Exhibit 99.3
 Managements Responsibility for the Financial Statements
    -s- Richard B. Clark
    
    -s- Bryan K. DavisRichard B. Clark
    
    Bryan K. DavisChief Executive Officer
    
    Senior Vice President and Chief Financial OfficerMarch 6, 2009
 66




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##### 



Report of Independent Registered Chartered Accountants
 To the Board of Directors and Shareholders of Brookfield Properties Corporation
     (DELOITTE & TOUCHE LLP)Toronto, Canada
    
    Independent Registered Chartered AccountantsMarch 6, 2009
    
    Licensed Public Accountants
 67




---



##### 



Managements Report on Internal Control over Financial Reporting
     -s- Richard B. Clark
    
    -s- Bryan K. DavisRichard B. Clark
    
    Bryan K. DavisChief Executive Officer
    
    Senior Vice President and Chief Financial OfficerMarch 6, 2009
 68




---



##### 



Report of Independent Registered Chartered Accountants
 To the Board of Directors and Shareholders of Brookfield Properties Corporation
       (DELOITTE & TOUCHE LLP)Toronto, Canada
    
    Independent Registered Chartered AccountantsMarch 6, 2009
    
    Licensed Public Accountants
 69




---



##### 



Consolidated Balance Sheets
 December 31 (US Millions)
    
    Note
    
    
    2008
    
    
    2007AssetsCommercial properties
    
    
    4
    
    
    $
    14,901
    
    
    $
    15,889Commercial developments
    
    
    5
    
    
    
    1,225
    
    
    
    1,172Residential developments
    
    
    6
    
    
    
    1,196
    
    
    
    1,228Receivables and other
    
    
    7
    
    
    
    935
    
    
    
    1,056Intangible assets
    
    
    8
    
    
    
    637
    
    
    
    759Restricted cash and deposits
    
    
    9
    
    
    
    116
    
    
    
    151Cash and cash equivalents
    
    
    27
    
    
    
    157
    
    
    
    214Assets related to discontinued operations
    
    
    10
    
    
    
    290
    
    
    
    4$
    19,457
    
    
    $
    20,473LiabilitiesCommercial property debt
    
    
    11
    
    
    $
    11,505
    
    
    $
    12,125Accounts payable and other liabilities
    
    
    12
    
    
    
    1,168
    
    
    
    1,357Intangible liabilities
    
    
    13
    
    
    
    707
    
    
    
    834Future income tax liabilities
    
    
    14
    
    
    
    247
    
    
    
    600Liabilities related to discontinued operations
    
    
    10
    
    
    
    217
    
    
    
    3Capital securities  corporate
    
    
    15
    
    
    
    882
    
    
    
    1,053Capital securities  fund subsidiaries
    
    
    16
    
    
    
    711
    
    
    
    739Non-controlling interests  fund subsidiaries
    
    
    16
    
    
    
    212
    
    
    
    216Non-controlling interests  other subsidiaries
    
    
    18
    
    
    
    68
    
    
    
    86Preferred equity  subsidiaries
    
    
    19
    
    
    
    313
    
    
    
    382Shareholders equityPreferred equity  corporate
    
    
    20
    
    
    
    45
    
    
    
    45Common equity
    
    
    21
    
    
    
    3,382
    
    
    
    3,033$
    19,457
    
    
    $
    20,473
 See accompanying notes to the consolidated financial statements
 On behalf of the Board,
 -s- Gordon E. Arnell
    
    -s- Richard B. ClarkGordon E. Arnell
    
    Richard B. ClarkChairman
    
    Chief Executive Officer
 70




---



##### 



Consolidated Statements of Income
 December 31 (US Millions, except per share amounts)
    
    Note
    
    
    2008
    
    
    2007Total revenue
    
    
    23
    
    
    $
    2,805
    
    
    $
    2,842Net operating incomeCommercial property operations
    
    
    23
    
    
    $
    1,328
    
    
    $
    1,260Residential development operations
    
    
    23
    
    
    
    144
    
    
    
    237Interest and other
    
    
    23
    
    
    
    52
    
    
    
    441,524
    
    
    
    1,541ExpensesInterestCommercial property debt
    
    
    
    
    
    
    637
    
    
    
    673Capital securities  corporate
    
    
    15
    
    
    
    57
    
    
    
    61Capital securities  fund subsidiaries
    
    
    16
    
    
    
    (70
    )
    
    
    (27
    )General and administrative
    
    
    
    
    
    
    103
    
    
    
    103Non-controlling interestsFund subsidiaries
    
    
    16
    
    
    
    (22
    )
    
    
    (75
    )Other subsidiaries
    
    
    
    
    
    
    20
    
    
    
    23Depreciation and amortization
    
    
    
    
    
    
    545
    
    
    
    519Future income taxes
    
    
    14
    
    
    
    (429
    )
    
    
    69Other
    
    
    17
    
    
    
    (24
    )
    
    
    44Net income from continuing operations
    
    
    
    
    
    
    707
    
    
    
    151Discontinued operations
    
    
    10
    
    
    
    (7
    )
    
    
    89Net income
    
    
    
    
    
    $
    700
    
    
    $
    240Net income from continuing operations per common share
    
    
    21Basic
    
    
    
    
    
    $
    1.79
    
    
    $
    0.38Diluted
    
    
    
    
    
    $
    1.79
    
    
    $
    0.37Net income per common share
    
    
    21Basic
    
    
    
    
    
    $
    1.77
    
    
    $
    0.60Diluted
    
    
    
    
    
    $
    1.77
    
    
    $
    0.59
 See accompanying notes to the consolidated financial statements
 71




---



##### 



Consolidated Statements of Changes in Common Equity
 December 31 (US Millions)
    
    Note
    
    
    2008
    
    
    2007Common sharesBalance, beginning of year
    
    
    
    
    
    $
    2,282
    
    
    $
    2,303Shares repurchased
    
    
    
    
    
    
    (13
    )
    
    
    (26
    )Proceeds from shares issued on exercise of options
    
    
    
    
    
    
    5
    
    
    
    5Balance, end of year
    
    
    21
    
    
    
    2,274
    
    
    
    2,282Contributed surplusBalance, beginning of year
    
    
    
    
    
    
    
    
    
    
    2Shares repurchased
    
    
    
    
    
    
    (6
    )
    
    
    (8
    )Stock-based compensation awards
    
    
    22
    
    
    
    6
    
    
    
    6Balance, end of year
    
    
    
    
    
    
    
    
    
    
    Retained earningsBalance, beginning of year
    
    
    
    
    
    
    659
    
    
    
    707Net income
    
    
    
    
    
    
    700
    
    
    
    240Shareholder distributionsPreferred share dividends  corporate
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Common share dividends
    
    
    
    
    
    
    (220
    )
    
    
    (216
    )Amount paid in excess of the book value of common shares purchased for cancellation
    
    
    
    
    
    
    (21
    )
    
    
    (69
    )Balance, end of year
    
    
    
    
    
    
    1,115
    
    
    
    659Accumulated other comprehensive (loss) incomeBalance, beginning of year
    
    
    
    
    
    
    92
    
    
    
    52Other comprehensive (loss) income for the year
    
    
    
    
    
    
    (99
    )
    
    
    40Balance, end of year
    
    
    21
    
    
    
    (7
    )
    
    
    92Total retained earnings and accumulated other comprehensive (loss) income
    
    
    
    
    
    
    1,108
    
    
    
    751Total common equity
    
    
    
    
    
    $
    3,382
    
    
    $
    3,033
 See accompanying notes to the consolidated financial statements
 Consolidated Statements of Comprehensive Income
 December 31 (US Millions)
    
    Note
    
    
    2008
    
    
    2007Net income
    
    
    
    
    
    $
    700
    
    
    $
    240Other comprehensive (loss) incomeChange in foreign currency translation (losses) gains on investments in subsidiaries
    
    
    
    
    
    
    (307
    )
    
    
    181Gains (losses) arising from hedges of net investments in subsidiaries, net of taxes of $49 million
(2007  $39 million)
    
    
    
    
    
    
    228
    
    
    
    (122
    )Net gains (losses) on derivatives designated as cash flow hedges, net of non-controlling
interests, net of taxes of $1 million (2007  $7 million)
    
    
    
    
    
    
    2
    
    
    
    (20
    )Reclassification to earnings of foreign exchange gains
    
    
    17
    
    
    
    (24
    )
    
    
    Reclassification to earnings of losses, net of taxes of $1 million (2007  $1 million)
    
    
    
    
    
    
    2
    
    
    
    1Total other comprehensive (loss) income
    
    
    
    
    
    
    (99
    )
    
    
    40Comprehensive income
    
    
    
    
    
    $
    601
    
    
    $
    280
 See accompanying notes to the consolidated financial statements
 72




---



##### 



Consolidated Statements of Cashflow
 December 31 (US Millions)
    
    Note
    
    
    2008
    
    
    2007Operating activitiesNet income
    
    
    
    
    
    $
    700
    
    
    $
    240Depreciation and amortization
    
    
    
    
    
    
    555
    
    
    
    534Future income taxes
    
    
    
    
    
    
    (399
    )
    
    
    103Foreign exchange gain
    
    
    17
    
    
    
    (24
    )
    
    
    Impairment loss
    
    
    10
    
    
    
    147
    
    
    
    Debt defeasance cost
    
    
    17
    
    
    
    
    
    
    
    27Property disposition gains
    
    
    10
    
    
    
    (164
    )
    
    
    (144
    )Amortization of value of acquired operating leases to rental revenue, net
    
    
    
    
    
    
    (139
    )
    
    
    (137
    )Straight-line rent, net
    
    
    
    
    
    
    (35
    )
    
    
    (47
    )Amortization of transaction costs
    
    
    
    
    
    
    16
    
    
    
    21Stock option and deferred share unit grant expense
    
    
    
    
    
    
    6
    
    
    
    3Non-controlling interests  fund and other subsidiaries
    
    
    
    
    
    
    (2
    )
    
    
    (52
    )Non-cash component of capital securities  fund subsidiaries
    
    
    16
    
    
    
    (93
    )
    
    
    (82
    )Income from equity-accounting investments
    
    
    
    
    
    
    (9
    )
    
    
    (4
    )Distributions received from equity-accounted investments
    
    
    
    
    
    
    3
    
    
    
    3Deferred leasing costs
    
    
    
    
    
    
    (49
    )
    
    
    (41
    )Increase in land and housing inventory and related working capital
    
    
    
    
    
    
    (148
    )
    
    
    (355
    )Working capital and other
    
    
    
    
    
    
    94
    
    
    
    (82
    )459
    
    
    
    (13
    )Financing activities and capital distributionsCommercial property debt arranged
    
    
    
    
    
    
    1,079
    
    
    
    1,776Commercial property debt repaid
    
    
    
    
    
    
    (1,184
    )
    
    
    (1,513
    )Corporate credit facilities arranged
    
    
    
    
    
    
    270
    
    
    
    837Corporate credit facilities repaid
    
    
    
    
    
    
    (346
    )
    
    
    (734
    )Capital securities arranged  fund subsidiaries
    
    
    
    
    
    
    34
    
    
    
    Non-controlling interest contributions arranged  fund subsidiaries
    
    
    
    
    
    
    16
    
    
    
    9Acquisition financing arranged
    
    
    
    
    
    
    
    
    
    
    130Land development debt arranged
    
    
    
    
    
    
    103
    
    
    
    271Land development debt repaid
    
    
    
    
    
    
    (91
    )
    
    
    (52
    )Distributions to non-controlling interests
    
    
    
    
    
    
    (36
    )
    
    
    (19
    )Common shares issued
    
    
    
    
    
    
    5
    
    
    
    5Common shares repurchased
    
    
    
    
    
    
    (40
    )
    
    
    (105
    )Preferred share dividends
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Common share dividends
    
    
    
    
    
    
    (220
    )
    
    
    (216
    )(413
    )
    
    
    386Investing activitiesLoans receivable
    
    
    
    
    
    
    35
    
    
    
    40Loans receivable  affiliate
    
    
    27
    
    
    
    
    
    
    
    (200
    )Acquisitions of commercial properties, net
    
    
    27
    
    
    
    (16
    )
    
    
    (307
    )Proceeds from sale of commercial properties, net
    
    
    27
    
    
    
    420
    
    
    
    224Restricted cash and deposits
    
    
    
    
    
    
    35
    
    
    
    365Commercial development and redevelopment investments
    
    
    
    
    
    
    (394
    )
    
    
    (313
    )Commercial property tenant improvements
    
    
    
    
    
    
    (106
    )
    
    
    (107
    )Capital expenditures
    
    
    
    
    
    
    (77
    )
    
    
    (49
    )(103
    )
    
    
    (347
    )(Decrease) increase in cash resources
    
    
    
    
    
    
    (57
    )
    
    
    26Opening cash and cash equivalents
    
    
    
    
    
    
    214
    
    
    
    188Closing cash and cash equivalents
    
    
    
    
    
    $
    157
    
    
    $
    214
 See accompanying notes to the consolidated financial statements
 73




---



##### 



Notes to the Consolidated Financial Statements
 NOTE 1: SUMMARY OF ACCOUNTING POLICIES
 (a) General
  (b) Principles of consolidation
  (i)
    
    the accounts of all wholly-owned subsidiaries of the company and the accounts of
all such wholly-owned subsidiaries incorporated and unincorporated joint ventures to
the extent of their proportionate interest in the respective assets, liabilities,
revenue and expenses of such ventures;(ii)
    
    the accounts of BPO Properties Ltd. (BPO Properties) and Brookfield Financial
Properties, L.P. (Brookfield Financial Properties) and the accounts of BPO Properties
and Brookfield Financial Properties incorporated and unincorporated joint ventures to
the extent of their proportionate interest in the respective assets, liabilities,
revenue and expenses of such ventures; and(iii)
    
    the accounts of Brookfield Properties Office Partners, Inc., TRZ Holdings LLC,
BPOP Holdings (US) LLC and BPOP (Canada) Inc. (collectively, the US Office Fund) and
the accounts of the US Office Funds incorporated and unincorporated joint ventures to
the extent of its proportionate interest in the respective assets, liabilities, revenue
and expenses of such ventures.
  (i)
    
    Brookfield Financial Properties: The company owns a 99.4% limited partnership
interest and a 100% managing general partnership interest in Brookfield Financial
Properties.(ii)
    
    BPO Properties: The company owns 89.2% on an equity basis and 56.1% on a voting
basis of the common shares of BPO Properties.(iii)
    
    US Office Fund: The company owns an indirect 45% economic interest in the US
Office Fund through its 100% equity interest in BPOP (Canada) Inc., which in turn holds
38% of the common equity in TRZ Holdings II Inc. (formerly Trizec Properties Inc.), and
its 6% equity interest in Brookfield Properties Office Partners, Inc., which holds a 35%
interest in the legal equity of TRZ Holdings LLC (which holds the remaining 62% of the
common equity of TRZ Holdings II Inc.). The company has determined that TRZ Holdings LLC
is a variable interest entity based on the characteristics of its equity. The company
consolidates TRZ Holdings LLC and the underlying portfolio of properties as, through its
subsidiaries, it is the most closely associated member of a related party group that
will absorb the majority of the variability of TRZ Holdings LLCs operations.
 (c) Properties
 (i)
    
    Commercial propertiesCommercial properties held for investment are carried at cost less accumulated
depreciation. Upon acquisition, the company allocates the purchase price to the
components of the commercial properties acquired: the amount allocated to land is based
on its estimated fair value; buildings and existing tenant improvements are recorded at
depreciated replacement cost; above- and below-market in-place operating leases are
determined based on the present value of the difference between the rents payable under
the contractual terms of the leases and estimated market rents; lease origination costs
for in-place operating leases are determined based on the estimated costs that would be
incurred to put the existing leases in place under the same terms and conditions; and
tenant relationships are measured based on the present value of the estimated avoided net
costs if a tenant were to renew its lease at expiry, discounted by the probability of
such renewal.Depreciation on buildings is provided on a straight-line basis over the useful lives of
the properties to a maximum of 60 years. Depreciation is determined with reference to
each rental propertys carried value, remaining estimated useful life and residual value.
Acquired tenant improvements, above- and below-market in-place operating leases and lease
origination costs are amortized on a straight-line basis over the remaining terms of the
leases. The value associated with acquired tenant relationships is amortized on a
straight-line basis over the expected term of the relationships. Depreciation on
buildings and amortization on tenant improvements and acquired tenant relationships are
recorded in depreciation and amortization expense. All other amounts are amortized to
revenue.The unamortized balance of above- and below- market leases, lease origination costs and
tenant relationships is included in intangible assets or intangible liabilities as
appropriate.
 74




---



##### 



Properties are reviewed for impairment whenever events or changes in circumstances
indicate the carrying value may not be recoverable. For commercial properties, an
impairment loss is recognized when a propertys carrying value exceeds its undiscounted
future net cashflow. The impairment is measured as the amount by which the carrying value
exceeds the estimated fair value. Projections of future cashflow take into account the
specific business plan for each property and managements best estimate of the most
probable set of economic conditions anticipated to prevail in the market.Leasing costs, which include third-party brokerage fees and legal costs incurred in the
successful negotiation of leases, have been deferred and are being amortized on a
straight-line basis over the terms of the respective leases. The unamortized balance is
included in commercial properties.(ii)
    
    Commercial developmentsCommercial properties under development consist of properties for which a major
repositioning program is being conducted and properties which are under construction.
These properties are recorded at cost, including pre-development expenditures. For
commercial development properties, an impairment loss is recognized when a propertys
carrying value exceeds its undiscounted future net cashflow. Properties are reviewed for
impairment whenever events or changes in circumstances indicate the carrying value may
not be recoverable. The impairment is measured as the amount by which the carrying value
exceeds the estimated fair value. Projections of future cashflow take into account the
specific business plan for each property and managements best estimate of the most
probable set of economic conditions anticipated to prevail in the market.(iii)
    
    Residential developmentsDevelopment land is held for residential development and is recorded at the lower of cost
and estimated net realizable value. Costs are allocated to the saleable acreage of each
project or subdivision in proportion to the anticipated revenue. For residential
developments, an impairment loss is recognized when carrying value of the land exceeds
its undiscounted future net cashflow. Residential developments are reviewed for
impairment whenever events or changes in circumstances indicate the carrying value may
not be recoverable. The impairment is measured as the amount by which the carrying value
exceeds the estimated fair value. Projections of future cashflow take into account the
specific development plans for each project and managements best estimate of the most
probable set of economic conditions anticipated to prevail in the market.(iv)
    
    Discontinued operationsProperties that qualify as held for sale pursuant to the criteria of CICA Handbook
Section 3475, Disposal of Long-Lived Assets and Discontinued Operations, are classified
as discontinued operations. Such properties are recorded at the lower of carrying amount
or fair value less estimated cost to sell and are not depreciated while classified as
held for sale. The results of operations and balance sheet items related to any property
that has been identified as a discontinued operation are reported separately if the
company will not have any significant continuing involvement in the operations of the
property after the disposal transaction. Comparative amounts are also reclassified.
 (d) Capitalized costs
  (e) Tenant improvements
  75




---



##### 



(f) Stock-based compensation
  (g) Revenue recognition
 (i)
    
    Commercial propertiesThe company has retained substantially all of the risks and benefits of ownership of its
rental properties and therefore accounts for leases with its tenants as operating leases.
Revenue recognition under a lease begins when the tenant takes possession of, or
controls, the physical use of the property subject to the lease. Generally, this occurs
on the lease commencement date or, where the company is required to make additions to the
property in the form of tenant improvements, upon substantial completion of those
improvements. The total amount of contractual rent to be received from operating leases
is recognized on a straight-line basis over the term of the lease; a straight-line or
free rent receivable, as applicable, is recorded for the difference between the rental
revenue recorded and the contractual amount received. Rental revenue also includes
percentage participating rents and recoveries of operating expenses, including property
and capital taxes. Percentage participating rents are recognized when tenants specified
sales targets have been met. Operating expense recoveries are recognized in the period
that recoverable costs are chargeable to tenants.Revenue and expenses related to commercial developments are recognized in income when the
development is substantially complete. This is also the point at which the property is
reclassified from commercial developments to commercial properties. The company considers
a commercial development to be substantially complete upon the earlier of attaining an
occupancy that results in break even income after debt servicing or the expiration of a
reasonable maximum period of time, but no later than one year after completion of major
construction. Prior to substantial completion, revenues and expenses related to
commercial developments are capitalized to the property.(ii)
    
    Residential propertiesLand sales are recognized at the time that the risks and rewards of ownership have been
transferred, possession or title passes to the purchaser, all material conditions of the
sales contract have been met, and a significant cash down payment or appropriate security
is received.Revenue from the sale of homes is recognized when title passes to the purchaser upon
closing and at which time all proceeds are received or collectability is assured.(iii)
    
    Performance and management fee revenueThe company is entitled to management fees and performance fees on the management of
properties for third parties. The company recognizes performance fees in revenue when the
amount receivable from its fund partners is determinable at the end of a contractually
specified term.
 (h) Income taxes
  (i) Reporting currency and foreign currency translation
    76




---



##### 



(j) Use of estimates
  (k) Financial instruments and derivatives
         77




---



##### 



(l) Cash and cash equivalents
  NOTE 2: CHANGES IN ACCOUNTING POLICIES
 Capital Disclosures
  Financial Instruments  Disclosures and Presentation
  Inventories
  NOTE 3: FUTURE ACCOUNTING POLICY CHANGES
 Goodwill and Intangible Assets
  78




---



##### 



NOTE 4: COMMERCIAL PROPERTIES
  (Millions)
    
    2008
    
    
    2007Commercial propertiesLand
    
    $
    2,697
    
    
    $
    2,828Building and improvements
    
    
    13,501
    
    
    
    14,253Total commercial properties
    
    
    16,198
    
    
    
    17,081Less: Accumulated depreciation
    
    
    (1,297
    )
    
    
    (1,192
    )Total
    
    $
    14,901
    
    
    $
    15,889
    (Millions)
    
    2008
    
    
    2007Assets
    
    $
    2,982
    
    
    $
    3,369Liabilities
    
    
    1,650
    
    
    
    1,782Revenues
    
    
    519
    
    
    
    617Expenses
    
    
    269
    
    
    
    344Net income(1)
    
    
    132
    
    
    
    242Cashflow from operating activities
    
    
    222
    
    
    
    252Cashflow from (used in) financing activities
    
    
    34
    
    
    
    (169
    )Cashflow (used in) from investing activities
    
    
    (73
    )
    
    
    134
 (1)
    
    Future income taxes are not reflected here as they are recorded at the corporate
level NOTE 5: COMMERCIAL DEVELOPMENTS
  NOTE 6: RESIDENTIAL DEVELOPMENTS
  (Millions)
    
    2008
    
    
    2007Land under development
    
    $
    390
    
    
    $
    431Housing inventory
    
    
    88
    
    
    
    85Land held for development
    
    
    718
    
    
    
    712Total
    
    $
    1,196
    
    
    $
    1,228
   79




---



##### 



NOTE 7: RECEIVABLES AND OTHER
  (Millions)
    
    2008
    
    
    2007Accounts receivable
    
    $
    137
    
    
    $
    135Straight-line rent and free rent receivables
    
    
    409
    
    
    
    378Real estate mortgages
    
    
    21
    
    
    
    63Residential receivables and other assets
    
    
    241
    
    
    
    292Prepaid expenses and other assets
    
    
    127
    
    
    
    188Total
    
    $
    935
    
    
    $
    1,056
 NOTE 8: INTANGIBLE ASSETS
  (Millions)
    
    2008
    
    
    2007Intangible assetsLease origination costs
    
    $
    382
    
    
    $
    377Tenant relationships
    
    
    499
    
    
    
    501Above-market leases and below-market ground leases
    
    
    66
    
    
    
    82947
    
    
    
    960Less accumulated amortizationLease origination costs
    
    
    (151
    )
    
    
    (124
    )Tenant relationships
    
    
    (138
    )
    
    
    (62
    )Above-market leases and below-market ground leases
    
    
    (21
    )
    
    
    (15
    )Total net
    
    $
    637
    
    
    $
    759
 NOTE 9: RESTRICTED CASH AND DEPOSITS
  NOTE 10: DISCONTINUED OPERATIONS
    80




---



##### 



(Millions)
    
    2008
    
    
    2007Revenue
    
    $
    76
    
    
    $
    108Operating expenses
    
    
    (41
    )
    
    
    (55
    )35
    
    
    
    53Interest expense
    
    
    (19
    )
    
    
    (26
    )Depreciation and amortization
    
    
    (10
    )
    
    
    (15
    )Income from discontinued operations prior to gains, non-controlling interests and taxes
    
    
    6
    
    
    
    12Gain on sale of discontinued operations
    
    
    164
    
    
    
    144Impairment loss
    
    
    (147
    )
    
    
    Non-controlling interests
    
    
    
    
    
    
    (33
    )Future income taxes
    
    
    (30
    )
    
    
    (34
    )(Loss) income and gains from discontinued operations
    
    $
    (7
    )
    
    $
    89(Loss) income and gains from discontinued operations per share  basic and diluted
    
    $
    (0.02
    )
    
    $
    0.22
 NOTE 11: COMMERCIAL PROPERTY DEBT
      Weighted-AverageScheduled
    
    
    
    
    
    
    
    
    
    
    Interest Rate at(Millions)
    
    Amortization
    
    
    Maturities
    
    
    Total(1)
    
    
    Dec. 31, 20082009
    
    $
    164
    
    
    $
    995
    
    
    $
    1,159
    
    
    
    3.87
    %2010
    
    
    182
    
    
    
    286
    
    
    
    468
    
    
    
    4.64
    %2011(2)
    
    
    191
    
    
    
    4,463
    
    
    
    4,654
    
    
    
    3.98
    %2012
    
    
    199
    
    
    
    182
    
    
    
    381
    
    
    
    6.24
    %2013
    
    
    61
    
    
    
    1,286
    
    
    
    1,347
    
    
    
    5.93
    %2014 and thereafter
    
    
    669
    
    
    
    3,026
    
    
    
    3,695
    
    
    
    6.14
    %Total commercial property debt
    
    $
    1,466
    
    
    $
    10,238
    
    
    $
    11,704
    
    
    
    5.07
    %
 (1)
    
    Includes $199 million of commercial property debt related to discontinued
operations at December 31, 2008 (December 31, 2007  nil)(2)
    
    Corporate mezzanine debt of $3,089 million within the U.S. Office Fund matures in
2011
 NOTE 12: ACCOUNTS PAYABLE AND OTHER LIABILITIES
  (Millions)
    
    2008
    
    
    2007Accounts payable and accrued liabilities
    
    $
    525
    
    
    $
    613Straight-line rent payable
    
    
    70
    
    
    
    59Residential payables and accrued liabilities
    
    
    139
    
    
    
    184Land development debt
    
    
    434
    
    
    
    501Total
    
    $
    1,168
    
    
    $
    1,357
 81




---



##### 



Weighted Average
    
    
    Principal RepaymentsInterest Rate at
    
    
    
    
    
    2014
    
    
    2008
    
    
    2007(Millions)
    
    Dec. 31, 2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    & Beyond
    
    
    Total
    
    
    TotalLand development debt
    
    
    3.87
    %
    
    $
    379
    
    
    $
    48
    
    
    $
    7
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    434
    
    
    $
    501
 NOTE 13: INTANGIBLE LIABILITIES
  (Millions)
    
    2008
    
    
    2007Intangible liabilitiesBelow-market leases
    
    $
    996
    
    
    $
    971Above-market ground lease obligations
    
    
    40
    
    
    
    581,036
    
    
    
    1,029Less accumulated amortizationBelow-market leases
    
    
    (322
    )
    
    
    (189
    )Above-market ground lease obligations
    
    
    (7
    )
    
    
    (6
    )Total net
    
    $
    707
    
    
    $
    834
 NOTE 14: FUTURE INCOME TAXES
  (Millions)
    
    2008
    
    
    2007Future income tax assets:Loss carryforwards
    
    $
    134
    
    
    $
    344Deferred financing costs
    
    
    6
    
    
    
    44140
    
    
    
    388Future income tax liabilities:Properties
    
    
    314
    
    
    
    840Deferred revenue
    
    
    41
    
    
    
    134Other
    
    
    32
    
    
    
    14387
    
    
    
    988Net future income tax liabilities
    
    $
    247
    
    
    $
    600
   (Millions)
    
    2008
    
    
    2007Income tax expense at the Canadian federal and provincial income
tax rate of 33.5% (2007  35%)
    
    $
    96
    
    
    $
    70Increase (decrease) in income tax expense due to the following:Non-deductible preferred share dividends
    
    
    19
    
    
    
    18Lower income tax rates in other jurisdictions
    
    
    (38
    )
    
    
    (23
    )Change in tax rate applicable to temporary differences
    
    
    (479
    )
    
    
    (75
    )Foreign exchange gains and losses
    
    
    (49
    )
    
    
    43Change in future Canadian tax rates
    
    
    
    
    
    
    17Other
    
    
    22
    
    
    
    19Total net
    
    $
    (429
    )
    
    $
    69
  82




---



##### 



NOTE 15: CAPITAL SECURITIES  CORPORATE
  Shares
    
    
    Shares
    
    
    Cumulative(Millions, except share information)
    
    Authorized
    
    
    Outstanding
    
    
    Dividend Rate
    
    
    2008(1)
    
    
    2007Class AAA Series E(2)
    
    
    12,000,000
    
    
    
    8,000,000
    
    
    70% of bank prime
    
    $
    
    
    
    $
    Class AAA Series F
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    6.00
    %
    
    
    163
    
    
    
    199Class AAA Series G
    
    
    6,000,000
    
    
    
    4,400,000
    
    
    
    5.25
    %
    
    
    109
    
    
    
    109Class AAA Series H
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.75
    %
    
    
    162
    
    
    
    199Class AAA Series I
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.20
    %
    
    
    164
    
    
    
    199Class AAA Series J
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.00
    %
    
    
    163
    
    
    
    198Class AAA Series K
    
    
    8,000,000
    
    
    
    6,000,000
    
    
    
    5.20
    %
    
    
    121
    
    
    
    149Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    882
    
    
    $
    1,053
 (1)
    
    Net of transaction costs of $6 million at December 31, 2008 (2007  $7 million)
which are amortized to interest expense over the life of the securities following the
effective interest method(2)
    
    Owned by Brookfield Asset Management Inc. (BAM); balance has been offset with a
promissory note receivable from BAM  refer to Note 27(a)
   Redemption Date(1)
    
    Redemption Price(2)
    
    Companys Option(3)
    
    Holders Option(4)Series E
    
    Retractable at par
    
    
    
    
    
    Series F
    
    September 30, 2009
    
    C $25.75
    
    September 30, 2009
    
    March 31, 2013Series G
    
    June 30, 2011
    
    US $26.00
    
    June 30, 2011
    
    September 30, 2015Series H
    
    December 31, 2011
    
    C $26.00
    
    December 31, 2011
    
    December 31, 2015Series I
    
    December 31, 2008
    
    C $25.75
    
    December 31, 2008
    
    December 31, 2010Series J
    
    June 30, 2010
    
    C $26.00
    
    June 30, 2010
    
    December 31, 2014Series K
    
    December 31, 2012
    
    C $26.00
    
    December 31, 2012
    
    December 31, 2016
 (1)
    
    Subject to applicable law and rights of the company, the company may, on or
after the dates specified above, redeem Class AAA preferred shares for cash as follows: the
Series F at a price of C$25.75, if redeemed during the 12 months commencing September 30,
2009 and decreasing by C$0.25 each 12-month period thereafter to a price per share of
C$25.00 if redeemed on or after September 30, 2012; the Series G at a price of US$26.00, if
redeemed during the 12 months commencing June 30, 2011 and decreasing by US$0.33 each
12-month period thereafter to a price per share of US$25.00 if redeemed on or after June 30,
2014; the Series H at a price of C$26.00, if redeemed during the 12 months commencing
December 31, 2011 and decreasing by C$0.33 each 12-month period thereafter to a price per
share of C$25.00 if redeemed on or after December 31, 2014; the Series I at a price of
C$25.75, if redeemed during the 12 months commencing December 31, 2008 and decreasing by
C$0.25 each 12-month period thereafter to a price per share of C$25.00 if redeemed on or
after December 31, 2010; the Series J at a price of C$26.00 if redeemed during the 12 months
commencing June 30, 2010 and decreasing by C$0.25 each 12-month period thereafter to a price
per share of C$25.00 if redeemed on or after June 30, 2014; the Series K at a price of
C$26.00 if redeemed during the 12-months commencing December 31, 2012 and decreasing by
C$0.33 each 12-month period thereafter to a price per share of $C25.00 if redeemed on or
after December 31, 2015.(2)
    
    Subject to applicable law and rights of the company, the company may purchase
Class AAA preferred shares for cancellation at the lowest price or prices at which, in the
opinion of the Board of Directors of the company, such shares are obtainable.(3)
    
    Subject to the approval of the Toronto Stock Exchange the company may, on or after
the dates specified above, convert the Class AAA, Series F, G, H, I, J and K into common
shares of the company. The Class AAA, Series F, G, H, I, J and K preferred shares may be
converted into that number of common shares determined by dividing the then-applicable
redemption price by the greater of C$2.00 (Series G  US$2.00) or 95% of the weighted average
trading price of common shares at such time.(4)
    
    Subject to the companys right to redeem or find substitute purchasers, the holder
may, on or after the dates specified above, convert Class AAA, Series F, G, H, I, J and K
preferred shares into that number of common shares determined by dividing the then-applicable
redemption price by the greater of C$2.00 (Series G  US$2.00) or 95% of the weighted average
trading price of common shares at such time.
  83




---



##### 



(Millions)
    
    2008
    
    
    2007Series E(1)
    
    $
    
    
    
    $
    4Series F through K
    
    
    57
    
    
    
    57Total net
    
    $
    57
    
    
    $
    61
 (1)
    
    Owned by Brookfield Asset Management Inc.  refer to Note 27(a)
 NOTE 16: U.S. OFFICE FUND
  (Millions)
    
    2008
    
    
    2007Capital securities  fund subsidiariesDebt securities
    
    $
    240
    
    
    $
    234Redeemable equity interests
    
    
    471
    
    
    
    505711
    
    
    
    739Non-controlling interests  fund subsidiaries
    
    
    212
    
    
    
    216Total
    
    $
    923
    
    
    $
    955
     (Millions)
    
    2008
    
    
    2007Interest on debt securities(1)
    
    $
    (13
    )
    
    $
    26Interest on redeemable equity interests
    
    
    36
    
    
    
    2923
    
    
    
    55Non-cash component(2)
    
    
    (93
    )
    
    
    (82
    )Total interest expense  capital securities  fund subsidiaries
    
    $
    (70
    )
    
    $
    (27
    )
 (1)
    
    Interest on debt securities includes a gain of $38 million (2007  nil)
representing the effect of a change in estimated future cash flows to settle the obligation(2)
    
    Represents co-investors share of non-cash items, such as depreciation and
amortization
 (Millions)
    
    2008
    
    
    2007Non-controlling interests
    
    $
    74
    
    
    $
    62Non-cash component(1)
    
    
    (96
    )
    
    
    (111
    )Non-controlling interests  fund subsidiaries
    
    $
    (22
    )
    
    $
    (49
    )
 (1)
    
    Represents co-investors share of non-cash items, such as depreciation and
amortization
 84




---



##### 



(Millions)
    
    2008
    
    
    2007Non-controlling interests  fund subsidiaries  continuing operations
    
    $
    (22
    )
    
    $
    (75
    )Non-controlling interests  fund subsidiaries  discontinued operations
    
    
    
    
    
    
    26Total non-controlling interests  fund subsidiaries
    
    $
    (22
    )
    
    $
    (49
    )
 NOTE 17: OTHER
   NOTE 18: NON-CONTROLLING INTERESTS  OTHER SUBSIDIARIES
  (Millions)
    
    Others Equity Ownership
    
    
    2008
    
    
    2007Common shares of BPO Properties(1)
    
    
    10.8
    %
    
    $
    45
    
    
    $
    73Limited partnership units of Brookfield Financial Properties
    
    
    0.6
    %
    
    
    13
    
    
    
    13UCAR joint venture
    
    
    50.0
    %
    
    
    10
    
    
    
    Total
    
    
    
    
    
    $
    68
    
    
    $
    86
 (1)
    
    Canadian dollar denominated
  NOTE 19: PREFERRED EQUITY  SUBSIDIARIES
  Shares
    
    
    Preferred
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Shares Series
    
    Dividend Rate
    
    2008
    
    
    2007BPO Properties
    
    
    1,805,489
    
    
    Series G
    
    70% of bank prime
    
    $
    37
    
    
    $
    453,816,527
    
    
    Series J
    
    70% of bank prime
    
    
    78
    
    
    
    96300
    
    
    Series K
    
    30-day BA + 0.4%
    
    
    124
    
    
    
    1502,847,711
    
    
    Series M
    
    70% of bank prime
    
    
    58
    
    
    
    71800,000
    
    
    Series N
    
    30-day BA + 0.4%
    
    
    16
    
    
    
    20Total
    
    
    
    
    
    
    
    
    
    $
    313
    
    
    $
    382
      85




---



##### 



NOTE 20: PREFERRED EQUITY  CORPORATE
  Shares
    
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Dividend Rate
    
    
    2008
    
    
    2007Class A redeemable voting
    
    
    14,202,000
    
    

    7.50%

    
    $
    11
    
    
    $
    11Class AA Series E
    
    
    2,000,000
    
    
    70% of bank prime
    
    
    34
    
    
    
    34Total
    
    
    
    
    
    
    
    
    
    $
    45
    
    
    $
    45
    NOTE 21: COMMON EQUITY
 (a) Common shares
  2008
    
    
    2007Common shares outstanding, beginning of year
    
    
    392,805,608
    
    
    
    396,868,457Shares issued as a result of exercise of options
    
    
    581,436
    
    
    
    450,871Shares repurchased for cancellation
    
    
    (2,268,604
    )
    
    
    (4,513,720
    )Common shares outstanding, end of year
    
    
    391,118,440
    
    
    
    392,805,608
   (b) Accumulated other comprehensive income
  Balance as at Dec. 31(Millions)
    
    2008
    
    
    2007Unrealized foreign currency translation gains
on investments in subsidiaries, net of related hedging activities
    
    $
    12
    
    
    $
    115Losses on derivatives designated as cash flow
hedges(1), net of taxes and
non-controlling interests
    
    
    (19
    )
    
    
    (23
    )Accumulated other comprehensive income
    
    $
    (7
    )
    
    $
    92
 (1)
    
    Includes losses of $4 million which will be reclassified to interest expense over the
next 12 months (2007  $1 million)
 86




---



##### 



(c) Earnings per share
  (Millions, except per share amounts)
    
    2008
    
    
    2007Net income from continuing operations
    
    $
    707
    
    
    $
    151Preferred share dividends
    
    
    (3
    )
    
    
    (3
    )Net income from continuing operations available to common shareholders
    
    $
    704
    
    
    $
    148Net income
    
    $
    700
    
    
    $
    240Preferred share dividends
    
    
    (3
    )
    
    
    (3
    )Net income available to common shareholders
    
    $
    697
    
    
    $
    237Weighted average shares outstanding  basic
    
    
    392.3
    
    
    
    395.9Unexercised dilutive options
    
    
    0.9
    
    
    
    3.3Weighted average shares outstanding  diluted
    
    
    393.2
    
    
    
    399.2
 NOTE 22: STOCK-BASED COMPENSATION
    WeightedIssue
    
    Expiry
    
    
    Number
    
    
    AverageDate
    
    Date
    
    
    of Shares
    
    
    Exercise Price1999
    
    
    2009
    
    
    
    29,300
    
    
    $
    4.392000
    
    
    2010
    
    
    
    395,495
    
    
    
    4.962001
    
    
    2011
    
    
    
    729,162
    
    
    
    7.652002
    
    
    2012
    
    
    
    1,019,446
    
    
    
    8.112003
    
    
    2013
    
    
    
    901,458
    
    
    
    8.672004
    
    
    2014
    
    
    
    1,403,352
    
    
    
    13.322005
    
    
    2015
    
    
    
    828,602
    
    
    
    16.342006
    
    
    2016
    
    
    
    818,058
    
    
    
    19.902007
    
    
    2017
    
    
    
    1,513,044
    
    
    
    31.092008
    
    
    2018
    
    
    
    2,155,299
    
    
    
    18.66Total
    
    
    
    
    
    
    9,793,216
    
    
    $
    16.29
  2008
    
    
    2007Number
    
    
    Weighted Average
    
    
    Number
    
    
    Weighted Averageof Options
    
    
    Exercise Price
    
    
    of Options
    
    
    Exercise PriceOutstanding, beginning of year
    
    
    8,221,097
    
    
    $
    11.77
    
    
    
    7,179,459
    
    
    $
    11.63Granted
    
    
    2,155,299
    
    
    
    18.66
    
    
    
    1,528,407
    
    
    
    31.21Exercised
    
    
    (581,436
    )
    
    
    (8.34
    )
    
    
    (450,871
    )
    
    
    (11.90
    )Expired / Forfeited
    
    
    (1,744
    )
    
    
    (14.31
    )
    
    
    (35,898
    )
    
    
    (17.56
    )Outstanding, end of year
    
    
    9,793,216
    
    
    $
    16.29
    
    
    
    8,221,097
    
    
    $
    11.77Exercisable at end of year
    
    
    5,174,428
    
    
    $
    11.69
    
    
    
    4,546,631
    
    
    $
    8.02
  87




---



##### 



NOTE 23: COMMERCIAL PROPERTY AND RESIDENTIAL DEVELOPMENT OPERATIONS
 (a) Revenue
  (Millions)
    
    2008
    
    
    2007(1)Revenue from commercial property operations
    
    $
    2,248
    
    
    $
    2,098Revenue from residential development operations
    
    
    505
    
    
    
    7002,753
    
    
    
    2,798Interest and other income
    
    
    52
    
    
    
    44Total
    
    $
    2,805
    
    
    $
    2,842
 (1)
    
    Comparative figures have been reclassified to conform with the current years
presentation
 (b) Commercial property operations
  (Millions)
    
    2008
    
    
    2007(1)Revenue
    
    $
    2,248
    
    
    $
    2,098Property operating costs
    
    
    (920
    )
    
    
    (838
    )Commercial property net operating income
    
    $
    1,328
    
    
    $
    1,260
 (1)
    
    Comparative figures have been reclassified to conform with the current years
presentation
     (Millions)
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013Rental revenue
    
    $
    1,381
    
    
    $
    1,369
    
    
    $
    1,260
    
    
    $
    1,174
    
    
    $
    1,024
 (c) Residential development operations
  (Millions)
    
    2008
    
    
    2007Revenue
    
    $
    505
    
    
    $
    700Expenses
    
    
    (361
    )
    
    
    (463
    )Residential development net operating income
    
    $
    144
    
    
    $
    237
 88




---



##### 



(d) Interest and other income
  NOTE 24: GUARANTEES, CONTINGENCIES AND OTHER
          89




---



##### 



NOTE 25: CAPITAL MANAGEMENT AND LIQUIDITY
   Cost of Capital(1)
    
    
    Underlying Value(2)(Millions)
    
    Dec. 31, 2008

    
    Dec. 31, 2007

    
    Dec. 31, 2008
    
    
    Dec. 31, 2007LiabilitiesCommercial property debt
    
    
    5.07
    %
    
    
    6.65
    %
    
    $
    11,704
    
    
    $
    12,125Residential debt
    
    
    3.87
    %
    
    
    6.17
    %
    
    
    434
    
    
    
    501Capital securities  corporate
    
    
    5.42
    %
    
    
    5.42
    %
    
    
    882
    
    
    
    1,053Capital securities  fund subsidiaries(3)
    
    
    10.00
    %
    
    
    10.00
    %
    
    
    711
    
    
    
    739Non-controlling interests  fund subsidiaries(3)
    
    
    10.00
    %
    
    
    10.00
    %
    
    
    212
    
    
    
    216Non-controlling interests  other subsidiaries(4)
    
    
    12.00
    %
    
    
    12.00
    %
    
    
    68
    
    
    
    86Preferred equity  subsidiaries
    
    
    4.19
    %
    
    
    4.40
    %
    
    
    313
    
    
    
    382Shareholders equityPreferred equity  corporate
    
    
    3.68
    %
    
    
    5.01
    %
    
    
    45
    
    
    
    45Common equity(5)
    
    
    12.00
    %
    
    
    12.00
    %
    
    
    3,023
    
    
    
    7,562Total(6)
    
    
    5.30
    %
    
    
    7.19
    %
    
    $
    17,392
    
    
    $
    22,709
 (1)
    
    As a percentage of average book value unless otherwise noted(2)
    
    Underlying value of liabilities represents the cost to retire on maturity. Underlying
value of common equity is based on the closing stock price of Brookfield Properties common
shares(3)
    
    Assuming 10% return on co-invested capital(4)
    
    Assuming 12% return on co-invested capital(5)
    
    Determined on a market value basis(6)
    
    In calculating the weighted average cost of capital, the cost of debt has been
tax-effected Commercial property debt
 Capital securities fund subsidiaries and Non-controlling interest  fund subsidiaries
 90




---



##### 



Capital securities  corporate, Preferred equity  subsidiaries and Preferred equity 
corporate
    
    
    cashflows from operations;
    
    construction loans;
    
    investment in new funds;
    
    proceeds from sales of assets; and
    
    credit facilities and refinancing opportunities.
   Payments Due By Period(Millions)
    
    Total
    
    
    1 year
    
    
    2 - 3 Years
    
    
    4 - 5 Years
    
    
    After 5 YearsCommercial property debt(1)(2)
    
    $
    11,704
    
    
    $
    1,159
    
    
    $
    5,122
    
    
    $
    1,728
    
    
    $
    3,695Residential development debt
    
    
    434
    
    
    
    379
    
    
    
    55
    
    
    
    
    
    
    
    Capital securities  corporate
    
    
    882
    
    
    
    
    
    
    
    164
    
    
    
    163
    
    
    
    555Capital securities  fund subsidiaries(3)
    
    
    240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
 (1)
    
    Net of transaction costs(2)
    
    Includes $199 million of debt associated with discontinued operations(3)
    
    Excludes redeemable equity interests NOTE 26: FINANCIAL INSTRUMENTS
 (a) Derivatives and hedging activities
  
    
    Foreign currency forward contracts to hedge exposures to Canadian dollar denominated net
investments in self-sustaining subsidiaries and foreign currency denominated financial
assets;
    
    Interest rate swaps to manage interest rate risk associated planned refinancings and
existing variable rate debt;
    
    Interest rate caps to hedge interest rate risk on a portion of its variable rate debt;
and
    
    Total return swap on the companys shares to economically hedge exposure to variability
in share price under the Deferred Share Unit plan (refer to Note 22).
  91




---



##### 



Foreign currency hedging
  Derivatives
    
    Non-DerivativesHedging Item
    
    Notional
    
    Rate
    
    Maturity
    
    Fair Value
    
    Hedging Item
    
    NotionalDecember 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    Capital securities  corporate
    
    C$750MDecember 31, 2007
    
    Forward 
Sell C$ / Buy US$
    
    C$800M
    
    C$1.00 = US$1.01
    
    March 2008
    
    nil
    
    Capital securities  corporate
    
    C$350M
 Interest rate hedging
  (Millions)
    
    Hedging Item
    
    
    Notional
    
    
    Rate

    
    Maturity
    
    
    Fair Value

    
    Hedged ItemDecember 31, 2008Interest rate cap
    
    $
    3,100
    
    
    
    6
    %
    
    
    2010
    
    
    nil
    
    Interest payments on LIBOR debtInterest rate cap
    
    
    600
    
    
    
    7
    %
    
    
    2010
    
    
    nil
    
    Interest payments on LIBOR debtInterest rate cap
    
    
    300
    
    
    
    5
    %
    
    
    2011
    
    
    nil
    
    Interest payments on LIBOR debtInterest rate swap(1)
    
    
    55
    
    
    Pay 2.68

    %
        
    2010
    
    
    
    (1)

    
    Interest payments on LIBOR debtDecember 31, 2007Interest rate cap
    
    
    3,100
    
    
    
    6
    %
    
    
    2008
    
    
    nil
    
    Interest payments on LIBOR debtInterest rate cap
    
    
    600
    
    
    
    7
    %
    
    
    2008
    
    
    nil
    
    Interest payments on LIBOR debtInterest rate swap(1)
    
    
    350
    
    
    Pay 5.8
    %    
    
    2017
    
    
    
    (33)

    
    Interest payments on refinancing of fixed debt
 (1)
    
    For interest rate swaps, receive LIBOR    Other derivatives
   (b) Fair value of non-derivative financial instruments
  92




---



##### 



2008

    
    
    2007Carrying
    
    
    
    
    
    
    
    Carrying(Millions)
    
    Value
    
    
    Fair Value

    
    
    Value
    
    
    Fair ValueFinancial AssetsReal estate mortgages
    
    $
    21
    
    
    Approximates carrying
    
    
    $
    63
    
    
    Approximates carryingResidential receivables and other assets
    
    
    241
    
    
    Approximates carrying
    
    
    
    292
    
    
    Approximates carryingFinancial liabilitiesCommercial property debt
    
    
    11,704
    
    
    
    11,545

    
    
    
    12,125
        
    
    12,071Land development debt
    
    
    434
    
    
    Approximates carrying
    
    
    
    501
    
    
    Approximates carryingCapital securities  corporate
    
    
    882
    
    
    Approximates carrying
    
    
    
    1,053
    
    
    Approximates carrying
 (c) Market risk
 Interest rate risk
  (Millions)
    
    Impact on net incomeCorporate revolver
    
    $
    2Term facility
    
    
    1Variable rate commercial property debt
    
    
    49Variable rate land development debt
    
    
    4Fixed rate commercial property debt due within one year
    
    
    2Total
    
    $
    58
  Foreign currency risk
   Equity price risk
  (d) Credit risk
  93




---



##### 



NOTE 27: OTHER INFORMATION
      Years ended December 31 (Millions)
    
    2008
    
    
    2007Acquisitions of real estate
    
    $
    16
    
    
    $
    (622
    )Mortgages and other balances assumed on acquisition
    
    
    
    
    
    
    315Net acquisitions
    
    $
    16
    
    
    $
    (307
    )Dispositions of real estate
    
    $
    420
    
    
    $
    328Mortgages assumed by purchasers
    
    
    
    
    
    
    (104
    )Net dispositions
    
    $
    420
    
    
    $
    224Cash taxes paid
    
    $
    18
    
    
    $
    35Cash interest paid (excluding dividends paid on capital securities)
    
    $
    762
    
    
    $
    761
       94




---



##### 



NOTE 28: SUBSEQUENT EVENTS
  NOTE 29: SEGMENTED INFORMATION
  Commercial
    
    
    
    ResidentialUnited States
    
    
    
    Canada
    
    
    
    Development
    
    
    
    Total(Millions)
    
    2008
    
    
    2007
    
    
    
    2008
    
    
    2007
    
    
    
    2008
    
    
    2007
    
    
    
    2008
    
    
    2007AssetsCommercial properties
    
    $
    13,147
    
    
    $
    13,498
    
    
    
    $
    1,754
    
    
    $
    2,391
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    14,901
    
    
    $
    15,889Development properties
    
    
    624
    
    
    
    676
    
    
    
    
    601
    
    
    
    496
    
    
    
    
    1,196
    
    
    
    1,228
    
    
    
    
    2,421
    
    
    
    2,400Receivables and other
    
    
    562
    
    
    
    569
    
    
    
    
    132
    
    
    
    195
    
    
    
    
    241
    
    
    
    292
    
    
    
    
    935
    
    
    
    1,056Intangible assets
    
    
    612
    
    
    
    719
    
    
    
    
    25
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    637
    
    
    
    759Restricted cash and deposits
    
    
    112
    
    
    
    146
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    2
    
    
    
    3
    
    
    
    
    116
    
    
    
    151Cash and cash equivalents
    
    
    97
    
    
    
    134
    
    
    
    
    59
    
    
    
    74
    
    
    
    
    1
    
    
    
    6
    
    
    
    
    157
    
    
    
    214Assets related to
discontinued operations
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    290
    
    
    
    4Total
    
    $
    15,444
    
    
    $
    15,742
    
    
    
    $
    2,573
    
    
    $
    3,202
    
    
    
    $
    1,440
    
    
    $
    1,529
    
    
    
    $
    19,457
    
    
    $
    20,473
  Commercial
    
    
    
    ResidentialUnited States
    
    
    
    Canada
    
    
    
    Development
    
    
    
    Total(Millions)
    
    2008
    
    
    2007(1)
    
    
    
    2008
    
    
    2007
    
    
    
    2008
    
    
    2007
    
    
    
    2008
    
    
    2007Revenues
    
    $
    1,809
    
    
    $
    1,684
    
    
    
    $
    439
    
    
    $
    414
    
    
    
    $
    505
    
    
    $
    700
    
    
    
    $
    2,753
    
    
    $
    2,798Expenses
    
    
    737
    
    
    
    667
    
    
    
    
    183
    
    
    
    171
    
    
    
    
    361
    
    
    
    463
    
    
    
    
    1,281
    
    
    
    1,3011,072
    
    
    
    1,017
    
    
    
    
    256
    
    
    
    243
    
    
    
    
    144
    
    
    
    237
    
    
    
    
    1,472
    
    
    
    1,497Interest and other income
    
    
    21
    
    
    
    18
    
    
    
    
    20
    
    
    
    14
    
    
    
    
    11
    
    
    
    12
    
    
    
    
    52
    
    
    
    44Net operating income from
continuing operations
    
    
    1,093
    
    
    
    1,035
    
    
    
    
    276
    
    
    
    257
    
    
    
    
    155
    
    
    
    249
    
    
    
    
    1,524
    
    
    
    1,541Interest expenseCommercial property debt
    
    
    589
    
    
    
    639
    
    
    
    
    48
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    
    
    637
    
    
    
    673Capital securities  corporate
    
    
    9
    
    
    
    9
    
    
    
    
    48
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    61Capital securities  fund subsidiaries
    
    
    (70
    )
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    (27
    )General and administrative
    
    
    57
    
    
    
    58
    
    
    
    
    46
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    103Transaction costs
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44Non-controlling interestsFund subsidiaries
    
    
    (22
    )
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    (75
    )Other subsidiaries
    
    
    
    
    
    
    1
    
    
    
    
    20
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    23Depreciation and amortization
    
    
    476
    
    
    
    458
    
    
    
    
    69
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    545
    
    
    
    519Income before unallocated costs
    
    
    54
    
    
    
    (68
    )
    
    
    
    45
    
    
    
    39
    
    
    
    
    155
    
    
    
    249
    
    
    
    
    254
    
    
    
    220Future income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (429
    )
    
    
    69Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    707
    
    
    
    151Discontinued operations
    
    
    (129
    )
    
    
    21
    
    
    
    
    122
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    89Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    700
    
    
    $
    240Acquisitions of commercial properties, net
    
    $
    16
    
    
    $
    307
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    16
    
    
    $
    307Dispositions of commercial properties, net
    
    
    
    
    
    
    (89
    )
    
    
    
    (420
    )
    
    
    (135
    )
    
    
    
    
    
    
    
    
    
    
    
    
    (420
    )
    
    
    (224
    )Commercial property tenant improvements
    
    
    99
    
    
    
    100
    
    
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    107Development and redevelopment
    
    
    164
    
    
    
    179
    
    
    
    
    230
    
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    
    
    394
    
    
    
    313Capital expenditures
    
    
    57
    
    
    
    32
    
    
    
    
    20
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    49
 
 (1)
    
    Comparative figures have been reclassified to conform with the current years
presentation  95




---



##### 



Corporate Governance
   
    
    The board has a majority of independent directors
    
    The full board is elected annually; shareholders have cumulative voting rights in
director elections
    
    The company does not have a poison pill in place
    
    The positions of CEO and Chairman are separated and a lead independent director has been
designated
    
    The company has publicly disclosed board guidelines and the performance of the board is
reviewed annually
    
    Independent directors routinely meet without the CEO or management present
    
    The audit committee and the governance and nominating committee are comprised solely of
independent directors
   Committee Membership
 Audit Committee
    
    Governance & Nominating Committee
    
    Human Resources & Compensation CommitteePaul D. McFarlane, Chair
    
    Allan S. Olson*, Chair
    
    J. Bruce Flatt, ChairWilliam T. Cahill
    
    William T. Cahill
    
    Paul D. McFarlaneAllan S. Olson
    
    Roderick D. Fraser
    
    Linda D. RabbittRobert L. Stelzl
    
    Diana L. Taylor
 *
    
    Lead independent director Corporate Social Responsibility
   97




---



##### 



Board of Directors
  (PHOTO OF GORDON E. ARNELL)
    
    Gordon E. ArnellCalgary, Alberta
Chairman
Brookfield Properties Corporation
Chairman of Brookfield Properties
since 1995; President 1990-1995; CEO
1990-2000; previously held senior
executive roles at Oxford Development
Group Ltd. and Trizec Corporation Ltd.(PHOTO OF  WILLIAM T. CAHILL)
    
    William T. CahillRidgefield, Connecticut
Managing Director, Independent Risk
Citi Community Capital
Current position since 2002. Previous
positions include Managing Director,
Citigroup Real Estate Inc., OREO
1996-2002 and Senior Asset Manager
1991-1996. Vice President and Senior
Asset Manager, Mellon Real Estate
Investment Advisors Inc., 1983-1991.(PHOTO OF  RICHARD B. CLARK)
    
    Richard B. ClarkNew York, New York
Chief Executive Officer
Brookfield Properties Corporation
Current position since 2002; President
and CEO of U.S. operations
2000-2002; senior positions for
Brookfield Properties and predecessor
companies including COO, EVP and
Director of Leasing. NAREIT and REBNY
Executive Committee; Former Chairman,
Real Estate Roundtable Tax Policy
Advisory Committee.(PHOTO OF JACK L. COCKWELL)
    
    Jack L. CockwellToronto, Ontario
Group Chairman
Brookfield Asset Management Inc.
Current position since 2002;
President and CEO 1991-2001; senior
executive of predecessor companies
from 1969. Governor, Royal Ontario
Museum and Ryerson University;
Director Astral Media Inc and the
Toronto Waterfront Corporation.
 (PHOTO OF  J. BRUCE FLATT)
    
    J. Bruce FlattToronto, Ontario
Senior Managing Partner and CEO
Brookfield Asset Management Inc.
Current position since 2002;
President and CEO of Brookfield
Properties Corporation 2000-2001;
President and COO 1995-2000; held
other senior management positions since 1992.(PHOTO OF  RODERICK D. FRASER)
    
    Roderick D. Fraser, Ph.D., O.C.Edmonton, Alberta
President Emeritus
University of Alberta
President and Vice-Chancellor, University
of Alberta 1995-2005; Dean of the Faculty
of Arts and Science and Vice-Principal
(Resources), Queens University, Kingston.
Officer of the Order of Canada. Director,
Canada-U.S. Fulbright Program, the Aga Khan University and the Alberta Ballet.(PHOTO OF  PAUL D. MCFARLANE)
    
    Paul D. McFarlaneMississauga, Ontario
Corporate Director
Retired from a Canadian chartered bank in
2002 after more than 40 years of service.
From 1994 until retirement, served as
Senior Vice President, Risk Management
Division, Head Office. Held positions in
numerous branch, regional and head office positions.(PHOTO OF ALLAN S. OLSON)
    
    Allan S. OlsonEdmonton, Alberta
Chairman and CEO
First Industries Corporation
Current position since 1991. Chairman and
CEO, Churchill Corp. 1989-1990 and
Banister Construction Group 1990-1991.
Various positions at Stuart Olson
Construction including President and CEO
1965-1989. Director, ZCL Composites Inc.
   98




---



##### 



(PHOTO OF LINDA RABBITT)
    
    Linda RabbittBethesda, Maryland
CEO, Founder and Chairman
Rand Construction Corporation
Current position since 1989. Executive
Vice President, co-founder and
co-owner, Hart Construction Co.,
1985-1989. Director, Watson Wyatt
Worldwide; Class C Director, the
Federal Reserve Bank of Richmond.
Trustee, George Washington University
and Federal City Council. Director,
the Greater Washington Board of Trade
and the Economic Club of Washington,
D.C.(PHOTO OF ROBERT L. STELZL)
    
    Robert L. StelzlLos Angeles, California
Retired from Colony Capital after 14
years as principal and member of the
investment committee. Chairman,
Brookfield Homes and Director, the
Van Eck Family of Mutual Funds, New
York. President, Bren Investment
Properties 1982-1989; senior
management positions with several
international real estate companies
including Cadillac Fairview and
Cabot, Cabot and Forbes. Former
Chairman, Aman Hotels.
 (PHOTO OF DIANA L. TAYLOR)
    
    Diana L .TaylorNew York, New York
Managing Director, Wolfensohn & Company
Current position since 2007.
Previously Superintendent of Banks for
the State of New York; Deputy
Secretary to Governor of New York; CFO
of Long Island Power Authority;
Investment Banker with Smith Barney
and Lehman Brothers; Founding Partner
of M. R. Beal & Co.; Director, After
School Corp., Hudson River Park Trust,
Literacy Partners, New York Womens
Foundation, Mailman School of Public
Health, Dartmouth College, ACCION
International, Sothebys, Allianz
Global Investors, and Fannie Mae.
Member, Council on Foreign Relations.(PHOTO OF JOHN E. ZUCCOTTI)
    
    John E. ZuccottiNew York, New York
Co-ChairmanBrookfield Properties Corporation
Current position since 2002. Chairman,
Real Estate Board of New York
2004-2006; Senior Counsel, Weil,
Gotshal and Manges since 1998; Deputy
Chairman, Brookfield Properties
1999-2002; President and CEO, Olympia
& York Companies U.S.A. 1990-1996;
Partner, Brown & Wood 1986-1990 and
Tufo & Zuccotti 1978-1986. First
Deputy Mayor of the City of New York
1975-1977. Chairman, New York City
Planning Commission 1973-1975.
Trustee Emeritus, Columbia University.
   99




---



##### 



Officers
  CORPORATE
 Chief Executive Officer
 President
 Chief Financial Officer
 Chief Compliance and Administrative Officer
Corporate Counsel
 Vice President, Investor Relations and
Communications
 Vice President, Taxation
 Vice President and Controller
 PROPERTY OPERATIONS
 UNITED STATES
 President and Chief Executive Officer
 Chief Operating Officer
 Executive Vice President
 Senior Vice President and Controller
 Senior Vice President, Strategic Initiatives
& Finance
 Senior Vice President, Acquisitions and
Dispositions
 Senior Vice President and General Counsel
 Senior Vice President, Design and Construction
 Senior Vice President, Operations
 Senior Vice President, Director of Leasing
 Executive Vice President, Houston
 Senior Asset Manager
 Senior Vice President, Development
 Senior Vice President, Midwest and Mountain
Region
 Vice President, Acquisitions and
Dispositions
 Vice President, Human Resources
 CANADA
 President and Chief Executive Officer
 Chief Operating Officer
 Senior Vice President, Asset Management
Eastern
 Senior Vice President, Office Leasing, Eastern
 Senior Vice President, Asset Management,
Western
 Senior Vice President, Legal, Eastern
 Senior Vice President, Development
 Senior Vice President, Investments
 Vice President, Office Leasing, Western
 Vice President and Controller
 RESIDENTIAL OPERATIONS
 President and Chief Executive Officer
   
 100