##### 



Exhibit
99.1




---



##### 








---



##### 



(PHOTO)
    
    (PHOTO)
    
    (PHOTO)
    
    (PHOTO)1. TD Canada Trust Tower
    
    3. First Canadian Place
    
    5. 151 Yonge Street
    
    6. Four World Financial Center2. BayWellington Tower
    BCE Place,Toronto
    
    4. Exchange Tower
     Toronto
    
    Toronto
    
    New York(PHOTO)
    
    (PHOTO)
    
    (PHOTO)
    
    (PHOTO)7. Three World Financial Center
     New York
    
    8. The Winter Garden
     New York
    
    9.Two World
Financial Center
      New York
    
    10. One Liberty Plaza
      New York(PHOTO)
    
    (PHOTO)
    
    (PHOTO)
    
    (PHOTO)11. One World Financial
Center
      New York
    
    12. Petro Canada Centre
      Calgary
    

13.
Bankers Hall, West Tower
14. Bankers Hall, East Tower
    
    15. Gulf Canada Square
      Calgary




---



##### 



(1)
 All amounts expressed in US dollars unless otherwise noted
 (Millions, except per share information)
    
    2005
    
    2004
    
    2003Results of operationsNet income
    
    $
    164
    
    
    $
    138
    
    
    $
    232Commercial property net operating income
    
    
    680
    
    
    
    671
    
    
    
    586Funds from operations excluding
lease termination income and gains
    
    
    435
    
    
    
    403
    
    
    
    343Funds from operations and gains
    
    
    435
    
    
    
    462
    
    
    
    442Per diluted common shareNet income
    
    $
    0.69
    
    
    $
    0.58
    
    
    $
    0.96Funds from operations excluding
lease termination income and gains
    
    
    1.85
    
    
    
    1.70
    
    
    
    1.43Funds from operations and gains
    
    
    1.85
    
    
    
    1.95
    
    
    
    1.85Dividends paid
    
    
    0.65
    
    
    
    0.42
    
    
    
    0.34
    (2)Book value
    
    
    8.35
    
    
    
    8.41
    
    
    
    8.12Closing market price  NYSE
    
    
    29.42
    
    
    
    24.93
    
    
    
    19.13Financial positionTotal assets
    
    $
    9,513
    
    
    $
    8,800
    
    
    $
    8,382Shareholdersequity
    
    
    1,943
    
    
    
    1,992
    
    
    
    1,938
 (1)
    

Excludes the assets, liabilities and results
of operations of Brookfield Homes Corporation(2)
    
    Excludes the distribution of Brookfield Homes
Corporation
 Brookfield
Properties vs. Market Vacancy (%)
 
 Top:
 Bottom:




---



##### 








---



##### 



Leasing
     Investing
   Top:
 Bottom:




---



##### 








---



##### 



Share Buybacks
  Development
      Additional Highlights of 2005
 
    
    Earned net income of $164 million or $0.69 per share;
    
    Generated funds from operations of $435
million or $1.85 per share;
    
    Enhanced the contributions coming from our residential
development operations by capitalizing on a
robust western Canadian economy;
    
    Increased our dividend 70%, reflecting our
belief in the strength of our underlying
business.
 Outlook
      
 
 Top:
 Bottom:




---



##### 








---



##### 



Top: Toronto
  
    
    2.5 million square foot capacity
    
    Three-phase mixed-use project
    
    Connected to underground pedestrian PATH retail center
    
    Below-grade infrastructure already in place
  Middle: Midtown Manhattan
  
 
 
 
 Bottom: Calgary
  
    
    Connected by pedestrian skyway to Bankers Hall
    
    15 story buildings
    
    Development to include parking
    
    30-month construction schedule
 8




---



##### 



Toronto
2 Queen Street E.
105 Adelaide Street WestYonge/Richmond Centre
Bay Adelaide Centre Development Site
Exchange TowerBay Wellington Tower
BCE III Development Site
First Canadian Place
HSBC Building
TD Canada Trust Tower
Midtown
Manhattan
245 Park Avenue
401 West 31st Street Development Site
300 Madison Avenue
Calgary
Fifth Avenue Place
Petro-Canada Centre
Bankers Hall
Bankers Court West Development Site
Bankers Court East Development Site
Gulf Canada Square




---



##### 



Core Properties of theO&Y Acquisition
    
    Square Feet (000s)1. First Canadian Place, Toronto
    
    
    2,7812. Gulf Canada Square, Calgary
    
    
    1,1453. Place de Ville I, Ottawa
    
    
    1,0894. Place de Ville II, Ottawa
    
    
    1,0435. Jean Edmonds Towers, Ottawa
    
    
    6456. 2 Queen Street E., Toronto
    
    
    545
 
 1
2
4
3
6
5 10




---



##### 








---



##### 



Residential Development: Record Results, Bright Outlook
With lot and home sales setting new record levels, 2005 was the most profitable year ever for our residential development operations. Largely based in Western Canada, our market share stands at 24% in Calgary and 10% in Edmonton.
Our strategy is simple: invest in growth quadrants of major centers with strong job creation and good quality of life, and assemble 500 to 1000 contiguous acres to provide master-planned community opportunities for home builders. For internal
housing operations, the focus is on affordable housing. Our future prospects are strong, with a land inventory bank of approximately 37,000 lots held for development and 4,000 lots under development across the portfolio.




---



##### 



UNITED STATES
 Effective
    
    
    BrookfieldsOwnership
    
    
    EffectiveNumber of
    
    
    Leased
    
    
    Office
    
    
    Retail/Other
    
    
    Leasable Area
    
    
    Interest
    
    
    InterestProperties
    
    
    %
    
    
    000s Sq. Ft.
    
    
    000s Sq. Ft.
    
    
    000s Sq. Ft.
    
    
    %
    
    
    000s Sq. Ft.New YorkWorld Financial CenterOne
    
    
    1
    
    
    
    87.0
    
    
    
    1,520
    
    
    
    108
    
    
    
    1,628
    
    
    
    100
    
    
    
    1,628Two
    
    
    1
    
    
    
    100.0
    
    
    
    2,455
    
    
    
    36
    
    
    
    2,491
    
    
    
    100
    
    
    
    2,491Three
    
    
    1
    
    
    
    81.5
    
    
    
    1,179
    
    
    
    53
    
    
    
    1,232
    
    
    
    100
    
    
    
    1,232Four
    
    
    1
    
    
    
    100.0
    
    
    
    1,711
    
    
    
    89
    
    
    
    1,800
    
    
    
    51
    
    
    
    917Retail
    
    
    
    
    
    
    67.6
    
    
    
    
    
    
    
    295
    
    
    
    295
    
    
    
    100
    
    
    
    295One Liberty Plaza
    
    
    1
    
    
    
    94.2
    
    
    
    2,194
    
    
    
    20
    
    
    
    2,214
    
    
    
    100
    
    
    
    2,214245 Park Avenue
    
    
    1
    
    
    
    99.5
    
    
    
    1,630
    
    
    
    62
    
    
    
    1,692
    
    
    
    51
    
    
    
    863300 Madison Avenue
    
    
    1
    
    
    
    100.0
    
    
    
    1,089
    
    
    
    5
    
    
    
    1,094
    
    
    
    100
    
    
    
    1,094Development 401 West 31st Street
    
    
    1
    
    
    
    
    
    
    
    2,500
    
    
    
    
    
    
    
    2,500
    
    
    
    100
    
    
    
    2,500Other
    
    
    1
    
    
    
    49.1
    
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    50
    
    
    
    49
    
    
    
    94.9
    
    
    
    14,278
    
    
    
    675
    
    
    
    14,953
    
    
    
    
    
    
    
    13,238Boston53 State Street
    
    
    1
    
    
    
    86.6
    
    
    
    1,091
    
    
    
    70
    
    
    
    1,161
    
    
    
    51
    
    
    
    59275 State Street
    
    
    1
    
    
    
    100.0
    
    
    
    742
    
    
    
    260
    
    
    
    1,002
    
    
    
    51
    
    
    
    5112
    
    
    
    92.1
    
    
    
    1,833
    
    
    
    330
    
    
    
    2,163
    
    
    
    
    
    
    
    1,103Washington, D.C.1625 Eye Street
    
    
    1
    
    
    
    96.2
    
    
    
    374
    
    
    
    197
    
    
    
    571
    
    
    
    100
    
    
    
    571701 9th Street
    
    
    1
    
    
    
    100.0
    
    
    
    340
    
    
    
    207
    
    
    
    547
    
    
    
    100
    
    
    
    547Potomac Tower
    
    
    1
    
    
    
    100.0
    
    
    
    236
    
    
    
    203
    
    
    
    439
    
    
    
    100
    
    
    
    4393
    
    
    
    98.5
    
    
    
    950
    
    
    
    607
    
    
    
    1,557
    
    
    
    
    
    
    
    1,557DenverRepublic PlazaOffice
    
    
    1
    
    
    
    86.2
    
    
    
    1,247
    
    
    
    
    
    
    
    1,247
    
    
    
    100
    
    
    
    1,247Development and other
    
    
    2
    
    
    
    
    
    
    
    1,300
    
    
    
    548
    
    
    
    1,848
    
    
    
    100
    
    
    
    1,848Trade Center
    
    
    2
    
    
    
    87.9
    
    
    
    767
    
    
    
    43
    
    
    
    810
    
    
    
    100
    
    
    
    8105
    
    
    
    86.9
    
    
    
    3,314
    
    
    
    591
    
    
    
    3,905
    
    
    
    
    
    
    
    3,905Minneapolis33 South Sixth Street
    
    
    2
    
    
    
    86.2
    
    
    
    1,082
    
    
    
    695
    
    
    
    1,777
    
    
    
    100
    
    
    
    1,777Dain Plaza
    
    
    2
    
    
    
    90.4
    
    
    
    593
    
    
    
    638
    
    
    
    1,231
    
    
    
    100
    
    
    
    1,2314
    
    
    
    87.9
    
    
    
    1,675
    
    
    
    1,333
    
    
    
    3,008
    
    
    
    
    
    
    
    3,008Subtotal United States
    
    
    23
    
    
    
    93.1
    
    
    
    22,050
    
    
    
    3,536
    
    
    
    25,586
    
    
    
    
    
    
    
    22,811
 13




---



##### 



CANADA
 Effective
    
    
    BrookfieldsOwnership
    
    
    EffectiveNumber of
    
    
    Leased
    
    
    Office
    
    
    Retail/Other
    
    
    Leasable Area
    
    
    Interest
    
    
    InterestProperties
    
    
    %
    
    
    000s Sq. Ft.
    
    
    000s Sq. Ft.
    
    
    000s Sq. Ft.
    
    
    %
    
    
    000s Sq. Ft.TorontoBCE PlaceBay Wellington Tower
    
    
    1
    
    
    
    91.3
    
    
    
    1,296
    
    
    
    42
    
    
    
    1,338
    
    
    
    100
    
    
    
    1,338TD Canada Trust Tower
    
    
    1
    
    
    
    98.1
    
    
    
    1,126
    
    
    
    17
    
    
    
    1,143
    
    
    
    50
    
    
    
    572Retail, parking and office
    
    
    2
    
    
    
    98.4
    
    
    
    136
    
    
    
    809
    
    
    
    945
    
    
    
    75
    
    
    
    704First Canadian Place
    
    
    1
    
    
    
    94.7
    
    
    
    2,409
    
    
    
    372
    
    
    
    2,781
    
    
    
    25
    
    
    
    695Exchange Tower Block
    
    
    2
    
    
    
    93.1
    
    
    
    1,136
    
    
    
    257
    
    
    
    1,393
    
    
    
    58
    
    
    
    812Atrium on Bay
    
    
    1
    
    
    
    89.4
    
    
    
    914
    
    
    
    327
    
    
    
    1,241
    
    
    
    50
    
    
    
    621Hudson Bay Centre
    
    
    1
    
    
    
    87.4
    
    
    
    536
    
    
    
    556
    
    
    
    1,092
    
    
    
    25
    
    
    
    2732 Queen St. E
    
    
    1
    
    
    
    91.5
    
    
    
    448
    
    
    
    97
    
    
    
    545
    
    
    
    25
    
    
    
    136Queens Quay Terminal
    
    
    1
    
    
    
    97.5
    
    
    
    428
    
    
    
    75
    
    
    
    503
    
    
    
    100
    
    
    
    503151 Yonge St.
    
    
    1
    
    
    
    100.0
    
    
    
    289
    
    
    
    82
    
    
    
    371
    
    
    
    25
    
    
    
    9318 King St. E
    
    
    1
    
    
    
    87.9
    
    
    
    219
    
    
    
    33
    
    
    
    252
    
    
    
    25
    
    
    
    632 St. Clair Ave. W
    
    
    1
    
    
    
    90.6
    
    
    
    210
    
    
    
    90
    
    
    
    300
    
    
    
    25
    
    
    
    75HSBC Building
    
    
    1
    
    
    
    100.0
    
    
    
    188
    
    
    
    37
    
    
    
    225
    
    
    
    100
    
    
    
    22540 St. Clair Ave. W
    
    
    1
    
    
    
    93.4
    
    
    
    117
    
    
    
    32
    
    
    
    149
    
    
    
    25
    
    
    
    37DevelopmentsBay Adelaide Centre
    
    
    3
    
    
    
    
    
    
    
    2,500
    
    
    
    
    
    
    
    2,500
    
    
    
    100
    
    
    
    2,500BCE Place III
    
    
    1
    
    
    
    
    
    
    
    800
    
    
    
    
    
    
    
    800
    
    
    
    65
    
    
    
    52020
    
    
    
    93.4
    
    
    
    12,752
    
    
    
    2,826
    
    
    
    15,578
    
    
    
    
    
    
    
    9,167CalgaryBankers Hall
    
    
    3
    
    
    
    99.5
    
    
    
    1,943
    
    
    
    750
    
    
    
    2,693
    
    
    
    50
    
    
    
    1,347Petro Canada Centre
    
    
    2
    
    
    
    99.9
    
    
    
    1,707
    
    
    
    245
    
    
    
    1,952
    
    
    
    50
    
    
    
    9765th Avenue Place
    
    
    2
    
    
    
    99.9
    
    
    
    1,428
    
    
    
    255
    
    
    
    1,683
    
    
    
    50
    
    
    
    842Gulf Canada Square
    
    
    1
    
    
    
    97.4
    
    
    
    1,052
    
    
    
    93
    
    
    
    1,145
    
    
    
    25
    
    
    
    286Altius Centre
    
    
    1
    
    
    
    99.5
    
    
    
    303
    
    
    
    75
    
    
    
    378
    
    
    
    25
    
    
    
    95840 - 7th Ave. SW
    
    
    1
    
    
    
    97.7
    
    
    
    250
    
    
    
    37
    
    
    
    287
    
    
    
    25
    
    
    
    72McFarlane Tower
    
    
    1
    
    
    
    99.3
    
    
    
    233
    
    
    
    44
    
    
    
    277
    
    
    
    25
    
    
    
    69Franklin Atrium
    
    
    1
    
    
    
    88.0
    
    
    
    143
    
    
    
    102
    
    
    
    245
    
    
    
    25
    
    
    
    61Altalink Place
    
    
    1
    
    
    
    100.0
    
    
    
    77
    
    
    
    28
    
    
    
    105
    
    
    
    25
    
    
    
    26Mount Royal Place
    
    
    1
    
    
    
    96.0
    
    
    
    54
    
    
    
    28
    
    
    
    82
    
    
    
    25
    
    
    
    20Franklin Building
    
    
    1
    
    
    
    100.0
    
    
    
    51
    
    
    
    38
    
    
    
    89
    
    
    
    25
    
    
    
    22DevelopmentBankers Court
    
    
    2
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    500
    
    
    
    50
    
    
    
    25017
    
    
    
    99.1
    
    
    
    7,741
    
    
    
    1,695
    
    
    
    9,436
    
    
    
    
    
    
    
    4,066OttawaPlace de Ville I
    
    
    2
    
    
    
    100.0
    
    
    
    558
    
    
    
    531
    
    
    
    1,089
    
    
    
    25
    
    
    
    272Place de Ville II
    
    
    2
    
    
    
    99.3
    
    
    
    577
    
    
    
    466
    
    
    
    1,043
    
    
    
    25
    
    
    
    261Jean Edmonds Towers
    
    
    2
    
    
    
    99.9
    
    
    
    528
    
    
    
    117
    
    
    
    645
    
    
    
    25
    
    
    
    1612204 Walkley
    
    
    1
    
    
    
    100.0
    
    
    
    104
    
    
    
    
    
    
    
    104
    
    
    
    25
    
    
    
    262200 Walkley
    
    
    1
    
    
    
    100.0
    
    
    
    54
    
    
    
    
    
    
    
    54
    
    
    
    25
    
    
    
    14DevelopmentPlace de Ville III
    
    
    1
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    500
    
    
    
    25
    
    
    
    1259
    
    
    
    99.7
    
    
    
    2,321
    
    
    
    1,114
    
    
    
    3,435
    
    
    
    
    
    
    
    859Other CommercialRoyal Centre, Vancouver
    
    
    1
    
    
    
    93.0
    
    
    
    493
    
    
    
    360
    
    
    
    853
    
    
    
    100
    
    
    
    853Canadian Western Bank, Edmonton
    
    
    1
    
    
    
    93.3
    
    
    
    372
    
    
    
    124
    
    
    
    496
    
    
    
    25
    
    
    
    124Enbridge Tower, Edmonton
    
    
    1
    
    
    
    98.3
    
    
    
    178
    
    
    
    34
    
    
    
    212
    
    
    
    25
    
    
    
    53330 St. Mary Avenue, Winnipeg
    
    
    1
    
    
    
    89.3
    
    
    
    143
    
    
    
    34
    
    
    
    177
    
    
    
    25
    
    
    
    44175 Hargrave Street, Winnipeg
    
    
    1
    
    
    
    71.0
    
    
    
    69
    
    
    
    5
    
    
    
    74
    
    
    
    25
    
    
    
    194342 Queen Street, Niagara Falls
    
    
    1
    
    
    
    91.2
    
    
    
    149
    
    
    
    60
    
    
    
    209
    
    
    
    25
    
    
    
    52Other
    
    
    1
    
    
    
    96.0
    
    
    
    71
    
    
    
    3
    
    
    
    74
    
    
    
    100
    
    
    
    747
    
    
    
    92.3
    
    
    
    1,475
    
    
    
    620
    
    
    
    2,095
    
    
    
    
    
    
    
    1,219Subtotal Canada
    
    
    53
    
    
    
    95.9
    
    
    
    24,289
    
    
    
    6,255
    
    
    
    30,544
    
    
    
    
    
    
    
    15,311Total portfolio
    
    
    76
    
    
    
    94.6
    
    
    
    46,339
    
    
    
    9,791
    
    
    
    56,130
    
    
    
    
    
    
    
    38,122Less: non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,485
    )Brookfields net effective ownership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,637
 14




---



##### 



PART I  OBJECTIVES AND FINANCIAL HIGHLIGHTS
    
    
    17PART II  FINANCIAL STATEMENT ANALYSIS
    
    
    22PART III  RISKS AND UNCERTAINTIES
    
    
    43PART IV  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
    
    
    47PART V  BUSINESS ENVIRONMENT AND OUTLOOK
    
    
    51
 FORWARD-LOOKING STATEMENTS
  15




---



##### 



PART I  OBJECTIVES AND FINANCIAL HIGHLIGHTS
 BASIS OF PRESENTATION
    FINANCIAL HIGHLIGHTS
 (Millions, except per share amounts)
    
    2005
    
    
    2004
    
    
    2003Results of operationsNet incomeExcluding lease termination income and gains(1)
    
    $
    164
    
    
    $
    102
    
    
    $
    162Including lease termination income and gains
    
    
    164
    
    
    
    138
    
    
    
    232Net income per share  dilutedExcluding lease termination income and gains(1)
    
    $
    0.69
    
    
    $
    0.43
    
    
    $
    0.67Including lease termination income and gains
    
    
    0.69
    
    
    
    0.58
    
    
    
    0.96Common share dividends paid per share
    
    
    0.65
    
    
    
    0.42
    
    
    
    0.34
    (2)Funds from operationsExcluding lease termination income and gains(1)
    
    $
    435
    
    
    $
    403
    
    
    $
    343Including lease termination income and gains
    
    
    435
    
    
    
    462
    
    
    
    442Funds from operations per share  dilutedExcluding lease termination income and gains(1)
    
    $
    1.85
    
    
    $
    1.70
    
    
    $
    1.43Including lease termination income and gains
    
    
    1.85
    
    
    
    1.95
    
    
    
    1.85Balance sheet dataTotal assets
    
    $
    9,513
    
    
    $
    8,800
    
    
    $
    8,382Commercial properties
    
    
    7,430
    
    
    
    6,555
    
    
    
    6,179Commercial property debt
    
    
    5,216
    
    
    
    4,754
    
    
    
    4,754Shareholders equity
    
    
    1,943
    
    
    
    1,992
    
    
    
    1,938
 (1)
    
    Exclusion of lease termination income and gains from these results is an additional
non-GAAP measure which we believe provides readers with a supplemental basis for
evaluating our on-going operations since lease terminations and gains are the result of
unpredictable and opportunistic events. The 2004 and 2003 results included $60 million and
$100 million, respectively, of lease termination income and gains ($36 million and $60
million, respectively, net of tax for purposes of net income). There was no lease
termination income or gains in 2005.(2)
    
    Excludes the distribution of Brookfield Homes Corporation (Brookfield Homes). On
January 6, 2003, we 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 Properties held on the date
of record, and the transaction was recorded as a distribution to shareholders at the
carried value of our investment in Brookfield Homes. 16




---



##### 



OVERVIEW OF THE BUSINESS
  COMMERCIAL PROPERTY OPERATIONS
   
    
    Surfacing value from our properties through pro-active leasing and select redevelopment
initiatives;
    
    Prudent capital management including the refinancing of mature properties and investing in
joint venture opportunities with institutional partners who seek to benefit from the depth of our
expertise;
    
    Monetizing development assets as the economy rebounds and continued supply constraints create
opportunities.
  BrookfieldLeasable
    
    
    Properties
    
    
    
    
    
    
    
    
    
    
    Net BookNumber of
    
    
    Area
    
    
    Owned Interest
    
    
    Book Value
    
    
    Debt
    
    
    EquityRegion
    
    Properties
    
    
    (000s Sq.Ft.)
    
    
    (000s Sq. Ft.)
    
    
    (Millions)
    
    
    (Millions)
    
    
    (Millions)New York, New York
    
    
    8
    
    
    
    12,453
    
    
    
    10,738
    
    
    $
    3,824
    
    
    $
    3,122
    
    
    $
    702Boston, Massachusetts
    
    
    2
    
    
    
    2,163
    
    
    
    1,103
    
    
    
    325
    
    
    
    159
    
    
    
    166Washington, D.C.
    
    
    3
    
    
    
    1,557
    
    
    
    1,557
    
    
    
    395
    
    
    
    357
    
    
    
    38Toronto, Ontario
    
    
    16
    
    
    
    12,278
    
    
    
    6,147
    
    
    
    1,399
    
    
    
    704
    
    
    
    695Calgary, Alberta
    
    
    15
    
    
    
    8,936
    
    
    
    3,816
    
    
    
    570
    
    
    
    409
    
    
    
    161Ottawa, Ontario
    
    
    8
    
    
    
    2,935
    
    
    
    734
    
    
    
    100
    
    
    
    50
    
    
    
    50Denver, Colorado(1)
    
    
    3
    
    
    
    2,605
    
    
    
    2,605
    
    
    
    344
    
    
    
    221
    
    
    
    123Minneapolis, Minnesota
    
    
    4
    
    
    
    3,008
    
    
    
    3,008
    
    
    
    429
    
    
    
    180
    
    
    
    249Other
    
    
    7
    
    
    
    2,095
    
    
    
    1,219
    
    
    
    119
    
    
    
    65
    
    
    
    5466
    
    
    
    48,030
    
    
    
    30,927
    
    
    $
    7,505
    
    
    $
    5,267
    
    
    $
    2,238Office development sites
    
    
    10
    
    
    
    8,100
    
    
    
    7,195
    
    
    
    224
    
    
    
    
    
    
    
    224Total
    
    
    76
    
    
    
    56,130
    
    
    
    38,122
    
    
    $
    7,729
    
    
    $
    5,267
    
    
    $
    2,462
 
 (1)
    
    Includes $75 million of assets and $51 million of liabilities related to
discontinued operations   17




---



##### 



New York/Boston/
    
    
    
    Toronto/Calgary/
    
    
    
    Denver/Minneapolis/Total Portfolio
    
    
    
    Washington, D. C.
    
    
    
    Ottawa
    
    
    
    OtherNet
    
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    
    NetRate
    
    
    
    
    
    
    
    
    
    
    
    Rate
    
    
    
    
    
    
    
    
    
    
    
    Rate
    
    
    
    
    
    
    
    
    
    
    
    Rate000s
    
    
    
    
    
    
    per Sq.
    
    
    
    000s
    
    
    
    
    
    
    per Sq.
    
    
    
    000s
    
    
    
    
    
    
    per Sq.
    
    
    
    000s
    
    
    
    
    
    
    per Sq.Year of Expiry
    
    Sq. Ft.
    
    
    %
    
    
    Ft.-$
    
    
    
    Sq. Ft.
    
    
    %
    
    
    Ft.-$
    
    
    
    Sq. Ft.
    
    
    %
    
    
    Ft.-$
    
    
    
    Sq. Ft.
    
    
    %
    
    
    Ft.-$Currently available
    
    
    2,242
    
    
    
    5.4
    
    
    
    
    
    
    
    
    784
    
    
    
    5.2
    
    
    
    
    
    
    
    
    763
    
    
    
    4.2
    
    
    
    
    
    
    
    
    695
    
    
    
    11.32006
    
    
    1,463
    
    
    
    3.6
    
    
    $
    14
    
    
    
    
    382
    
    
    
    2.5
    
    
    $
    15
    
    
    
    
    772
    
    
    
    3.6
    
    
    $
    13
    
    
    
    
    309
    
    
    
    5.0
    
    
    $
    102007
    
    
    1,402
    
    
    
    3.4
    
    
    
    19
    
    
    
    
    103
    
    
    
    0.7
    
    
    
    26
    
    
    
    
    959
    
    
    
    4.9
    
    
    
    17
    
    
    
    
    340
    
    
    
    5.5
    
    
    
    132008
    
    
    3,427
    
    
    
    8.3
    
    
    
    17
    
    
    
    
    717
    
    
    
    4.8
    
    
    
    27
    
    
    
    
    2,110
    
    
    
    6.1
    
    
    
    13
    
    
    
    
    600
    
    
    
    9.7
    
    
    
    122009
    
    
    1,868
    
    
    
    4.5
    
    
    
    16
    
    
    
    
    127
    
    
    
    0.8
    
    
    
    31
    
    
    
    
    1,282
    
    
    
    6.3
    
    
    
    14
    
    
    
    
    459
    
    
    
    7.4
    
    
    
    82010
    
    
    3,457
    
    
    
    8.3
    
    
    
    25
    
    
    
    
    689
    
    
    
    4.6
    
    
    
    38
    
    
    
    
    2,254
    
    
    
    12.5
    
    
    
    21
    
    
    
    
    514
    
    
    
    8.3
    
    
    
    102011
    
    
    3,097
    
    
    
    7.5
    
    
    
    25
    
    
    
    
    616
    
    
    
    4.1
    
    
    
    42
    
    
    
    
    2,228
    
    
    
    12.3
    
    
    
    18
    
    
    
    
    253
    
    
    
    4.1
    
    
    
    122012
    
    
    2,378
    
    
    
    5.8
    
    
    
    20
    
    
    
    
    664
    
    
    
    4.4
    
    
    
    20
    
    
    
    
    1,370
    
    
    
    7.6
    
    
    
    19
    
    
    
    
    344
    
    
    
    5.6
    
    
    
    172013 & beyond
    
    
    28,696
    
    
    
    53.2
    
    
    
    25
    
    
    
    
    12,091
    
    
    
    72.9
    
    
    
    33
    
    
    
    
    12,411
    
    
    
    42.5
    
    
    
    17
    
    
    
    
    4,194
    
    
    
    43.1
    
    
    
    1248,030
    
    
    
    100.0
    
    
    $
    25
    
    
    
    
    16,173
    
    
    
    100.0
    
    
    $
    33
    
    
    
    
    24,149
    
    
    
    100.0
    
    
    $
    17
    
    
    
    
    7,708
    
    
    
    100.0
    
    
    $
    12Weighted average market net rent
    
    $
    25
    
    
    
    
    
    
    
    
    
    
    
    $
    33
    
    
    
    
    
    
    
    
    
    
    
    $
    20
    
    
    
    
    
    
    
    
    
    
    
    $
    14
 Commercial Development
   NumberLocation
    
    of Sites
    
    
    Ownership
    
    
    Sq. Ft.New York, New York401 West 31st Street
    
    Ninth Avenue across from Moynihan Train Station
    
    
    1
    
    
    
    100
    %
    
    
    2,500,000Toronto, OntarioBay Adelaide Centre
    
    Bay and Adelaide Streets
    
    
    3
    
    
    
    100
    %
    
    
    2,500,000BCE Place III
    
    Third phase of BCE Place project
    
    
    1
    
    
    
    65
    %
    
    
    800,000Calgary, AlbertaBankers Court
    
    East and West Parkades adjacent to Bankers Hall
    
    
    2
    
    
    
    50
    %
    
    
    500,000Ottawa, OntarioPlace de Ville III
    
    Third phase of Place de Ville project located at 300 Queen Street
    
    
    1
    
    
    
    25
    %
    
    
    500,000Denver, Colorado425 15th Street
    
    One block from Republic Plaza
    
    
    1
    
    
    
    100
    %
    
    
    800,000Tremont Garage
    
    One block from Republic Plaza
    
    
    1
    
    
    
    100
    %
    
    
    500,000Total
    
    
    
    
    10
    
    
    
    
    
    
    
    8,100,000
 Residential Development
  18




---



##### 



Under Development
    
    
    
    Held for DevelopmentBook Value
    
    
    
    Estimated
    
    
    Book ValueNumber of Lots
    
    
    (Millions)
    
    
    
    Number of Lots
    
    
    (Millions)Alberta
    
    
    2,713
    
    
    $
    113
    
    
    
    
    24,943
    
    
    $
    156Ontario
    
    
    497
    
    
    
    32
    
    
    
    
    6,983
    
    
    
    39Colorado
    
    
    729
    
    
    
    19
    
    
    
    
    2,931
    
    
    
    23Texas and other
    
    
    158
    
    
    
    2
    
    
    
    
    1,859
    
    
    
    7Total
    
    
    4,097
    
    
    $
    166
    
    
    
    
    36,716
    
    
    $
    225
 PERFORMANCE MEASUREMENT
  
    
    Net income per share;
    
    Net operating income;
    
    Funds from operations per share;
    
    Overall indebtedness level;
    
    Weighted average cost of debt; and
    
    Occupancy levels.
  Net Income
  Net Operating Income
  Funds from Operations
  19




---



##### 



KEY PERFORMANCE DRIVERS
  
    
    Increases in occupancies by leasing up vacant space;
    
    Increases in rental rates as market conditions permit; and
    
    Reduction in occupancy costs through achieving economies of scale and diligently managing
contracts.
  
    
    The availability of new property acquisitions which fit into our strategic plan;
    
    The availability of equity capital at a reasonable cost; and
    
    The availability of debt capital at a cost and on terms conducive to our goals.
 SIGNIFICANT EVENTS
   Brookfield Properties
    
    
    Purchase PriceNumber of
    
    
    Leasable Area
    
    
    Owned Interest
    
    
    Book ValueRegion
    
    Properties
    
    
    (000s Sq. Ft.)
    
    
    (000s Sq. Ft.)
    
    
    (Millions)Toronto, Ontario
    
    
    6
    
    
    
    4,397
    
    
    
    1,099
    
    
    $
    266Calgary, Alberta
    
    
    8
    
    
    
    2,608
    
    
    
    651
    
    
    
    110Ottawa, Ontario
    
    
    8
    
    
    
    2,935
    
    
    
    734
    
    
    
    97Edmonton, Alberta
    
    
    2
    
    
    
    708
    
    
    
    177
    
    
    
    14Winnipeg, Manitoba
    
    
    2
    
    
    
    252
    
    
    
    63
    
    
    
    3Niagara Falls, Ontario
    
    
    1
    
    
    
    209
    
    
    
    52
    
    
    
    227
    
    
    
    11,109
    
    
    
    2,776
    
    
    $
    492Office development site
    
    
    1
    
    
    
    500
    
    
    
    125
    
    
    
    3Total commercial and development properties
    
    
    28
    
    
    
    11,609
    
    
    
    2,901
    
    
    $
    495Accounts receivable and other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56Accounts payable and other liabilities assumed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Intangible liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97
    )Future income tax liabilities assumed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26
    )Commercial property debt assumed(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (246
    )Total purchase price
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    182
 (1)
    
    Includes acquisition financing of $110 million 20




---



##### 



PART II  FINANCIAL STATEMENT ANALYSIS
 ASSET PROFILE
  (Millions)
    
    2005
    
    
    2004Commercial properties
    
    $
    7,430
    
    
    $
    6,555Development properties
    
    
    615
    
    
    
    716Receivables and other
    
    
    955
    
    
    
    739Restricted cash and deposits
    
    
    316
    
    
    
    297Marketable securities
    
    
    58
    
    
    
    285Cash and cash equivalents
    
    
    64
    
    
    
    112Assets related to discontinued operations
    
    
    75
    
    
    
    96Total
    
    $
    9,513
    
    
    $
    8,800
 COMMERCIAL PROPERTIES
    Brookfield Properties
    
    
    2005
    
    
    2004Leasable Area
    
    
    Owned Interest
    
    
    Book Value
    
    
    Book ValueRegion
    
    (000s Sq. Ft.)
    
    
    (000s Sq. Ft.)
    
    
    (Millions)
    
    
    (Millions)New York, New York
    
    
    12,453
    
    
    
    10,738
    
    
    $
    3,824
    
    
    $
    3,542Boston, Massachusetts
    
    
    2,163
    
    
    
    1,103
    
    
    
    325
    
    
    
    328Washington, D.C.
    
    
    1,557
    
    
    
    1,557
    
    
    
    395
    
    
    
    397Toronto, Ontario
    
    
    12,278
    
    
    
    6,147
    
    
    
    1,399
    
    
    
    1,068Calgary, Alberta
    
    
    8,936
    
    
    
    3,816
    
    
    
    570
    
    
    
    448Ottawa, Ontario
    
    
    2,935
    
    
    
    734
    
    
    
    100
    
    
    
    Denver, Colorado(1)
    
    
    2,605
    
    
    
    2,605
    
    
    
    344
    
    
    
    370Minneapolis, Minnesota
    
    
    3,008
    
    
    
    3,008
    
    
    
    429
    
    
    
    414Other
    
    
    2,095
    
    
    
    1,219
    
    
    
    119
    
    
    
    84Total
    
    
    48,030
    
    
    
    30,927
    
    
    $
    7,505
    
    
    $
    6,651
 
 (1)
    
    Includes $75 million and $96 million of discontinued operations at December 31, 2005
and 2004, respectively TENANT INSTALLATION COSTS AND CAPITAL EXPENDITURES
   21




---



##### 



(Millions)
    
    2005
    
    
    2004Leasing commissions
    
    $
    15
    
    
    $
    15Tenant improvements
    
    
    108
    
    
    
    67Total
    
    $
    123
    
    
    $
    82
    (Millions)
    
    2005
    
    
    2004Revenue enhancing
    
    $
    15
    
    
    $
    14Non-revenue enhancing
    
    
    6
    
    
    
    12Total
    
    $
    21
    
    
    $
    26
 ASSETS RELATED TO DISCONTINUED OPERATIONS
 
 DEVELOPMENT PROPERTIES
   (Millions)
    
    2005
    
    
    2004Commercial developments
    
    $
    224
    
    
    $
    399Residential development
    
    
    391
    
    
    
    317Total
    
    $
    615
    
    
    $
    716
 22




---



##### 



Commercial developments
  Buildable(Millions)
    
    Sq. Ft.
    
    
    2005
    
    
    2004Bay Adelaide Centre, Toronto
    
    
    2,500,000
    
    
    $
    191
    
    
    $
    101Three World Financial Center, New York(1)
    
    
    
    
    
    
    
    
    
    
    248Hudsons Bay Centre, Toronto(1)
    
    
    
    
    
    
    
    
    
    
    29Other:401 West 31st Street, New York
    
    
    2,500,000BCE Place III, Toronto
    
    
    800,000Bankers Court, Calgary
    
    
    500,000Place de Ville III, Ottawa
    
    
    500,000425 15th Street, Denver
    
    
    800,000Tremont Garage, Denver
    
    
    500,0005,600,000
    
    
    
    33
    
    
    
    21Total
    
    
    8,100,000
    
    
    $
    224
    
    
    $
    399
 
 (1)
    
    Reclassified to commercial properties in 2005     (Millions)
    
    2005
    
    
    2004Construction costs
    
    $
    30
    
    
    $
    21Interest capitalized
    
    
    15
    
    
    
    14Property taxes and other
    
    
    5
    
    
    
    20Total
    
    $
    50
    
    
    $
    55
 Residential development
   (Millions)
    
    2005
    
    
    2004Under development
    
    $
    166
    
    
    $
    132Held for development
    
    
    225
    
    
    
    185Total
    
    $
    391
    
    
    $
    317
 23




---



##### 



Number of Lots
    
    
    
    Book Value (Millions)Under Development
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004Alberta
    
    
    2,713
    
    
    
    2,585
    
    
    
    $
    113
    
    
    $
    90Ontario
    
    
    497
    
    
    
    748
    
    
    
    
    32
    
    
    
    16Colorado
    
    
    729
    
    
    
    818
    
    
    
    
    19
    
    
    
    22Texas and other
    
    
    158
    
    
    
    30
    
    
    
    
    2
    
    
    
    4Total
    
    
    4,097
    
    
    
    4,181
    
    
    
    $
    166
    
    
    $
    132
 EstimatedNumber of Lots
    
    
    
    Number of Acres
    
    
    
    Book Value (Millions)Held for Development
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004Alberta
    
    
    24,943
    
    
    
    23,795
    
    
    
    
    4,428
    
    
    
    4,215
    
    
    
    $
    156
    
    
    $
    125Ontario
    
    
    6,983
    
    
    
    5,738
    
    
    
    
    1,364
    
    
    
    1,164
    
    
    
    
    39
    
    
    
    28Colorado
    
    
    2,931
    
    
    
    3,222
    
    
    
    
    548
    
    
    
    666
    
    
    
    
    23
    
    
    
    24Texas and other
    
    
    1,859
    
    
    
    2,080
    
    
    
    
    541
    
    
    
    575
    
    
    
    
    7
    
    
    
    8Total
    
    
    36,716
    
    
    
    34,835
    
    
    
    
    6,881
    
    
    
    6,620
    
    
    
    $
    225
    
    
    $
    185
 RECEIVABLES AND OTHER ASSETS
   (Millions)
    
    2005
    
    
    2004Receivables and real estate mortgages
    
    $
    551
    
    
    $
    435Prepaid expenses and other assets
    
    
    279
    
    
    
    234Intangible assets
    
    
    125
    
    
    
    70Total
    
    $
    955
    
    
    $
    739
 RESTRICTED CASH AND DEPOSITS
  CASH AND MARKETABLE SECURITIES
  24




---



##### 



UTILIZATION OF CASH RESOURCES
  (Millions)
    
    2005
    
    
    2004
    
    
    TotalCashflow from operating activities
    
    $
    106
    
    
    $
    459
    
    
    $
    565FinancingBorrowings, net of repayments
    
    
    283
    
    
    
    (182
    )
    
    
    101Net issuance of preferred shares
    
    
    
    
    
    
    261
    
    
    
    261Net repurchase of common shares
    
    
    (66
    )
    
    
    (33
    )
    
    
    (99
    )Shareholder distributions
    
    
    (149
    )
    
    
    (261
    )
    
    
    (410
    )68
    
    
    
    (215
    )
    
    
    (147
    )InvestingMarketable securities
    
    
    227
    
    
    
    (18
    )
    
    
    209Acquisitions of real estate, net
    
    
    (359
    )
    
    
    (144
    )
    
    
    (503
    )Development and redevelopment
    
    
    (50
    )
    
    
    (55
    )
    
    
    (105
    )Restricted cash and deposits
    
    
    (19
    )
    
    
    (21
    )
    
    
    (40
    )Capital expenditures
    
    
    (21
    )
    
    
    (26
    )
    
    
    (47
    )(222
    )
    
    
    (264
    )
    
    
    (486
    )Decrease in cash
    
    $
    (48
    )
    
    $
    (20
    )
    
    $
    (68
    )
  25




---



##### 



LIABILITIES AND SHAREHOLDERS EQUITY
  (Millions)
    
    2005
    
    
    2004LiabilitiesCommercial property debt
    
    $
    5,216
    
    
    $
    4,754Accounts payable and other liabilities
    
    
    626
    
    
    
    452Future income tax liability
    
    
    188
    
    
    
    96Liabilities related to discontinued operations
    
    
    51
    
    
    
    64Capital securities
    
    
    1,101
    
    
    
    1,069Non-controlling interests
    
    
    59
    
    
    
    53Preferred equity  subsidiaries
    
    
    329
    
    
    
    320Shareholders equityPreferred equity  corporate
    
    
    45
    
    
    
    45Common equity
    
    
    1,898
    
    
    
    1,947Total
    
    $
    9,513
    
    
    $
    8,800
 COMMERCIAL PROPERTY DEBT
 
  Three year
    
    
    Annual ResultsObjective
    
    average
    
    
    2005
    
    
    2004
    
    
    2003Maintain debt to total market capitalization of 50% or less
    
    
    38
    %
    
    
    34
    %
    
    
    37
    %
    
    
    42
    %Move toward long-term goal of 95% non-recourse debt
    
    
    89
    %
    
    
    88
    %
    
    
    93
    %
    
    
    86
    %Maintain interest expense coverage of 2.3x or greater
    
    
    2.5
    x
    
    
    2.6
    x
    
    
    2.6
    x
    
    
    2.3
    x
   Financed / Refinanced(Millions)
    
    Mortgage
    
    
    Interest Rate %Corporate revolver facility
    
    $
    350
    
    
    LIBOR + 110bpsOne World Financial Center, New York
    
    
    300
    
    
    LIBOR + 100bpsAtrium on Bay, Toronto
    
    
    34
    
    
    CDOR + (95bps-115bps)Total
    
    $
    684
   26




---



##### 



BrookfieldPropertiesInterest
    
    Maturity
    
    ProportionateCommercial Property
    
    Location
    
    Rate %
    
    Date
    
    Share (Millions)
    
    
    Mortgage DetailsAtrium on Bay
    
    Toronto
    
    4.30
    
    2006
    
    $
    34
    
    
    Non-recourse, floating rateOne Liberty Plaza(1)
    
    New York
    
    6.98
    
    2007
    
    
    246
    
    
    Non-recourse, fixed rateTD Canada Trust Tower
    
    Toronto
    
    6.60
    
    2007
    
    
    108
    
    
    Non-recourse, fixed ratePetro-Canada Centre
    
    Calgary
    
    6.43
    
    2008
    
    
    112
    
    
    Non-recourse, fixed rateOne World Financial Center
    
    New York
    
    5.39
    
    2009
    
    
    300
    
    
    Recourse, floating rateFirst Canadian Place
    
    Toronto
    
    8.06
    
    2009
    
    
    64
    
    
    Non-recourse, fixed rate245 Park Avenue
    
    New York
    
    6.65
    
    2011
    
    
    243
    
    
    Non-recourse, fixed rateOne Liberty Plaza
    
    New York
    
    6.75
    
    2011
    
    
    407
    
    
    Non-recourse, fixed rateFifth Avenue Place
    
    Calgary
    
    7.59
    
    2011
    
    
    67
    
    
    Non-recourse, fixed ratePotomac Tower
    
    Washington
    
    4.72
    
    2011
    
    
    75
    
    
    Non-recourse, fixed rateExchange Tower
    
    Toronto
    
    6.83
    
    2012
    
    
    57
    
    
    Non-recourse, fixed rateTwo World Financial Center
    
    New York
    
    6.91
    
    2013
    
    
    659
    
    
    Non-recourse, fixed rateFour World Financial Center
    
    New York
    
    6.95
    
    2013
    
    
    341
    
    
    Non-recourse, fixed rateBay Wellington Tower
    
    Toronto
    
    6.49
    
    2013
    
    
    306
    
    
    Non-recourse, fixed rateBankers Hall
    
    Calgary
    
    7.20
    
    2013
    
    
    155
    
    
    Non-recourse, fixed rateRepublic Plaza
    
    Denver
    
    5.13
    
    2014
    
    
    170
    
    
    Non-recourse, fixed rate1625 Eye Street
    
    Washington
    
    6.00
    
    2014
    
    
    129
    
    
    Non-recourse, fixed rateRoyal Centre
    
    Vancouver
    
    7.50
    
    2022
    
    
    44
    
    
    Non-recourse, fixed rate53 State Street
    
    Boston
    
    6.91
    
    2023
    
    
    72
    
    
    Non-recourse, fixed rate33 South Sixth Street
    
    Minneapolis
    
    6.72
    
    2027
    
    
    97
    
    
    Non-recourse, fixed rateDain Plaza
    
    Minneapolis
    
    7.37
    
    2027
    
    
    83
    
    
    Non-recourse, fixed rate701 9th Street
    
    Washington
    
    6.73
    
    2028
    
    
    153
    
    
    Non-recourse, fixed rate75 State Street
    
    Boston
    
    7.00
    
    2028
    
    
    87
    
    
    Non-recourse, fixed rate300 Madison Avenue
    
    New York
    
    7.26
    
    2032
    
    
    400
    
    
    Non-recourse, fixed rate300 Madison Avenue
    
    New York
    
    3.55
    
    2012
    
    
    109
    
    
    Non-recourse, floating rateCorporate credit facilities
    
    
    
    
    
    
    
    
    324
    
    
    Recourse, floating rateO&Y acquisition financing and
other assumed debt
    
    
    
    
    
    
    
    
    187
    
    
    Various termsDevelopment and other debt
    
    
    
    
    
    
    
    
    187
    
    
    Various termsTotal
    
    
    
    6.50%
    
    
    
    $
    5,216
 (1)
    
    Included in restricted cash and deposits is $256 of securities to match interest and
principal payments on this commercial property debt
  Weighted Average(Millions)
    
    Scheduled
    
    
    
    
    
    
    
    
    
    
    Interest Rate atYear
    
    Amortization
    
    
    Maturities
    
    
    Total
    
    
    Dec. 31, 20052006
    
    $
    60
    
    
    $
    210
    
    
    $
    270
    
    
    
    5.2
    %2007
    
    
    263
    
    
    
    371
    
    
    
    634
    
    
    
    6.5
    %2008
    
    
    197
    
    
    
    180
    
    
    
    377
    
    
    
    5.8
    %2009
    
    
    174
    
    
    
    663
    
    
    
    837
    
    
    
    5.4
    %2010
    
    
    185
    
    
    
    4
    
    
    
    189
    
    
    
    6.4
    %2011 and thereafter
    
    
    
    
    
    
    2,909
    
    
    
    2,909
    
    
    
    6.5
    %Total
    
    $
    879
    
    
    $
    4,337
    
    
    $
    5,216
    
    
    
    6.5
    %
  27




---



##### 



CONTRACTUAL OBLIGATIONS
  Payments Due By Period(Millions)
    
    Total
    
    
    1 - 3 Years
    
    
    4 - 5 Years
    
    
    After 5 YearsCommercial property debt
    
    $
    5,216
    
    
    $
    1,281
    
    
    $
    1,026
    
    
    $
    2,909Residential development debt
    
    
    158
    
    
    
    155
    
    
    
    3
    
    
    
    Capital securities(1)
    
    
    929
    
    
    
    
    
    
    
    172
    
    
    
    757Interest expense(2)Commercial property debt
    
    
    2,463
    
    
    
    848
    
    
    
    445
    
    
    
    1,170Capital securities(1)
    
    
    415
    
    
    
    193
    
    
    
    96
    
    
    
    126
 (1)
    
    Excludes Class AAA Series E, as these are retractable at the holders option or
redeemable at our option at any time(2)
    
    Represents aggregate interest expense expected to be paid over the term of the debt,
on an undiscounted basis, based on current interest and foreign exchange rates
  Credit Ratings
   DBRS
    
    S&PCorporate rating
    
    BBB(high)
    
    BBBPreferred shares
    
    Pfd-3(high)
    
    P3(high)
  Corporate Guarantees and Contingent Obligations
   ACCOUNTS PAYABLE AND OTHER LIABILITIES
  28




---



##### 



(Millions)
    
    2005
    
    
    2004Accounts payable
    
    $
    342
    
    
    $
    289Residential development debt
    
    
    158
    
    
    
    135Intangible liabilities
    
    
    126
    
    
    
    28Total
    
    $
    626
    
    
    $
    452
 FUTURE INCOME TAXES
  (Millions)
    
    2005
    
    
    2004Future income tax liabilities related to difference in tax and book basis, net
    
    $
    541
    
    
    $
    568Future income tax assets related to non-capital losses and capital losses
    
    
    (353
    )
    
    
    (472
    )Total
    
    $
    188
    
    
    $
    96
 CAPITAL SECURITIES
   Shares
    
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Dividend Rate
    
    
    2005
    
    
    2004Class AAA Series E
    
    
    8,000,000
    
    
    70% of bank prime
    
    $
    172
    
    
    $
    167Class AAA Series F
    
    
    8,000,000
    
    
    
    6.00
    %
    
    
    172
    
    
    
    167Class AAA Series G
    
    
    4,400,000
    
    
    
    5.25
    %
    
    
    110
    
    
    
    110Class AAA Series H
    
    
    8,000,000
    
    
    
    5.75
    %
    
    
    173
    
    
    
    167Class AAA Series I
    
    
    8,000,000
    
    
    
    5.20
    %
    
    
    172
    
    
    
    167Class AAA Series J
    
    
    8,000,000
    
    
    
    5.00
    %
    
    
    172
    
    
    
    167Class AAA Series K
    
    
    6,000,000
    
    
    
    5.20
    %
    
    
    130
    
    
    
    124Total
    
    
    
    
    
    
    
    
    
    $
    1,101
    
    
    $
    1,069
 For redemption dates, refer to Note 14 of the consolidated financial statements
 NON-CONTROLLING INTERESTS
   (Millions)
    
    Others Equity Ownership
    
    
    2005
    
    
    2004Common shares of BPO Properties
    
    
    11.0
    %
    
    $
    47
    
    
    $
    42Limited partnership units of Brookfield Financial Properties
    
    
    0.6
    %
    
    
    12
    
    
    
    11Total
    
    
    
    
    
    $
    59
    
    
    $
    53
  29




---



##### 



PREFERRED EQUITY  SUBSIDIARIES
   Shares
    
    
    Preferred
    
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Shares Series
    
    
    Dividend Rate
    
    2005
    
    
    2004BPO Properties1,805,489
    
    
    Series G
    
    70% of bank prime
    
    $
    39
    
    
    $
    383,816,527
    
    
    Series J
    
    70% of bank prime
    
    
    82
    
    
    
    80300
    
    
    Series K
    
    30-day BA + 0.4%
    
    
    129
    
    
    
    1242,847,711
    
    
    Series M
    
    70% of bank prime
    
    
    62
    
    
    
    59800,000
    
    
    Series N
    
    30-day BA + 0.4%
    
    
    17
    
    
    
    17$
    329
    
    
    $
    318100%-owned subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    329
    
    
    $
    320
  PREFERRED EQUITY  CORPORATE
   Shares
    
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Dividend Rate
    
    
    2005
    
    
    2004Class A redeemable voting
    
    
    6,312,000
    
    
    
    7.50
    %
    
    $
    11
    
    
    $
    11Class AA Series E
    
    
    2,000,000
    
    
    70% of bank prime
    
    
    34
    
    
    
    34Total
    
    
    
    
    
    
    
    
    
    $
    45
    
    
    $
    45
 For detailed terms on our preferred shares, refer to our Annual Information Form.
  COMMON EQUITY
   2005
    
    
    2004(1)Common shares outstanding
    
    
    231,209,625
    
    
    
    233,387,780Unexercised options
    
    
    4,641,961
    
    
    
    4,692,869Common shares outstanding  diluted(2)
    
    
    235,851,586
    
    
    
    238,080,649Common shares repurchased
    
    
    2,693,500
    
    
    
    2,114,850
 (1)
    
    Adjusted for the three-for-two common
stock-split on March 31, 2005(2)
    
    Includes all
potential common shares at December 31, 2005
  30




---



##### 



CAPITAL RESOURCES AND LIQUIDITY
    COST OF CAPITAL
    Cost of Capital(1)
    
    
    Underlying Value(2)(Millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004LiabilitiesCommercial property debt
    
    
    6.5
    %
    
    
    6.5
    %
    
    $
    5,267
    
    
    $
    4,818Residential debt
    
    
    3.2
    %
    
    
    2.7
    %
    
    
    158
    
    
    
    135Capital securities
    
    
    5.1
    %
    
    
    5.0
    %
    
    
    1,101
    
    
    
    1,069Non-controlling interests
    
    
    12.0
    %
    
    
    12.0
    %
    
    
    59
    
    
    
    53Preferred equity  subsidiaries
    
    
    3.6
    %
    
    
    3.0
    %
    
    
    329
    
    
    
    320Shareholders equityPreferred equity  corporate
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    45
    
    
    
    45Common equity
    
    
    12.0
    %
    
    
    12.0
    %
    
    
    6,802
    
    
    
    5,818Total(3)
    
    
    8.1
    %
    
    
    8.0
    %
    
    $
    13,761
    
    
    $
    12,258
 (1)
    
    As a percentage of average book value(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)
    
    In calculating the weighted average cost of capital, the cost of debt
has been tax-effected
 31




---



##### 



OPERATING RESULTS
 NET INCOME
  
    
    $64 million of growth ($0.18 per diluted share) from our residential development
operations which continues to benefit from the low interest rate environment and strong demand
in the North American housing market;
    
    the retroactive adoption of CICA Handbook section 3861, Financial Instruments 
Disclosure and Presentation, resulted in the recognition of a $63 million ($0.18 per diluted
share) unrealized foreign exchange loss in 2004 (refer to Note 2 of the consolidated financial
statements);
    
    a $30 million fee received from Goldman Sachs in 2005 pursuant to a cooperation agreement
permitting the commencement of construction on Site 26 in New York, as compared to $60 million
in lease termination income realized in the second quarter of 2004 ($0.09 per diluted share)
and a leasing fee of $16 million ($0.04 per diluted share) realized upon the successful
completion of a sublease at 300 Madison Avenue in the first quarter of 2004; and
    
    an increase in interest expense of $26 million ($0.07 per diluted share) related to
additional corporate borrowings, a full year of interest carry and amortization on the
Washington, D.C. properties acquired in 2004, interest and amortization related to the O&Y
acquisition, and the cessation of interest capitalization on Three World Financial Center in
the first quarter of 2005.
  (Millions)
    
    2005
    
    
    2004
    
    
    2003Total revenue and gains
    
    $
    1,549
    
    
    $
    1,442
    
    
    $
    1,363Net operating incomeCommercial property operationsOperating income from commercial properties
    
    $
    680
    
    
    $
    671
    
    
    $
    586Operating income from properties sold(1)
    
    
    11
    
    
    
    12
    
    
    
    11Lease termination income and gains
    
    
    
    
    
    
    60
    
    
    
    100Total commercial property operations
    
    
    691
    
    
    
    743
    
    
    
    697Residential development operations
    
    
    106
    
    
    
    42
    
    
    
    31Interest and other income
    
    
    37
    
    
    
    47
    
    
    
    62834
    
    
    
    832
    
    
    
    790ExpensesInterest
    
    
    330
    
    
    
    304
    
    
    
    279Interest related to discontinued operations(1)
    
    
    5
    
    
    
    5
    
    
    
    4General and administrative
    
    
    48
    
    
    
    41
    
    
    
    44Non-controlling interests expense
    
    
    16
    
    
    
    20
    
    
    
    21Funds from operations and gains
    
    
    435
    
    
    
    462
    
    
    
    442Depreciation and amortization
    
    
    163
    
    
    
    140
    
    
    
    76Depreciation and amortization related to discontinued operations(1)
    
    
    5
    
    
    
    5
    
    
    
    3Unrealized foreign exchange on preferred share restatement
    
    
    
    
    
    
    63
    
    
    
    29Future income taxes and other provisions
    
    
    103
    
    
    
    116
    
    
    
    102Net income
    
    $
    164
    
    
    $
    138
    
    
    $
    232Net income per share  dilutedPrior to discontinued operations and lease termination income and gains
    
    $
    0.69
    
    
    $
    0.42
    
    
    $
    0.65Discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    0.02Lease termination income and gains
    
    
    
    
    
    
    0.15
    
    
    
    0.29$
    0.69
    
    
    $
    0.58
    
    
    $
    0.96Funds from operations per share  dilutedPrior to discontinued operations and lease termination income and gains
    
    $
    1.82
    
    
    $
    1.67
    
    
    $
    1.40Discontinued operations
    
    
    0.03
    
    
    
    0.03
    
    
    
    0.03Lease termination income and gains
    
    
    
    
    
    
    0.25
    
    
    
    0.42$
    1.85
    
    
    $
    1.95
    
    
    $
    1.85
 (1)
    
    Refer to page 40 for further details on discontinued operations
 32




---



##### 



(Millions, except per share amounts)
    
    2005
    
    
    2004
    
    
    2003Net income
    
    $
    164
    
    
    $
    138
    
    
    $
    232Preferred share dividends
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Net income available to common shareholders
    
    $
    162
    
    
    $
    136
    
    
    $
    230Weighted average shares outstanding  basic
    
    
    232.1
    
    
    
    234.0
    
    
    
    236.1Net income per share  basic
    
    $
    0.70
    
    
    $
    0.58
    
    
    $
    0.96Weighted average shares outstanding  diluted
    
    
    234.2
    
    
    
    235.7
    
    
    
    237.9Net income per share  diluted
    
    $
    0.69
    
    
    $
    0.58
    
    
    $
    0.96Weighted average shares outstanding  basic
    
    
    232.1
    
    
    
    234.0
    
    
    
    236.1Unexercised options
    
    
    2.1
    
    
    
    1.7
    
    
    
    1.8Weighted average shares outstanding  diluted
    
    
    234.2
    
    
    
    235.7
    
    
    
    237.9
 RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
 (Millions)
    
    2005
    
    
    2004
    
    
    2003Net income
    
    $
    164
    
    
    $
    138
    
    
    $
    232Add:Depreciation and amortization(1)
    
    
    168
    
    
    
    145
    
    
    
    79Unrealized foreign exchange on preferred share restatement
    
    
    
    
    
    
    63
    
    
    
    29Future income taxes and other provisions
    
    
    103
    
    
    
    116
    
    
    
    102Funds from operations and gains
    
    $
    435
    
    
    $
    462
    
    
    $
    442Less:Lease termination income and gains(2)
    
    
    
    
    
    
    (59
    )
    
    
    (99
    )Funds from operations
    
    $
    435
    
    
    $
    403
    
    
    $
    343
 (1)
    
    Includes depreciation and amortization from the consolidated income statements of
$163 million, $140 million and $76 million and depreciation and amortization from discontinued
operations of $5 million, $5 million and $3 million for the years ended December 31, 2005, 2004 and
2003, respectively(2)
    
    Net of non-controlling interests expense
  (Millions, except per share amounts)
    
    2005
    
    
    2004
    
    
    2003Funds from continuing operations
    
    $
    435
    
    
    $
    403
    
    
    $
    343Preferred share dividends
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )$
    433
    
    
    $
    401
    
    
    $
    341Weighted average shares outstanding
    
    
    234.2
    
    
    
    235.7
    
    
    
    237.9Funds from operations per share
    
    $
    1.85
    
    
    $
    1.70
    
    
    $
    1.43
   33




---



##### 



(Millions)
    
    2005
    
    
    2004
    
    
    2003Commercial property operationsRevenue from current properties, including fee income
    
    $
    1,051
    
    
    $
    1,006
    
    
    $
    921Recurring fee income
    
    
    22
    
    
    
    20
    
    
    
    20Non-recurring fee and other income
    
    
    30
    
    
    
    27
    
    
    
    15Revenue from discontinued operations
    
    
    20
    
    
    
    21
    
    
    
    20Lease termination income and gains
    
    
    
    
    
    
    60
    
    
    
    100Total commercial property revenue
    
    
    1,123
    
    
    
    1,134
    
    
    
    1,076Revenue from residential development operations
    
    
    389
    
    
    
    261
    
    
    
    225Revenue from commercial property and residential development operations
    
    
    1,512
    
    
    
    1,395
    
    
    
    1,301Interest and other
    
    
    37
    
    
    
    47
    
    
    
    62Total
    
    $
    1,549
    
    
    $
    1,442
    
    
    $
    1,363
 COMMERCIAL PROPERTY OPERATIONS
   (Millions)
    
    2005
    
    
    2004
    
    
    2003Rental revenue
    
    $
    1,051
    
    
    $
    1,006
    
    
    $
    921Recurring fee income
    
    
    22
    
    
    
    20
    
    
    
    20Property operating costs
    
    
    (423
    )
    
    
    (382
    )
    
    
    (370
    )Net operating income
    
    
    650
    
    
    
    644
    
    
    
    571Non-recurring fee and other income
    
    
    30
    
    
    
    27
    
    
    
    15Lease termination income and gains
    
    
    
    
    
    
    60
    
    
    
    100Net operating income including lease termination income and gains
    
    $
    680
    
    
    $
    731
    
    
    $
    686
  (Millions)
    
    2005
    
    
    2004Net operating income, prior year(1)
    
    $
    644
    
    
    $
    571(a) Contractual rent increases and straight-line rental income, net
    
    
    (3
    )
    
    
    27(b) Leasing activity
    
    
    (1
    )
    
    
    4(c) Acquisitions, net of dispositions
    
    
    8
    
    
    
    42(d) Recurring fee income
    
    
    2
    
    
    
    Net operating income, end of year
    
    $
    650
    
    
    $
    644(e) Non-recurring fee and other income
    
    
    30
    
    
    
    27(f) Lease termination income
    
    
    
    
    
    
    60Net operating income including lease termination income, end of year
    
    $
    680
    
    
    $
    731
 (1)
    
    Prior year net operating income has been restated for discontinued operations
 (a) Contractual rent increases and straight-line rental income, net
  34




---



##### 



(b) Leasing activity
   Gross
    
    
    Avg.
    
    
    Avg. In-place
    
    
    Avg. MarketLeasable Area
    
    
    Lease Term
    
    
    Net Rent
    
    
    Net Rent(000s Sq. Ft.)
    
    
    (Years)
    
    
    ($ per Sq. Ft.)
    
    
    ($ per Sq. Ft.)New York, New YorkMidtown
    
    
    2,786
    
    
    
    19
    
    
    $
    39
    
    
    $
    55Lower Manhattan
    
    
    9,667
    
    
    
    9
    
    
    
    31
    
    
    
    25Boston,
Massachusetts
    
    
    2,163
    
    
    
    6
    
    
    
    29
    
    
    
    30Washington, D.C.
    
    
    1,557
    
    
    
    15
    
    
    
    30
    
    
    
    38Toronto, Ontario
    
    
    12,278
    
    
    
    7
    
    
    
    22
    
    
    
    22Calgary, Alberta
    
    
    8,936
    
    
    
    8
    
    
    
    16
    
    
    
    24Ottawa, Ontario
    
    
    2,935
    
    
    
    5
    
    
    
    10
    
    
    
    14Denver, Colorado
    
    
    2,605
    
    
    
    4
    
    
    
    14
    
    
    
    15Minneapolis,
Minnesota
    
    
    3,008
    
    
    
    8
    
    
    
    8
    
    
    
    13Other
    
    
    2,095
    
    
    
    11
    
    
    
    9
    
    
    
    14Total(1)
    
    
    48,030
    
    
    
    10
    
    
    $
    23
    
    
    $
    25
 (1)
    
    Excludes developments   Dec. 31, 2005
    
    
    Dec. 31, 2004Total
    
    
    
    
    
    
    TotalSquare
    
    
    %
    
    
    Square
    
    
    %(Thousands of square feet)
    
    Feet
    
    
    Leased
    
    
    Feet
    
    
    LeasedNew York, New York
    
    
    12,453
    
    
    
    94.9
    
    
    
    12,453
    
    
    
    92.1Boston, Massachusetts
    
    
    2,163
    
    
    
    92.1
    
    
    
    2,163
    
    
    
    96.8Washington, D.C.
    
    
    1,557
    
    
    
    98.5
    
    
    
    1,557
    
    
    
    93.2Toronto, Ontario
    
    
    12,278
    
    
    
    93.4
    
    
    
    7,882
    
    
    
    93.3Calgary, Alberta
    
    
    8,936
    
    
    
    99.1
    
    
    
    6,331
    
    
    
    98.4Ottawa, Ontario
    
    
    2,935
    
    
    
    99.7
    
    
    
    
    
    
    
    Denver, Colorado
    
    
    2,605
    
    
    
    86.9
    
    
    
    3,017
    
    
    
    85.4Minneapolis, Minnesota
    
    
    3,008
    
    
    
    87.9
    
    
    
    3,008
    
    
    
    85.8Other
    
    
    2,095
    
    
    
    92.3
    
    
    
    926
    
    
    
    90.5Total(1)
    
    
    48,030
    
    
    
    94.6
    
    
    
    37,337
    
    
    
    92.7New
York/Boston/Washington/
Toronto/Calgary/Ottawa
    
    
    40,322
    
    
    
    95.6
    
    
    
    30,386
    
    
    
    94.0Denver/Minneapolis/Other
    
    
    7,708
    
    
    
    88.7
    
    
    
    6,951
    
    
    
    86.2Total(1)
    
    
    48,030
    
    
    
    94.6
    
    
    
    37,337
    
    
    
    92.7
 (1)
    
    Excludes developments




---



##### 



December 31, 2004
    
    
    
    2005 Activities
    
    
    
    December 31, 2005Accelerated
    
    
    Expiring
    
    
    
    
    
    
    Leasing
    
    
    Acq.(Thousands of sq. ft.)
    
    GLA(1)
    
    
    Leased
    
    
    
    Expiries
    
    
    Expiries
    
    
    Net Rent
    
    
    Leasing
    
    
    Net Rent
    
    
    (Disp.)
    
    
    
    GLA(1)
    
    
    LeasedNew York, New YorkMidtown
    
    
    2,786
    
    
    
    2,749
    
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    1
    
    
    
    
    2,786
    
    
    
    2,777Lower Manhattan
    
    
    9,667
    
    
    
    8,744
    
    
    
    
    (277
    )
    
    
    (107
    )
    
    
    
    
    
    
    698
    
    
    
    
    
    
    
    (1
    )
    
    
    
    9,667
    
    
    
    9,057Boston, Massachusetts
    
    
    2,163
    
    
    
    2,103
    
    
    
    
    (158
    )
    
    
    (342
    )
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    (1
    )
    
    
    
    2,163
    
    
    
    2,013Washington, D.C.
    
    
    1,557
    
    
    
    1,490
    
    
    
    
    (6
    )
    
    
    (36
    )
    
    
    
    
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    
    1,557
    
    
    
    1,542Toronto, Ontario
    
    
    7,882
    
    
    
    7,449
    
    
    
    
    (413
    )
    
    
    (667
    )
    
    
    
    
    
    
    1,027
    
    
    
    
    
    
    
    4,195
    
    
    
    
    12,278
    
    
    
    11,591Calgary, Alberta
    
    
    6,331
    
    
    
    6,247
    
    
    
    
    (40
    )
    
    
    (480
    )
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    2,538
    
    
    
    
    8,936
    
    
    
    8,865Ottawa, Ontario
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,930
    
    
    
    
    2,935
    
    
    
    2,930Denver, Colorado
    
    
    3,017
    
    
    
    2,657
    
    
    
    
    (242
    )
    
    
    (238
    )
    
    
    
    
    
    
    430
    
    
    
    
    
    
    
    (273
    )
    
    
    
    2,605
    
    
    
    2,334Minneapolis, Minnesota
    
    
    3,008
    
    
    
    2,655
    
    
    
    
    (47
    )
    
    
    (243
    )
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    (1
    )
    
    
    
    3,008
    
    
    
    2,708Other
    
    
    926
    
    
    
    863
    
    
    
    
    (4
    )
    
    
    (82
    )
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    1,087
    
    
    
    
    2,095
    
    
    
    1,971Total
    
    
    37,337
    
    
    
    34,957
    
    
    
    
    (1,187
    )
    
    
    (2,270
    )
    
    $
    20
    
    
    
    3,813
    
    
    $
    19
    
    
    
    10,475
    
    
    
    
    48,030
    
    
    
    45,788
 (1)
    
    Excludes developments (c) Acquisitions, net of dispositions
  (d) Recurring fee income
   (Millions)
    
    2005
    
    
    2004
    
    
    2003Property management, leasing and project management fees
    
    $
    7
    
    
    $
    6
    
    
    $
    6Brookfield Residential fees
    
    
    9
    
    
    
    8
    
    
    
    8Brookfield LePage Johnson Controls
    
    
    6
    
    
    
    6
    
    
    
    6Total
    
    $
    22
    
    
    $
    20
    
    
    $
    20
  (e) Non-recurring fee and other income




---



##### 



(f) Lease termination income and gains
  Commercial Property Operating Costs
  RESIDENTIAL DEVELOPMENT OPERATIONS
    (Millions)
    
    2005
    
    
    2004
    
    
    2003Sales revenue
    
    $
    389
    
    
    $
    261
    
    
    $
    225Operating costs
    
    
    283
    
    
    
    219
    
    
    
    194Total
    
    $
    106
    
    
    $
    42
    
    
    $
    31
  Lot sales
    
    
    
    Lot Sales Revenue
    
    
    
    Average Lot Sales Revenue(Units)
    
    
    
    (Millions)
    
    
    
    (Thousands)2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003Alberta
    
    
    2,617
    
    
    
    2,078
    
    
    
    1,768
    
    
    
    $
    182
    
    
    $
    107
    
    
    $
    83
    
    
    
    $
    70
    
    
    $
    51
    
    
    $
    47Colorado
    
    
    369
    
    
    
    468
    
    
    
    448
    
    
    
    
    24
    
    
    
    19
    
    
    
    24
    
    
    
    
    65
    
    
    
    41
    
    
    
    54Total
    
    
    2,986
    
    
    
    2,546
    
    
    
    2,216
    
    
    
    $
    206
    
    
    $
    126
    
    
    $
    107
    
    
    
    $
    69
    
    
    $
    49
    
    
    $
    48
  Home sales
    
    
    
    Home Sales Revenue
    
    
    
    Average Home Sales Revenue(Units)
    
    
    
    (Millions)
    
    
    
    (Thousands)2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003Alberta
    
    
    556
    
    
    
    496
    
    
    
    479
    
    
    
    $
    86
    
    
    $
    61
    
    
    $
    55
    
    
    
    $
    155
    
    
    $
    123
    
    
    $
    115Ontario
    
    
    391
    
    
    
    339
    
    
    
    318
    
    
    
    
    97
    
    
    
    74
    
    
    
    63
    
    
    
    
    248
    
    
    
    218
    
    
    
    198Total
    
    
    947
    
    
    
    835
    
    
    
    797
    
    
    
    $
    183
    
    
    $
    135
    
    
    $
    118
    
    
    
    $
    193
    
    
    $
    162
    
    
    $
    148




---



##### 



INTEREST AND OTHER INCOME
  INTEREST EXPENSE
  GENERAL AND ADMINISTRATIVE EXPENSES
  NON-CONTROLLING INTERESTS EXPENSE
     (Millions)
    
    Type
    
    2005
    
    
    2004
    
    
    2003BPO Properties
    
    Redeemable preferred shares(1)
    
    $
    10
    
    
    $
    8
    
    
    $
    9BPO Properties
    
    Common shares
    
    
    1
    
    
    
    37
    
    
    
    1100%-owned subsidiaries
    
    Redeemable preferred shares(1)
    
    
    
    
    
    
    3
    
    
    
    4Dividends  shares of subsidiaries
    
    
    
    $
    11
    
    
    $
    48
    
    
    $
    14BPO Properties
    
    Participating interests
    
    $
    4
    
    
    $
    (30
    )
    
    $
    5Brookfield Financial Properties
    
    Participating interests
    
    
    1
    
    
    
    2
    
    
    
    2Non-controlling interests expense in subsidiary
earnings
    
    
    
    $
    5
    
    
    $
    (28
    )
    
    $
    7Total
    
    
    
    $
    16
    
    
    $
    20
    
    
    $
    21
 (1)
    
    Non-participating DEPRECIATION AND AMORTIZATION EXPENSE




---



##### 



DISCONTINUED OPERATIONS
  (Millions)
    
    2005
    
    
    2004
    
    
    2003Revenue from properties sold
    
    $
    20
    
    
    $
    21
    
    
    $
    20Operating expenses
    
    
    9
    
    
    
    9
    
    
    
    9$
    11
    
    
    $
    12
    
    
    $
    11Interest expense
    
    
    (5
    )
    
    
    (5
    )
    
    
    (4
    )Funds from operations  discontinued operations
    
    $
    6
    
    
    $
    7
    
    
    $
    7Depreciation and amortization
    
    
    (5
    )
    
    
    (5
    )
    
    
    (3
    )Income from discontinued operations
    
    $
    1
    
    
    $
    2
    
    
    $
    4
 SEGMENTED INFORMATION
  Commercial
    
    
    
    ResidentialUnited States
    
    
    
    Canada
    
    
    
    Development
    
    
    
    Total(Millions)
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004AssetsProperties
    
    $
    5,318
    
    
    $
    5,224
    
    
    
    $
    2,336
    
    
    $
    1,730
    
    
    
    $
    391
    
    
    $
    317
    
    
    
    $
    8,045
    
    
    $
    7,271Receivables and other
    
    
    407
    
    
    
    339
    
    
    
    
    375
    
    
    
    316
    
    
    
    
    173
    
    
    
    84
    
    
    
    
    955
    
    
    
    739Restricted cash and deposits
    
    
    314
    
    
    
    297
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    316
    
    
    
    297Marketable securities
    
    
    
    
    
    
    285
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    285Cash and cash equivalents
    
    
    33
    
    
    
    49
    
    
    
    
    25
    
    
    
    59
    
    
    
    
    6
    
    
    
    4
    
    
    
    
    64
    
    
    
    112Assets related to discontinued operations
    
    
    75
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    96Total
    
    $
    6,147
    
    
    $
    6,290
    
    
    
    $
    2,796
    
    
    $
    2,105
    
    
    
    $
    570
    
    
    $
    405
    
    
    
    $
    9,513
    
    
    $
    8,800
 Commercial
    
    
    
    ResidentialUnited States
    
    
    
    Canada
    
    
    
    Development
    
    
    
    Total(Millions)
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004Revenue
    
    $
    787
    
    
    $
    752
    
    
    
    $
    316
    
    
    $
    301
    
    
    
    $
    389
    
    
    $
    261
    
    
    
    $
    1,492
    
    
    $
    1,314Lease termination income
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Expenses
    
    
    292
    
    
    
    253
    
    
    
    
    131
    
    
    
    129
    
    
    
    
    283
    
    
    
    219
    
    
    
    
    706
    
    
    
    601495
    
    
    
    559
    
    
    
    
    185
    
    
    
    172
    
    
    
    
    106
    
    
    
    42
    
    
    
    
    786
    
    
    
    773Other revenues
    
    
    6
    
    
    
    14
    
    
    
    
    27
    
    
    
    33
    
    
    
    
    4
    
    
    
    
    
    
    
    
    37
    
    
    
    47Net operating income from continuing
operations
    
    
    501
    
    
    
    573
    
    
    
    
    212
    
    
    
    205
    
    
    
    
    110
    
    
    
    42
    
    
    
    
    823
    
    
    
    820Interest expense
    
    
    231
    
    
    
    243
    
    
    
    
    99
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    330
    
    
    
    304General and administrative
    
    
    26
    
    
    
    20
    
    
    
    
    22
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    41Non-controlling interests expense
    
    
    
    
    
    
    4
    
    
    
    
    16
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    20Income before undernoted
    
    
    244
    
    
    
    306
    
    
    
    
    75
    
    
    
    107
    
    
    
    
    110
    
    
    
    42
    
    
    
    
    429
    
    
    
    455Depreciation and amortization
    
    
    126
    
    
    
    98
    
    
    
    
    37
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    140Income before unallocated costs
    
    
    118
    
    
    
    208
    
    
    
    
    38
    
    
    
    65
    
    
    
    
    110
    
    
    
    42
    
    
    
    
    266
    
    
    
    315Unrealized foreign exchange on preferred
share restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63Future income taxes and other provisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    116Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    163
    
    
    $
    136Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    164
    
    
    $
    138




---



##### 



QUARTERLY RESULTS
  2005
    
    
    
    2004(Millions, except per share amounts)
    
    Q4
    
    
    Q3
    
    
    
    
    
    
    Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Total revenue
    
    $
    474
    
    
    $
    378
    
    
    
    
    
    
    $
    362
    
    
    $
    335
    
    
    
    $
    390
    
    
    $
    345
    
    
    $
    381
    
    
    $
    326Net operating incomeCommercial property operations
    
    
    192
    
    
    
    160
    
    
    
    
    
    
    
    162
    
    
    
    166
    
    
    
    
    167
    
    
    
    165
    
    
    
    163
    
    
    
    176Lease termination income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    Total commercial property operations
    
    
    192
    
    
    
    160
    
    
    
    
    
    
    
    162
    
    
    
    166
    
    
    
    
    167
    
    
    
    165
    
    
    
    223
    
    
    
    176Residential development operations
    
    
    45
    
    
    
    24
    
    
    
    
    
    
    
    24
    
    
    
    13
    
    
    
    
    13
    
    
    
    11
    
    
    
    10
    
    
    
    8Interest and other
    
    
    6
    
    
    
    10
    
    
    
    
    
    
    
    10
    
    
    
    11
    
    
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    14243
    
    
    
    194
    
    
    
    
    
    
    
    196
    
    
    
    190
    
    
    
    
    191
    
    
    
    187
    
    
    
    244
    
    
    
    198ExpensesInterest
    
    
    86
    
    
    
    84
    
    
    
    
    
    
    
    81
    
    
    
    79
    
    
    
    
    79
    
    
    
    76
    
    
    
    76
    
    
    
    73General and administrative
    
    
    15
    
    
    
    11
    
    
    
    
    
    
    
    11
    
    
    
    11
    
    
    
    
    10
    
    
    
    10
    
    
    
    11
    
    
    
    10Non-controlling interests expense
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    5
    
    
    
    3
    
    
    
    
    4
    
    
    
    5
    
    
    
    6
    
    
    
    5138
    
    
    
    95
    
    
    
    
    
    
    
    99
    
    
    
    97
    
    
    
    
    98
    
    
    
    96
    
    
    
    151
    
    
    
    110Depreciation and amortization
    
    
    47
    
    
    
    41
    
    
    
    
    
    
    
    40
    
    
    
    35
    
    
    
    
    38
    
    
    
    35
    
    
    
    34
    
    
    
    33Unrealized foreign exchange on preferred share
restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    28
    
    
    
    (2
    )
    
    
    (4
    )Future income taxes and other provisions
    
    
    42
    
    
    
    22
    
    
    
    
    
    
    
    19
    
    
    
    20
    
    
    
    
    17
    
    
    
    22
    
    
    
    47
    
    
    
    30Net income from continuing operations
    
    $
    49
    
    
    $
    32
    
    
    
    
    
    
    $
    40
    
    
    $
    42
    
    
    
    $
    2
    
    
    $
    11
    
    
    $
    72
    
    
    $
    51Discontinued operations
    
    
    (2
    )
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Net income
    
    $
    47
    
    
    $
    33
    
    
    
    
    
    
    $
    41
    
    
    $
    43
    
    
    
    $
    2
    
    
    $
    11
    
    
    $
    73
    
    
    $
    52Net income per share  basicPrior to discontinued operations and lease
termination income
    
    $
    0.21
    
    
    $
    0.14
    
    
    
    
    
    
    $
    0.17
    
    
    $
    0.18
    
    
    
    $
    
    
    
    $
    0.05
    
    
    $
    0.15
    
    
    $
    0.22Discontinued operations
    
    
    (0.01
    )
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    Lease termination income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.15
    
    
    
    $
    0.20
    
    
    $
    0.14
    
    
    
    
    
    
    $
    0.18
    
    
    $
    0.18
    
    
    
    $
    
    
    
    $
    0.05
    
    
    $
    0.31
    
    
    $
    0.22Net income per share  dilutedPrior to discontinued operations and lease
termination income
    
    $
    0.21
    
    
    $
    0.14
    
    
    
    
    
    
    $
    0.16
    
    
    $
    0.18
    
    
    
    $
    
    
    
    $
    0.05
    
    
    $
    0.15
    
    
    $
    0.22Discontinued operations
    
    
    (0.01
    )
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    Lease termination income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.15
    
    
    
    $
    0.20
    
    
    $
    0.14
    
    
    
    
    
    
    $
    0.17
    
    
    $
    0.18
    
    
    
    $
    
    
    
    $
    0.05
    
    
    $
    0.31
    
    
    $
    0.22Funds from operations per share  dilutedPrior to discontinued operations and lease
termination income
    
    $
    0.59
    
    
    $
    0.40
    
    
    
    
    
    
    $
    0.42
    
    
    $
    0.41
    
    
    
    $
    0.42
    
    
    $
    0.40
    
    
    $
    0.39
    
    
    $
    0.46Discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    
    
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Lease termination income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.25
    
    
    
    $
    0.59
    
    
    $
    0.41
    
    
    
    
    
    
    $
    0.43
    
    
    $
    0.42
    
    
    
    $
    0.42
    
    
    $
    0.41
    
    
    $
    0.65
    
    
    $
    0.47
 Notes:(1)
    
    The 2004 results have been restated to reflect the impact of the reclassification of
certain preferred share dividends to interest expense and foreign exchange on the
reclassification of certain preferred shares to liabilities(2)
    
    Per share amounts include the effect of the three-for-two common stock split on
March 31, 2005




---



##### 








---



##### 



PART
III  RISKS AND UNCERTAINTIES
  INTEREST RATE AND FINANCING RISK
     Approximate Change in Annual
    
    
    Approximate Change on InterestAs at
    
    Interest Rate Movement
    
    
    Interest Expense (Millions)
    
    
    Expense per Share per YearDecember 31, 2005
    
    + 100 bps
    
    
    $
    16
    
    
    $
    0.07December 31, 2004
    
    + 100 bps
    
    
    $
    8
    
    
    $
    0.04
  CREDIT RISK
    42




---



##### 



Year of
    
    
    000s
    
    
    
    % ofTenant
    
    Location
    
    Expiry(1)
    
    
    Sq. Ft.
    (2)
    
    
    Sq. Ft.
    (2)
    
    Credit Rating(3)RatedMerrill Lynch
    
    New York/Toronto
    
    2013
    
    
    4,363
    
    
    
    9.1
    %
    
    A+CIBC/CIBC World Markets
    
    New York/Toronto/Calgary
    
    2028
    
    
    2,066
    
    
    
    4.3
    %
    
    A+Government of Canada
    
    Toronto/Ottawa/Edmonton
    
    2010
    
    
    2,008
    
    
    
    4.2
    %
    
    AAABank of Montreal/Nesbitt Burns
    
    Toronto/Calgary
    
    2018
    
    
    1,092
    
    
    
    2.3
    %
    
    AA-JPMorgan Chase
    
    New York/Denver
    
    2018
    
    
    1,029
    
    
    
    2.1
    %
    
    A+RBC Financial Group
    
    Five major markets
    
    2018
    
    
    981
    
    
    
    2.0
    %
    
    AA-Petro-Canada
    
    Calgary
    
    2013
    
    
    871
    
    
    
    1.8
    %
    
    BBBTarget Corporation
    
    Minneapolis
    
    2013
    
    
    840
    
    
    
    1.8
    %
    
    A+Imperial Oil
    
    Calgary
    
    2011
    
    
    633
    
    
    
    1.3
    %
    
    AAATalisman Energy
    
    Calgary
    
    2015
    
    
    527
    
    
    
    1.1
    %
    
    BBB+CP Rail
    
    Calgary
    
    2014
    
    
    452
    
    
    
    0.9
    %
    
    BBBConoco Phillips
    
    Calgary
    
    2010
    
    
    445
    
    
    
    0.9
    %
    
    A-American Express
    
    New York
    
    2022
    
    
    408
    
    
    
    0.8
    %
    
    A+Fidelity Properties Inc.
    
    New York/Boston
    
    2009
    
    
    381
    
    
    
    0.8
    %
    
    BBB-Pepco Holdings Inc.
    
    Washington, D.C.
    
    2028
    
    
    364
    
    
    
    0.8
    %
    
    BBB+Enbridge Inc.
    
    Calgary/Edmonton
    
    2016
    
    
    355
    
    
    
    0.7
    %
    
    A-Teachers Insurance Annuity Association
    
    Denver
    
    2008
    
    
    323
    
    
    
    0.7
    %
    
    AAACanadian Natural Resources
    
    Calgary
    
    2011
    
    
    277
    
    
    
    0.6
    %
    
    BBB+Goldman Sachs
    
    New York
    
    2015
    
    
    274
    
    
    
    0.6
    %
    
    A+EnCana Corporation
    
    Calgary
    
    2013
    
    
    256
    
    
    
    0.5
    %
    
    A-Lehman Brothers
    
    New York
    
    2010
    
    
    253
    
    
    
    0.5
    %
    
    AA-Anadarko Canada Corporation
    
    Calgary
    
    2011
    
    
    235
    
    
    
    0.5
    %
    
    BBB+Bank of Nova Scotia
    
    New York
    
    2014
    
    
    230
    
    
    
    0.5
    %
    
    AA-Amdocs Canada Inc.
    
    Toronto
    
    2010
    
    
    220
    
    
    
    0.5
    %
    
    BBB-Bank of America
    
    Boston
    
    2008
    
    
    213
    
    
    
    0.4
    %
    
    AAMarsh Mercer
    
    Toronto
    
    2015
    
    
    207
    
    
    
    0.4
    %
    
    BGovernment and related services
    
    Various
    
    Various
    
    
    1,285
    
    
    
    2.7
    %
    
    BBB- or higherOther investment grade
    
    Various
    
    Various
    
    
    3,479
    
    
    
    7.3
    %
    
    BBB- or higher24,067
    
    
    
    50.1
    %UnratedCadwalader, Wickersham & Taft LLP
    
    New York
    
    2024
    
    
    465
    
    
    
    1.0
    %
    
    Cleary, Gottlieb, Steen & Hamilton
    
    New York
    
    2012
    
    
    446
    
    
    
    1.0
    %
    
    Goodwin Procter LLP
    
    Boston
    
    2016
    
    
    397
    
    
    
    0.8
    %
    
    Wellington Management Co.
    
    Boston
    
    2011
    
    
    358
    
    
    
    0.7
    %
    
    National Association of Securities Dealers
    
    New York
    
    2020
    
    
    277
    
    
    
    0.6
    %
    
    Osler Hoskin & Harcourt LLP
    
    Toronto
    
    2015
    
    
    254
    
    
    
    0.5
    %
    
    CI Investments Inc.
    
    Toronto
    
    2011
    
    
    212
    
    
    
    0.4
    %
    
    Total
    
    
    
    
    
    
    26,476
    
    
    
    55.1
    %
 (1)
    
    Weighted average based on square feet(2)
    
    Prior to considering partnership
interests in partially-owned properties(3)
    
    From Standard & Poors, Moodys or Dominion Bond Rating
Service LEASE ROLL-OVER RISK
  43




---



##### 



December 31, 2005
    
    Currently
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013 &(000s Sq. Ft.)
    
    Available
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Beyond
    
    
    TotalNew York
    
    
    619
    
    
    
    317
    
    
    
    18
    
    
    
    252
    
    
    
    102
    
    
    
    517
    
    
    
    216
    
    
    
    591
    
    
    
    9,821
    
    
    
    12,453Boston
    
    
    150
    
    
    
    65
    
    
    
    85
    
    
    
    447
    
    
    
    15
    
    
    
    172
    
    
    
    382
    
    
    
    26
    
    
    
    821
    
    
    
    2,163Washington, D.C.
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    10
    
    
    
    
    
    
    
    18
    
    
    
    47
    
    
    
    1,449
    
    
    
    1,557Toronto
    
    
    687
    
    
    
    454
    
    
    
    604
    
    
    
    697
    
    
    
    849
    
    
    
    1,122
    
    
    
    615
    
    
    
    735
    
    
    
    6,515
    
    
    
    12,278Calgary
    
    
    71
    
    
    
    201
    
    
    
    289
    
    
    
    407
    
    
    
    298
    
    
    
    1,130
    
    
    
    1,613
    
    
    
    633
    
    
    
    4,294
    
    
    
    8,936Ottawa
    
    
    5
    
    
    
    117
    
    
    
    66
    
    
    
    1,006
    
    
    
    135
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    1,602
    
    
    
    2,9351,547
    
    
    
    1,154
    
    
    
    1,062
    
    
    
    2,827
    
    
    
    1,409
    
    
    
    2,943
    
    
    
    2,844
    
    
    
    2,034
    
    
    
    24,502
    
    
    
    40,322% of total
    
    
    3.8
    %
    
    
    2.8
    %
    
    
    2.6
    %
    
    
    6.8
    %
    
    
    3.4
    %
    
    
    7.1
    %
    
    
    6.9
    %
    
    
    5.0
    %
    
    
    46.7
    %
    
    
    85.1
    %Denver
    
    
    271
    
    
    
    126
    
    
    
    154
    
    
    
    446
    
    
    
    92
    
    
    
    250
    
    
    
    101
    
    
    
    136
    
    
    
    1,029
    
    
    
    2,605Minneapolis
    
    
    300
    
    
    
    56
    
    
    
    31
    
    
    
    83
    
    
    
    212
    
    
    
    50
    
    
    
    32
    
    
    
    117
    
    
    
    2,127
    
    
    
    3,008Other
    
    
    124
    
    
    
    127
    
    
    
    155
    
    
    
    71
    
    
    
    155
    
    
    
    214
    
    
    
    120
    
    
    
    91
    
    
    
    1,038
    
    
    
    2,095695
    
    
    
    309
    
    
    
    340
    
    
    
    600
    
    
    
    459
    
    
    
    514
    
    
    
    253
    
    
    
    344
    
    
    
    4,194
    
    
    
    7,708% of total
    
    
    1.6
    %
    
    
    0.8
    %
    
    
    0.8
    %
    
    
    1.5
    %
    
    
    1.1
    %
    
    
    1.2
    %
    
    
    0.6
    %
    
    
    0.8
    %
    
    
    6.5
    %
    
    
    14.9
    %2,242
    
    
    
    1,463
    
    
    
    1,402
    
    
    
    3,427
    
    
    
    1,868
    
    
    
    3,457
    
    
    
    3,097
    
    
    
    2,378
    
    
    
    28,696
    
    
    
    48,0305.4
    %
    
    
    3.6
    %
    
    
    3.4
    %
    
    
    8.3
    %
    
    
    4.5
    %
    
    
    8.3
    %
    
    
    7.5
    %
    
    
    5.8
    %
    
    
    53.2
    %
    
    
    100.0
    %
  ENVIRONMENTAL RISKS
   OTHER RISKS AND UNCERTAINTIES
     44




---



##### 



FOREIGN EXCHANGE FLUCTUATIONS
  DERIVATIVE FINANCIAL INSTRUMENTS
       45




---



##### 



PART IV  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 CHANGES IN ACCOUNTING POLICIES
  Liabilities and equity, CICA Handbook Section 3861
  Consolidation of variable interest entities, CICA AcG 15
  FUTURE ACCOUNTING POLICY CHANGES
  Comprehensive Income, CICA Handbook Section 1530
  Financial
Instruments  Recognition and Measurement, CICA Handbook Section 3855
  Hedges, CICA Handbook Section 3865
  46




---



##### 



Effect of Contingently Convertible Instruments on the Computation of Diluted Earnings Per Share,
Emerging Issues Committee Abstract 155
  Implicit Variable Interests, Emerging Issues Committee Abstract 157
  Conditional Asset Retirement Obligations, Emerging Issues Committee Abstract 159
  USE OF ESTIMATES
   Property Acquisitions
  47




---



##### 



Depreciation
  Impairment of Assets
    Revenue Recognition
   Fair Value of Financial Instruments
  Tax
   48




---



##### 



RELATED-PARTY TRANSACTIONS
   49




---



##### 



PART V  BUSINESS ENVIRONMENT AND OUTLOOK
 COMMERCIAL OPERATIONS
    RESIDENTIAL DEVELOPMENT OPERATIONS
   DISCLOSURE CONTROLS AND PROCEDURES
 Multilateral Instrument 52-109
 OUTLOOK
  
 February 8, 2006
 50




---



##### 



DISTRIBUTIONS
  Currency
    
    
    Dec. 31, 2005
    
    
    Dec. 31, 2004
    
    
    Dec. 31, 2003
    
    
    Dec. 31, 2002Common shares(1)
    
    US$
    
    
    $
    0.6500
    
    
    $
    0.4200
    
    
    $
    0.3400
    (2)
    
    $
    0.2800Class A preferred shares
    
    
    C$
    
    
    
    0.1875
    
    
    
    0.1875
    
    
    
    0.1875
    
    
    
    0.1875Class AA Series E preferred shares
    
    
    C$
    
    
    
    0.7591
    
    
    
    0.7061
    
    
    
    0.8202
    
    
    
    0.7272Class AAA Series A preferred shares
    
    
    C$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6521Class AAA Series B preferred shares
    
    
    C$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6521Class AAA Series C preferred shares
    
    
    C$
    
    
    
    
    
    
    
    
    
    
    
    1.2356
    
    
    
    2.0000Class AAA Series D preferred shares
    
    
    C$
    
    
    
    
    
    
    
    
    
    
    
    1.2356
    
    
    
    2.0000Class AAA Series E preferred shares
    
    
    C$
    
    
    
    0.7695
    
    
    
    0.7027
    
    
    
    
    
    
    
    Class AAA Series F preferred shares
    
    
    C$
    
    
    
    1.5000
    
    
    
    1.5000
    
    
    
    1.5000
    
    
    
    0.3986Class AAA Series G preferred shares
    
    US$
    
    
    
    1.3125
    
    
    
    1.3125
    
    
    
    0.7237
    
    
    
    Class AAA Series H preferred shares
    
    
    C$
    
    
    
    1.4375
    
    
    
    1.4375
    
    
    
    0.3033
    
    
    
    Class AAA Series I preferred shares
    
    
    C$
    
    
    
    1.3000
    
    
    
    1.3000
    
    
    
    
    
    
    
    Class AAA Series J preferred shares
    
    
    C$
    
    
    
    1.2500
    
    
    
    0.8333
    
    
    
    
    
    
    
    Class AAA Series K preferred shares
    
    
    C$
    
    
    
    1.3000
    
    
    
    0.2486
    
    
    
    
    
    
    
    
 
 (1)

Per share amounts include the effect of the three-for-two
common stock-split on March 31, 2005(2)

    Excludes the distribution
of Brookfield Properties Homes Corporation 51




---



##### 



-s- Richard B. Clark
    

-s- Craig J. LaurieRichard B. Clark
    
    Craig J. LauriePresident and Chief Executive Officer
    
    Senior Vice President and Chief Financial OfficerFebruary 8, 2006
       Toronto, Canada
    

(DELOITTE & TOUCHE LLP)February 8, 2006
    
    Independent Registered Chartered Accountants
 52




---



##### 



December 31 (US Millions)
    
    Note
    
    
    2005
    
    
    2004(1)AssetsCommercial properties
    
    
    5
    
    
    $
    7,430
    
    
    $
    6,555Development properties
    
    
    6
    
    
    
    615
    
    
    
    716Receivables and other
    
    
    7
    
    
    
    955
    
    
    
    739Restricted cash and deposits
    
    
    8
    
    
    
    316
    
    
    
    297Marketable securities
    
    
    9
    
    
    
    58
    
    
    
    285Cash and cash equivalents
    
    
    
    
    
    
    64
    
    
    
    112Assets related to discontinued operations
    
    
    10
    
    
    
    75
    
    
    
    96$
    9,513
    
    
    $
    8,800LiabilitiesCommercial property debt
    
    
    11
    
    
    $
    5,216
    
    
    $
    4,754Accounts payable and other liabilities
    
    
    12
    
    
    
    626
    
    
    
    452Future income tax liability
    
    
    13
    
    
    
    188
    
    
    
    96Liabilities related to discontinued operations
    
    
    10
    
    
    
    51
    
    
    
    64Capital securities
    
    
    14
    
    
    
    1,101
    
    
    
    1,069Noncontrolling interests
    
    
    15
    
    
    
    59
    
    
    
    53Preferred equity  subsidiaries
    
    
    16
    
    
    
    329
    
    
    
    320Shareholders equityPreferred equity  corporate
    
    
    17
    
    
    
    45
    
    
    
    45Common equity
    
    
    18
    
    
    
    1,898
    
    
    
    1,947$
    9,513
    
    
    $
    8,800
 (1)
    
Certain comparative information has been restated to conform with current year
presentation  see Notes 2, 8 and 10
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
    
    President and Chief Executive Officer
 53




---



##### 



December 31 (US Millions, except per share amounts)
    
    Note
    
    
    2005
    
    
    2004(1)Total revenue
    
    
    20
    
    
    $
    1,549
    
    
    $
    1,442Net operating incomeCommercial property operations
    
    
    20Operating income from properties
    
    
    
    
    
    $
    680
    
    
    $
    671Lease termination income
    
    
    
    
    
    
    
    
    
    
    60Total commercial property operations
    
    
    
    
    
    
    680
    
    
    
    731Residential development operations
    
    
    20
    
    
    
    106
    
    
    
    42Interest and other
    
    
    
    
    
    
    37
    
    
    
    47823
    
    
    
    820ExpensesInterest
    
    
    
    
    
    
    330
    
    
    
    304General and administrative
    
    
    
    
    
    
    48
    
    
    
    41Non-controlling interests expense
    
    
    
    
    
    
    16
    
    
    
    20429
    
    
    
    455Depreciation and amortization
    
    
    
    
    
    
    163
    
    
    
    140Unrealized foreign exchange on preferred share restatement
    
    
    
    
    
    
    
    
    63Future income taxes and other provisions
    
    
    13
    
    
    
    103
    
    
    
    116Net income from continuing operations
    
    
    
    
    
    $
    163
    
    
    $
    136Discontinued operations
    
    
    10
    
    
    
    1
    
    
    
    2Net income
    
    
    
    
    
    $
    164
    
    
    $
    138Net income per common share
    
    
    18Basic
    
    
    
    
    
    $
    0.70
    
    
    $
    0.58Diluted
    
    
    
    
    
    $
    0.69
    
    
    $
    0.58
 (1)
    
Certain comparative information has been restated to conform with current year
presentation  see Notes 2 and 10
See accompanying notes to the consolidated financial
statements  December 31 (US Millions)
    
    Note
    
    
    2005
    
    
    2004(1)Retained earnings  beginning of year
    
    
    
    
    
    $
    787
    
    
    $
    777Net income
    
    
    
    
    
    
    164
    
    
    
    138Shareholder distributionsPreferred shares dividends  corporate
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Common share dividends
    
    
    
    
    
    
    (150
    )
    
    
    (96
    )Amount paid in excess of the book value of commonshares purchased for cancellation
    
    
    
    
    
    
    (52
    )
    
    
    (30
    )Retained earnings  end of year
    
    
    18
    
    
    $
    747
    
    
    $
    787
 (1)
    
Certain comparative information has been restated to conform with
current year presentation  see Note 2
See accompanying notes to the consolidated
financial statements 54




---



##### 



December 31 (US Millions)
    
    Note
    
    
    2005
    
    
    2004Operating activitiesNet income
    
    
    
    
    
    $
    164
    
    
    $
    138Depreciation and amortization
    
    
    
    
    
    
    168
    
    
    
    145Unrealized foreign exchange on preferred share restatement
    
    
    
    
    
    
    
    
    
    
    63Future income taxes and other provisions
    
    
    
    
    
    
    103
    
    
    
    116Commercial property tenant installation costs
    
    
    
    
    
    
    (123
    )
    
    
    (82
    )Other
    
    
    
    
    
    
    (206
    )
    
    
    79106
    
    
    
    459Financing activities and capital distributionsCommercial property debt arranged
    
    
    
    
    
    
    750
    
    
    
    452Commercial property debt repayments
    
    
    
    
    
    
    (463
    )
    
    
    (626
    )Land development debt, net
    
    
    
    
    
    
    (4
    )
    
    
    (8
    )Capital securities issued
    
    
    
    
    
    
    
    
    
    
    261Common shares issued
    
    
    
    
    
    
    8
    
    
    
    10Common shares repurchased
    
    
    
    
    
    
    (74
    )
    
    
    (43
    )Cashflow retained from (distributed to) non-controlling interests
    
    
    
    
    
    
    3
    
    
    
    (163
    )Preferred share dividends  corporate
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Common share dividends
    
    
    
    
    
    
    (150
    )
    
    
    (96
    )68
    
    
    
    (215
    )Investing activitiesMarketable securities
    
    
    
    
    
    
    227
    
    
    
    (18
    )Acquisitions of real estate, net
    
    
    23
    
    
    
    (366
    )
    
    
    (207
    )Dispositions of real estate, net
    
    
    23
    
    
    
    7
    
    
    
    63Development and redevelopment investments
    
    
    
    
    
    
    (50
    )
    
    
    (55
    )Restricted cash and deposits
    
    
    
    
    
    
    (19
    )
    
    
    (21
    )Capital expenditures
    
    
    
    
    
    
    (21
    )
    
    
    (26
    )(222
    )
    
    
    (264
    )Decrease in cash resources
    
    
    
    
    
    
    (48
    )
    
    
    (20
    )Opening cash and cash equivalents
    
    
    
    
    
    
    112
    
    
    
    132Closing cash and cash equivalents
    
    
    
    
    
    $
    64
    
    
    $
    112
 See accompanying notes to the consolidated financial statements
 55




---



##### 



NOTE 1: SUMMARY OF ACCOUNTING POLICIES
 (a) General
  (b) Principles of consolidation
  (i)
    
    the accounts of all subsidiaries of the company including its wholly-owned operations,
as well as BPO Properties Ltd. (BPO Properties) and Brookfield Financial Properties L.P.
(Brookfield Financial Properties); and(ii)
    
    the accounts of all subsidiaries incorporated and unincorporated joint ventures and
partnerships to the extent of the companys proportionate interest in their respective
assets, liabilities, revenue and expenses.
  (i)
    
    Brookfield Financial Properties L.P.: The company owns a 99.4% limited partnership
interest and general partnership interest in Brookfield Financial Properties L.P.(ii)
    
    BPO Properties Ltd.: The company owns 89% on an equity basis and 54.3% on a voting
basis of the common shares of BPO Properties Ltd.
 (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 tenant relationships is amortized on a straight-line
basis over the expected term of the relationships. All other tenant improvements and
re-leasing costs are deferred and amortized on a straight-line basis over the lives of the
leases to which they relate. Depreciation on buildings and amortization of deferred leasing
costs and tenant improvements that are determined to be assets of the company are recorded
in depreciation and amortization expense. All other amounts are amortized to revenue.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.(ii)
    
    Commercial development propertiesCommercial 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
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
 56




---



##### 



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 development propertiesDevelopment 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.
 (d) Capitalized costs
  (e) Deferred financing costs
  (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. 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 includes
percentage participating rents and recoveries of operating expenses, including
property, capital and Canadian large corporation 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 from a commercial property is recognized upon the earlier of attaining a
break-even point in cashflow after debt servicing or the expiration of a reasonable
period of time, subject to the time limitation determined when the project is approved,
but no later than one year following substantial completion. Prior to this, the
property is categorized as a property under development, and related revenue is applied
to reduce development costs.(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.
 (h) Income taxes
  57




---



##### 



(i) Reporting currency and foreign currency translation
   (j) Marketable securities
   (k) Use of estimates
  (l) Derivative financial instruments
     (m) Cash and cash equivalents
  (n) Comparative figures
  58




---



##### 



NOTE 2: CHANGES IN ACCOUNTING POLICIES
  (i) Liabilities and equity, CICA Handbook Section 3861
  (ii) Consolidation of variable interest entities, CICA AcG 15
  NOTE 3: FUTURE ACCOUNTING POLICY CHANGES
  (i) Comprehensive Income, CICA Handbook Section 1530
  (ii) Financial Instruments  Recognition and Measurement, CICA Handbook Section 3855
  (iii) Hedges, CICA Handbook Section 3865
  59




---



##### 



(iv) Effect of Contingently Convertible Instruments on the Computation of Diluted Earnings Per
Share, Emerging Issues Committee Abstract 155
  (v) Implicit Variable Interests, Emerging Issues Committee Abstract 157
  (vi) Conditional Asset Retirement Obligations, Emerging Issues Committee Abstract 159
  NOTE 4: PROPERTY ACQUISITIONS
   Purchase Price(Millions)
    
    Book ValueCommercial and development properties
    
    $
    495Accounts receivable and other assets
    
    
    14Intangible assets(1)
    
    
    56Accounts payable and other liabilities assumed
    
    
    (14
    )Intangible liabilities(1)
    
    
    (97
    )Future income tax liabilities assumed
    
    
    (26
    )Commercial property debt assumed(2)
    
    
    (246
    )Total purchase price
    
    $
    182
 (1)
    
All intangibles are subject to amortization(2)
    
Includes acquisition financing of $110 million  60




---



##### 



NOTE 5: COMMERCIAL PROPERTIES
  (Millions)
    
    2005
    
    
    2004Commercial properties
    
    $
    8,137
    
    
    $
    7,093Less: Accumulated depreciation
    
    
    (707
    )
    
    
    (538
    )Total
    
    $
    7,430
    
    
    $
    6,555
   (Millions)
    
    2005
    
    
    2004Assets
    
    $
    2,669
    
    
    $
    2,173Liabilities
    
    
    1,611
    
    
    
    1,254Operating revenues
    
    
    381
    
    
    
    363Operating expenses
    
    
    151
    
    
    
    141Net income
    
    
    99
    
    
    
    110Cashflow from operating activities
    
    
    140
    
    
    
    146Cashflow from financing activities
    
    
    (19
    )
    
    
    Cashflow (used in) from investing activities
    
    
    (174
    )
    
    
    25
 NOTE 6: DEVELOPMENT PROPERTIES
  (Millions)
    
    2005
    
    
    2004Commercial developments
    
    $
    224
    
    
    $
    399Residential development land
    
    
    391
    
    
    
    317Total
    
    $
    615
    
    
    $
    716
   NOTE 7: RECEIVABLES AND OTHER
  (Millions)
    
    2005
    
    
    2004Receivables and real estate mortgages
    
    $
    551
    
    
    $
    435Prepaid expenses and other assets
    
    
    279
    
    
    
    234Intangible assets
    
    
    125
    
    
    
    70Total
    
    $
    955
    
    
    $
    739
  61




---



##### 



NOTE 8: RESTRICTED CASH AND DEPOSITS
  NOTE 9: MARKETABLE SECURITIES
  NOTE 10: DISCONTINUED OPERATIONS
    (Millions, except per share information)
    
    2005
    
    
    2004Revenue
    
    $
    20
    
    
    $
    21Operating expenses
    
    
    9
    
    
    
    9$
    11
    
    
    $
    12Interest expense
    
    
    (5
    )
    
    
    (5
    )$
    6
    
    
    $
    7Depreciation and amortization
    
    
    (5
    )
    
    
    (5
    )Income from discontinued operations
    
    $
    1
    
    
    $
    2Income from discontinued operations per common share
    
    $
    
    
    
    $
    
 NOTE 11: COMMERCIAL PROPERTY DEBT
  WeightedAverageInterest Rate at
    
    
    
    
    
    
    Principal Repayments
    
    
    
    
    
    
    2011 &
    
    
    2005
    
    
    2004(Millions)
    
    Dec. 31, 2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Beyond
    
    
    Total
    
    
    TotalCommercial property debt
    
    
    6.5
    %
    
    $
    270
    
    
    $
    634
    
    
    $
    377
    
    
    $
    837
    
    
    $
    189
    
    
    $
    2,909
    
    
    $
    5,216
    
    
    $
    4,754




---



##### 



NOTE 12: ACCOUNTS PAYABLE AND OTHER LIABILITIES
  (Millions)
    
    2005
    
    
    2004Accounts payable
    
    $
    342
    
    
    $
    289Land development debt
    
    
    158
    
    
    
    135Intangible liabilities
    
    
    126
    
    
    
    28Total
    
    $
    626
    
    
    $
    452
  NOTE 13: FUTURE INCOME TAXES
  (Millions)
    
    2005
    
    
    2004Future income tax liabilities related to difference in tax and book basis, net
    
    $
    (541
    )
    
    $
    (568
    )Future income tax assets related to non-capital losses and capital losses
    
    
    353
    
    
    
    472Total
    
    $
    (188
    )
    
    $
    (96
    )
   (Millions)
    
    2005
    
    
    2004Income tax expense at the Canadian federal and provincial income
tax rate of 35% (2004  35%)
    
    $
    94
    
    
    $
    89Increase (decrease) in income tax expense due to the following:Non-deductible preferred share dividends
    
    
    19
    
    
    
    14Higher income tax rates in other jurisdictions
    
    
    1
    
    
    
    6Minority shareholders interests in income tax expense
    
    
    (2
    )
    
    
    (4
    )Tax assets previously not recognized
    
    
    (18
    )
    
    
    (25
    )Non-taxable portion of capital gains
    
    
    
    
    
    
    (1
    )Foreign exchange on preferred share restatement
    
    
    
    
    
    
    22Other
    
    
    9
    
    
    
    15Total
    
    $
    103
    
    
    $
    116
 NOTE 14: CAPITAL SECURITIES
  Shares
    
    
    Shares
    
    
    Cumulative(Millions, except share information)
    
    Authorized
    
    
    Outstanding
    
    
    Dividend Rate
    
    2005
    
    
    2004Class AAA Series E
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    70% of bank prime
    
    $
    172
    
    
    $
    167Class AAA Series F
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    6.00
    %
    
    
    172
    
    
    
    167Class AAA Series G
    
    
    6,000,000
    
    
    
    4,400,000
    
    
    
    5.25
    %
    
    
    110
    
    
    
    110Class AAA Series H
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.75
    %
    
    
    173
    
    
    
    167Class AAA Series I
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.20
    %
    
    
    172
    
    
    
    167Class AAA Series J
    
    
    8,000,000
    
    
    
    8,000,000
    
    
    
    5.00
    %
    
    
    172
    
    
    
    167Class AAA Series K
    
    
    6,000,000
    
    
    
    6,000,000
    
    
    
    5.20
    %
    
    
    130
    
    
    
    124Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,101
    
    
    $
    1,069




---



##### 



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
    U
    S $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 corporation, 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 corporation, 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.  NOTE 15: NON-CONTROLLING INTERESTS
  (Millions)
    
    Others Equity Ownership
    
    
    2005
    
    
    2004Common shares of BPO Properties(1)
    
    
    11.0
    %
    
    $
    47
    
    
    $
    42Limited partnership units of Brookfield Financial Properties
    
    
    0.6
    %
    
    
    12
    
    
    
    11Total
    
    
    
    
    
    $
    59
    
    
    $
    53
 (1) Canadian dollar denominated




---



##### 



NOTE 16: PREFERRED EQUITY  SUBSIDIARIES
  Shares
    
    
    Preferred
    
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Shares Series
    
    
    Dividend Rate
    
    
    2005
    
    
    2004BPO Properties
    
    
    1,805,489
    
    
    Series G
    
    70% of bank prime
    
    $
    39
    
    
    $
    383,816,527
    
    
    Series J
    
    70% of bank prime
    
    
    82
    
    
    
    80300
    
    
    Series K
    
    30-day BA + 0.4%
    
    
    129
    
    
    
    1242,847,711
    
    
    Series M
    
    70% of bank prime
    
    
    62
    
    
    
    59800,000
    
    
    Series N
    
    30-day BA + 0.4%
    
    
    17
    
    
    
    17$
    329
    
    
    $
    318100%-owned subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    329
    
    
    $
    320
      NOTE 17: PREFERRED EQUITY  CORPORATE
  Shares
    
    
    Cumulative(Millions, except share information)
    
    Outstanding
    
    
    Dividend Rate
    
    
    2005
    
    
    2004Class A redeemable voting
    
    
    6,312,000
    
    
    7.50%
    
    
    $
    11
    
    
    $
    11Class AA Series E
    
    
    2,000,000
    
    
    70% of
 bank prime
    
    
    34
    
    
    
    34Total
    
    
    
    
    
    
    
    
    
    $
    45
    
    
    $
    45




---



##### 



NOTE 18: COMMON EQUITY
  (Millions)
    
    2005
    
    
    2004(1)Common shares
    
    $
    1,066
    
    
    $
    1,080Retained earnings and cumulative translation adjustment
    
    
    832
    
    
    
    867Total
    
    $
    1,898
    
    
    $
    1,947
 (1)
    
    Certain comparative information has been restated due to adoption of an amendment
to the CICA Handbook Section 3861, Financial Instruments  Disclosure and Presentation
(See Note 2)
  (a) Common shares
  2005
    
    
    2004Common shares outstanding, beginning of year
    
    
    233,387,780
    
    
    
    234,370,052Addition of shares as a result of exercise of options
    
    
    515,345
    
    
    
    1,132,578Deduction of shares as a result of repurchases made
    
    
    (2,693,500
    )
    
    
    (2,114,850
    )Common shares outstanding, end of year
    
    
    231,209,625
    
    
    
    233,387,780
  (b) Earnings per share
  (Millions, except per share amounts)
    
    2005
    
    
    2004Net income
    
    $
    164
    
    
    $
    138Preferred share dividends
    
    
    (2
    )
    
    
    (2
    )Net income available to common shareholders
    
    $
    162
    
    
    $
    136Weighted average shares outstanding  basic
    
    
    232.1
    
    
    
    234.0Net income per share  basic
    
    $
    0.70
    
    
    $
    0.58Weighted average shares outstanding  diluted
    
    
    234.2
    
    
    
    235.7Net income per share  diluted
    
    $
    0.69
    
    
    $
    0.58Weighted average shares outstanding  basic
    
    
    232.1
    
    
    
    234.0Unexercised options
    
    
    2.1
    
    
    
    1.7Weighted average shares outstanding  diluted
    
    
    234.2
    
    
    
    235.7




---



##### 



NOTE 19: STOCK-BASED COMPENSATION
    WeightedIssue
    
    Expiry
    
    
    Number
    
    
    AverageDate
    
    Date
    
    
    of Shares
    
    
    Exercise Price1998
    
    
    2008
    
    
    
    347,750
    
    
    $
    9.421999
    
    
    2009
    
    
    
    43,950
    
    
    
    6.812000
    
    
    2010
    
    
    
    321,560
    
    
    
    7.822001
    
    
    2011
    
    
    
    636,370
    
    
    
    11.952002
    
    
    2012
    
    
    
    806,296
    
    
    
    12.662003
    
    
    2013
    
    
    
    673,685
    
    
    
    13.442004
    
    
    2014
    
    
    
    1,125,747
    
    
    
    20.272005
    
    
    2015
    
    
    
    686,604
    
    
    
    24.89Total
    
    
    
    
    
    
    4,641,962
    
    
    $
    15.70
  2005
    
    
    

    2004Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof Options
    
    
    Exercise Price
    
    
    of Options
    
    
    Exercise PriceOutstanding, beginning of year
    
    
    4,692,869
    
    
    $
    14.03
    
    
    
    4,863,360
    
    
    $
    10.69Granted
    
    
    763,000
    
    
    
    24.40
    
    
    
    1,462,500
    
    
    
    19.61Exercised
    
    
    (515,345
    )
    
    
    (12.44
    )
    
    
    (1,132,578
    )
    
    
    (8.81
    )Cancelled
    
    
    (298,562
    )
    
    
    (20.63
    )
    
    
    (500,413
    )
    
    
    (13.13
    )Outstanding, end of year
    
    
    4,641,962
    
    
    $
    15.70
    
    
    
    4,692,869
    
    
    $
    14.03Exercisable at end of year
    
    
    2,875,041
    
    
    $
    13.30
    
    
    
    2,371,086
    
    
    $
    11.83




---



##### 



NOTE 20: COMMERCIAL PROPERTY AND RESIDENTIAL DEVELOPMENT OPERATIONS
 (a) Revenue
  (Millions)
    
    2005
    
    
    2004Revenue from commercial property operations
    
    $
    1,123
    
    
    $
    1,134Revenue from residential development operations
    
    
    389
    
    
    
    261Revenue from commercial property and residential development operations
    
    
    1,512
    
    
    
    1,395Interest and other
    
    
    37
    
    
    
    47Total
    
    $
    1,549
    
    
    $
    1,442
 (b) Commercial property operations
  (Millions)
    
    2005
    
    
    2004Revenue from current properties
    
    $
    1,103
    
    
    $
    1,053Property operating costs
    
    
    (423
    )
    
    
    (382
    )Net operating income
    
    
    680
    
    
    
    671Lease termination income
    
    
    
    
    
    
    60Net operating income including lease termination income
    
    $
    680
    
    
    $
    731
    (c) Residential development operations
  (Millions)
    
    2005
    
    
    2004Revenue
    
    $
    389
    
    
    $
    261Expenses
    
    
    283
    
    
    
    219Total
    
    $
    106
    
    
    $
    42




---



##### 



NOTE 21: DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES
  (a) Income statement differences
   (Millions, except per share information)
    
    Note
    
    
    2005
    
    
    2004Net income as reported under Canadian GAAP(1)
    
    
    
    
    
    $
    164
    
    
    $
    138Adjustments:Decreased commercial property income
    
    
    (i)
    
    
    
    (15
    )
    
    
    (18
    )Decreased commercial property depreciation
    
    (ii)
    
    
    
    8
    
    
    
    7(Decreased) increased commercial property lease termination
income and gains
    
    (iii)
    
    
    
    (2
    )
    
    
    42Unrealized foreign exchange on preferred share restatement
    
    (iv)
        
    
    
    
    
    
    63Decreased interest expense
    
    
    (v)
    
    
    
    49
    
    
    
    39Decreased residential development income
    
    (vi)
    
    
    
    (26
    )
    
    
    Increased deferred income taxes
    
    (vii)
    
    
    
    (5
    )
    
    
    (12
    )Net income under US GAAP(1)
    
    
    
    
    
    $
    173
    
    
    $
    259Net income per shareBasic
    
    
    
    
    
    $
    0.52
    
    
    $
    0.93Diluted
    
    
    
    
    
    $
    0.52
    
    
    $
    0.92
 (1)
    
    Included in net income under both Canadian and US GAAP is $1 million from
discontinued operations in 2005 (2004  $2 million)
  (i) Decreased commercial property income
  (ii) Decreased commercial property depreciation
  (iii) (Decreased) Increased commercial property lease termination income and gains
  (iv) Unrealized foreign exchange on preferred share restatement




---



##### 



(v) Decreased interest expense
  (vi) Decreased residential development income
  (vii) Increased deferred income taxes
    (Millions, except per share information)
    
    2005
    
    
    2004Net income under US GAAP
    
    $
    173
    
    
    $
    259Preferred share dividends(1)
    
    
    (51
    )
    
    
    (41
    )Net income available to common shareholders under US GAAP
    
    $
    122
    
    
    $
    218Earnings per share under US GAAPBasic
    
    $
    0.52
    
    
    $
    0.93Diluted
    
    $
    0.52
    
    
    $
    0.92
 (1)
    
    Preferred share dividends for Canadian GAAP purposes were $2 million (2004  $2
million)
 (b) Comprehensive income
    (Millions)
    
    2005
    
    
    2004Net income under US GAAP
    
    $
    173
    
    
    $
    259Foreign currency translation adjustment under US GAAP
    
    
    11
    
    
    
    71Comprehensive income using US GAAP amounts
    
    $
    184
    
    
    $
    330




---



##### 



(c) Balance sheet differences
  (Millions)
    
    Note
    
    
    2005
    
    
    2004AssetsCommercial properties
    
    
    (i)
    
    
    $
    7,025
    
    
    $
    6,145Development properties
    
    (ii)
    
    
    
    642
    
    
    
    716Receivables and other
    
    (iii)
    
    
    
    977
    
    
    
    831Restricted cash and deposits
    
    
    
    
    
    
    316
    
    
    
    297Marketable securities
    
    
    
    
    
    
    58
    
    
    
    285Cash and cash equivalents
    
    
    
    
    
    
    64
    
    
    
    112Deferred income tax asset
    
    (iv)
    
    
    
    
    
    
    
    6Assets related to discontinued operations
    
    
    (i)
    
    
    
    69
    
    
    
    90Total assets under US GAAP
    
    
    
    
    
    $
    9,151
    
    
    $
    8,482LiabilitiesCommercial property debt
    
    
    
    
    
    $
    5,216
    
    
    $
    4,754Accounts payable and other liabilities
    
    
    (v)
    
    
    
    766
    
    
    
    586Deferred income tax liability
    
    (iv)
    
    
    
    92
    
    
    
    Liabilities related to discontinued operations
    
    
    
    
    
    
    51
    
    
    
    64Non-controlling interests
    
    
    
    
    
    
    64
    
    
    
    58Preferred equity  subsidiaries
    
    
    
    
    
    
    329
    
    
    
    320Shareholders equityPreferred equity  corporate
    
    (vi)
    
    
    
    865
    
    
    
    865Common equity
    
    (vii)
    
    
    
    1,768
    
    
    
    1,835Total liabilities and shareholders
equity under US GAAP
    
    
    
    
    
    $
    9,151
    
    
    $
    8,482
  (i) Commercial properties
  (Millions)
    
    2005
    
    
    2004Commercial properties under Canadian GAAP
    
    $
    7,430
    
    
    $
    6,555Additional accumulated depreciation under US GAAP
    
    
    (405
    )
    
    
    (410
    )Commercial properties under US GAAP
    
    $
    7,025
    
    
    $
    6,145




---



##### 



(Millions)
    
    2005
    
    
    2004Assets related to discontinued operations under Canadian GAAP
    
    $
    75
    
    
    $
    96Additional accumulated depreciation under US GAAP
    
    
    (6
    )
    
    
    (6
    )Assets related to discontinued operations under US GAAP
    
    $
    69
    
    
    $
    90
 (ii) Development properties
  (Millions)
    
    2005
    
    
    2004Development properties under Canadian GAAP
    
    $
    615
    
    
    $
    716Residential inventory adjustment
    
    
    27
    
    
    
    Development properties under US GAAP
    
    $
    642
    
    
    $
    716
 (iii) Receivables and other
  (Millions)
    
    2005
    
    
    2004Receivables and other under Canadian GAAP
    
    $
    955
    
    
    $
    739Straight-line rent receivable adjustment
    
    
    76
    
    
    
    92Residential receivable adjustment
    
    
    (54
    )
    
    
    Receivables and other under US GAAP
    
    $
    977
    
    
    $
    831
 (iv) Deferred income taxes
  (Millions)
    
    2005
    
    
    2004Tax assets related to net operating and capital losses
    
    $
    489
    
    
    $
    612Tax liabilities related to differences in tax and book basis
    
    
    (442
    )
    
    
    (458
    )Valuation allowance
    
    
    (139
    )
    
    
    (148
    )Deferred income tax (liability) asset under US GAAP
    
    $
    (92
    )
    
    $
    6
 (v) Accounts payable and other liabilities
  (Millions)
    
    2005
    
    
    2004Accounts payable and other liabilities under Canadian GAAP
    
    $
    626
    
    
    $
    452Classification of Class AAA, Series E preferred shares(1)
    
    
    172
    
    
    
    167Tenant inducement
    
    
    (32
    )
    
    
    (33
    )Accounts payable and other liabilities under US GAAP
    
    $
    766
    
    
    $
    586
 (1) Classified as capital securities for Canadian GAAP purposes
 (vi)  Preferred
equity  corporate
  (Millions)
    
    2005
    
    
    2004Preferred
shares  corporate under Canadian GAAP
    
    $
    45
    
    
    $
    45Classification of capital securities as preferred equity
    
    
    820
    
    
    
    820Preferred
shares  corporate under US GAAP
    
    $
    865
    
    
    $
    865
 72




---



##### 



(vii) Common shareholders equity
  (Millions)
    
    2005
    
    
    2004Common shareholders equity under Canadian GAAP
    
    $
    1,898
    
    
    $
    1,947Adjustment to accumulated depreciation under US GAAP
    
    
    (411
    )
    
    
    (416
    )Adjustment to accounts payable and other liabilities under US GAAP
    
    
    32
    
    
    
    33Adjustment to deferred income tax asset under US GAAP
    
    
    95
    
    
    
    102Rental revenue adjustments under US GAAP
    
    
    74
    
    
    
    92Residential revenue adjustment under US GAAP
    
    
    (27
    )
    
    
    Foreign currency translation adjustments, net
    
    
    27
    
    
    
    (3
    )Net effect on equity of amendment to CICA Handbook
Section 3861 not required for US GAAP
    
    
    80
    
    
    
    80Common shareholders equity under US GAAP
    
    $
    1,768
    
    
    $
    1,835
  (Millions)
    
    2005
    
    
    2004Common shares
    
    $
    1,159
    
    
    $
    1,173Additional paid-in capital, net of retained earnings
    
    
    847
    
    
    
    871Cumulative translation adjustment
    
    
    (18
    )
    
    
    (29
    )Cumulative adjustments to net income and retained earnings
    
    
    (220
    )
    
    
    (180
    )Common shareholders equity under US GAAP
    
    $
    1,768
    
    
    $
    1,835
 Joint ventures
  (d) Cashflow statement differences
  (Millions)
    
    2005
    
    
    2004Cash provided from (used in) the following activitiesOperating
    
    $
    155
    
    
    $
    498Financing
    
    
    19
    
    
    
    (254
    )Investing
    
    
    (222
    )
    
    
    (264
    )Decrease in cash
    
    $
    (48
    )
    
    $
    (20
    )
 (e) Change in accounting policies
 (i) EITF 03-6, Participating Securities and the Two-Class Method under FASB
Statement No. 128, Earnings per Share
  (ii) FASB Interpretation 47, Accounting for Conditional Asset Retirement Obligations
  73




---



##### 



(f) Future accounting policy changes
 (i) SFAS 154, Accounting Changes and Error Corrections
  (ii) SFAS 123R, Share-Based Payment
    NOTE 22: GUARANTEES, CONTINGENCIES AND OTHER
   74




---



##### 



NOTE 23: OTHER INFORMATION
    75




---



##### 



Years ended December 31 (Millions)
    
    2005
    
    
    2004Acquisitions of real estate
    
    $
    (653
    )
    
    $
    (359
    )Mortgages and other balances assumed on acquisition
    
    
    287
    
    
    
    152Net acquisitions
    
    $
    (366
    )
    
    $
    (207
    )Dispositions of real estate
    
    $
    19
    
    
    $
    99Mortgages assumed by purchasers
    
    
    (12
    )
    
    
    (36
    )Net dispositions
    
    $
    7
    
    
    $
    63Cash taxes paid
    
    $
    9
    
    
    $
    7Cash interest paid (excluding dividends paid on capital securities)
    
    $
    265
    
    
    $
    273
   NOTE 24: SUBSEQUENT EVENTS
   76




---



##### 



NOTE 25: SEGMENTED INFORMATION
  Commercial
    
    
    
    ResidentialUnited States
    
    
    
    Canada
    
    
    
    Development
    
    
    
    Commercial(Millions)
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004AssetsProperties
    
    $
    5,318
    
    
    $
    5,224
    
    
    
    $
    2,336
    
    
    $
    1,730
    
    
    
    $
    391
    
    
    $
    317
    
    
    
    $
    8,045
    
    
    $
    7,271Receivables and other
    
    
    407
    
    
    
    339
    
    
    
    
    375
    
    
    
    316
    
    
    
    
    173
    
    
    
    84
    
    
    
    
    955
    
    
    
    739Restricted cash and deposits
    
    
    314
    
    
    
    297
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    316
    
    
    
    297Marketable securities
    
    
    
    
    
    
    285
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    285Cash and cash equivalents
    
    
    33
    
    
    
    49
    
    
    
    
    25
    
    
    
    59
    
    
    
    
    6
    
    
    
    4
    
    
    
    
    64
    
    
    
    112Assets related to discontinued operations
    
    
    75
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    96Total
    
    $
    6,147
    
    
    $
    6,290
    
    
    
    $
    2,796
    
    
    $
    2,105
    
    
    
    $
    570
    
    
    $
    405
    
    
    
    $
    9,513
    
    
    $
    8,800
  Commercial
    
    
    
    ResidentialUnited States
    
    
    
    Canada
    
    
    
    Development
    
    
    
    Total(Millions)
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004
    
    
    
    2005
    
    
    2004Revenues
    
    $
    787
    
    
    $
    752
    
    
    
    $
    316
    
    
    $
    301
    
    
    
    $
    389
    
    
    $
    261
    
    
    
    $
    1,492
    
    
    $
    1,314Lease termination income
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Expenses
    
    
    292
    
    
    
    253
    
    
    
    
    131
    
    
    
    129
    
    
    
    
    283
    
    
    
    219
    
    
    
    
    706
    
    
    
    601495
    
    
    
    559
    
    
    
    
    185
    
    
    
    172
    
    
    
    
    106
    
    
    
    42
    
    
    
    
    786
    
    
    
    773Other revenues
    
    
    6
    
    
    
    14
    
    
    
    
    27
    
    
    
    33
    
    
    
    
    4
    
    
    
    
    
    
    
    
    37
    
    
    
    47Net operating income from continuing
operations
    
    
    501
    
    
    
    573
    
    
    
    
    212
    
    
    
    205
    
    
    
    
    110
    
    
    
    42
    
    
    
    
    823
    
    
    
    820Interest expense
    
    
    231
    
    
    
    243
    
    
    
    
    99
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    330
    
    
    
    304General and administrative
    
    
    26
    
    
    
    20
    
    
    
    
    22
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    41Non-controlling interests expense
    
    
    
    
    
    
    4
    
    
    
    
    16
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    20Income before undernoted
    
    
    244
    
    
    
    306
    
    
    
    
    75
    
    
    
    107
    
    
    
    
    110
    
    
    
    42
    
    
    
    
    429
    
    
    
    455Depreciation and amortization
    
    
    126
    
    
    
    98
    
    
    
    
    37
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    140Income before unallocated costs
    
    
    118
    
    
    
    208
    
    
    
    
    38
    
    
    
    65
    
    
    
    
    110
    
    
    
    42
    
    
    
    
    266
    
    
    
    315Unrealized foreign exchange on preferred
share restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63Future income taxes and other provisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    116Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    163
    
    
    $
    136Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    164
    
    
    $
    138Acquisitions of real estate, net
    
    $
    
    
    
    $
    124
    
    
    
    $
    254
    
    
    $
    83
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    254
    
    
    $
    207Dispositions of real estate, net
    
    
    (7
    )
    
    
    (31
    )
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (63
    )Commercial property tenant improvements
    
    
    108
    
    
    
    69
    
    
    
    
    15
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    123
    
    
    
    82Development and redevelopment
    
    
    41
    
    
    
    51
    
    
    
    
    9
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    55Capital expenditures
    
    
    8
    
    
    
    13
    
    
    
    
    13
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    26
  77




---



##### 



December 31 (US Millions, except per share information)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Financial results (1)Commercial property net operating income
    
    $
    680
    
    
    $
    671
    
    
    $
    586
    
    
    $
    589
    
    
    $
    606Funds from operations
    
    
    435
    
    
    
    403
    
    
    
    343
    
    
    
    314
    
    
    
    279Net income
    
    
    164
    
    
    
    138
    
    
    
    232
    
    
    
    236
    
    
    
    202Total assets
    
    
    9,513
    
    
    
    8,800
    
    
    
    8,382
    
    
    
    7,450
    
    
    
    7,419Shareholders equity
    
    
    1,943
    
    
    
    1,992
    
    
    
    1,938
    
    
    
    2,093
    
    
    
    1,944Per diluted common share (1)Common shares outstanding
    
    
    231.2
    
    
    
    233.4
    
    
    
    234.3
    
    
    
    240.6
    
    
    
    242.6Fully diluted shares outstanding
    
    
    235.9
    
    
    
    238.1
    
    
    
    239.4
    
    
    
    245.9
    
    
    
    247.7Funds from operations and gains
    
    $
    1.85
    
    
    $
    1.95
    
    
    $
    1.85
    
    
    $
    1.45
    
    
    $
    1.28Funds from operations excluding straight line rent,
lease termination income and gains
    
    
    1.85
    
    
    
    1.70
    
    
    
    1.43
    
    
    
    1.25
    
    
    
    1.09Net income
    
    
    0.69
    
    
    
    0.58
    
    
    
    0.96
    
    
    
    0.89
    
    
    
    0.75Dividends paid
    
    
    0.65
    
    
    
    0.42
    
    
    
    0.34

(2)
    
    
    0.28
    
    
    
    0.23Shareholders equity  book value
    
    
    8.35
    
    
    
    8.41
    
    
    
    8.12
    
    
    
    7.38
    
    
    
    6.85Common share price at year end
    
    
    29.42
    
    
    
    24.93
    
    
    
    19.13
    
    
    
    18.20
    
    
    
    15.45Operating dataCommercial propertiesNumber of properties and development sites
    
    
    76
    
    
    
    46
    
    
    
    48
    
    
    
    50
    
    
    
    50Rentable area (millions of sq. ft.)
    
    
    56
    
    
    
    46
    
    
    
    46
    
    
    
    46
    
    
    
    45Effective interest (millions of sq. ft.)
    
    
    37
    
    
    
    35
    
    
    
    36
    
    
    
    35
    
    
    
    37Average occupancy (%)
    
    
    94.6
    
    
    
    92.7
    
    
    
    94.1
    
    
    
    95.5
    
    
    
    97.3
 (1)

    Excludes the assets, liabilities and results of operations of Brookfield Homes
Corporation(2)

    Excludes the distribution of Brookfield Homes Corporation 79




---



##### 



Governance Policies
  
    
    The board has a majority of independent directors and a lead independent director
    
    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 company expenses stock option grants on its income statement
    
    The positions of CEO and Chairman are separated
    
    The company has publicly-disclosed board guidelines
    
    Outside directors meet without the CEO or management present
    
    The audit committee is comprised solely of independent directors
 NYSE Rules
   Committee Membership
 Audit Committee
    
    Governance & Nominating Committee
    
    Human Resources & Compensation CommitteePaul D. McFarlane, Chair
    
    Allan S. Olson, Chair
    
    Jack L. Cockwell, ChairWilliam T. Cahill
    
    William T. Cahill
    
    Paul D. McFarlaneAllan S. Olson
    
    Roderick D. Fraser
    
    William C. WheatonRobert L. Stelzl
    
    Samuel P.S. Pollock
 80




---



##### 



(PHOTO OF GORDON E. ARNELL)
    
    Gordon E. ArnellLondon, United Kingdom
Chairman
Brookfield Properties Corporation
Chairman of Brookfield since 1989;
President and CEO of Brookfields
predecessor, Carena Developments Ltd., for
eleven years; senior executive roles at
Oxford Development Group Ltd. and Trizec
Corporation Ltd.(PHOTO OF WILLIAM T. CAHILL)
    
    William T. CahillRidgefield, Connecticut
Senior Credit Officer
Citibank Community Development
Current position since 2002. Previous
positions include Managing Director,
Citigroup Real Estate, 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
President and CEO
Brookfield Properties Corporation
Current position since 2002; President
and CEO of U.S. operations 20002002;
senior positions for Brookfield Properties
predecessor companies including COO,
EVP and Director of Leasing. Chairman,
Real Estate Roundtable Tax Policy Advisory
Committee; Member, NAREIT and REBNY
Board of Governors.(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. Director,
Astral Media Inc., Chairman, Board of
Trustees, Royal Ontario Museum and
Director, C.D. Howe Institute.(PHOTO OF J. BRUCE FLATT)
    
    J. Bruce FlattToronto, Ontario
President and CEO
Brookfield Asset Management Inc.
Current position since 2002;
President and CEO of Brookfield
Properties Corporation 20002001;
President and COO 19952000;
other senior management positions
from 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 and the
Aga Khan University.(PHOTO OF PAUL D. MCFARLANE)
    
    Paul D. McFarlaneMississauga, Ontario
Corporate Director
Retired from CIBC in 2002 after more
than 40 years service in numerous
branch, regional and head office positions,
most recently as Senior Vice President,
Special Loans, Head Office, from 1994
until retirement.(PHOTO OF ALLAN S. OLSON)
    
    Allan S. OlsonEdmonton, Alberta
President and CEO
First Industries Corporation
Current position since 1991. President and
CEO, Churchill Corp. 19891990 and
Banister Construction Group 19901991.
Various positions at Stuart Olson
Construction including President and CEO
19651989. Chairman, Summit REIT and
Director, Ipsco Steel.
 81




---



##### 



(PHOTO OF SAMUEL P.S. POLLOCK, O.C.)
    
    Samuel P.S. Pollock, O.C.Toronto, Ontario
President of 96345 Canada Inc.
Chairman, Toronto Blue Jays 1995
2000; Chairman, John Labatt Ltd.
19911995; President, Carena Investments
19781991; Vice President and General
Manager, Montreal Canadiens 19641978.
Officer, Order of Canada and Member,
Order of Quebec. Inducted to Hockey Hall
of Fame and Canadian Sports Hall of
Fame. Named Great Montrealer in 1978.(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, Washington Performing Arts
Society, Greater Washington Board of
Trade and Watson Wyatt & Co. Holdings.
Trustee, George Washington University
and Federal City Council.(PHOTO OF ROBERT L. STELZL)
    
    Robert L. StelzlLos Angeles, California
Retired from Colony Capital after 14
years of service as principal and member of
the investment committee. 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 WILLIAM C. WHEATON, PH.D.)
    
    William C. Wheaton, Ph.D.Hamilton, Massachusetts
Professor of EconomicsMassachusetts Institute of Technology
Founder and former director MIT Center for
Real Estate, 19922005; MIT faculty member
since 1972. Founder and Principal, Torto
Wheaton Research. Co-author, Urban
Economics and the Real Estate Markets (1996).(PHOTO OF JOHN E. ZUCCOTTI)
    
    John E. ZuccottiNew York, New York
Co-Chairman
Brookfield Properties Corporation
Current position since 1997. Chairman,
Real Estate Board of New York since 2004;
Senior Counsel, Weil, Gotshal and Manges
since 1998; 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.
 82




---



##### 



CHAIRMEN   Chairman
 Co-Chairman
 CORPORATE   President and Chief Executive Officer
 Senior Vice President, Finance
 Senior Vice President and General
Counsel and Secretary
 Senior Vice President and
Chief Financial Officer
 Vice President, Investor Relations and
Communications
 Vice President and Controller
 Vice President, Taxation
 Vice President, Human Resources
 Vice President, Risk Management
 Vice President, Information Technologies
 PROPERTY OPERATIONS
 UNITED STATES   President and Chief Operating Officer
 Executive Vice President, Development
 Senior Vice President and Controller
 Senior Vice President, Acquisitions and
Dispositions
 Senior Vice President, Operations
 Senior Vice President, Director of Leasing
 Senior Vice President, Midwest and Mountain
Region
 Vice President and Associate Counsel
 Vice President, Acquisitions and Dispositions
 CANADA   President and Chief Operating Officer
 Executive Vice President, Development
 Senior Vice President, Office Leasing, Eastern
 Senior Vice President, Asset Management,
Western
 Senior Vice President, Legal, Eastern
 Senior Vice President, Investments
 Senior Vice President and Controller
 Vice President, Office Leasing, Western
 RESIDENTIAL OPERATIONS   President and Chief Executive Officer
 83




---



##### 



Head Office
 
 Transfer Agent
 Stock Exchange Listings
 Stock Symbol
    
    Exchange
    
    Record Date
    
    Payment DateCommon shares
    
    BPO
    
    NYSE, TSX
    
    First day of March, June,
    
    Last business day ofSeptember and December
    
    March, June,September and DecemberClass A Preferred SharesSeries A
    
    Not listed
    
    
    
    First day of March and
    
    15th day of March andSeries B
    
    Not listed
    
    
    
    September
    
    SeptemberClass AA Preferred SharesSeries E
    
    Not listed
    
    
    
    15th day of March, June,
    
    Last business day ofSeptember and December
    
    March, June,September and DecemberClass AAA Preferred SharesSeries F
    
    BPO.PR.F
    
    TSX
    
    15th day of March, June,
    
    Last business day ofSeries G
    
    BPO.PR.U
    
    TSX
    
    September and December
    
    March, June,Series H
    
    BPO.PR.H
    
    TSX
    
    
    
    September and DecemberSeries I
    
    BPO.PR.I
    
    TSXSeries J
    
    BPO.PR.J
    
    TSXSeries K
    
    BPO.PR.K
    
    TSX
 Shareholder Information
   Annual General Meeting
 
 
 84