
    
    
    %
    
    
    Sq. Ft.-$
    
    
    
    Sq. Ft.
    
    
    %
    
    
    Sq. Ft.-$
    
    
    
    Sq. Ft.
    
    
    %
    
    
    Sq. Ft.-$Currently available
    
    
    1,452
    
    
    
    4.8
    
    
    
    
    
    
    
    
    323
    
    
    
    2.3
    
    
    
    
    
    
    
    
    352
    
    
    
    3.2
    
    
    
    
    
    
    
    
    777
    
    
    
    13.82005
    
    
    1,387
    
    
    
    4.5
    
    
    $
    24
    
    
    
    
    471
    
    
    
    3.4
    
    
    $
    37
    
    
    
    
    609
    
    
    
    5.5
    
    
    $
    18
    
    
    
    
    307
    
    
    
    5.5
    
    
    $
    142006
    
    
    1,391
    
    
    
    4.5
    
    
    
    16
    
    
    
    
    495
    
    
    
    3.6
    
    
    
    21
    
    
    
    
    492
    
    
    
    4.4
    
    
    
    16
    
    
    
    
    404
    
    
    
    7.2
    
    
    
    112007
    
    
    951
    
    
    
    3.1
    
    
    
    19
    
    
    
    
    171
    
    
    
    1.2
    
    
    
    31
    
    
    
    
    445
    
    
    
    4.0
    
    
    
    19
    
    
    
    
    335
    
    
    
    6.0
    
    
    
    142008
    
    
    1,904
    
    
    
    6.2
    
    
    
    22
    
    
    
    
    646
    
    
    
    4.7
    
    
    
    31
    
    
    
    
    594
    
    
    
    5.4
    
    
    
    21
    
    
    
    
    664
    
    
    
    11.8
    
    
    
    142009
    
    
    985
    
    
    
    3.2
    
    
    
    19
    
    
    
    
    100
    
    
    
    0.7
    
    
    
    31
    
    
    
    
    557
    
    
    
    5.0
    
    
    
    21
    
    
    
    
    328
    
    
    
    5.8
    
    
    
    122010
    
    
    2,017
    
    
    
    6.6
    
    
    
    28
    
    
    
    
    674
    
    
    
    4.9
    
    
    
    39
    
    
    
    
    1,031
    
    
    
    9.3
    
    
    
    24
    
    
    
    
    312
    
    
    
    5.5
    
    
    
    172011
    
    
    2,708
    
    
    
    8.9
    
    
    
    23
    
    
    
    
    607
    
    
    
    4.4
    
    
    
    43
    
    
    
    
    1,910
    
    
    
    17.2
    
    
    
    18
    
    
    
    
    191
    
    
    
    3.4
    
    
    
    162012 & beyond
    
    
    22,219
    
    
    
    58.2
    
    
    
    26
    
    
    
    
    11,454
    
    
    
    74.8
    
    
    
    35
    
    
    
    
    7,131
    
    
    
    46.0
    
    
    
    18
    
    
    
    
    3,634
    
    
    
    41.0
    
    
    
    1135,014
    
    
    
    100.0
    
    
    $
    23
    
    
    
    
    14,941
    
    
    
    100.0
    
    
    $
    35
    
    
    
    
    13,121
    
    
    
    100.0
    
    
    $
    18
    
    
    
    
    6,952
    
    
    
    100.0
    
    
    $
    11Weighted average market net rent
    
    
    
    
    
    $
    25
    
    
    
    
    
    
    
    
    
    
    
    $
    32
    
    
    
    
    
    
    
    
    
    
    
    $
    20
    
    
    
    
    
    
    
    
    
    
    
    $
    14
 TENANT INSTALLATION COSTS AND CAPITAL EXPENDITURES Upon the signing of the majority of its leases, Brookfield provides tenant improvements for
leased space in order to accommodate the specific space requirements of the tenant. In addition to
this capital, leasing commissions are paid to third-party brokers representing tenants in lease
negotiations. Tenant improvement costs and leasing commissions are capitalized in the year
incurred, amortized over the term of the lease and recovered through rental payments. Expenditures
for tenant improvements in 2004 totaled $82 million, compared with the $26 million expended in 2003
and $49 million in 2002 due to a higher number of leases being negotiated in the New York market
where tenant inducement costs are higher than other markets in which Brookfield operates. On an annual basis, one to two million square feet of leases expire on average with a cost to
replace these tenancies approximating $15 to $20 per square foot, with each region of operation
varying in actual cost per square foot. The average expenditure on tenant inducements across the
portfolio over the last three years was $16 per square foot. Tenant installation costs are
summarized as follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Commercial property tenant improvementsLeasing commissions
    
    $
    15
    
    
    $
    8
    
    
    $
    9Tenant improvements  first generation space
    
    
    3
    
    
    
    
    
    
    
    2Tenant improvements  second generation space
    
    
    64
    
    
    
    18
    
    
    
    38Total
    
    $
    82
    
    
    $
    26
    
    
    $
    49
 Brookfield also invests in on-going maintenance and capital improvement projects to sustain
the high quality of the infrastructure and tenant service amenities in its properties. Due to the
relatively recent construction and major renovation of Brookfields core properties as well as
high-quality construction standards, recurring capital maintenance expenditures are lower than
industry norms. Capital maintenance expenditures totaled $26 million in 2004, compared with $16
million in 2003 and $16 million in 2002. These expenditures exclude repairs and maintenance costs
which are recovered through contractual tenant cost recovery payments. 20




---



##### 



Capital expenditures include revenue-enhancing capital expenditures which represent
improvements to an asset or reconfiguration of space to increase rentable area or increase current
rental rates, and non-revenue enhancing expenditures, which are those required to maintain the
service life of an asset. The details of the companys capital expenditures are summarized as
follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Capital expendituresRevenue enhancing
    
    $
    14
    
    
    $
    9
    
    
    $
    10Non-revenue enhancing
    
    
    12
    
    
    
    7
    
    
    
    6Total
    
    $
    26
    
    
    $
    16
    
    
    $
    16
 DEVELOPMENT AND RESIDENTIAL OPERATIONS Brookfields residential land development operations are focused in five markets: Calgary,
Alberta; Edmonton, Alberta; Toronto, Ontario; Denver, Colorado and Austin, Texas. Most of the land
holdings were purchased in the mid-1990s, and as a result have an embedded cost advantage over
many companies which are acquiring land today at much higher prices. In addition, the companys
development and residential operations continued to benefit from the low interest rate environment
and strong demand in the North American housing market. Development and residential operations contributed $42 million of income in 2004, an increase of
$11 million over 2003 and $20 million over 2002. (Millions)
    
    2004
    
    
    2003
    
    
    2002Sales revenue
    
    $
    261
    
    
    $
    225
    
    
    $
    321Operating costs
    
    
    219
    
    
    
    194
    
    
    
    299Total
    
    $
    42
    
    
    $
    31
    
    
    $
    22
 Lot and home sales for the past two years, including lots sold to third-party homebuilders are as follows: Home sales
    
    
    
    Lot sales(Units)
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003Alberta
    
    
    496
    
    
    
    479
    
    
    
    
    1,937
    
    
    
    1,712Ontario
    
    
    339
    
    
    
    318
    
    
    
    
    
    
    
    
    Colorado
    
    
    
    
    
    
    
    
    
    
    
    468
    
    
    
    448Total
    
    
    835
    
    
    
    797
    
    
    
    
    2,405
    
    
    
    2,160
 INTEREST AND OTHER Interest and other income includes interest charged on loans receivable, interest received on
cash balances and transactional gains and losses realized on the disposal of non-core assets.
Interest and other income decreased to $47 million in 2004 compared with $62 million in 2003
primarily due to the completion of the companys residential condominium development project in
Toronto. UNALLOCATED COSTS Unallocated costs were $331 million for the year ended December 31, 2004, compared with $330
million in 2003. The amounts are comprised of interest expense, administrative and development
expenses and minority interests of others in properties, as follows: (a) Interest expense Interest expense increased 2% to $270 million in 2004, compared with $265 million in 2003. This
increase is a result of debt assumed on the purchase of 701 9th Street and the financing of 1625
Eye Street and Potomac Tower in Washington, D.C., the placement of higher levels of
investment-grade debt on properties, offset by a decrease in the refinancing interest rate on
Republic Plaza in Denver, reduction of debt through amortization and the sale of a 49% interest in
245 Park Avenue in New York in October 2003. (b) Administrative and development expenses Administrative costs during the year ended 2004 decreased to $41 million from $44 million in 2003
as the company successfully implemented cost reduction initiatives. (c) Minority interests of others in properties Minority interests of others in properties consist of earnings attributable to interests not owned
by Brookfield in BPO Properties Ltd. and Brookfield Financial Properties L.P., as well as dividends
on shares issued by BPO Properties Ltd. and 100%-owned subsidiaries. For the year ended December
31, 2004, other shareholders interests expenses of $20 million decreased by $1 million from the
same period in 2003. Dividends paid on shares issued by the companys subsidiaries increased to $48
million in 2004 from $14 million 21




---



##### 



in 2003 and minority interests of others in BPO Properties Ltd. decreased by $35 million in
2004 from $5 million in 2003 primarily from a payment of a special dividend during the first
quarter of 2004. The following table outlines the dividends and earnings paid or attributable to other shareholders
of subsidiaries of Brookfield: (Millions)
    
    Type
    
    2004
    
    
    2003
    
    
    2002BPO Properties Ltd.
    
    Redeemable preferred shares*
    
    $
    8
    
    
    $
    9
    
    
    $
    7BPO Properties Ltd.
    
    Common shares
    
    
    37
    
    
    
    1
    
    
    
    100%-owned subsidiaries
    
    Redeemable preferred shares*
    
    
    3
    
    
    
    4
    
    
    
    4Dividends  shares of subsidiaries
    
    
    
    
    48
    
    
    
    14
    
    
    
    11BPO Properties Ltd.
    
    Participating interests
    
    
    (30
    )
    
    
    5
    
    
    
    12Brookfield Financial Properties L.P.
    
    Participating interests
    
    
    2
    
    
    
    2
    
    
    
    7Minority interests of others in subsidiary earnings
    
    
    
    
    (28
    )
    
    
    7
    
    
    
    19Total
    
    
    
    $
    20
    

    
    $
    21
    
    
    $
    30
   *
    
    Non-participating DEPRECIATION EXPENSE Depreciation for the year ended December 31, 2004 increased by $64 million to $143 million.
The majority of this increase was due to additional depreciation recognized with the adoption of
CICA Handbook section 1100 requiring a change to a straight-line basis. See Note 2 to the
consolidated financial statements for further discussion. NET INCOME Brookfields net income per share from continuing operations decreased to $1.28 per share
including gains or $1.06 per share excluding gains, due to a smaller gain in 2004 and the change in
accounting policy for depreciation previously discussed. Brookfields net income per share is
calculated as follows: Including Lease Termination
    
    
    
    Excluding Lease TerminationIncome and Gains
    
    
    
    Income and Gains(Millions, except per share amounts)
    
    2004
    
    
    2003
    
    
    2002
    
    
    
    2004
    
    
    2003
    
    
    2002Net income from continuing operations
    
    $
    242
    
    
    $
    279
    
    
    $
    236
    
    
    
    $
    206
    
    
    $
    209
    
    
    $
    194Preferred share dividends
    
    
    (41
    )
    
    
    (20
    )
    
    
    (19
    )
    
    
    
    (41
    )
    
    
    (20
    )
    
    
    (19
    )Net income available to common shareholders
    
    $
    201
    
    
    $
    259
    
    
    $
    217
    
    
    
    $
    165
    
    
    $
    189
    
    
    $
    175Weighted average shares outstanding  diluted
    
    
    157.1
    
    
    
    158.6
    
    
    
    162.3
    
    
    
    
    157.1
    
    
    
    158.6
    
    
    
    162.3Net income per share  diluted
    
    $
    1.28
    
    
    $
    1.63
    
    
    $
    1.34
    
    
    
    $
    1.06
    
    
    $
    1.19
    
    
    $
    1.09
 It should be noted that challenges of comparability of net income exist among various real
estate companies, as those entities structured as corporations, such as Brookfield, are required to
charge their earnings with tax expense, despite the presence of tax losses which reduce the cash
tax obligation. This differs from those entities which operate as real estate investment trusts
(REITs), as REITs are not subject to taxation, provided they remain in compliance with specific
tax codes. 22




---



##### 



QUARTERLY RESULTS The 2004 and 2003 results by quarter are as follows: Q1
    
    
    
    Q2
    
    
    
    Q3
    
    
    
    Q4(Millions, except per share amounts)
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003
    
    
    
    2004
    
    
    2003Total revenue and gains
    
    $
    326
    
    
    $
    295
    
    
    
    $
    381
    
    
    $
    301
    
    
    
    $
    345
    
    
    $
    320
    
    
    
    $
    390
    
    
    $
    447Net operating incomeCommercial property operationsOperating income from current properties
    
    
    179
    
    
    
    142
    
    
    
    
    166
    
    
    
    141
    
    
    
    
    168
    
    
    
    141
    
    
    
    
    170
    
    
    
    144Operating income from properties sold
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    Lease termination income and gains
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Total commercial property operations
    
    
    179
    
    
    
    150
    
    
    
    
    226
    
    
    
    152
    
    
    
    
    168
    
    
    
    151
    
    
    
    
    170
    
    
    
    244Development and residential income
    
    
    8
    
    
    
    7
    
    
    
    
    10
    
    
    
    7
    
    
    
    
    11
    
    
    
    7
    
    
    
    
    13
    
    
    
    10Interest and other
    
    
    14
    
    
    
    15
    
    
    
    
    11
    
    
    
    14
    
    
    
    
    11
    
    
    
    16
    
    
    
    
    11
    
    
    
    17201
    
    
    
    172
    
    
    
    
    247
    
    
    
    173
    
    
    
    
    190
    
    
    
    174
    
    
    
    
    194
    
    
    
    271ExpensesInterest
    
    
    66
    
    
    
    70
    
    
    
    
    68
    
    
    
    67
    
    
    
    
    67
    
    
    
    66
    
    
    
    
    69
    
    
    
    62Administrative and development
    
    
    10
    
    
    
    11
    
    
    
    
    11
    
    
    
    11
    
    
    
    
    10
    
    
    
    11
    
    
    
    
    10
    
    
    
    11Minority interests of others in properties
    
    
    5
    
    
    
    5
    
    
    
    
    6
    
    
    
    5
    
    
    
    
    5
    
    
    
    6
    
    
    
    
    4
    
    
    
    5Income before undernoted
    
    
    120
    
    
    
    86
    
    
    
    
    162
    
    
    
    90
    
    
    
    
    108
    
    
    
    91
    
    
    
    
    111
    
    
    
    193Depreciation and amortization
    
    
    34
    
    
    
    18
    
    
    
    
    35
    
    
    
    20
    
    
    
    
    36
    
    
    
    20
    
    
    
    
    38
    
    
    
    21Taxes and other non-cash items
    
    
    30
    
    
    
    18
    
    
    
    
    47
    
    
    
    17
    
    
    
    
    22
    
    
    
    21
    
    
    
    
    17
    
    
    
    46Net income
    
    $
    56
    
    
    $
    50
    
    
    
    $
    80
    
    
    $
    53
    
    
    
    $
    50
    
    
    $
    50
    
    
    
    $
    56
    
    
    $
    126Funds from operations per share - diluted*Excluding lease termination income and gains
    
    $
    0.70
    
    
    $
    0.51
    
    
    
    $
    0.60
    
    
    $
    0.53
    
    
    
    $
    0.62
    
    
    $
    0.55
    
    
    
    $
    0.63
    
    
    $
    0.56Lease termination income and gains
    
    
    
    
    
    
    
    
    
    
    
    0.38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.63$
    0.70
    
    
    $
    0.51
    
    
    
    $
    0.98
    
    
    $
    0.53
    
    
    
    $
    0.62
    
    
    $
    0.55
    
    
    
    $
    0.63
    
    
    $
    1.19Net income per share - basic*Excluding lease termination income and gains
    
    $
    0.30
    
    
    $
    0.29
    
    
    
    $
    0.24
    
    
    $
    0.30
    
    
    
    $
    0.25
    
    
    $
    0.29
    
    
    
    $
    0.28
    
    
    $
    0.32Lease termination income and gains
    
    
    
    
    
    
    
    
    
    
    
    0.22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.44$
    0.30
    
    
    $
    0.29
    
    
    
    $
    0.46
    
    
    $
    0.30
    
    
    
    $
    0.25
    
    
    $
    0.29
    
    
    
    $
    0.28
    
    
    $
    0.76Net income per share - diluted*Excluding lease termination income and gains
    
    $
    0.30
    
    
    $
    0.29
    
    
    
    $
    0.23
    
    
    $
    0.30
    
    
    
    $
    0.25
    
    
    $
    0.29
    
    
    
    $
    0.28
    
    
    $
    0.31Lease termination income and gains
    
    
    
    
    
    
    
    
    
    
    
    0.22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.44$
    0.30
    
    
    $
    0.29
    
    
    
    $
    0.45
    
    
    $
    0.30
    
    
    
    $
    0.25
    
    
    $
    0.29
    
    
    
    $
    0.28
    
    
    $
    0.75
   *
    
    Per share amount before giving effect to stock dividend Operating income from current properties in the fourth quarter of 2004 remained consistent
with previous quarters in 2004. Operating income from current properties for 2004 increased
compared to 2003 due to acquisitions of 1625 Eye Street, 701 9th Street and Potomac Tower in
Washington, D.C. and the completion of the development project at 300 Madison Avenue in New York.
The gain realized in the second quarter of 2004 of $60 million in lease termination income is a
result of the termination of a previously existing lease and the commencement of a new lease at One
World Financial Center in New York. The gain realized in the fourth quarter of 2003 of $100 million
is related to the sale of a 49% interest in 245 Park Avenue in New York. Development and residential income increased in the fourth quarter of 2004 compared with previous
quarters in 2004 and 2003 due to the continued strength of the North American housing markets.
Interest and other income decreased in each quarter in 2004 as the 2003 results included a
contribution from the companys now-complete residential condominium project. Interest expense increased in the fourth quarter of 2004 as a result of the financing of 1625 Eye
Street and Potomac Tower in Washington, D.C., partially offset by the repayment of corporate debt
with the proceeds received from the issuance of preferred shares. Administrative and development
expenses and minority interests of others in properties remained consistent with prior quarters.
Taxes and other non-cash items as well as net income decreased in the fourth quarter of 2004
compared to the fourth quarter of 2003 due to the gain on the sale of 49% interest in 245 Park
Avenue recognized in the fourth quarter of 2003. 23




---



##### 



ASSET PROFILE Total assets increased by approximately $394 million to $8.5 billion at December 31, 2004. The
increase in total assets is primarily attributable to the acquisition of 701 9th Street, N.W. and
Potomac Tower in Washington, D.C., and the impact of the higher Canadian dollar on Canadian assets.
The following is a summary of the companys assets over the past three years: (Millions)
    
    2004
    
    
    2003
    
    
    2002*AssetsCommercial properties
    
    $
    6,693
    
    
    $
    6,297
    
    
    $
    5,661Development properties
    
    
    716
    
    
    
    684
    
    
    
    944Receivables and other
    
    
    685
    
    
    
    717
    
    
    
    769Marketable securities
    
    
    285
    
    
    
    267
    
    
    
    Cash and cash equivalents
    
    
    112
    
    
    
    132
    
    
    
    76Total
    
    $
    8,491
    
    
    $
    8,097
    
    
    $
    7,450
   *
    
    Excludes Brookfield Homes Corporation which was distributed to common shareholders on January 6, 2003 COMMERCIAL PROPERTIES The acquisition of two premier assets in Washington, D.C. accounts for most of the increase in
book value of commercial properties from December 31, 2003. 701 9th Street, N.W. was purchased for
$167 million in the first quarter of 2004 and Potomac Tower was purchased for $106 million in the
third quarter of 2004. These two assets, and 1625 Eye Street, N.W., which was acquired in December
2003, comprise 1.6 million square feet in the Washington, D.C. market. These additions were offset
by the sale of the companys non-core retail asset Chicago Place for proceeds totaling $39 million.
The consolidated carrying value of the companys North American properties is approximately $250
per square foot, significantly less than the estimated replacement cost of these assets.
Brookfields core properties are on average of 1.4 million square feet in size. A breakdown of the
companys commercial properties by region is as follows: Brookfield
    
    
    2004
    
    
    2003Leaseable Area
    
    
    Owned Interest
    
    
    Book Value
    
    
    Book ValueRegion
    
    (000s Sq. Ft.)
    
    
    (000s Sq. Ft.)
    
    
    (Millions)
    
    
    (Millions)New York, New York
    
    
    11,221
    
    
    
    9,506
    
    
    $
    3,542
    
    
    $
    3,531Boston, Massachusetts
    
    
    2,163
    
    
    
    1,103
    
    
    
    328
    
    
    
    333Washington, D.C.
    
    
    1,557
    
    
    
    1,557
    
    
    
    439
    
    
    
    161Toronto, Ontario
    
    
    6,790
    
    
    
    4,777
    
    
    
    1,068
    
    
    
    928Calgary, Alberta
    
    
    6,331
    
    
    
    3,166
    
    
    
    448
    
    
    
    450Denver, Colorado
    
    
    3,017
    
    
    
    2,811
    
    
    
    370
    
    
    
    372Minneapolis, Minnesota
    
    
    3,008
    
    
    
    3,008
    
    
    
    414
    
    
    
    400Other
    
    
    927
    
    
    
    927
    
    
    
    84
    
    
    
    122Total*
    
    
    35,014
    
    
    
    26,855
    
    
    $
    6,693
    
    
    $
    6,297
   *
    
    Excludes developments DEVELOPMENT PROPERTIES Development properties consist of commercial property development sites, density rights and
related infrastructure, as well as residential land and infrastructure in the companys land
development business. The total book value of this development land and infrastructure was $716
million at December 31, 2004, an increase of $32 million from $684 million in 2003. The increase is
primarily attributable to additional capitalized costs on the companys commercial development
properties, offset by a reduction in residential development inventory. In 2004, the company
capitalized approximately $36 million related to the Three World Financial Center project. 24




---



##### 



The details of the development property portfolio are as follows: Buildable
    
    
    Book Value
    
    
    Book ValueRegion
    
    Sq. Ft.
    
    
    2004
    
    
    2003
    
    
    ChangeCommercial developments and infrastructureThree World Financial Center, New York
    
    
    1,200,000
    
    
    $
    248
    
    
    $
    212
    
    
    $
    36Bay-Adelaide Centre, Toronto
    
    
    1,800,000
    
    
    
    101
    
    
    
    90
    
    
    
    11Hudsons Bay Centre, Toronto
    
    
    1,092,000
    
    
    
    29
    
    
    
    26
    
    
    
    3Other:401 West 31st Street, New York
    
    
    2,500,000BCE Place III, Toronto
    
    
    800,000Bankers Hall, Calgary
    
    
    500,000Republic Plaza, Denver
    
    
    400,0004,200,000
    
    
    
    21
    
    
    
    21
    
    
    
    8,292,000
    *
    
    $
    399
    
    
    $
    349
    
    
    $
    50Residential development land and infrastructureUnder development
    
    
    
    
    
    
    132
    
    
    
    210
    
    
    
    (78
    )Held for development
    
    
    
    
    
    
    185
    
    
    
    125
    
    
    
    60Total
    
    
    
    
    
    $
    716
    
    
    $
    684
    
    
    $
    32
   * Excludes rights which Brookfield holds on Site 26 at the World Financial Center in New York (a) Commercial developments and infrastructure Although Brookfield is not a speculative developer, the company is a full-service real estate
company with in-house development expertise. With approximately eight million square feet of
high-quality, centrally-located development properties in New York, Toronto, Calgary and Denver,
the company generally undertakes developments only when the risk-adjusted returns are adequate and
significant pre-leasing for at least 50% to 60% of the space has been achieved. In September 2002, Brookfield acquired 1.2 million square feet of space in the 2.1 million square
foot Three World Financial Center tower in New York which is home to the world headquarters of
co-owner American Express. Brookfield has exclusive rights to lease 1.2 million square feet of
space and is not entitled to rents attributable to the space owned by American Express. Brookfield
acquired this property vacant at a substantial discount to replacement value and is currently in
the process of securing tenants for the portion owned by the company. As at December 31, 2004, this
property was classified as a property under development, and all direct costs of the building,
including interest costs and property taxes, were capitalized to the asset. In February 2001, Brookfield acquired a 50% interest in the Bay-Adelaide Centre office and
residential development project, located at the corner of Bay and Adelaide Streets in downtown
Toronto. Brookfield subsequently acquired two small buildings adjacent to the site fronting Bay
Street to further enhance the value of the project. This project included full below-grade
infrastructure for 1.8 million square feet of office and residential space and a fully operational
underground revenue-generating parking facility. Brookfield also owns expansion rights for a third
office tower at BCE Place, the companys flagship Toronto office complex, which includes approximately 800,000 square feet of density. Brookfield has similar rights to
develop 2.5 million square feet at 401 West 31st Street in Midtown Manhattan, New York, 500,000
square feet of office space at Bankers Hall in Calgary, and 400,000 square feet at Republic Plaza
in Denver. 25




---



##### 



The status of each development project is as follows: Location
    
    Ownership
    

Sq. Ft.
    
    StatusNew York, New YorkThree World Financial Center
    
    200 Vesey Street at West Street
    
    
    100
    %
    
    
    1,200,000
    
    
    - Under redevelopment401 West 31st Street
    
    West 31st Street at Ninth Avenue
    
    
    100
    %
    
    
    2,500,000
    
    
    - Being zoned for potentially2.5 million square feet of officeToronto, OntarioBay-Adelaide Centre
    
    Bay and Adelaide Streets
    
    
    50
    %
    
    
    1,800,000
    
    
    - PlanningBCE Place III
    
    Third tower of currentBCE Place project
    
    
    65
    %
    
    
    800,000
    
    
    - PlanningHudsons Bay Centre
    
    Yonge and Bloor Streets
    
    
    25
    %
    
    
    1,092,000
    
    
    - Office and retail projectsunder redevelopmentCalgary, AlbertaBankers Hall
    
    East and West Parkades
    
    
    50
    %
    
    
    500,000
    
    
    - PlanningDenver, ColoradoRepublic Plaza
    
    Downtown Denver
    
    
    100
    %
    
    
    400,000
    
    
    - Planning8,292,000
    *
   *
    
    Excludes rights which Brookfield holds on Site 26 at the World Financial Center in New York (b) Residential development land and infrastructure Brookfields land development operations are focused in five markets: Calgary, Alberta; Toronto,
Ontario; Edmonton, Alberta; Denver, Colorado and Austin, Texas. The book value of these investments
at December 31, 2004 was $317 million, compared with $335 million at the end of 2003. The decrease
was primarily attributable to residential development inventory sold, offset by acquisitions. The
details of the residential development land under development and held for development are as
follows: Under Development
    
    
    
    Held for DevelopmentNumber
    
    
    Book Value
    
    
    
    Number
    
    
    Book Valueof Lots
    
    
    (Millions)
    
    
    
    of Lots
    
    
    (Millions)Alberta
    
    
    2,585
    
    
    $
    90
    
    
    
    
    22,795
    
    
    $
    125Ontario
    
    
    1,593
    
    
    
    16
    
    
    
    
    4,893
    
    
    
    28Colorado
    
    
    818
    
    
    
    22
    
    
    
    
    3,222
    
    
    
    24Texas and other
    
    
    30
    
    
    
    4
    
    
    
    
    2,080
    
    
    
    8Total
    
    
    5,026
    
    
    $
    132
    
    
    
    
    32,990
    
    
    $
    185
 RECEIVABLES AND OTHER Receivables and other assets decreased to $685 million at December 31, 2004 from $717 million
at December 31, 2003. Receivables and real estate mortgages decreased by $64 million to $435
million at December 31, 2004 from a deposit on the acquisition of a land lease on one of the
companys Canadian commercial properties, offset by an increase in straight line rent receivable
due to accounting changes and the acquisition of a $27 million, seven-year, 11.2% fixed rate
mezzanine debt investment on the Bank of America Center in San Francisco. This investment comprises
the junior-most tier of a $750 million financing for the 1.78 million square foot building, giving
the company a toehold in this attractive market. Prepaid expenses and other assets increased by $34
million to $246 million at December 31, 2004 as the company classified $29 million of restricted
cash held for tenant improvements or required under debt covenants to Other Assets. The components
of receivables and other assets are as follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Receivables and real estate mortgages
    
    $
    435
    
    
    $
    499
    
    
    $
    465Prepaid expenses and other assets
    
    
    246
    
    
    
    212
    
    
    
    210Non-core real estate assets held for sale
    
    
    4
    
    
    
    6
    
    
    
    51Future income tax asset
    
    
    
    
    
    
    
    
    
    
    43Total
    
    $
    685
    
    
    $
    717
    
    
    $
    769
 26




---



##### 



CAPITAL RESOURCES AND LIQUIDITY Brookfield employs a broad range of financing strategies to facilitate growth and manage
financial risk, with particular focus on the overall reduction of the weighted average cost of
capital, thereby enhancing returns for common shareholders. Funds from operations represent the primary source of liquidity to fund debt service, dividend
payments, and recurring capital and leasing costs in the companys commercial property portfolio.
Sufficient cashflows are generated by the companys properties to service these obligations.
Brookfield seeks to increase income from the companys existing properties by maintaining quality
standards which promote high occupancy rates and permit increases in rental rates while reducing
tenant turnover and controlling operating expenses. Other sources of revenue include third-party
fees generated by the companys real estate management, leasing and development businesses. In
addition, Brookfields tax status as a corporation and substantial tax loss pools allow the company
to reinvest and retain cash generated by operations without incurring cash taxes.
 Brookfields commercial property debt is primarily fixed-rate and non-recourse to the company. These
investment-grade financings are typically structured on a 50% to 60% loan-to-appraised-value basis.
In addition, in certain circumstances when a building is leased almost exclusively to a
high-quality tenant, a higher loan-to-value financing, based on the tenants credit quality, is put
in place at rates commensurate with the cost of funds for the tenant. This reduces the companys
equity requirements to finance commercial property, and as a result, enhances equity returns. As at December 31, 2004, Brookfield had approximately $216 million (December 31, 2003  $562
million) of indebtedness outstanding to Brascan Corporation and its affiliates. During the first
quarter of 2004, the company, based on an agreement signed in 1997, purchased the land lease on one
of its Canadian properties for an amount equal to its carrying value of $80 million from Brascan
Corporation. CASH AND MARKETABLE SECURITIES Brookfield maintains high levels of liquidity to ensure that it can react quickly to potential
investment opportunities. This liquidity consists of cash and marketable securities which
contribute investment returns, as well as committed lines of credit. To ensure the company
maximizes its returns, cash balances are generally carried at a modest level, and excess cash is
used to repay revolving credit lines and invested in short-term marketable securities, which
provide a source of liquidity to fund investment initiatives. Marketable securities are comprised
of a portfolio of fixed-rate corporate bonds which are carried at amortized cost with a fair value
which approximates their book value and an average yield of 2.6%. The portfolio matures over the
period of 2005 to 2007. As at December 31, 2004, cash balances decreased to $112 million from $132
million at December 31, 2003 and marketable securities increased to $285 million from $267 million
at December 31, 2003, as excess funds were invested in additional investment-grade corporate bonds.
In addition, the company classified $29 million of restricted cash held for tenant improvements or
required under debt covenants to Other Assets. UTILIZATION OF CASH RESOURCES The following table illustrates the utilization of free cashflow generated by the companys
operations and financing initiatives as well as the reallocation of capital and the repurchase of
common equity and minority interests of others in properties: (Millions)
    
    2004
    
    
    2003
    
    
    2002
    
    
    TotalCashflow from operations
    
    $
    477
    
    
    $
    334
    
    
    $
    250
    
    
    $
    1,061FinancingBorrowings, net of repayments
    
    
    (182
    )
    
    
    7
    
    
    
    (134
    )
    
    
    (309
    )Net issuance (repurchase) of preferred shares
    
    
    261
    
    
    
    334
    
    
    
    (3
    )
    
    
    592Net repurchase of common shares
    
    
    (33
    )
    
    
    (98
    )
    
    
    (25
    )
    
    
    (156
    )Shareholder distributions
    
    
    (300
    )
    
    
    (114
    )
    
    
    (113
    )
    
    
    (527
    )(254
    )
    
    
    129
    
    
    
    (275
    )
    
    
    (400
    )InvestingMarketable securities
    
    
    (18
    )
    
    
    (267
    )
    
    
    
    
    
    
    (285
    )(Acquisitions) dispositions of real estate, net
    
    
    (144
    )
    
    
    50
    
    
    
    114
    
    
    
    20Development and redevelopment
    
    
    (55
    )
    
    
    (174
    )
    
    
    (206
    )
    
    
    (435
    )Capital expenditures
    
    
    (26
    )
    
    
    (16
    )
    
    
    (16
    )
    
    
    (58
    )(243
    )
    
    
    (407
    )
    
    
    (108
    )
    
    
    (758
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    14Increase (decrease) in cash
    
    $
    (20
    )
    
    $
    56
    
    
    $
    (119
    )
    
    $
    (83
    )
 27




---



##### 



LIABILITIES AND SHAREHOLDERS INTERESTS Brookfields asset base of $8.5 billion is financed with a combination of debt, preferred
shares and common equity. The increase in total liabilities and shareholders interests is
primarily attributable to the issuance of 8,000,000 Class AAA, Series J preferred shares and
6,000,000 Class AAA, Series K preferred shares for total proceeds of C$350 million. The components
of Brookfields liabilities and shareholders interests are as follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002*LiabilitiesCommercial property debt
    
    $
    4,550
    
    
    $
    4,537
    
    
    $
    4,588Accounts payable and other liabilities
    
    
    591
    
    
    
    545
    
    
    
    429Future income tax liability
    
    
    96
    
    
    
    18
    
    
    
    Shareholders interestsMinority interests of others in properties
    
    
    53
    
    
    
    81
    
    
    
    84Preferred sharesSubsidiaries
    
    
    320
    
    
    
    415
    
    
    
    341Corporate
    
    
    854
    
    
    
    586
    
    
    
    238Common shares
    
    
    2,027
    
    
    
    1,915
    
    
    
    1,770Total
    
    $
    8,491
    
    
    $
    8,097
    
    
    $
    7,450
   *
    
    Excludes Brookfield Homes Corporation which was distributed to common shareholders on January 6,
2003 COMMERCIAL PROPERTY DEBT Commercial property debt totaled $4.6 billion at December 31, 2004, compared with $4.5 billion
at December 31, 2003 and $4.6 billion at December 31, 2002. The increase during the year is
primarily related to the financings of 1625 Eye Street and Potomac Tower in Washington, D.C. and
the impact of the higher Canadian dollar on Canadian-denominated commercial property debt, offset
by the repayment of corporate debt with the proceeds received from the issuance of C$350 million
preferred shares during 2004, and amortization. Commercial property debt at December 31, 2004 had
an average interest rate of 6.5% and an average term to maturity of 12 years. Predominantly all of
Brookfields commercial property debt is recourse only to specific properties, thereby reducing the
overall financial risk to the company. 28




---



##### 



Commercial property debt, in order of maturity, is as follows: Interest
    
    
    
    
    
    
    BrookfieldRate
    
    
    Maturity
    
    
    Proportionate ShareCommercial Property
    
    Location
    
    %
    
    
    Date
    
    
    (Millions)
    
    
    DetailsOne World Financial Center
    
    New York
    
    
    3.71
    
    
    
    2007
    
    
    $
    300
    
    
    Recourse, floating rateTD Canada Trust Tower
    
    Toronto
    
    
    6.53
    
    
    
    2007
    
    
    
    108
    
    
    Non-recourse, fixed rateTrade Center
    
    Denver
    
    
    7.00
    
    
    
    2007
    
    
    
    52
    
    
    Non-recourse, fixed ratePetro-Canada Centre
    
    Calgary
    
    
    6.43
    
    
    
    2008
    
    
    
    111
    
    
    Non-recourse, fixed rateOne Liberty Plaza
    
    New York
    
    
    6.75
    
    
    
    2011
    
    
    
    413
    
    
    Non-recourse, fixed rate245 Park Avenue
    
    New York
    
    
    6.65
    
    
    
    2011
    
    
    
    248
    
    
    Non-recourse, fixed ratePotomac Tower
    
    Washington, D.C.
    
    
    4.72
    
    
    
    2011
    
    
    
    75
    
    
    Non-recourse, fixed rateFifth Avenue Place
    
    Calgary
    
    
    7.59
    
    
    
    2011
    
    
    
    65
    
    
    Non-recourse, fixed rateExchange Tower
    
    Toronto
    
    
    6.83
    
    
    
    2012
    
    
    
    56
    
    
    Non-recourse, fixed rateTwo World Financial Center
    
    New York
    
    
    6.91
    
    
    
    2013
    
    
    
    707
    
    
    Non-recourse, fixed rateFour World Financial Center
    
    New York
    
    
    6.95
    
    
    
    2013
    
    
    
    373
    
    
    Non-recourse, fixed rateBay Wellington Tower
    
    Toronto
    
    
    6.49
    
    
    
    2013
    
    
    
    299
    
    
    Non-recourse, fixed rateBankers Hall
    
    Calgary
    
    
    7.20
    
    
    
    2013
    
    
    
    152
    
    
    Non-recourse, fixed rateRepublic Plaza
    
    Denver
    
    
    5.15
    
    
    
    2014
    
    
    
    170
    
    
    Non-recourse, fixed rate1625 Eye Street
    
    Washington, D.C.
    
    
    6.00
    
    
    
    2014
    
    
    
    130
    
    
    Non-recourse, fixed rateRoyal Centre
    
    Vancouver
    
    
    7.50
    
    
    
    2022
    
    
    
    44
    
    
    Non-recourse, fixed rate53 State Street
    
    Boston
    
    
    6.91
    
    
    
    2023
    
    
    
    74
    
    
    Non-recourse, fixed rate33 South Sixth Street
    
    Minneapolis
    
    
    6.72
    
    
    
    2027
    
    
    
    99
    
    
    Non-recourse, fixed rateDain Plaza
    
    Minneapolis
    
    
    7.37
    
    
    
    2027
    
    
    
    84
    
    
    Non-recourse, fixed rate701 9th Street
    
    Washington, D.C.
    
    
    6.73
    
    
    
    2028
    
    
    
    152
    
    
    Non-recourse, fixed rate75 State Street
    
    Boston
    
    
    7.00
    
    
    
    2028
    
    
    
    88
    
    
    Non-recourse, fixed rate300 Madison Avenue
    
    New York
    
    
    7.26
    
    
    
    2032
    
    
    
    526
    
    
    Non-recourse, fixed rateDevelopment and other debt
    
    
    
    
    
    
    
    
    
    
    
    
    204
    
    
    Various termsCorporate credit facility
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    Recourse, floating rateTotal
    
    
    
    
    6.50
    %
    
    
    
    
    
    $
    4,550
 During 2004, Brookfield financed or refinanced $375 million of commercial property debt. The
details are as follows: Financed / RefinancedMortgage
    
    
    Interest Rate(Millions)
    
    
    %Republic Plaza, Denver
    
    $
    170
    
    
    
    5.151625 Eye Street, Washington, D.C.
    
    
    130
    
    
    
    6.00Potomac Tower, Washington, D.C.
    
    
    75
    
    
    
    4.72Total
    
    $
    375
    
    
    
    5.36
    %
 Commercial property debt maturities for the next five years and thereafter are as follows: Weighted Average(Millions)
    
    Scheduled
    
    
    
    
    
    
    
    
    
    
    Interest Rate atYear
    
    Amortization
    
    
    Maturities
    
    
    Total
    
    
    Dec. 31, 20042005
    
    $
    142
    
    
    $
    135
    
    
    $
    277
    
    
    
    7.2
    %2006
    
    
    155
    
    
    
    20
    
    
    
    175
    
    
    
    7.3
    %2007
    
    
    157
    
    
    
    475
    
    
    
    632
    
    
    
    5.2
    %2008
    
    
    168
    
    
    
    110
    
    
    
    278
    
    
    
    6.7
    %2009
    
    
    181
    
    
    
    12
    
    
    
    193
    
    
    
    6.8
    %2010 and thereafter
    
    
    
    
    
    
    2,995
    
    
    
    2,995
    
    
    
    6.5
    %Total
    
    $
    803
    
    
    $
    3,747
    
    
    $
    4,550
    
    
    
    6.5
    %
 During 2004, the company refinanced Republic Plaza in Denver with a $170 million, ten-year,
fixed-rate mortgage at 5.15% interest. This refinancing represents a reduction of approximately 400
basis points from the prior fixed-rate mortgage. The company also financed 1625 Eye Street in
Washington, D.C. with a $130 million, ten-year, 6% fixed rate mortgage. The financing was comprised
of two-stage funding, with $74 million funded in September 2004 and $56 million funded in December
2004. The company also
financed Potomac Tower which was acquired in the third quarter of 2004 with a $75 million,
seven-year, 4.72% fixed rate mortgage. 29




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##### 

\

The only significant maturity in the next five years is the floating-rate recourse mortgage which
was placed on One World Financial Center in 2003 in order to facilitate flexibility in tenant
discussions on this project and to minimize borrowing costs. It is expected this facility will be
refinanced in the future with long-term, fixed-rate debt. The companys bank credit facility is in the form of a three-year revolving facility totaling $150
million. This facility had a floating interest rate of approximately 3.7% and was drawn in the
amount of $20 million as at December 31, 2004. CONTRACTUAL OBLIGATIONS The following table presents contractual obligations of the company over the next five years: Payments Due By Period(Millions)
    
    Total
    
    
    1 - 3 Years
    
    
    4 - 5 Years
    
    
    After 5 YearsCommercial property debt
    
    $
    4,550
    
    
    $
    1,084
    
    
    $
    471
    
    
    $
    2,995Other obligations
    
    
    302
    
    
    
    135
    
    
    
    
    
    
    
    167Total
    
    $
    4,852
    
    
    $
    1,219
    
    
    $
    471
    
    
    $
    3,162
 Other obligations include retractable preferred shares and debt attributable to the land
development operations. See Accounts Payable and Other Liabilities and Note 9 of the consolidated
financial statements for further discussion on other obligations. The company also has properties
situated on land held under leases or other agreements largely expiring after the year 2069.
Minimum rental payments on land leases are approximately $22 million annually for the next five
years and $973 million in total on an undiscounted basis. CORPORATE GUARANTEES AND CONTINGENT OBLIGATIONS Brookfield conducts its operations through entities that are fully or proportionately
consolidated in the financial statements except for its investment in Brookfield LePage Johnson
Controls, which is equity accounted. Brookfield LePage Facilities Management, one of the largest
facilities management operations in Canada, is owned 40% by Brookfield in partnership with Johnson
Controls, the largest facilities management operator in the world. This joint venture manages close
to 100 million square feet of premises for major corporations and governments, and continues to
benefit from the trend towards outsourcing of facilities management worldwide. The company may be
contingently liable with respect to litigation and claims that arise in the normal course of
business. In addition, the company may execute agreements that provide for indemnifications and
guarantees to third parties. Disclosure of commitments, guarantees and contingencies can be found
in Note 17 to the consolidated financial statements. CREDIT RATINGS Brookfield is currently rated by two agencies. The company is committed to arranging its
affairs to maintain these ratings as well as to improve them further over time. The credit ratings
for the company at December 31, 2004 and at the date of this report were as follows: DBRS
    
    
    S&PCorporate rating
    
    BBB(high)
    
    BBBPreferred shares
    
    Pfd-3(high)
    
    P3(high)
 ACCOUNTS PAYABLE AND OTHER LIABILITIES Accounts payable and other liabilities totaled $591 million, compared with $545 million in
2003. The increase is due to tenant inducements and the impact of the higher Canadian dollar on
Canadian liabilities. Also included in accounts payable and other liabilities are Class AAA Series
E retractable preferred shares, which have a cumulative dividend rate of 70% of bank prime. Total
debt attributable to the land development business at December 31, 2004 was $135 million, compared
with $150 million in 2003. This financing is primarily recourse in nature to subsidiaries of the
company and relates to construction and development loans, which are repaid from the sales proceeds
of building lots and homes, and other short-
term advances. As new homes are constructed, loans are funded on a rolling basis. This financing
carried an average interest rate of 4.2% (2003 - 4.4%). The company also has a revolving five-year
term facility with a shareholder which bears interest based on the prime rate. This revolving
facility is convertible at either partys option into a fixed-rate financing at 9.75% repayable in
2015. This facility was undrawn at December 31, 2004. A breakdown of accounts payable and other
liabilities is as follows: (Millions)
    
    2004
    
    
    2003
    
    
    2002Accounts payable
    
    $
    289
    
    
    $
    241
    
    
    $
    217AdvancesRetractable preferred shares
    
    
    167
    
    
    
    154
    
    
    
    127Other
    
    
    135
    
    
    
    150
    
    
    
    85Total
    
    $
    591
    
    
    $
    545
    
    
    $
    429
 30




---



##### 



FUTURE INCOME TAXES At December 31, 2004, the company had a future income tax liability of $96 million compared to
$18 million at December 31, 2003, an increase of $78 million with the deferred tax expense
generated on the utilization of tax losses during the year. MINORITY INTERESTS OF OTHERS IN PROPERTIES In addition to 100% owned subsidiaries, Brookfield conducts its commercial property operations
through BPO Properties Ltd. (BPO Properties) in Canada which holds substantially all of the
companys Canadian assets other than BCE Place, and through Brookfield Financial Properties L.P.
(Brookfield Financial Properties) in the U.S., which holds substantially all of the companys
interests in its New York, Boston and Washington, D.C. assets. The following table details the components of minority interests of others in properties: (Millions)
    
    2004
    
    
    2003
    
    
    2002BPO Properties
    
    $
    42
    
    
    $
    72
    
    
    $
    64Brookfield Financial Properties
    
    
    11
    
    
    
    9
    
    
    
    20Total
    
    $
    53
    
    
    $
    81
    
    
    $
    84
 Minority interests of others in BPO Properties decreased to $42 million at December 31, 2004
from $72 million at December 31, 2003 as a result of the payment of a special dividend by that
entity during the first quarter of 2004. Minority interests of others in Brookfield Financial
Properties increased by $2 million to $11 million at December 31, 2004 primarily due to increased
earnings in the year, including the proportionate share of interests of others in the lease
termination income earned in the second quarter of 2004.
 During 2003, Brookfield Financial
Properties completed the redemption of certain of its outstanding Partnership Units from minority
interest owners for cash consideration of $10 million. In 2002, redemptions totaled $56 million. As
a result of such redemptions, each remaining partners percentage interest increased on a pro rata
basis. The company currently holds 99.4% of the outstanding Partnership Units of Brookfield
Financial Properties. Also during 2003, the company acquired an additional 574,900 voting common shares of BPO Properties
in a private transaction at a cost of C$27.00 per BPO Properties share. The transaction increased
Brookfields equity interest in BPO Properties from 87% to 89%. A wholly-owned subsidiary of
Brookfield acquired these additional shares by issuing C$15.5 million of retractable preferred
shares. These retractable preferred were redeemed during 2004 for cash of approximately C$30
million. PREFERRED SHARES  SUBSIDIARIES AND CORPORATE The company has $1.2 billion of preferred equity outstanding at December 31, 2004 consisting
of $854 million issued by Brookfield and $320 million issued by its consolidated subsidiaries. This
equity represents low cost capital for the company, without dilution to the common equity base.
Dividends paid on preferred shares issued by the company are accounted for as capital distributions
while dividends paid on preferred shares issued by subsidiaries are a component of minority
interests of others in properties. (a) Subsidiaries The companys subsidiaries have the following preferred shares outstanding: Shares
    
    
    Preferred
    
    
    Cumulative(Millions except share information)
    
    Outstanding
    
    
    Share Series
    
    
    Dividend Rate
    
    
    2004
    
    
    2003
    
    
    2002BPO Properties1,805,489
    
    
    Series G
    
    70% of bank prime
    
    $
    38
    
    
    $
    35
    
    
    $
    283,816,527
    
    
    Series J
    
    70% of bank prime
    
    
    80
    
    
    
    74
    
    
    
    61300
    
    
    Series K
    
    30-day BA + 0.4%
    
    
    124
    
    
    
    115
    
    
    
    952,847,711
    
    
    Series M
    
    70% of bank prime
    
    
    59
    
    
    
    55
    
    
    
    45800,000
    
    
    Series N
    
    30-day BA + 0.4%
    
    
    17
    
    
    
    15
    
    
    
    12$
    318
    
    
    $
    294
    
    
    $
    241100%-owned subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    121
    
    
    
    100Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    320
    
    
    $
    415
    
    
    $
    341
 During 2004, the company redeemed preferred shares issued by its 100%-owned subsidiaries
totaling approximately C$155 million held by Brascan Corporation. 31




---



##### 



(b) Corporate The company has the following preferred shares outstanding: Shares
    
    
    Cumulative(Millions except share information)
    
    Outstanding
    
    
    Dividend Rate
    
    
    2004
    
    
    2003
    
    
    2002Class A redeemable voting
    
    
    6,312,000
    
    
    
    7.50
    %
    
    $
    11
    
    
    $
    11
    
    
    $
    11Class AA Series E
    
    
    2,000,000
    
    
    70% of bank prime
    
    
    34
    
    
    
    34
    
    
    
    34Class AAA Series C and D
    
    
    
    
    
    
    8.00
    %
    
    
    
    
    
    
    
    
    
    
    67Class AAA Series F
    
    
    8,000,000
    
    
    
    6.00
    %
    
    
    126
    
    
    
    126
    
    
    
    126Class AAA Series G
    
    
    4,400,000
    
    
    
    5.25
    %
    
    
    110
    
    
    
    110
    
    
    
    Class AAA Series H
    
    
    8,000,000
    
    
    
    5.75
    %
    
    
    151
    
    
    
    151
    
    
    
    Class AAA Series I
    
    
    8,000,000
    
    
    
    5.20
    %
    
    
    154
    
    
    
    154
    
    
    
    Class AAA Series J
    
    
    8,000,000
    
    
    
    5.00
    %
    
    
    146
    
    
    
    
    
    
    
    Class AAA Series K
    
    
    6,000,000
    
    
    
    5.20
    %
    
    
    122
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    $
    854
    
    
    $
    586
    
    
    $
    238
 During 2004, the company issued 8,000,000 Class AAA, Series J preferred shares and 6,000,000
Class AAA, Series K preferred shares for total proceeds of C$350 million. Proceeds were used for
general corporate purposes including the repayment of existing floating-rate preferred shares and
debt held by Brascan Corporation. During 2003, the company issued 4,400,000 Class AAA, Series G preferred shares, 8,000,000 Class
AAA, Series H preferred shares, and 8,000,000 Class AAA, Series I preferred shares for total
proceeds of $415 million. In June 2003, 4,000,000 Class AAA, Series C and D preferred shares were
redeemed for $74 million. During 2002, the company issued 8,000,000 Class AAA, Series F preferred shares for proceeds of $126
million. Proceeds of the issue were utilized to redeem 3,000,000 Class AAA, Series A preferred
shares, 3,000,000 Class AAA, Series B preferred shares and 2,000,000 Class AAA, Series C preferred
shares for total cash of $126 million. Dividends paid on preferred shares issued by the company are accounted for as capital
distributions. In 2004, the company paid preferred dividends of $41 million compared with $20
million in 2003. The increase relates to dividends paid on $683 million of preferred shares issued
during 2003 and 2004 through five offerings with favorable dividend rates averaging 5.3%. As a result of new accounting requirements, the company will reclassify as financial obligations
preferred equity securities that are convertible into common shares at the option of the holders at
market prices, notwithstanding the companys right to redeem the securities for cash prior to
conversion. This change will be implemented January 1, 2005. COMMON SHARES As at December 31, 2004, the company had 155,591,853 issued and outstanding common shares. On
a fully diluted basis, the company had 158,720,432 common shares outstanding, calculated as
follows: 2004
    
    
    2003
    
    
    2002Common shares outstanding
    
    
    155,591,853
    
    
    
    156,246,701
    
    
    
    160,364,416Unexercised options
    
    
    3,128,579
    
    
    
    3,306,240
    
    
    
    3,568,791Common
shares outstanding - fully diluted
    
    
    158,720,432
    
    
    
    159,552,941
    
    
    
    163,933,207Common shares repurchased
    
    
    1,409,900
    
    
    
    5,006,700
    
    
    
    1,385,900
 The diluted book value per common share at December 31, 2004 was $13.19 compared with $12.31
at December 31, 2003. During the year ended December 31, 2004, the company repurchased 1.4 million
shares under its normal course issuer bid at an average price of $30.54 per share. Since the
inception of the normal course issuer bid in 1999, 12.2 million shares have been repurchased at an
average price of $19.69 per share. The book value of Brookfields common equity was $2.0 billion at
December 31, 2004, compared with a market equity capitalization of $5.8 billion, calculated as
total common shares outstanding
multiplied by $37.40, the closing price per common share on the New York Stock Exchange on December
31, 2004. On February 9, 2005, the Board of Directors approved a three-for-two stock split. The stock split
will be in the form of a stock dividend. Shareholders will receive one Brookfield common share for
each two common shares held. The stock dividend will be payable on March 31, 2005 to shareholders
of record at the close of business on March 15, 2005. The stock split will not change the economic
value of the common shares issued and outstanding. Effectively, the number of common shares
increases by one-half and the earnings per share decreases by one-third. 32




---



##### 



COST OF CAPITAL Brookfield continually strives to reduce its weighted average cost of capital and improve
common shareholders equity returns through value-enhancement initiatives and the consistent
monitoring of the balance between debt and equity financing. Brookfields weighted average cost of capital, utilizing a 20% return on equity, is 9.2%.
Brookfields cost of capital is lower than many of its peers because of the greater amount of
investment-grade financing which can be placed on the companys assets, a function of the
high-quality assets and tenant base which comprise Brookfields portfolio. FOREIGN EXCHANGE FLUCTUATIONS While approximately 25% of Brookfields assets and revenues originate in Canada, Brookfield
has substantially matched its Canadian assets with Canadian liabilities. As a result, Brookfield
has generally not been materially impacted by the movement in the Canadian to U.S. dollar exchange
rate. REAL ESTATE INDUSTRY AND RISKS Brookfields strategy is to invest in high-quality commercial properties defined by the
physical characteristics of the asset, but more importantly, the certainty of receiving rental
payments from the tenants of those assets. Brookfield remains exposed to certain risks inherent in
the commercial property business. In evaluating Brookfield and its business, the following is a brief review of the potential impact
these different factors may have on the companys operations. Further discussion of the risk
factors that should be considered can be found in Brookfields Annual Information Form posted on
the companys Web site at www.brookfieldproperties.com, or on www.sedar.com or www.sec.gov. Real estate investments are generally subject to varying degrees of risk depending on the nature of the
property. These risks include changes in general economic conditions (such as the availability and
cost of mortgage funds), local conditions (such as an oversupply of space or a reduction in demand
for real estate in the markets in which the company operates), the attractiveness of the properties
to tenants, competition from others with available space and the ability of the owner 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 or not a property is
producing sufficient income to service these expenses. Brookfields commercial properties are
subject to mortgages, which require significant debt service payments. If the company is 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 sale. Real estate is relatively illiquid. Such illiquidity will tend to limit Brookfields ability to vary its 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 Brookfield
operates. Brookfields 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 to
ensure expiring leases are renewed and new tenants are found promptly to fill vacancies. While the outlook for commercial office rents is positive in the longer term, 2005 may not provide
the same level of increases in rental rates on renewal as compared to previous years. The company
is, however, substantially protected against these short-term market conditions, since most of the
companys leases are long-term in nature with an average term of ten years. A protracted disruption
in the economy, such as the onset of a severe recession, could place downward pressure on overall
occupancy levels and net effective rents. Brookfields commercial properties operations have
insurance covering certain acts of terrorism for up to $600 million of damage and business
interruption costs. The company continues to seek additional coverage equal to the full replacement
cost of its assets; however, until this type of coverage becomes commercially available on an
economically reasonable basis, any damage or business interruption costs as a result of uninsured
acts of terrorism could result in a material cost to the company. DERIVATIVE FINANCIAL INSTRUMENTS The company and its subsidiaries utilize derivative financial instruments primarily to manage
financial risks, including interest rate, commodity and foreign exchange risks. The use of
derivative contracts is governed by documented risk management policies and approved limits. Hedge
accounting is applied where the derivative is designated as a hedge of a specific exposure and
there is reasonable assurance the hedge will be effective. Realized and unrealized gains and losses
on forward exchange contracts designated as hedges of currency risks are included in the cumulative
translation account when the currency risk being hedged relates to a net investment in a
self-sustaining subsidiary. Otherwise, realized and unrealized gains and losses on derivative
financial instruments designated as hedges of financial risks are included in income as an offset
to the hedged item in the period the underlying asset, liability or anticipated transaction affects
income. At December 31, 2004, the company had foreign exchange contracts to sell a notional amount 33




---



##### 



of C$711 million at a weighted average exchange rate of C$1.00 = US$0.76, maturing in January 2005,
designated as hedges for accounting purposes to manage the companys foreign exchange risk in
respect to its Canadian-denominated net investments. The fair value of these contracts at December
31, 2004 was a loss of $52 million which is reflected in the cumulative translation adjustment
account. The companys self-sustaining subsidiaries also had foreign exchange contracts to sell a
notional amount of US$310 million at a weighted average exchange rate of US$1.00 = C$1.33, maturing
in January 2005, which have not been designated as hedges for financial reporting purposes. The
aggregate fair value of these contracts at December 31, 2004 was a gain of $30 million. DISCONTINUED OPERATIONS On October 29, 2002, the Board of Directors approved the special distribution of Brookfield
Homes, the companys U.S. residential home building business. Brookfield Homes commenced trading on
the NYSE under the symbol BHS on January 7, 2003. This transaction allowed Brookfield to focus on
its core business of owning and operating premier office properties in select North American city
centers, as well as enabling shareholders to maximize the value of their interest in Brookfields
U.S. residential home building operations by remaining as a shareholder or monetizing their
investment. Common shareholders of record on January 2, 2003 received a special distribution equivalent to
one-fifth of a Brookfield Homes share for each Brookfield common share that they owned. The value
of the special dividend, based on a book value of $323 million of equity, was $2.00 per Brookfield
common share and resulted in a reduction in the stated value of the companys common equity of $323
million, as approved by the companys shareholders on December 16, 2002. The company has not
retained any common share ownership of Brookfield Homes; however, it did retain a $98 million
subordinated note receivable that was set to mature on December 31, 2005, which bore interest at
10%. This note was subsequently repaid by Brookfield Homes in 2003. At December 31, 2002, total assets of Brookfield Homes included in the companys assets were $879
million, an increase of $7 million over 2001. These assets were financed at the asset level by $556
million in construction debt facilities, payables and subordinated debt at December 31, 2002. Reflecting the distribution as if it were completed at December 31, 2002, the pro forma balance
sheet of Brookfield Homes was as follows: (Millions)
    
    2002AssetsResidential housing inventory
    
    $
    734Development properties
    
    
    40Receivables and other
    
    
    105$
    879LiabilitiesResidential construction financing
    
    $
    345Accounts payable and other liabilities
    
    
    113Subordinated debt
    
    
    98Common shares
    
    
    323$
    879
 Contributions to income from discontinued operations was comprised entirely of the results of
operations from Brookfields U.S. residential home building business. This contribution to total
funds from operations increased to $73 million in 2002 from $65 million in 2001 as continued low
interest rates increased demand for homes in Brookfield Homes markets throughout California and
Northern Virginia. After considering the impact of future income taxes, Brookfield Homes
contributed $44 million to net income in 2002, an increase of 13% over 2001. Pursuant to the distribution of Brookfield Homes on January 6, 2003, the Board of Directors
approved a methodology for adjusting downward the exercise price of all outstanding stock options
at that date, to give effect to this distribution. This methodology, developed in consultation with
the Toronto Stock Exchange, resulted in a reduction of the exercise price of all outstanding stock
options by $1.00 effective February 4, 2003. The Company recognized an expense as a result of
reducing the strike price of outstanding stock options measured as the difference between the fair
value of the modified options determined using the Black-Scholes model of valuation and the value
of the old options immediately before their terms were modified, determined based on the expected
remaining life of the outstanding revalued stock options. SEGMENTED INFORMATION The company and its subsidiaries operate in the U.S. and Canada within the commercial property
business and the residential land development business. The commercial markets in which the company
operates are primarily New York, Boston, Washington, D.C., Denver and Minneapolis in the U.S., and
Toronto and Calgary in Canada. Approximately 73% of the companys net operating income 34




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or 69% of the companys funds from operations are derived from the U.S. The companys residential
land development operations are focused in five markets: Calgary, Edmonton, and Toronto in Canada
and Denver and Austin in the U.S. Details of the segmented financial information for the companys
principal areas of business by industry and geographic location are provided in Note 19 of the
consolidated financial statements. The details of the contribution to net operating income and funds from operations by region are as
follows: By Contribution to Net
    
    
    By Contribution toRegion
    
    Operating Income
    
    
    Funds from OperationsNew York, New York
    
    
    56
    %
    
    
    51
    %Boston, Massachusetts
    
    
    6
    %
    
    
    7
    %Washington, D.C.
    
    
    3
    %
    
    
    3
    %Toronto, Ontario
    
    
    13
    %
    
    
    14
    %Calgary, Alberta
    
    
    8
    %
    
    
    10
    %Denver, Colorado
    
    
    5
    %
    
    
    5
    %Minneapolis, Minnesota
    
    
    3
    %
    
    
    3
    %Other
    
    
    6
    %
    
    
    7
    %Total
    
    
    100
    %
    
    
    100
    %
 CHANGES IN ACCOUNTING POLICIES Effective January 1, 2004, the company adopted CICA Handbook section 1100, Generally Accepted
Accounting Principles. The section establishes standards for financial reporting in accordance
with Canadian GAAP, and provides guidance on sources to consult when selecting accounting policies
and determining appropriate disclosures when a matter is not dealt with explicitly in the primary
sources of Canadian GAAP. In particular, this section requires the company to record income arising
from tenant leases and depreciation on buildings on a straight-line basis. Adoption of this section
resulted in recognition of additional straight-line rental revenue of $22 million and additional
depreciation of $58 million before any tax effects for the year ended December 31, 2004.
Previously, the company recorded rental revenue as it was contractually due and payable, and
recorded depreciation on buildings using the sinking fund method. Effective January 1, 2004, the company adopted CICA Handbook section 3063, Impairment of
Long-Lived Assets. The section provides that an impairment loss be recognized when the carrying
value of an asset exceeds the total undiscounted cash flows expected from its use and eventual
disposition. The impairment recognized is measured as the amount by which the carrying value
exceeds its fair value. The adoption of section 3063 did not have a significant impact on the
companys consolidated financial statements. Previously, the impairment was measured as the excess
of the carrying value over the sum of the total undiscounted cash flows. Effective January 1, 2004, the company adopted CICA Handbook section 3110, Asset Retirement Obligations. The section
addresses the recognition and re-measurement of obligations associated with the retirement of a
tangible long-lived asset. This standard provides that obligations associated with the retirement
of tangible long-lived assets be recorded as liabilities when those obligations are incurred, with
the amount of the liability initially measured at fair value. These obligations are capitalized to
the book value of the related long-lived assets and are depreciated over the useful life of the
related asset. The adoption of section 3110 did not have a significant impact on the companys
consolidated financial statements. Effective January 1, 2004, the company adopted Accounting Guideline 13, Hedging Relationships,
(AcG 13), a new accounting guideline issued by the Accounting Standards Board (AcSB) of the CICA
addressing identification, designation, documentation and effectiveness of hedging relationships
for the purposes of applying hedge accounting. Under AcG 13, hedge designation of derivative
financial instruments is only allowed if, both at the inception of the hedge and throughout the
hedge period, the changes in the fair value or cash flows of the derivative instruments are
expected to substantially offset the fair value or cash flows of the underlying asset, liability or
anticipated transaction. Realized and unrealized gains and losses on derivative financial
instruments designated as hedges of financial risks are included in income in the same period as
when the underlying asset, liability or anticipated transaction affects income. The company has adopted CICA Emerging Issue Committee Abstract 140, Accounting for Operating
Leases Acquired in Either an Asset Acquisition or Business Combination, (EIC 140), issued in
September 2003. EIC 140 requires that when a company acquires real estate in either an asset
acquisition or business combination, a portion of the purchase price should be allocated to the
in-place leases to reflect the intangible amounts of leasing costs, above or below market leases
and tenant relationship values, if any. These intangible costs are amortized over their respective
lease terms. The adoption of EIC 140 did not have a significant impact on the companys
consolidated financial statements. 35




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##### 



USE OF ESTIMATES The preparation of financial statements in conformity with Canadian generally accepted
accounting principles requires estimates and assumptions that affect the carried amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates. Significant estimates are required in the determination of:
future cash flows and probabilities in assessing net recoverable amounts and net realizable value,
the allocation of the purchase price to components of commercial properties acquired, depreciation
and amortization, the companys ability to utilize tax losses, hedge effectiveness, and fair value
for disclosure purposes. These estimates are impacted by, among other things, movements in interest
rates and other factors as described in the analysis of business environment and risks included on
page 33. The interrelated and complex nature of these factors prevents us from quantifying the
overall impact of movements on the companys financial statements. OUTLOOK We are optimistic as we look to 2005. The leasing markets within which we operate are
continuing to improve on a measured basis and the general economic environment has strengthened,
although there are some conditions that warrant continued caution. The company remains focused on
delivering on its performance targets and creating shareholder value. With a strong balance sheet,
over six million square feet of development opportunities, significant financial flexibility, a
solid growth strategy and a dedicated team, Brookfield is well positioned to continue to deliver on
its commitments to shareholders. -s- Craig J. Laurie Craig J. LaurieSenior Vice President and Chief Financial Officer February 9, 2005 DIVIDENDS PAID Dividends paid per share by the company during the year ended December 31, 2004 and in the past three fiscal years are as follows: 2004
    
    
    2003
    
    
    2002
    
    
    2001Common shares (US$)
    
    $
    0.6200
    
    
    $
    2.5000
    (1)
    
    $
    0.4000
    
    
    $
    0.3300Class A preferred shares (C$)
    
    
    0.1875
    
    
    
    0.1875
    
    
    
    0.1875
    
    
    
    0.1875Class AA Series E preferred shares (C$)
    
    
    0.7061
    
    
    
    0.8202
    
    
    
    0.7272
    
    
    
    1.1009Class AAA Series A preferred shares (C$)
    
    
    
    
    
    
    
    
    
    
    1.6521
    
    
    
    2.2500Class AAA Series B preferred shares (C$)
    
    
    
    
    
    
    
    
    
    
    1.6521
    
    
    
    2.2500Class AAA Series C preferred shares (C$)
    
    
    
    
    
    
    1.2356
    
    
    
    2.0000
    
    
    
    2.0000Class AAA Series D preferred shares (C$)
    
    
    
    
    
    
    1.2356
    
    
    
    2.0000
    
    
    
    2.0000Class AAA Series F preferred shares (C$)
    
    
    1.5000
    
    
    
    1.5000
    
    
    
    0.3986
    
    
    
    Class AAA Series G preferred shares (US$)
    
    
    1.3125
    
    
    
    0.7237
    
    
    
    
    
    
    
    Class AAA Series H preferred shares (C$)
    
    
    1.4375
    
    
    
    0.3033
    
    
    
    
    
    
    
    Class AAA Series I preferred shares (C$)
    
    
    1.3000
    
    
    
    
    
    
    
    
    
    
    
    Class AAA Series J preferred shares (C$)
    
    
    0.8333
    
    
    
    
    
    
    
    
    
    
    
    Class AAA Series K preferred shares (C$)
    
    
    0.2486
    
    
    
    
    
    
    
    
    
    
    
    
   (1) Includes the distribution of Brookfield Homes
Corporation valued at $2.00 per common share
 36