Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

COMMISSION FILE NUMBER 1-34948

Brookfield Property REIT Inc.

(Exact name of registrant as specified in its charter)



Delaware			27-2963337
(State or other jurisdiction of incorporating or organization)			(I.R.S. Employer Identification Number)

250 Vesey Street, 15th Floor	New York	NY	10281-1023
(Address of principal executive offices)			(Zip Code)

(212) 417-7000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Stock, par value $.01 per share	BPR	Nasdaq Global Select Market
6.375% Series A Cumulative Perpetual Redeemable Preferred Stock, par value $0.01 per share	BPRAP	Nasdaq Global Select Market

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

☒ Yes ☐ No

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

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



☒	Large accelerated filer	☐	Accelerated filer
☐	Non-accelerated filer	☐	Smaller reporting company
		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

The number of shares of Class A Stock, $.01 par value, outstanding on November 6, 2019 was 65,457,145.

Brookfield Property REIT Inc.

INDEX



			PAGE NUMBER

Part I	FINANCIAL INFORMATION

	Item 1: Financial Statements

		Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited)	3

		Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	4

		Consolidated Statements of Equity for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	6

		Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)	10

		Notes to Consolidated Financial Statements (Unaudited)	12

		Note 1: Organization	12

		Note 2: Summary of Significant Accounting Policies	12

		Note 3: Acquisitions, Sales and Joint Venture Activity	20

		Note 4: Fair Value	23

		Note 5: Unconsolidated Real Estate Affiliates	25

		Note 6: Mortgages, Notes and Loans Payable	27

		Note 7: Leases	30

		Note 8: Income Taxes	33

		Note 9: Equity and Redeemable Noncontrolling Interests	33

		Note 10: Earnings Per Share	41

		Note 11: Stock-Based Compensation Plans	42

		Note 12: Accounts Receivable, net	44

		Note 13: Notes Receivable	45

		Note 14: Prepaid Expenses and Other Assets	45

		Note 15: Accounts Payable and Accrued Expenses	46

		Note 16: Litigation	46

		Note 17: Commitments and Contingencies	46

		Note 18: Subsequent Events	47

	Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations		48

		Liquidity and Capital Resources	52

	Item 3: Quantitative and Qualitative Disclosures about Market Risk		61

	Item 4: Controls and Procedures		62

Part II	OTHER INFORMATION

	Item 1: Legal Proceedings		63

	Item 1A: Risk Factors		63

	Item 2: Unregistered Sales of Equity Securities and Use of Proceeds		63

	Item 3: Defaults Upon Senior Securities		63

	Item 4: Mine Safety Disclosures		63

	Item 5: Other Information		63

	Item 6: Exhibits		65

SIGNATURES			66

PART I FINANCIAL INFORMATION

ITEM I FINANCIAL STATEMENTS

Brookfield Property REIT Inc.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



	September 30, 2019			December 31, 2018
	(Dollars in thousands, except share and per share amounts)
Assets:
Investment in real estate:
Land	$	3,234,324		$	2,706,701
Buildings and equipment	11,785,472			10,774,079
Less accumulated depreciation	(2,457,103		)	(2,214,603		)
Construction in progress	83,122			576,695
Net property and equipment	12,645,815			11,842,872
Investment in Unconsolidated Real Estate Affiliates	4,935,345			5,385,582
Net investment in real estate	17,581,160			17,228,454
Cash and cash equivalents	189,212			247,019
Accounts receivable, net	218,922			222,562
Notes receivable	44,550			256,937
Deferred expenses, net	157,321			145,631
Prepaid expenses and other assets (see Notes 7 and 14)	349,832			313,648
Deferred tax assets, net	630,086			619,275
Total assets	$	19,171,083		$	19,033,526
Liabilities:
Mortgages, notes and loans payable (including related party debt - see Note 6)	$	14,307,203		$	12,589,649
Investment in Unconsolidated Real Estate Affiliates	85,633			124,627
Accounts payable and accrued expenses (see Notes 7 and 15)	843,777			953,369
Dividend payable	13,895			4,668
Junior subordinated notes	206,200			206,200
Total liabilities	15,456,708			13,878,513
Redeemable Class A equity interests	1,394,910			2,305,895
Redeemable noncontrolling interests	62,264			73,696
Total redeemable interests	1,457,174			2,379,591
Equity:
Class B Stock & Series B Preferred Stock (collectively, "Combined Class B Stock"): 5,907,500,000 shares authorized, $0.01 par value, 478,167,829 and 454,744,938 issued and outstanding as of September 30, 2019 and December 31, 2018, respectively (see Note 9)	4,782			4,547
Class C Stock: 1,000,000,000 shares authorized, $0.01 par value, 640,051,301 issued and outstanding as of September 30, 2019 and December 31, 2018	6,401			6,401
Common Stock: 965,000,000 shares authorized, $0.01 par value, no shares issued or outstanding as of September 30, 2019 and December 31, 2018	—			—
Preferred Stock: 500,000,000 shares authorized, $0.01 par value, 10,000,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018	242,042			242,042
Additional paid-in capital	6,339,508			5,772,824
Retained earnings (accumulated deficit)	(5,686,823		)	(4,721,335		)
Accumulated other comprehensive loss	(87,518		)	(82,653		)
Total stockholders' equity	818,392			1,221,826
Noncontrolling interests in Consolidated Real Estate Affiliates	17,248			26,652
Noncontrolling interests of the Operating Partnership	1,421,561			1,526,944
Total equity	2,257,201			2,775,422
Total liabilities, redeemable interests and equity	$	19,171,083		$	19,033,526

The accompanying notes are an integral part of these consolidated financial statements.

Brookfield Property REIT Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Dollars in thousands, except per share amounts)
Revenues:
Rental revenues, net	$	317,469		$	447,767		$	954,728		$	1,518,930
Management fees and other corporate revenues	44,206			30,483			123,444			82,278
Other	13,450			14,899			34,368			49,250
Total revenues	375,125			493,149			1,112,540			1,650,458
Expenses:
Real estate taxes	43,726			55,081			126,955			177,417
Property maintenance costs	6,297			8,381			22,693			34,070
Marketing	965			1,801			2,790			4,961
Other property operating costs	45,271			66,327			129,768			209,832
Provision for doubtful accounts	—			3,517			—			9,180
Property management and other costs	59,042			43,763			174,339			119,932
General and administrative	4,929			15,947			15,661			40,235
Costs related to the BPY Transaction	—			204,159			9,179			204,159
Provision for impairment	38,794			7,487			223,142			45,866
Depreciation and amortization	120,249			156,401			357,429			515,437
Total expenses	319,273			562,864			1,061,956			1,361,089
Interest and dividend income	12,138			7,240			23,451			25,906
Interest expense	(180,755		)	(144,632		)	(494,306		)	(423,120		)
Loss on extinguishment of debt	(27,542		)	—			(27,542		)	—
Gain from changes in control of investment properties and other, net	39,712			2,850,017			39,712			2,862,681
(Loss) income before income taxes, equity in income of Unconsolidated Real Estate Affiliates and related gain on investment, and allocation to noncontrolling interests	(100,595		)	2,642,910			(408,101		)	2,754,836
Benefit from income taxes	14,021			570,716			6,068			571,018
Equity in income of Unconsolidated Real Estate Affiliates	16,145			20,336			434			59,206
Unconsolidated Real Estate Affiliates - gain on investment, net	33,640			478,293			137,994			488,654
Net (loss) income	(36,789		)	3,712,255			(263,605		)	3,873,714
Allocation to noncontrolling interests	3,366			(28,981		)	34,617			(32,790		)
Net (loss) income attributable to Brookfield Property REIT Inc.	$	(33,423	)	$	3,683,274		(228,988		)	3,840,924
Class A Stock Earnings Per Share (See Note 10):
Basic & Diluted Earnings Per Share	$	0.330		$	0.315		$	0.990		$	0.315
Common Stock Earnings Per Share (See Note 10):
Basic				$	4.70					$	4.16
Diluted				$	4.68					$	4.15

Brookfield Property REIT Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Continued) (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Dollars in thousands, except per share amounts)
Comprehensive Income (Loss), Net:
Net (loss) income	$	(36,789	)	$	3,712,255		$	(263,605	)	$	3,873,714
Other comprehensive income (loss)
Foreign currency translation	(5,472		)	(2,347		)	(4,745		)	(12,764		)
Net unrealized gains (losses) on other financial instruments	(72		)	8			(120		)	16
Other comprehensive income (loss)	(5,544		)	(2,339		)	(4,865		)	(12,748		)
Comprehensive income (loss)	(42,333		)	3,709,916			(268,470		)	3,860,966
Comprehensive loss (income) allocated to noncontrolling interests	3,366			(29,105		)	34,617			(32,829		)
Comprehensive income (loss) attributable to Brookfield Property REIT Inc.	$	(38,967	)	$	3,680,811		$	(233,853	)	$	3,828,137

The accompanying notes are an integral part of these consolidated financial statements.

Brookfield Property REIT Inc. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

	Common Stock			Combined Class B Stock		Class C Stock		Preferred Stock		Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Common Stock in Treasury			Noncontrolling Interests in Consolidated Real Estate Affiliates and Operating Partnership			Total Equity			Redeemable Class A Stock
	(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2018	$	10,130		$	—	$	—	$	242,042	$	11,845,532		$	(2,107,498	)	$	(71,906	)	$	(1,122,640	)	$	104,748		$	8,900,408		$	—

Cumulative effect of accounting change													(16,864		)										(16,864		)
Net income													3,789,792									(1,827		)	3,787,965			51,132
Distributions to noncontrolling interests in consolidated Real Estate Affiliates																						(4,213		)	(4,213		)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates										3,808												(9,229		)	(5,421		)
Long-Term Incentive Plan Common Unit grants, net (238,655 LTIP Units)										—			—									17,859			17,859
Restricted stock grants, net (1,000,143 common shares and 48,773 Class A stock)	10							—		9,241															9,251			2,910
Employee stock purchase program										1,797															1,797
Stock options exercised (288,715 common shares)	3									4,972															4,975
Cash dividends reinvested (DRIP) in stock	—							—		245			(245		)										—
Other comprehensive loss																(12,786		)							(12,786		)
Dividends on Common Stock													(421,446		)										(421,446		)
Cash distributions on Preferred Stock ($1.1952 per share)													(11,952		)										(11,952		)
Adjust Mezzanine Equity to Fair Value										40,294															40,294
OP Unit Conversion to Common Stock (4,098,105 common shares)	41									87,149															87,190
Special Pre-Closing Dividend													(9,152,446		)							(36,436		)	(9,188,882		)
BPR Equity Recapitalization	(10,184		)	4,074						(7,428,698		)	2,903,347						1,122,640			(661		)	(3,409,482		)	3,408,889
Cash Contribution from BPY						6,401				193,599															200,000
Class A Conversion to Class B (14,328,654 Class B Shares)				143						306,347															306,490			(306,490		)
Adjust Class A stock to Fair Value										24,501															24,501			(24,501		)
Acquisition of NCI by Institutional Investor																						1,470,857			1,470,857
Class A Dividend																									—			(51,132		)
Balance at September 30, 2018	$	—		$	4,217	$	6,401	$	242,042	$	5,088,787		$	(5,017,312	)	$	(84,692	)	$	—		$	1,541,098		$	1,780,541		$	3,080,808

Brookfield Property REIT Inc. CONSOLIDATED STATEMENTS OF EQUITY (Continued) (UNAUDITED)

	Common Stock			Combined Class B Stock		Class C Stock		Preferred Stock		Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Common Stock in Treasury			Noncontrolling Interests in Consolidated Real Estate Affiliates and Operating Partnership			Total Equity			Redeemable Class A Stock
	(Dollars in thousands, except for per share and share amounts)
Balance at July 1, 2018	$	10,144		$	—	$	—	$	242,042	$	11,880,450		$	(2,396,371	)	$	(82,229	)	$	(1,122,640	)	$	102,666		$	8,634,062		$	—

Net income													3,632,142									(2,997		)	3,629,145			51,132
Distributions to noncontrolling interests in consolidated Real Estate Affiliates																						(1,325		)	(1,325		)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates										3,808												(4,231		)	(423		)
Long-Term Incentive Plan issuance and expense																						13,225			13,225
Restricted stock grants, net (48,773 Class A stock)										4,244															4,244			2,910
Employee stock purchase program	(1		)							—															(1		)
Stock options exercised (39,207 common shares)	1									856															857
Cash dividends reinvested (DRIP) in stock										—			—												—
Other comprehensive loss																(2,463		)							(2,463		)
Cash distributions on Preferred Stock ($0.3984 per share)													(3,984		)										(3,984		)
Fair value adjustment for noncontrolling interest in Operating Partnership										(22,395		)													(22,395		)
Adjust Mezzanine Equity to Fair Value										40,294															40,294
OP Unit Conversion to Common Stock (4,031,041 common shares)	40									85,781															85,821
Special Pre-Closing Dividend													(9,152,446		)							(36,436		)	(9,188,882		)
BPR Equity Recapitalization	(10,184		)	4,074						(7,428,698		)	2,903,347						1,122,640			(661		)	(3,409,482		)	3,408,889
Cash Contribution from BPY						6,401				193,599															200,000
Class A Conversion to Class B (14,328,654 Class B Shares)				143						306,347															306,490			(306,490		)
Adjust Class A stock to Fair Value										24,501															24,501			(24,501		)
Acquisition of NCI by Institutional Investor																						1,470,857			1,470,857
Class A Dividend																									—			(51,132		)
Balance at September 30, 2018	$	—		$	4,217	$	6,401	$	242,042	$	5,088,787		$	(5,017,312	)	$	(84,692	)	$	—		$	1,541,098		$	1,780,541		$	3,080,808

Brookfield Property REIT Inc. CONSOLIDATED STATEMENTS OF EQUITY (Continued) (UNAUDITED)

	Common Stock		Combined Class B Stock			Class C Stock		Preferred Stock		Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Common Stock in Treasury		Noncontrolling Interests in Consolidated Real Estate Affiliates and Operating Partnership			Total Equity			Redeemable Class A Stock
	(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2019	$	—	$	4,547		$	6,401	$	242,042	$	5,772,824		$	(4,721,335	)	$	(82,653	)	$	—	$	1,553,596		$	2,775,422		$	2,305,895

Net income (loss)													(315,935		)						(39,005		)	(354,940		)	86,947
Distributions to noncontrolling interests in consolidated Real Estate Affiliates and Operating Partnership																					(76,241		)	(76,241		)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates																					1,188			1,188
Buyback of Class A Stock													5,283											5,283			(120,210		)
Buyback of Class B-1 Stock			(105		)					(158,517		)	(65,902		)									(224,524		)
Series K Preferred Unit redemption													941								(729		)	212
Long Term Incentive Plan & Stock Option Expense													653											653
Preferred stock dividend ($1.1952 per share)													(11,952		)									(11,952		)
Other comprehensive loss																(4,865		)						(4,865		)
Dividends on Class A ($0.99 per share) and Combined Class B Stock (Refer to Note 9)													(651,098		)									(651,098		)	(86,947		)
Restricted stock grants, net of forfeitures (607,450 Class A Stock)										—														—			7,288
Class A Conversion to Class B-1 (38,002,949 Class A Shares converted to 33,919,596 Class B-1 Shares)			340							725,201			72,522											798,063			(798,063		)
Balance at September 30, 2019	$	—	$	4,782		$	6,401	$	242,042	$	6,339,508		$	(5,686,823	)	$	(87,518	)	$	—	$	1,438,809		$	2,257,201		$	1,394,910

Brookfield Property REIT Inc. CONSOLIDATED STATEMENTS OF EQUITY (Continued) (UNAUDITED)

	Common Stock		Combined Class B Stock		Class C Stock		Preferred Stock		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Common Stock in Treasury		Noncontrolling Interests in Consolidated Real Estate Affiliates and Operating Partnership			Total Equity			Redeemable Class A Stock
	(Dollars in thousands, except for per share and share amounts)
Balance at July 1, 2019	$	—	$	4,664	$	6,401	$	242,042	$	6,087,409	$	(5,652,263	)	$	(81,974	)	$	—	$	1,453,857		$	2,060,136		$	1,674,301

Net income (loss)											(56,318		)						(4,717		)	(61,035		)	22,900
Distributions to noncontrolling interests in consolidated Real Estate Affiliates and Operating Partnership																			(14,538		)	(14,538		)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates																			4,392			4,392
Buyback of Class A Stock											2,008											2,008			(5,668		)
Series K Preferred Unit redemption											18								(185		)	(167		)
Long Term Incentive Plan & Stock Option Expense											223											223
Preferred stock dividend ($0.3984 per share)											(3,984		)									(3,984		)
Other comprehensive loss														(5,544		)						(5,544		)
Dividends on Class A ( $0.33 per share) and Combined Class B Stock (Refer to Note 9)											—											—			(22,900		)
Restricted stock grants, net of forfeitures (25,562 Class A Stock)																						—			1,990
Class A Conversion to Class B-1 (13,129,125 Class A Shares converted to 11,791,341 Class B-1 Shares)			118						252,099		23,493											275,710			(275,713		)
Balance at September 30, 2019	$	—	$	4,782	$	6,401	$	242,042	$	6,339,508	$	(5,686,823	)	$	(87,518	)	$	—	$	1,438,809		$	2,257,201		$	1,394,910

The accompanying notes are an integral part of these consolidated financial statements.

Brookfield Property REIT Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Nine Months Ended September 30,
	2019			2018
	(Dollars in thousands)
Cash Flows provided by Operating Activities:
Net (loss) income	$	(263,605	)	$	3,873,714
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of Unconsolidated Real Estate Affiliates	(434		)	(59,206		)
Distributions received from Unconsolidated Real Estate Affiliates	79,267			85,269
Provision for doubtful accounts	8,244			9,180
Depreciation and amortization	357,429			515,437
Amortization/write-off of deferred finance costs	21,644			10,381
Accretion/write-off of debt market rate adjustments	(1,255		)	(1,643		)
Amortization of intangibles other than in-place leases	(2,480		)	15,338
Amortization of right of use assets	3,934			—
Straight-line rent amortization	(5,633		)	766
Deferred income taxes	(10,810		)	(573,109		)
Unconsolidated Real Estate Affiliates - gain on investment, net	(137,994		)	(488,654		)
Gain from changes in control of investment properties and other, net	(39,712		)	(2,862,681		)
Provision for impairment	223,142			45,866
Loss on extinguishment of debt	27,542			—
Net changes:
Accounts and notes receivable, net	45,614			(19,962		)
Prepaid expenses and other assets (see Notes 7 and 14)	(4,137		)	(7,791		)
Deferred expenses, net	(13,012		)	(28,863		)
Accounts payable and accrued expenses (see Notes 7 and 15)	(39,910		)	(66,203		)
Other, net	4,359			40,386
Net cash provided by operating activities	252,193			488,225
Cash Flows (used in) provided by Investing Activities:
Acquisition of real estate and property additions	(169,596		)	—
Development of real estate and property improvements	(381,811		)	(587,418		)
Loans to affiliates	(330,000		)	—
Loans to joint venture and joint venture partners	(97,548		)	(6,739		)
Proceeds from repayment of loans to affiliates	330,000			—
Proceeds from repayment of loans to joint venture and joint venture partners	18,020			82,000
Proceeds from sales of investment properties and Unconsolidated Real Estate Affiliates	173,774			2,878,021
Contributions to Unconsolidated Real Estate Affiliates	(208,277		)	(102,118		)
Distributions received from Unconsolidated Real Estate Affiliates in excess of income	269,465			343,047
Net cash (used in) provided by investing activities	(395,973		)	2,606,793
Cash Flows provided by (used in) Financing Activities:
Proceeds from refinancing/issuance of mortgages, notes and loans payable (including related party debt - see Note 6)	4,653,639			6,571,856
Principal payments on mortgages, notes and loans payable - (including related party debt - see Note 6)	(3,364,544		)	(1,186,149		)
Payment of deferred finance costs	(30,471		)	(110,584		)
Issuances of Class C Stock	—			200,000
Buyback of Class A Stock	(114,927		)	—
Buyback of Combined Class B Stock	(224,524		)	—
Series K preferred unit redemptions	(14,719		)	—
Cash contributions from noncontrolling interests in consolidated real estate affiliates	—			1,470,857
Cash distributions to noncontrolling interests in consolidated real estate affiliates	(67,035		)	(4,213		)
Cash distributions paid to stockholders	(738,043		)	(9,835,798		)
Cash distributions reinvested (DRIP) in common stock	—			357
Cash distributions paid to preferred stockholders	(11,952		)	(11,952		)
Cash distributions and redemptions paid to unit holders	(5,248		)	(106,167		)
Other, net	—			(9,631		)
Net cash provided by (used in) financing activities	82,176			(3,021,424		)
Net change in cash, cash equivalents and restricted cash	(61,604		)	73,594
Cash, cash equivalents and restricted cash at beginning of period	298,693			231,939
Cash, cash equivalents and restricted cash at end of period	$	237,089		$	305,533



Brookfield Property REIT Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED)
	Nine Months Ended September 30,
	2019		2018
	(Dollars in thousands)
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	484,479	$	442,924
Interest capitalized	13,412		15,123
Income taxes paid	5,994		2,522
Accrued capital expenditures included in accounts payable and accrued expenses	221,995		219,022
Cash paid for amounts included in the measurement of lease liabilities	6,406		—
Recognition of right-of-use asset	73,633		—
Lease liabilities arising from obtaining right-of-use lease asset	73,633		—
Straight-line ground rent asset reclassed to right-of-use asset	53,779		—
Straight-line ground rent liability reclassed to right-of-use asset	3,817		—
Straight-line building rent liability reclassed to right-of-use asset	3,599		—
Non-cash transfer of legal rights for Coronado Center Mall (Refer to Note 3)	53,100		—
Non-cash satisfaction of notes receivable from joint venture partner (Refer to Note 3)	250,000		—

The accompanying notes are an integral part of these consolidated financial statements.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 1 ORGANIZATION

Readers of this Quarterly Report on Form 10-Q (this "Quarterly Report") should refer to the Company's (as defined below) audited consolidated financial statements for the year ended December 31, 2018 which are included in the Company's Annual Report on Form 10-K (our "Annual Report") for the fiscal year ended December 31, 2018 (Commission File No. 001-34948), as certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this Quarterly Report. Unless context otherwise requires, capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.

General

Brookfield Property REIT Inc. (referred to herein as "BPR or the "Company"), formerly known as GGP Inc. ("GGP"), a Delaware corporation, was organized in July 2010 and is an externally managed real estate investment trust, referred to as a "REIT".

On March 26, 2018, GGP and Brookfield Property Partners L.P. ("BPY") entered into a definitive agreement (the "Merger Agreement") pursuant to which BPY would acquire all of the shares of GGP common stock, par value $0.01 per share, that BPY and its affiliates did not already own through a series of transactions (collectively, the "BPY Transaction"), including, among other things, the exchange of all shares of GGP common stock owned by certain affiliates of BPY and any subsidiary of GGP for Series B Preferred Stock (the "Class B Exchange") and the payment of a special dividend payable to certain holders of record of GGP common stock pursuant to the terms of the Merger Agreement (the "Pre-Closing Dividend").

BPR is an indirect subsidiary of BPY, one of the world's largest commercial real estate companies. In these notes, the terms "we", "us" and "our" refer to BPR and its subsidiaries. BPR, through its subsidiaries and affiliates, is an owner and operator of retail properties. As of September 30, 2019, we were the owner, either entirely or with joint venture partners, of 123 retail properties in the United States.

Substantially all of our business is conducted through BPR OP, LP ("BPROP"), which we sometimes refer to herein as the Operating Partnership, and its subsidiaries. As of September 30, 2019, BPR held approximately 99% of the common equity of BPROP, while the remaining 1% was held by limited partners and certain previous contributors of properties to BPROP.

In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through BPR REIT Services LLC. ("BPRRS"), Brookfield Properties Retail Inc. ("BPRI") and General Growth Management, Inc. ("GGMI"). Each of GGMI and BPRI is a taxable REIT subsidiary ("TRS"), which earn real estate management, leasing, development, and financing fees for other ancillary services for a majority of our Unconsolidated Real Estate Affiliates (defined below) and for substantially all of our Consolidated Properties (defined below). BPRI also serves as a contractor to GGMI for these services. BPRRS generally provides financial, accounting, tax, legal, development, and other services to our Consolidated Properties.

We refer to our ownership interests in properties in which we own a majority or controlling interest and are consolidated under accounting principles generally accepted in the United States of America ("GAAP") as the "Consolidated Properties." We also own interests in certain properties through joint venture entities in which we own a noncontrolling interest ("Unconsolidated Real Estate Affiliates") and we refer to those properties as the "Unconsolidated Properties".

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of BPR, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated joint ventures, the noncontrolling partner's share of the assets, liabilities and operations of the joint ventures (generally computed as the joint venture partner's ownership percentage) is included in noncontrolling interests in consolidated real estate affiliates as permanent equity of the Company. Intercompany balances and transactions have been eliminated. Noncontrolling interests are included on our Consolidated Balance Sheets related to the Common,

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Preferred, and LTIP Units of BPROP and are presented either as redeemable noncontrolling interests or as noncontrolling interests in our permanent equity. The Operating Partnership and each of our consolidated joint ventures are variable interest entities as the limited partners do not have substantive kick-out rights or substantive participating rights. However, as the Company holds a majority voting interest in the Operating Partnership and our consolidated joint ventures, it qualifies for the exemption from providing certain of the disclosure requirements associated with variable interest entities.

We operate in a single reportable segment, which includes the operation, development and management of retail and other rental properties. Our portfolio is targeted to a range of market sizes and consumer tastes. Each of our operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. The Company's chief operating decision maker is comprised of a team of several members of executive management who use property operations in assessing segment operating performance. We do not distinguish or group our consolidated operations based on geography, size or type for purposes of making property operating decisions. Our operating properties have similar economic characteristics and provide similar products and services to our tenants. There are no individual operating segments that are greater than 10% of combined revenue or combined assets. When assessing segment operating performance, certain non-cash and non-comparable items such as straight-line rent, depreciation expense and intangible asset and liability amortization are excluded from property operations, which are a result of GGP's emergence from bankruptcy, acquisition accounting and other capital contribution or restructuring events. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. As a result, the Company's operating properties are aggregated into a single reportable segment.

Reclassifications

Components of revenue that were previously reported as minimum rents, tenant recoveries, and overage rents have been combined and reported as rental revenues on the Consolidated Statements of Comprehensive Income. This change in presentation was done to improve comparability by conforming prior year presentation to the current year presentation required under Accounting Standards Codification ("ASC") 842. Total revenues of the Company are unchanged by this reclassification. Refer to Note 7 for further information.



	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
	As Originally Reported		As Reclassified		As Originally Reported		As Reclassified
Minimum rents	$	309,983	$	—	$	1,057,817	$	—
Tenant recoveries	133,103		—		446,260		—
Overage rent	4,681		—		14,853		—
Total rental revenues	$	—	$	447,767	$	—	$	1,518,930

Acquisitions of Operating Properties (Note 3)

The fair values of tangible assets are determined on an "if vacant" basis. The "if vacant" fair value is allocated to land, where applicable, buildings, equipment and tenant improvements based on comparable sales and other relevant information with respect to the property. Specifically, the "if vacant" value of the buildings and equipment was calculated using a cost approach utilizing published guidelines for current replacement cost or actual construction costs for similar, recently developed properties; and an income approach. Assumptions used in the income approach to the value of buildings include: capitalization and discount rates, lease-up time, market rents, make ready costs, land value, and site improvement value.

The estimated fair value of in-place tenant leases includes lease origination costs (costs we would have incurred to lease the property to the current occupancy level of the property) and the lost revenues during the period necessary to lease-up from vacant to current occupancy level. Such estimates include the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, we evaluate the time period over which such occupancy level would be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance, and utilities) incurred during the lease-up period, which generally ranges up to one year. The fair value of the acquired in-place tenant leases is included in the balance of buildings and equipment and amortized over the remaining lease term for each tenant.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where we are the lessor or the lessee. The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably certain. The remaining term of leases with renewal options at terms significantly below market reflect the assumed exercise of such below-market renewal options and assume the amortization period would coincide with the extended lease term.

The gross asset balances and accumulated amortization of the in-place value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.



	Gross Asset		Accumulated Amortization			Net Carrying Amount

As of September 30, 2019
Tenant leases:
In-place value	$	162,548	$	(68,464	)	$	94,084

As of December 31, 2018
Tenant leases:
In-place value	$	188,140	$	(86,510	)	$	101,630

The above-market tenant leases are included in prepaid expenses and other assets (Note 14); the below-market tenant leases are included in accounts payable and accrued expenses (Note 15) in our Consolidated Balance Sheets.

Amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, had the following effects on our income from continuing operations:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Amortization/accretion effect on continuing operations	$	(8,665	)	$	(11,524	)	$	(18,446	)	$	(42,390	)

Future amortization/accretion of all intangibles in Note 14 and Note 15, is estimated to decrease results from continuing operations as follows:



Year	Amount
2019 Remaining	$	4,621
2020	14,067
2021	9,499
2022	8,741
2023	8,458

Revenue Recognition and Related Matters

Accounting for real estate sales distinguishes between sales to a customer or non-customer for purposes of revenue recognition. Once we, as the seller, determine that we have a contract, we will identify each distinct non-financial asset promised to the counter-party and whether the counter-party obtains control and transfers risks and rewards of ownership of each non-financial asset to determine if we should derecognize the asset.

Leases

We have entered into lease arrangements for the land and buildings at certain properties, as well as for the use of office space in Chicago, Illinois. We account for leases under Accounting Standards Update ("ASU") 2016-02, Leases ("Topic 842" or "the new leasing standard"). We elected to use the "package of practical expedients", as discussed below, which allowed us not to reassess

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

under the new leasing standard prior conclusions about lease identification, lease classification, and initial direct costs. We elected to recast prior-period comparative information presented in our Consolidated Statements of Comprehensive Income (Loss) related to rental revenues.

The new leasing standard requires lessees to record a right-of-use ("ROU") asset and a related lease liability for the rights and obligations associated with all lessee leases. Topic 842 also modified the lease classification criteria through the elimination of "bright-line" tests, the removal of historical real estate specific lease provisions, and changes to lessor accounting to align with the new revenue recognition standard (ASC 606).

On the adoption date, we recognized lease liabilities of $73.4 million and ROU assets of $118.9 million for operating leases of Consolidated Properties for which we are the lessee included in accounts payable and accrued expenses and prepaid expenses and other assets, respectively, on the Consolidated Balance Sheet and there was no cumulative effect on retained earnings. In order to determine the lease liabilities recognized upon adoption, we discounted the remaining lease payments using our incremental borrowing rates ("IBR") at January 1, 2019. The weighted average rate applied was 7.36%. The ROU asset balance was initially measured as the lease liability amount adjusted by the amount of prepaid or accrued lease payments, deferred straight-line lease liabilities, and intangible ground lease assets and liabilities relating to leases recognized on our Consolidated Balance Sheet as of December 31, 2018. In transition, an adjustment of $45.4 million was made to the ROU asset balance to derecognize $52.8 million of below-market ground lease intangible assets (within prepaid expenses and other assets) and $7.4 million of accrued straight-line rent (within accounts payable and accrued expenses) which are now part of the total ROU assets previously recorded on our Consolidated Balance Sheet.

In addition to the "package of practical expedients", we elected to use the following additional practical expedients permitted by the new leasing standard:


•	The transition practical expedient that allows us to carry forward our historical accounting treatment for land easements on existing agreements.


•	The short-term lease election that allows a lessee not to apply the balance sheet recognition requirements to leases with a term of 12 months or less; lease payments associated with these leases are recognized on a straight-line basis as an expense over the lease term and are not material.


•	The practical expedient which allows a lessee to not separate lease and non-lease components. We have elected to apply this election to all classes of underlying assets.


•	The Company did not elect to apply the practical expedients related to hindsight or assessing impairment of ROU assets.

Lessee arrangements (policy applicable from January 1, 2019)

To account for leases for which we are the lessee under the new leasing standard, contracts must be analyzed upon inception to determine if the arrangement is, or contains, a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification tests and measurement procedures are performed at the lease commencement date. Differences in lease classification will affect only the pattern and classification of expense recognition in our Consolidated Statements of Comprehensive Income (Loss).

The lease liability is initially measured as the present value of the lease payments over the lease term, discounted using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the lessee’s incremental borrowing rate is used. The lease liability balance is subsequently amortized using the effective interest method. The incremental borrowing rate is determined using an approach based on the rate of interest that the lessee would pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. We utilized a market-based approach to estimate the IBR for each individual lease. The approach required significant judgment. Therefore, we utilized different data sets to estimate base IBRs via an analysis of (i) yields on outstanding public debt of BPR, as well as comparable companies, (ii) observable mortgage rates, and (iii) unlevered property yields and discount rates. We then applied adjustments to account for considerations related to (i) term and (ii) security that may not be fully incorporated by the aforementioned data sets. Based on individual characteristics of each lease, we selected an IBR taking into consideration how each data approach and adjustments thereto incorporate term, currency and security.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

The lease term is the noncancelable period of the lease, and includes any renewal and termination options we are reasonably certain to exercise. The reasonably certain threshold is evaluated at lease commencement and is typically met if substantial economic incentives or termination penalties are identified.

Lease payments measured at the commencement date include fixed payments, in-substance fixed payments, variable lease payments dependent on a rate or index (using the index or rate in effect at lease commencement), any purchase option the lessee is reasonably certain to exercise, and payments of penalties for terminating the lease if the lease term reflects the lessee exercising the termination option. Fully variable lease payments without an in-substance fixed component are not included in the measurement of the lease liability and are recognized in the period in which the underlying contingency is resolved.

The lease liability is remeasured when the contract is modified, upon the resolution of a contingency such that variable payments become fixed or if our assessment of exercising an extension, termination or purchase option changes. Once remeasured, an adjustment is made to the ROU asset. However, if the carrying amount of the right-of-use asset is reduced to zero, any remaining amount of the remeasurement is recognized in earnings.

The ROU asset balance is initially measured as the lease liability amount, adjusted for any lease payments made prior to the commencement date, initial direct costs, estimated costs to dismantle, remove, or restore the underlying asset and incentives received.

Our current lessee lease portfolio is comprised entirely of operating leases; however if we enter into a finance lease in the future, the new leasing standard requires us to initially recognize and measure these leases using the same method as described above for operating leases. Subsequent to initial recognition, each lease payment would be allocated between interest expense and a reduction of the lease liability. Interest expense would be recognized over the lease term using the interest method to produce a constant periodic rate of interest on the remaining balance of the liability for each period and would be included in interest expense in our Consolidated Statements of Comprehensive Income (Loss). The ROU asset would be amortized on a straight-line basis over the lease term, with depreciation recorded in depreciation and amortization in our Consolidated Statements of Comprehensive Income (Loss).

The ROU assets in our operating leases are evaluated for impairment in a manner similar to our operating properties, as described below under "Impairment".

Lessor arrangements (policy applicable from January 1, 2019)

At the inception of a new lease arrangement, including new leases that arise from amendments, we assess the terms and conditions to determine the proper lease classification. When the terms of a lease effectively transfer control of the underlying asset, the lease is classified as a sales-type lease. When a lease does not effectively transfer control of the underlying asset to the lessee, but we obtain a guarantee for the value of the asset from a third party, we classify the lease as a direct financing lease. All other leases are classified as operating leases. Control of the underlying asset is transferred to the lessee if any of the following criteria are met: (i) transfer of ownership to the lessee prior to or shortly after the end of the lease term, (ii) lessee has an option to purchase the underlying property that the lessee is reasonably certain to exercise, (iii) the lease term is for the major part of the underlying property’s remaining economic life, (iv) the present value of the sum of lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments is equal to or exceeds substantially all of the fair value of the leased property or (v) the underlying property is of such a specialized nature that it is expected to have no alternative use at the end of the lease term. As of September 30, 2019, we do not have any material sales-type or direct financing leases.

For operating leases with minimum scheduled rent increases, we recognize rental income on a straight‑line basis, including the effect of any free rent periods, over the lease term when collectability of lease payments (and, if applicable, any amounts necessary to satisfy a residual value guarantee) is probable. Variable lease payments are recognized as rental income in the period when the changes in facts and circumstances on which the variable lease payments are based occur. Variable lease payments include overage rent, which is paid by a tenant when the tenant's sales exceed an agreed upon minimum amount, is recognized once tenant sales exceed contractual tenant lease thresholds and is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Our leases also contain provisions for tenants to reimburse us for real estate taxes and insurance, as well as for other property operating expenses, marketing costs, and utilities, which are considered to be non-lease components. These tenant reimbursements are most often established in the leases or in less frequent cases computed based upon a formula. We have elected the practical expedient to not separate non-lease components from the lease component for all classes of underlying assets and determined that the lease component is the predominant component in the contract; therefore, these recoveries are recognized in a manner similar to minimum rents and variable rents within rental revenues on our Consolidated Statements of Comprehensive Income (Loss).

Recognizing rental and related income on a straight-line basis results in a difference in the timing of revenue recognition from what is contractually due from tenants. Straight-line rents are recorded in accounts receivable, net in our Consolidated Balance Sheet. For leases where collectability of the lease payments is probable, we establish a general allowance for doubtful accounts against the portion of accounts receivable, net, including straight-line rents, which is estimated to be uncollectible based on our previous recovery experience. Changes in the general allowance are recognized in rental income on our Consolidated Statements of Comprehensive Income (Loss). If we determine that collectability of the lease payments is not probable, we record a current-period adjustment to rental income to reduce cumulative income recognized since lease commencement to the amount of cash collected from the lessee. Future revenue recognition is limited to amounts paid by the lessee. Generally, a lease is returned to accrual status when all delinquent payments become current under the terms of the lease agreement and collectability of the remaining contractual lease payments is reasonably probable.

Rental revenues also includes lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination dates, as well as accretion related to above-market and below-market tenant leases on acquired properties and properties that were recorded at fair value at the emergence from bankruptcy.

In leasing tenant space, we may provide funding to the lessee through a tenant allowance. To account for a tenant allowance, we determine whether the allowance represents funding for the construction of leasehold improvements and evaluate the control and ownership of such improvements. If we are considered the owner of the leasehold improvements, we capitalize the amount of the tenant allowance and depreciate it over the shorter of the useful life of the leasehold improvements or the related lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event we are not considered the owner of the leasehold improvements, the allowance is capitalized to deferred expenses and considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue on a straight-line basis.

Deferred expenses (policy applicable from January 1, 2019)

The new leasing standard defines initial direct costs as incremental costs of a lease that would not have been incurred if the lease had not been obtained. These initial direct costs (consisting primarily of leasing commissions paid to third parties) are recognized as deferred expenses on our Consolidated Balance Sheet and are amortized using the straight-line method over the life of the leases. Other leasing costs which do not meet the definition of initial direct costs (consisting primarily of internal legal and leasing overhead costs) are expensed as incurred and included in property management and other costs in our Consolidated Statements of Comprehensive Income (Loss).

Policy applicable to periods prior to January 1, 2019

Our accounting policy for leases in which we are the lessor or lessee prior to the adoption of the new leasing standard can be found in our audited consolidated financial statements for the year ended December 31, 2018, which are included in our Annual Report.

Management Fees and Other Corporate Revenues

Management fees and other corporate revenues primarily represent real estate management and leasing fees, development fees, financing fees and fees for other ancillary services performed for the benefit of certain of the Unconsolidated Real Estate Affiliates. Management fees are reported at 100% of the revenue earned from the joint venture in management fees and other corporate revenues on our Consolidated Statements of Comprehensive Income (Loss). Our share of the management fee expense incurred by the Unconsolidated Real Estate Affiliates is reported within equity in income of Unconsolidated Real Estate Affiliates on our Consolidated Statements of Comprehensive Income (Loss) and in property management and other costs in the Condensed Combined

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Statements of Income in Note 5. The following table summarizes the management fees from affiliates and our share of the management fee expense:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Management fees from affiliates	$	44,206		$	30,483		$	123,444		$	82,278
Management fee expense	(11,956		)	(11,630		)	(36,485		)	(32,409		)
Net management fees from affiliates	$	32,250		$	18,853		$	86,959		$	49,869

Following the BPY Transaction, certain Brookfield Asset Management Inc. ("BAM")-owned entities provide certain management and administration services to BPR. BPR will pay an annual base management fee to BAM equal to 1.25% of the total capitalization of BPR, subject to certain adjustments. For the first twelve months following closing of the BPY Transaction, BAM has agreed to waive management fees payable by BPR. For the period August 29, 2019 through September 30, 2019, the Company accrued base management fees of $986 thousand due to BAM which is included in accounts payable and accrued expenses on the Consolidated Balance Sheets and in property management and other costs on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019.

Following the BPY Transaction, an affiliate of BAM is entitled to receive incentive distributions based on an amount by which quarterly distributions exceed specified target levels. There were no such amounts payable for the three and nine months ended September 30, 2019.

Impairment

Operating Properties

We regularly review our Consolidated Properties for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income, significant decreases in occupancy, debt maturities, changes in management's intent with respect to the properties and prevailing market conditions.

If an indicator of potential impairment exists, the property is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows. Although the carrying amount may exceed the estimated fair value of certain properties, a real estate asset is only considered to be impaired when its carrying amount cannot be recovered through estimated future undiscounted cash flows. To the extent an impairment provision is determined to be necessary, the excess of the carrying amount of the property over its estimated fair value is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of the asset group. The adjusted carrying amount, which represents the new cost basis of the property, is depreciated over the remaining useful life of the property.

Although we may market a property for sale, there can be no assurance that the transaction will be complete until the sale is finalized. However, GAAP requires us to utilize the Company's expected holding period of our properties when assessing recoverability. If we cannot recover the carrying value of these properties within the planned holding period, we will estimate the fair values of the assets and record impairment charges for properties when the estimated fair value is less than their carrying value.

Impairment indicators for pre-development costs, which are typically costs incurred during the beginning stages of a potential development and construction in progress, are assessed by project and include, but are not limited to, significant changes in the Company's plans with respect to the project, significant changes in projected completion dates, tenant demand, anticipated revenues or cash flows, development costs, market factors and sustainability of development projects.

Impairment charges are recorded in the Consolidated Statements of Comprehensive Income (Loss) when the carrying value of a property is not recoverable and it exceeds the estimated fair value of the property, which can occur in accounting periods preceding disposition and/or in the period of disposition.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

During the three months ended September 30, 2019, we recorded an impairment charge of $38.8 million on our Consolidated Statements of Comprehensive Income (Loss) related to one operating property where the carrying value exceeded the transfer price to our affiliate (Note 3). During the nine months ended September 30, 2019, we recorded a $223.1 million impairment charge on our Consolidated Statements of Comprehensive Income (Loss), $184.3 million of which related to one operating property as a result of a significant decrease in market leasing assumptions and $38.8 million of which related to the impairment charge on the operating property discussed above.

During the nine months ended September 30, 2018, we recorded a $45.9 million impairment charge on our Consolidated Statements of Comprehensive Income (Loss) related to one operating property that had non-recourse debt maturing during 2019 that exceeded the fair value of the operating property.

Changes in economic and operating conditions that occur subsequent to our review of recoverability of our properties could impact the assumptions used in that assessment and could result in future impairment if assumptions regarding those properties differ from actual results.

Investment in Unconsolidated Real Estate Affiliates

A series of operating losses of an investee or other factors may indicate that an other-than-temporary decline in value of our investment in an Unconsolidated Real Estate Affiliate has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated for valuation declines below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we performed for such joint ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary declines with respect to the carrying values of our Unconsolidated Real Estate Affiliates.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions and access to our credit facility. Our credit risk exposure with regard to our cash and the $1.5 billion available under our credit facility is spread among a diversified group of investment grade financial institutions. We had $315.0 million and $387.0 million outstanding under our credit facility as of September 30, 2019 and December 31, 2018, respectively.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases. This new guidance, including related ASUs that have been subsequently issued, was effective January 1, 2019, and required lessees to recognize a liability to make lease payments and a right-of-use asset, initially measured at the present value of lease payments, for both operating and finance leases. For leases with a term of 12 months or less, lessees were permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. The guidance allowed lessors and lessees to make an accounting policy election, by class of underlying asset, to not separate non-lease components from lease components. The guidance also provided an optional transition method which allowed entities to initially apply the new guidance in the period of adoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings, if necessary. The Company elected to apply the alternative transition method and no cumulative-effect adjustment to the opening balance of retained earnings was deemed necessary to record.

The Company adopted the new standard on January 1, 2019 and applied the new guidance as of that date. In addition, the Company has presented all income as a single line item within "rental revenues" in the accompanying Consolidated Statements of Comprehensive Income (Loss) for the current and comparative period. Refer to the Reclassifications section of Note 2 for additional detail. The Company elected to use the "package of practical expedients", which allowed the Company to not reassess under the new standard prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not make any adjustments to the opening balance of retained earnings upon adoption of the new standard given the nature of the impacts and other transition practical expedients elected by the Company. The leases section above and Note 7 includes a discussion of the effect of the adoption of the new standard.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which changes the model for the measurement of credit losses on financial instruments. Specifically, the amendments in the ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of this new guidance. The amendments in this ASU will be effective for the Company January 1, 2020. The Company is evaluating the potential impact of this pronouncement and does not expect that it will have a material effect on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement. This new guidance is effective January 1, 2020, with early adoption permitted, and provides new, and in some cases eliminates or modifies the existing disclosure requirements on fair value measurements. Public entities will be required to disclose the following: (i) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (ii) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. In addition, public entities will no longer be required to disclose the following: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The new pronouncement also clarifies and modifies certain existing provisions, including eliminating "at a minimum" from the phrase "an entity shall disclose at a minimum" to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and clarifying that materiality is an appropriate consideration when evaluating disclosure requirements. The Company is evaluating the potential impact of this pronouncement and does not expect that it will have a material effect on its consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, estimates and assumptions have been made with respect to allocating the purchase price of real estate acquisitions, the useful lives of assets, capitalization of development and leasing costs, provision for income taxes, recoverable amounts of receivables and deferred taxes, provision for loan loss, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to acquisitions, impairment of long-lived assets, litigation related accruals and disclosures and fair value of debt. Actual results could differ from these and other estimates.

NOTE 3 ACQUISITIONS, SALES AND JOINT VENTURE ACTIVITY

On September 13, 2019, BPR Cumulus LLC (an indirect subsidiary of the Company) purchased 10,000,000 shares of Class A Units in PFC Associates LLC (P.F. Chang's) (par value $0.01 per share) at a price of $1.00 per share, for a $10.0 million total investment, resulting in a 3.2% ownership interest in PF Chang's. P.F. Chang's is a tenant at certain properties for which we receive rental income included in rental revenues on the Consolidated Statements of Comprehensive Income (Loss). The investment is accounted for using the cost method as the Company has neither control nor significant influence over PF Chang's and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

On August 26, 2019, the Company purchased an additional ownership interest of 49.677% in 730 Fifth Owners, LLC from its joint venture partner resulting in the Company obtaining control of the entity with a total ownership percentage for the Company of 99.677%. The transaction was accounted for as an asset acquisition. The transaction consideration consisted of cash consideration of $153.0 million and satisfaction of notes receivable of $249.5 million from the joint venture partner. Because of the presence of non-cash consideration, the Company determined that the fair value of the net assets acquired was more readily determinable than the fair value of the consideration given, and determined that the aggregate fair value of the joint venture's equity was $808.0 million on the acquisition date, which was allocated to the Company's 99.677% ownership interest for $805.4 million and the joint venture partner's remaining 0.323% non-controlling interest for $2.6 million. Concurrent with this transaction, the joint venture partner repaid $54.7 million of interest on the notes receivable (including amounts that had been annually capitalized onto the outstanding principal balance). The Company recorded a gain on change in control of investment properties of $39.7 million related to the Company's previously held 50% ownership interest. Immediately following this transaction, the Company sold a condominium interest in one unit of the property to an affiliate of the joint venture partner for a gross sales price of $12.6 million

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

to an affiliate of the joint venture partner, and incurred fees of $0.4 million, which resulted in no gain or loss, as the fair value of the condominium interest in the consolidation transaction had been determined to be $12.2 million.

The table below summarizes the gain from changes in control of investment properties ($ in millions):



Fair value of Investment in Unconsolidated Real Estate Affiliates as of change in control	$	404.0
Less: carrying value of Investment in Unconsolidated Real Estate Affiliates	364.3
Gain from changes in control of investment properties and other, net	$	39.7

The following table summarizes the allocation of the purchase price to net assets acquired at the date of acquisition. The allocation were based on the relative fair value of the assets acquired and liabilities assumed ($ in millions):



Investment in real estate, including intangible assets and liabilities	$	1,560.5
Debt held by the joint venture	(720.0		)
Net working capital	(32.5		)
Net assets acquired	$	808.0

On August 19, 2019, the Company sold the SoNo Collection to a newly formed joint venture owned 80.5% by an affiliated fund (which is a related party of the Company) and 19.5% by the Company. The property was contributed to the joint venture at a value of $419.3 million based on project-specific cash costs. This excludes additional costs to complete the project by the joint venture. Prior to obtaining project-specific financing on August 9, 2019, the Company was required under GAAP to capitalize interest on general corporate financings into the cost basis of the project, which resulted in a $38.8 million impairment due to the difference between the project’s GAAP basis and the sale price based upon total project-specific cash costs. Following the transaction, the Company accounts for its non-controlling investment in the SoNo Collection under the equity method of accounting as the Company can exercise significant influence but not control over the joint venture.

On August 12, 2019, the Company completed the sale of the land in the former Sears anchor parcel at Columbia Mall for a gross sales price of $5.0 million, which resulted in a gain on the sale of $3.6 million included in other revenues on the Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended September 30, 2019.

On August 9, 2019, the Company completed the sale of 49.3% of its interest in Authentic Brands Group LLC ("ABG") for a gross sales price of $32.1 million, which resulted in a gain on the sale of $16.8 million included in Unconsolidated Real Estate Affiliates - Gain on Investment on the Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended September 30, 2019. The basis of the remaining 50.7% investment was marked to fair value of $32.1 million in conjunction with the sale transaction noted above, which resulted in an additional gain on sale of $16.8 million directly related to the step up basis in fair value. This gain is recorded in Unconsolidated Real Estate Affiliates - Gain on Investment on the Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended September 30, 2019. The investment will continue to be accounted for using the cost method as the Company has neither control nor significant influence over ABG and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

On July 26, 2019, the Company purchased 2,255,503 shares of Series D Preferred Units in Industrious National Management Company LLC at a price of $2.22 per share, for a $5.0 million total investment, resulting in a less than 2.0% ownership interest in Industrious National Management Company LLC. The investment is accounted for using the cost method as the Company has neither control nor significant influence over Industrious National Management Company LLC and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

On April 19, 2019, BPR Cumulus LLC (an indirect subsidiary of the Company) purchased 1,250,000 shares of Series F Convertible Preferred Stock in Pinstripes, Inc. (par value $0.01 per share) at a price of $8.00 per share, for a $10.0 million total investment, resulting in a 7.6% ownership interest in Pinstripes, Inc. The investment is accounted for using the cost method as the Company has neither control nor significant influence over Pinstripes, Inc. and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

In connection with the formation of the BPR-FF JV LLC joint venture described below, the Company agreed to use reasonable efforts to cause a transfer to BPR-FF JV LLC of the legal rights it held in the Seritage Venture at Coronado Center Mall at an agreed upon value of $53.1 million. On April 9, 2019, the Company transferred its rights in the Sears Anchor Parcel at Coronado Center Mall to Coronado Center LLC. No gain or loss was recognized on the transaction.

On January 7, 2019, the Company completed the sale of our 12.0% interest in Bayside Marketplace for a sales price of $42.0 million. Due to cumulative distributions received in excess of its investment, the Company had a liability balance associated with its investment in Bayside Marketplace. Accordingly, the Company recognized a gain of $104.4 million included in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2019.

The Company entered into a series of separate transactions on August 27, 2018 as a result of the BPY Transaction as follows:

•

The BPR-FF JV LLC joint venture was formed with Brookfield Real Estate Partners F LP. The Company contributed properties and recognized a gain of $1.4 billion included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018. In addition, the Company recognized a gain in Unconsolidated Real Estate Affiliates - Gain on Investment of $18.5 million on the Consolidated Statements of Comprehensive Income (Loss)for the three and nine months ended September 30, 2018.

•

Joint ventures were formed with the Teachers Insurance and Annuity Association of America. The Company contributed properties and recognized a gain of $981.6 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018. In addition, the Company recognized a gain in Unconsolidated Real Estate Affiliates - Gain on Investment of $19.4 million on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.


•	Joint ventures were formed with CBRE Global Investment Partners. The Company contributed properties and recognized a gain of $461.2 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.


•	Joint ventures were formed with the California Public Employees' Retirement System. The Company contributed properties and recognized a gain in Unconsolidated Real Estate Affiliates - Gain on Investment of $440.3 million for the three and nine months ended September 30, 2018.


•	A new joint venture, BPY Retail Holdings LLC, was formed with an institutional investor. As a result of this investment, the institutional investor owns a noncontrolling interest in all retail assets of the Company, as all retail assets are wholly or partially owned by the Operating Partnership.

On August 3, 2018, we completed the sale of an anchor box at The Oaks Mall for a gross sales price of $5.0 million, which resulted in a loss of $13.8 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

On July 13, 2018, we completed the sale of the commercial office unit at 685 Fifth Avenue for a gross sales price of $135.0 million. In conjunction with the sale, we paid down a $100.0 million loan and recognized a gain of $11.4 million included in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

On January 29, 2018, we completed the sale of a 49.49% joint venture interest in an anchor box at Oakbrook Center to our joint venture partner for a sales price of $44.7 million, which resulted in a gain of $12.7 million recognized in Gain from Changes in Control of Investment Properties, net on the Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2018.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

On September 15, 2016, joint ventures we formed with Simon Property Group and ABG acquired Aeropostale, Inc. ("Aeropostale") for $80.0 million in total cash which included cash for working capital requirements of the retail business. The intellectual property and brand related assets were assigned to the Aero IpCo, LLC venture ("IPCO") and the assets and liabilities necessary to run the stores were assigned to the Aero OpCo, LLC venture. In connection with the transaction, our total investment was $20.4 million of cash contributed to the ventures for an effective ownership of approximately 26% in the two joint ventures. Aeropostale is a tenant at certain properties for which we receive rental income included in rental revenues on the Consolidated Statements of Comprehensive Income (Loss).

On December 29, 2017, we sold approximately 54% of our interest in IPCO to ABG for a sales price of $16.6 million, which resulted in a gain of $12.0 million recognized in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2017. On March 30, 2018, ABG exercised their call right to purchase the remaining 46% of our original interest in IPCO for a sales price of $13.9 million, which resulted in a gain of $10.4 million recognized in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2018. In addition, we invested $30.5 million in ABG units on December 29, 2017. The investment is considered a cost method investment and is included in investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets. On August 9, 2019, the Company completed the sale of 49.3% of its interest in ABG for a gross sales price of $32.1 million (see above for further discussion).

NOTE 4 FAIR VALUE

Nonrecurring Fair Value Measurements

We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the negotiated sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based upon these inputs, we determined that our valuations of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For our properties for which the estimated fair value was based on negotiated sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy.

The following table summarizes certain of our assets that are measured at fair value on a nonrecurring basis as a result of impairment charges recorded. During the three and nine months ended September 30, 2019, we recognized $38.8 million and $223.1 million in impairment charges, respectively. During the three and nine months ended September 30, 2018, we recognized $7.5 million and$45.9 million in impairment charges, respectively.



	Total Fair Value Measurement		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Provisions for Impairment
Three months ended September 30, 2019
Investments in real estate (1)	$	419,327	$	—	$	—	$	419,327	38,794
Nine months ended September 30, 2019
Investments in real estate (1)	$	599,721	$	—	$	—	$	599,721	$	223,142
Three months ended September 30, 2018
Investments in real estate (1)	$	62,490	$	—	$	—	$	62,490	7,487
Nine months ended September 30, 2018
Investments in real estate (1)	$	62,490	$	—	$	—	$	62,490	45,866

_______________________________________________________________________________


(1)	Refer to Note 2 for more information regarding impairment. Investments in real estate includes consolidated properties and Unconsolidated Real Estate Affiliates.

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



Unobservable Quantitative Input		Rate
Three months ended September 30, 2019
Agreed upon purchase price		N/A
Nine months ended September 30, 2019
Discount rate		5.50%
Terminal capitalization rate		4.00%
Three and nine months ended September 30, 2018
Discount rates		9.75% to 11.00%
Terminal capitalization rates		9.50% to 10.25%

Disclosure of Fair Value of Financial Instruments

The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt. Management's estimates of fair value are presented below for our debt as of September 30, 2019 and December 31, 2018.



	September 30, 2019				December 31, 2018
	Carrying Amount (1)		Estimated Fair Value		Carrying Amount (2)		Estimated Fair Value
Fixed-rate debt	$	6,979,976	$	7,026,813	$	6,073,193	$	6,048,104
Variable-rate debt	7,327,227		7,413,350		6,516,456		6,614,172
	$	14,307,203	$	14,440,163	$	12,589,649	$	12,662,276


(1)	Includes net market rate adjustments of $6.5 million and deferred financing costs of $132.7 million, net.


(2)	Includes net market rate adjustments of $7.7 million and deferred financing costs of $123.8 million, net.

The fair value of our junior subordinated notes approximates their carrying amount as of September 30, 2019 and December 31, 2018. We estimated the fair value of mortgages, notes and other loans payable using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current LIBOR, U.S. treasury obligation interest rates and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and assume that the debt is outstanding through maturity. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 5 UNCONSOLIDATED REAL ESTATE AFFILIATES

Following is summarized financial information for all of our real estate related Unconsolidated Real Estate Affiliates accounted for using the equity method and a reconciliation to our total investment in Unconsolidated Real Estate Affiliates. The reconciliation to our total investment in Unconsolidated Real Estate Affiliates is inclusive of investments accounted for using the cost method (Note 2).



	September 30, 2019			December 31, 2018
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates
Assets:
Land	$	3,608,922		$	3,595,706
Buildings and equipment	23,342,387			23,468,110
Less accumulated depreciation	(4,830,466		)	(4,361,210		)
Construction in progress	958,722			489,250
Net property and equipment	23,079,565			23,191,856
Investment in unconsolidated joint ventures	72,171			632,060
Net investment in real estate	23,151,736			23,823,916
Cash and cash equivalents	714,812			540,905
Accounts receivable, net	383,495			348,655
Notes receivable	22,151			22,881
Deferred expenses, net	473,797			511,814
Prepaid expenses and other assets	740,947			796,815
Total assets	$	25,486,938		$	26,044,986
Liabilities and Owners' Equity:	\
Mortgages, notes and loans payable	$	16,489,813		$	16,139,498
Accounts payable, accrued expenses and other liabilities	1,103,734			1,118,663
Redeemable non-controlling interest	125			—
Cumulative effect of foreign currency translation ("CFCT")	(12,574		)	(21,384		)
Owners' equity, excluding CFCT	7,905,840			8,808,209
Total liabilities and owners' equity	$	25,486,938		$	26,044,986
Investment in Unconsolidated Real Estate Affiliates, Net:
Owners' equity	$	7,893,266		$	8,786,824
Less: joint venture partners' equity	(4,379,829		)	(4,796,896		)
Plus: excess investment/basis differences	1,258,943			1,220,632
Investment in Unconsolidated Real Estate Affiliates, net (equity method)	4,772,380			5,210,560
Investment in Unconsolidated Real Estate Affiliates, net (cost method)	57,061			30,483
Retail investment, net	20,271			19,912
Investment in Unconsolidated Real Estate Affiliates, net	$	4,849,712		$	5,260,955
Reconciliation - Investment in Unconsolidated Real Estate Affiliates:
Asset - Investment in Unconsolidated Real Estate Affiliates	$	4,935,345		$	5,385,582
Liability - Investment in Unconsolidated Real Estate Affiliates	(85,633		)	(124,627		)
Investment in Unconsolidated Real Estate Affiliates, net	$	4,849,712		$	5,260,955

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates (1)
Revenues:
Rental revenues, net	$	622,704		$	507,749		$	1,885,482		$	1,355,703
Condominium sales	9,390			28,401			9,390			77,674
Other	51,224			16,278			85,059			47,280
Total revenues	683,318			552,428			1,979,931			1,480,657
Expenses:
Real estate taxes	61,633			47,160			184,215			121,516
Property maintenance costs	11,886			10,047			40,026			22,655
Marketing	4,111			4,379			13,930			13,296
Other property operating costs	87,034			71,226			249,925			184,218
Condominium cost of sales	6,844			20,701			6,844			56,625
Provision for doubtful accounts	—			3,882			—			7,802
Property management and other costs (2)	27,645			25,821			83,649			71,681
General and administrative	1,309			566			3,440			2,232
Depreciation and amortization	254,413			174,295			780,729			458,617
Total expenses	454,875			358,077			1,362,758			938,642
Interest income	3,288			1,763			8,783			5,187
Interest expense	(188,722		)	(149,139		)	(538,394		)	(369,786		)
Benefit from income taxes	(354		)	(320		)	(743		)	(722		)
(Loss) income in unconsolidated joint ventures	(6,254		)	555			(23,498		)	(17,116		)
Income from continuing operations	36,401			47,210			63,321			159,578
Allocation to noncontrolling interests	(13		)	(17		)	(40		)	(54		)
Net income attributable to the ventures	$	36,388		$	47,193		$	63,281		$	159,524
Equity In Income (loss) of Unconsolidated Real Estate Affiliates:
Net income attributable to the ventures	$	36,388		$	47,193		$	63,281		$	159,524
Joint venture partners' share of income	(15,576		)	(16,287		)	(28,202		)	(64,528		)
Elimination of gain from consolidated real estate investment with interest owned through joint venture	—			53			—			679
Gain (loss) on retail investment	5,785			10,526			1,249			3,427
Amortization of capital or basis differences	(10,452		)	(21,149		)	(35,894		)	(39,896		)
Equity in income (loss) of Unconsolidated Real Estate Affiliates	$	16,145		$	20,336		$	434		$	59,206


(1)	The Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates include income from the joint ventures formed in conjunction with the BPY Transaction subsequent to August 27, 2018 (Note 3).

(2) Includes management fees charged to the unconsolidated joint ventures by BPRRS and BRMI.

The Unconsolidated Real Estate Affiliates represent our investments in real estate joint ventures that are not consolidated. We hold interests in 27 domestic joint ventures, comprising 65 U.S. retail properties and one joint venture in Brazil. Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures. We account for investments in joint ventures where we own a non-controlling joint interest using either the equity method or the cost

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

method. If we have significant influence but not control over the investment, we utilize the equity method. If we have neither control nor significant influence, we utilize the cost method. If we control the joint venture, we account for the venture as a consolidated investment.

As of September 30, 2019, the balance of ROU assets was $68.7 million, net and lease liabilities of $78.7 million for 25 ground leases in the Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates under Topic 842, included in prepaid expenses and other assets and accounts payable and accrued expenses, respectively. All of these leases are operating leases; we do not have any finance leases.

On September 30, 2019, the Company completed the sale of certain space formerly occupied by Barneys at Grand Canal Shoppes for a gross sales price of $37.6 million, which resulted in $15.9 million included in Equity in Income of Unconsolidated Real Estate Affiliates on the Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended September 30, 2019.

Unconsolidated Mortgages, Notes and Loans Payable, and Retained Debt

Our proportionate share of the mortgages, notes and loans payable of the unconsolidated joint ventures was $7.7 billion as of September 30, 2019 and $7.6 billion as of December 31, 2018, including Retained Debt (as defined below). There can be no assurance that the Unconsolidated Properties will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

On August 9, 2019, the Company closed on new debt at the SoNo Collection for $305.0 million. This debt is comprised of a $245.0 million mortgage loan and a $60.0 million mezzanine loan with respective interest rates of LIBOR plus 3.015% and LIBOR plus 6.75%. The loans mature on August 6, 2023.

We have debt obligations in excess of our pro rata share of the debt for one of our Unconsolidated Real Estate Affiliates ("Retained Debt"). This Retained Debt represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our pro rata share of the non-recourse mortgage indebtedness. The proceeds of the Retained Debt which were distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates. We had Retained Debt of $82.0 million at one property as of September 30, 2019, and $83.3 million as of December 31, 2018. We are obligated to contribute funds on an ongoing basis, as needed, to our Unconsolidated Real Estate Affiliates in amounts sufficient to pay debt service on such Retained Debt. If we do not contribute such funds, our interest in or our distributions from such Unconsolidated Real Estate Affiliates could be reduced to the extent of such deficiencies. As of September 30, 2019, we do not anticipate an inability to perform on our obligations with respect to Retained Debt.

NOTE 6 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable and the weighted-average interest rates are summarized as follows:



	September 30, 2019 (1)		Weighted-Average Interest Rate (2)		December 31, 2018 (3)		Weighted-Average Interest Rate (2)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	5,991,736	4.34	%	$	6,073,193	4.38	%
Senior secured notes - silver bonds	988,240		5.75	%	—		—
Total fixed-rate debt	6,979,976		4.54	%	6,073,193		4.38	%
Variable-rate debt:
Collateralized mortgages, notes and loans payable (4)	2,606,811		4.57	%	1,702,142		4.22	%
Unsecured corporate debt (5)	4,720,416		4.41	%	4,814,314		4.86	%
Total variable-rate debt	7,327,227		4.47	%	6,516,456		4.69	%
Total Mortgages, notes and loans payable	$	14,307,203	4.50	%	$	12,589,649	4.54	%
Junior subordinated notes	$	206,200	3.72	%	$	206,200	3.97	%

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Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)


(1)	Includes $6.5 million of market rate adjustments and $132.7 million of deferred financing costs, net.


(2)	Represents the weighted-average interest rates on our principal balances, excluding the effects of market rate adjustments and deferred financing costs.


(3)	Includes $7.7 million of market rate adjustments and $123.8 million of deferred financing costs, net.


(4)	$1.3 billion of the variable-rate balance is cross-collateralized.


(5)	Includes deferred financing costs, which are shown as a reduction to the debt balance. See table below for the balance excluding deferred financing costs.

Collateralized Mortgages, Loan Extension, Notes and Loans Payable

As of September 30, 2019, $11.4 billion of land, buildings and equipment (before accumulated depreciation) and construction in progress have been pledged as collateral for our mortgages, notes and loans payable. Certain of these consolidated secured loans, representing $1.3 billion of debt, are cross-collateralized. Although a majority of the $8.6 billion of fixed and variable rate collateralized mortgages, notes and loans payable are non-recourse, $744.9 million of such mortgages, notes and loans payable are recourse to the Company as guarantees on secured financings. In addition, certain mortgage loans contain other credit enhancement provisions which have been provided by BPR. Certain mortgages, notes and loans payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.

On September 6, 2019, the Company closed a new loan at Park City Center in the amount of $135.0 million with an interest rate of LIBOR plus 3.00% which matures on September 9, 2021. This loan replaced the previous debt of $172.2 million that matured June 6, 2019 and included a pay down of the existing mezzanine loan in the amount of $36.8 million. For the period between the maturity date of the previous debt and the effective date of the new loan, the company extended forbearance and paid forbearance fees in total amount of $450.4 thousand.

On August 26, 2019, the Company closed a new loan on 730 Fifth Avenue in the amount of $807.5 million with a 5-year loan at LIBOR plus 3.53% which matures on September 1, 2024. This loan replaced the previous debt of $720.0 million that was previously extended to August 27, 2019 and included a pay down of $180.0 million on June 28, 2019.

On July 10, 2019, the Company closed a new loan on Westlake Center in the amount of $48.8 million with a 2-year floating rate at LIBOR plus 2.50% which matures on July 10, 2021. This loan replaced the previous debt of $42.5 million that matured July 10, 2019.

On July 5, 2019, the Company closed on new loans on The Woodlands Mall for a total of $465.0 million, which consists of $425.0 million with an interest rate of 4.25% and $40.0 million with an interest rate of 5.50%. The loan has a weighted average interest rate of 4.36% which matures on August 1, 2029. The loan replaced the previous debt of $294.0 million on the property that had a weighted average interest rate of 4.83% and scheduled to mature on June 10, 2023. In accordance with the previous debt agreement, the Company incurred a prepayment penalty of $27.5 million which is recorded as loss on extinguishment of debt on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019.

On July 1, 2019, the Company closed on a one-year extension on the loan at 830 North Michigan Ave in the amount of $78.0 million at LIBOR plus 1.60% which matures on July 1, 2020. This loan replaced the previous debt of $85.0 million that matured on July 1, 2019 and includes principal repayment of $7.0 million made in conjunction with the extension.

On June 3, 2019, the Company closed a new loan on the Grand Canal Shoppes in the amount of $975.0 million with a 10-year fixed interest rate of 4.29%, which matures on July 2, 2029. This loan replaced the previous debt of $625.0 million on the property that matured on June 3, 2019.

On April 25, 2019, the Company obtained a one-year extension of a $1.3 billion loan secured by cross-collateralized mortgages on 15 properties with an interest rate of LIBOR plus 1.75%. A principal repayment of $10.1 million was made in conjunction with the extension.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

On April 9, 2019, the Company closed a new loan on three properties included in the BPR-FF JV LLC joint venture. The three properties are Coronado Center, Governor's Square and Lynnhaven Mall. These properties were previously encumbered by $462.0 million of third-party debt which was replaced by a $515.0 million loan with an interest rate of LIBOR plus 340 basis points, maturing May 1, 2024. The new loan was recorded as an extinguishment of the previous loans and allocation of the new debt to the three properties.

During the year ended December 31, 2018, we refinanced a consolidated mortgage note at 685 Fifth Avenue. The prior $340.0 million variable-rate consolidated mortgage note matured on July 1, 2018 and had an interest rate of LIBOR plus 2.75%. In connection with the refinancing, $100.0 million remained related to the commercial office unit and a new $275.0 million fixed-rate consolidated mortgage note with a term-to-maturity of 10.0 years and an interest rate of 4.53% was obtained on the retail unit. The $100.0 million was paid down in full in conjunction with the sale of the commercial office unit on July 13, 2018. In addition, we obtained a new fixed-rate subordinate loan at The Woodlands Mall for $62.4 million with an interest rate of 4.05% and obtained a new fixed-rate loan at 605 North Michigan Avenue for $80.0 million with an interest rate of 4.76%. We also refinanced mortgage notes totaling $117.0 million at two properties. The prior loans totaling $152.3 million had a weighted-average interest rate of 4.42%. The new loans have a weighted-average term-to-maturity of 4.3 years and a weighted-average interest rate of 5.24%. We released Columbiana Centre from the $1.4 billion term loan, substituting Columbia Mall and Quail Springs Mall, and conveyed Oak View Mall to the lender in full satisfaction of $74.7 million in outstanding debt. The Oak View transaction resulted in a $12.4 million gain on extinguishment of debt for the year ended December 31, 2018.

Corporate and Other Unsecured Loans

We have certain debt obligations, the terms of which are described below:



	September 30, 2019 (1)		Weighted-Average Interest Rate		December 31, 2018 (2)		Weighted-Average Interest Rate
Corporate debt:
Unsecured corporate debt	$	4,814,014	4.41	%	$	4,923,740	4.86	%
Senior secured notes - silver bonds	1,000,000		5.75	%	—		—
Total corporate debt	$	5,814,014	4.64	%	$	4,923,740	4.86	%


(1)	Excludes deferred financing costs of $105.4 million in 2019 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.


(2)	Excludes deferred financing costs of $109.4 million in 2018 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.

On May 1, 2019, the Company and BPR Cumulus LLC, BPR Nimbus LLC and GGSI Sellco LLC (each, an indirect subsidiary of the Company) issued $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes - Silver Bonds due 2026. The notes bear interest at an annual rate of 5.75% payable on May 15 and November 15 of each year, beginning on November 15, 2019 and will mature on May 15, 2026.

On March 25, 2019, the Company secured a $341.8 million subordinated unsecured note with Brookfield BPY Holdings Inc.,

a related party. The note bears interest at a rate equal to LIBOR plus 2.75% and is scheduled to mature on March 25, 2029. During the quarter ended September 30, 2019, the Company made a principal payment of $115.6 million in addition to the principal payment of $200.1 million made in the second quarter of 2019. The balance at September 30, 2019 was $26.1 million. The Company borrowed an additional $70.5 million during the second quarter of 2019, with a maturity date of June 25, 2029. The balance at September 30, 2019 was $70.5 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

and is scheduled to mature in August 2023 bearing interest at a rate equal to LIBOR plus 225 basis points. The Term B Loan has a total commitment of $2.0 billion and is scheduled to mature in August 2025 bearing interest at a rate equal to LIBOR plus 250 basis points. The Term A-1, A-2, and B Loans are contractually obligated to be prepaid through net proceeds from property level refinances and asset sales as outlined in the Agreement. The Agreement contains certain restrictive covenants which limit material changes in the nature of our business conducted, including, but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required not to exceed a maximum net debt-to-value ratio and fixed charge coverage ratio. As of September 30, 2019, we are not aware of any instances of non-compliance with such covenants.

Junior Subordinated Notes

GGP Capital Trust I, a Delaware statutory trust (the "Trust"), completed a private placement of $200.0 million of trust preferred securities ("TRUPS") in 2006. The Trust also issued $6.2 million of common securities to BPROP. The Trust used the proceeds from the sale of the TRUPS and common securities to purchase $206.2 million of floating rate junior subordinated notes of BPROP due 2036. Distributions on the TRUPS are equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The TRUPS mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if the Trust exercises its right to redeem a like amount of junior subordinated notes. The junior subordinated notes bear interest at LIBOR plus 1.45% and are fully recourse to the Company. We have recorded the junior subordinated notes as a liability and our common equity interest in the Trust as prepaid expenses and other assets in our Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $46.9 million as of September 30, 2019 and $42.4 million as of December 31, 2018. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

We are not aware of any instances of non-compliance with our financial covenants related to our mortgages, notes and loans payable as of September 30, 2019.

NOTE 7 LEASES

Lessee arrangements

We are the lessee in several ground lease agreements for the land under some of our owned buildings. Generally, we own the land underlying the properties; however, at certain properties, all or part of the underlying land is owned by a third party that leases the land to us through a long-term ground lease. In addition, we lease office space for our corporate headquarters and field offices. Our material consolidated leases have reasonably certain lease terms ranging from four years to forty years. Certain leases provide the lessee with two to three renewal options which are considered to be termination options unless it is reasonably certain that the Company will elect to renew and generally range from five years to ten years each, with renewal rent payments based on a predetermined annual increase, market rates at the time of exercise of the renewal, or changes in the Consumer Price Index ("CPI").

As of September 30, 2019, the balance of ROU assets was $116.0 million, net and lease liabilities of $71.2 million for seven ground leases and one office lease in the Consolidated Balance Sheets under Topic 842, included in prepaid expenses and other assets and accounts payable and accrued expenses, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

The maturity of our operating lease liabilities as of September 30, 2019 is as follows:



Year	Amount
Remainder of 2019	$	2,138
2020	8,755
2021	8,970
2022	9,191
2023	9,418
2024	9,650
2025 and thereafter	93,732
Total undiscounted lease payments	141,854
Less: Present value adjustment	(70,640		)
Total lease liability	$	71,214

The maturity of our operating lease liabilities as of December 31, 2018 is as follows:



Year	Amount
2019	$	9,948
2020	10,164
2021	10,386
2022	10,592
2023	10,794
2024 and thereafter	118,835
Total	$	170,719

Straight-line rent expense recognized for our consolidated operating leases was $0.6 million and $2.0 million for ground leases and $2.2 million and $5.9 million for the office lease for the three and nine months ended September 30, 2019, respectively, and is included in other property operating costs for ground leases and property management and other costs for the office lease, respectively, in the Consolidated Statements of Comprehensive Income (Loss). Several lease agreements include variable lease payments which vary based on factors such as sublease income received, the revenues or net operating income of the properties constructed on the leased premises, increases in CPI, and changes in market rents. In addition, our leases require us to reimburse the lessor for the lessor’s tax, insurance and common area costs. Variable lease payments and short-term lease costs recognized as rent expense for operating leases were not significant for the three and nine months ended September 30, 2019 and are included in other property operating costs in the Consolidated Statements of Comprehensive Income (Loss).

The following summarizes additional information related to our operating leases as of September 30, 2019:



Weighted-average remaining lease term (years)	16.9
Weighted-average discount rate	7.36%

Supplemental disclosure for the statement of cash flows:
Cash paid for amounts included in the measurement of lease liabilities	$6,406

Lessor arrangements

We own a property portfolio comprised primarily of Class A retail properties and lease this retail space to tenants. As of September 30, 2019, we own a controlling interest in and consolidated 58 retail properties located throughout the United States comprising approximately 50 million square feet of GLA. We enter into operating leases with a variety of tenants, the majority of which are national and regional retail chains and local retailers. These operating leases expire starting in year 2019 and typically include

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

renewal options, which are generally exercisable only by the tenant. Certain leases also include early termination options which are typically exercisable only by the tenant. Our leases do not allow the tenant to purchase the retail space.

The maturity analysis of the lease payments we expect to receive from our operating leases as of September 30, 2019 is as follows:



Year	Amount
Remainder of 2019	$	250,860
2020	933,247
2021	861,283
2022	770,277
2023	679,050
2024	574,700
Subsequent	2,001,802
	$	6,071,219

The maturity analysis of the lease payments we expect to receive from our operating leases as of December 31, 2018 is as follows:



Year	Amount
2019	$	764,196
2020	696,381
2021	621,582
2022	543,232
2023	464,453
Subsequent	1,442,312
	$	4,532,156

All lease-related income is reported as a single line item, rental revenues, in our Consolidated Statements of Comprehensive Income (Loss). Effective January 1, 2019, with the adoption of Topic 842, rental revenues is presented net of provision for doubtful accounts. Rental income recognized on a straight-line basis consists primarily of fixed and in-substance fixed lease payments (including lease payments related to non-lease components which have been combined with the lease component). Variable rental income represents variable lease payments, which consist primarily of overage rents; reimbursements for tenants’ pro rata share of real estate taxes, insurance, property operating and marketing expenses, and utilities; lease payments related to CPI-based escalations and market rent resets; and lease termination income.

In accordance with the terms of our operating leases, we bill our tenants separately for minimum rents, tenant recoveries and overage rents, lease termination income as shown below for the three and nine months ended September 30, 2019:



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Minimum rents, billed	$	224,326		$	665,263
Tenant recoveries, billed	89,253			269,346
Lease termination income, billed	3,875			6,320
Overage rent, billed	2,865			9,159
Total contractual operating lease billings	320,319			950,088
Adjustment to recognize contractual operating lease billings on a straight-line basis	1,684			5,633
Above and below-market tenant leases, net	(37		)	7,250
Less provision for doubtful accounts	(4,497		)	(8,243		)
Total rental revenues, net	$	317,469		$	954,728

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Of the total contractual rental revenues we have billed, 78.0% and 78.9% are fixed lease payments for the three and nine months ended September 30, 2019, respectively.

NOTE 8 INCOME TAXES

The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. We intend to maintain REIT status. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our taxable ordinary income. In addition, the Company is required to meet certain asset and income tests.

As a REIT, we will generally not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to Federal income and excise taxes on our undistributed taxable income and capital gains. We are currently statutorily open to audit by the Internal Revenue Service for the years ended December 31, 2016 through 2018 and are generally statutorily open to audit by state taxing authorities for the years ended December 31, 2015 through 2018.

We have no unrecognized tax benefits recorded pursuant to uncertain tax positions as of September 30, 2019.

NOTE 9 EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

Allocation to Noncontrolling Interests

Noncontrolling interests consists of the redeemable interests related to BPROP Common, Preferred, and LTIP Units and the noncontrolling interest in our consolidated joint ventures. The following table reflects the activity included in the allocation to noncontrolling interests.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Distributions to preferred BPROP units ("Preferred Units")	$	(1,352	)	$	(1,554	)	$	(4,389	)	$	(2,814	)
Net income allocation to noncontrolling interests in BPROP from continuing operations ("Common Units")	—			(30,425		)	—			(31,803		)
Net income allocation to noncontrolling interests in BPROP from continuing operations ("LTIP Units")	—			(7,835		)	—			(8,159		)
Net loss (income) allocated to noncontrolling interest in consolidated real estate affiliates	389			(379		)	10,309			(1,226		)
Net loss (income) allocated to noncontrolling interest of the Operating Partnership (1)	4,329			11,212			28,697			11,212
Allocation to noncontrolling interests	3,366			(28,981		)	34,617			(32,790		)
Other comprehensive (income) loss allocated to noncontrolling interests	—			(124		)	—			(39		)
Comprehensive loss (income) allocated to noncontrolling interests	$	3,366		$	(29,105	)	$	34,617		$	(32,829	)

_______________________________________________________________________________

(1) Represents the noncontrolling interest of our institutional investor (Note 3).

Noncontrolling Interests

The noncontrolling interest related to the Common, Preferred, and LTIP Units of BPROP are presented either as redeemable noncontrolling interests in mezzanine equity or as noncontrolling interests in our permanent equity on our Consolidated Balance Sheets. Classification as redeemable or permanent equity is considered on a tranche-by-tranche basis and is dependent on whether we could be required, under certain events outside of our control, to redeem the securities for cash by the holders of the securities,

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

Those tranches for which we could be required to redeem the security for cash are included in redeemable equity. If we control the decision to redeem the securities for cash, the securities are classified as permanent equity.

The redeemable Common and Preferred Units of BPROP are recorded at the greater of the carrying amount adjusted for the noncontrolling interest’s share of the allocation of income or loss (and its share of other comprehensive income or loss) and dividends or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period to period is recorded within additional paid-in capital in our Consolidated Balance Sheets. Allocation to noncontrolling interests is presented as an adjustment to net income to arrive at net income (loss) attributable to BPR. The preferred redeemable noncontrolling interests have been recorded at carrying value.

Holders of Series B Preferred Units, Series D Preferred Units, Series E Preferred Units and Series G Preferred Units of BPROP are each entitled to periodic distributions at the rates set forth in the Sixth Amended and Restated Agreement of Limited Partnership of BPROP. Generally, each Series K Preferred Unit of BPROP entitles its holder to distributions and a liquidation preference identical to those established for each share of BPR's Class A Stock. The holders of Series L Preferred Units of BPROP are generally entitled to a pro rata distribution of an aggregate cash amount equal to the sum of (i) the aggregate cash dividends declared on all outstanding shares of BPR's Class B Stock and (ii) the aggregate cash dividends declared on all outstanding shares of BPR's Series B Preferred Stock. Holders of Common Units of BPROP are entitled to distributions of all or a portion of BPROP’s remaining net operating cash flow, when and as declared by BPROP’s general partner. However, the Sixth Amended and Restated Agreement of Limited Partnership of BPROP permits distributions solely to BPR if such distributions were required to allow the Company to comply with the REIT distribution requirements or to avoid the imposition of excise tax.

Noncontrolling Interests - Permanent

As of September 30, 2019, there were 9,717.658 Series B Preferred Units of BPROP outstanding. As of July 10, 2017, the Series B Preferred Unit conversion option expired, and each Series B Preferred Unit now has a carrying value of $50 per unit.

Also, as of September 30, 2019, there were 4,156,971.851 Common Units of BPROP outstanding and 1,691,144.853 Series K Preferred Units of BPROP (former common unit holders). These Series K Units were established at $21 per unit and are not subject to adjustment based on fair value.

Noncontrolling Interests - Redeemable

The Series D Preferred Units of BPROP are convertible based on a conversion ratio of 1.50821, which is the quotient of the Series D Preferred Unit’s $50 liquidation preference and $33.151875 conversion price. Upon conversion, each Series D Preferred Unit entitles its holder to (i) $21.9097 in cash, (ii) a number of Series K Preferred Units of BPROP equal to (x) 0.40682134 Series K Preferred Units (which is subject to adjustment), multiplied by (y) the Series D conversion ratio; and (iii) a number of Common Units of BPROP equal to (x) one Common Unit (which is subject to adjustment), multiplied by (y) the Series D conversion ratio. As of September 30, 2019, there were 532,749.6574 Series D Preferred Units of BPROP outstanding.

The Series E Preferred Units of BPROP are convertible based on a conversion ratio of 1.29836, which is the quotient of the Series E Preferred Unit’s $50 liquidation preference and $38.51 conversion price. Upon conversion, each Series E Preferred Unit entitles its holder to (i) $18.8613 in cash, (ii) a number of Series K Preferred Units of BPROP equal to (x) 0.40682134 Series K Preferred Units (which is subject to adjustment), multiplied by (y) the Series E conversion ratio; and (iii) a number of Common Units of BPROP equal to (x) one Common Unit (which is subject to adjustment), multiplied by (y) the Series E conversion ratio. As of September 30, 2019, there were 502,657.8128 Series E Preferred Units of BPROP outstanding.

The holder of each Series K Preferred Unit of BPROP issued upon conversion of Series D Preferred Units or Series E Preferred Units of BPROP has the right to redeem such Series K Preferred Unit for a cash amount equal to the average closing price of BPR’s Class A Stock for the five consecutive trading days ending on the date of the notice of redemption, provided that BPR may elect to satisfy such redemption by delivering one share of BPR’s Class A Stock. The holder of each Common Unit of BPROP issued upon conversion of Series D Preferred Units or Series E Preferred Units of BPROP has the right to redeem such Common Unit for a cash amount equal to $0.324405869, subject to adjustment.

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

Each LTIP Unit of BPROP is convertible into, and, except for the level of preference, entitles its holder to regular and liquidating distributions equivalent to that of 0.016256057 Series K Preferred Units, subject to adjustment. Each Series K Preferred Unit received by an LTIP holder in connection with the BPY Transaction is redeemable for a cash amount equal to the average closing price of BPR's Class A Stock for five consecutive trading days ending on the date of the notice of redemption, provided that BPR may elect to satisfy such redemption by delivering one share of BPR's Class A Stock. If the holders had requested redemption of the Class A Stock and Preferred Units as of September 30, 2019, the aggregate amount of cash the Company would have paid would have been $1.35 billion and $58.6 million, respectively.

The following table reflects the activity of the common redeemable noncontrolling interests for the three and nine months ended September 30, 2019, and 2018.



Balance at January 1, 2018	$	248,126
Net income	560
Distributions	(1,842		)
Other comprehensive loss	(2		)
Fair value adjustment for noncontrolling interests in Operating Partnership	(23,252		)
Balance at March 31, 2018	223,590
Net income	818
Distributions	(1,842		)
Other comprehensive income (loss)	(84		)
Fair value adjustment for noncontrolling interests in Operating Partnership	857
Balance at June 30, 2018	223,339
Net income	30,425
Distributions	(1		)
Adjustment of Mezzanine Equity to fair value	(40,294		)
Other comprehensive income (loss)	125
Common Unit Redemption to Common Stock	(85,818		)
Reclassification of Mezzanine Equity to Permanent Equity	(37,840		)
Fair value adjustment for noncontrolling interests in Operating Partnership	22,395
Pre-Closing Dividend	(60,673		)
BPR Equity Recapitalization	21,923
Balance at September 30, 2018	$	73,581

Balance at January 1, 2019	$	73,696
Net income	3,358
Series K Preferred Unit redemption	(14,935		)
Balance at March 31, 2019	62,119
Net income	103
Balance at June 30, 2019	62,222
Net income	42
Balance at September 30, 2019	$	62,264

Class A Stock

Class A Stock refers to the Company's Class A Stock, par value $0.01 per share, authorized and issued to unaffiliated GGP common stockholders as part of the BPY Transaction.

Each share of Class A Stock is entitled to cumulative dividends per share in a cash amount equal in value to the amount of any distribution made on a BPY limited partnership unit ("BPY unit"). In addition, each share of Class A Stock is exchangeable for

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

one BPY unit or its cash equivalent (the form of payment to be determined by BP US REIT LLC, in its sole discretion). Such exchange and distribution rights are subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR. If and to the extent declared by the Company's board of directors, the record and payment dates for the dividends or other distributions upon the shares of Class A Stock, to the extent not prohibited by applicable law, is expected to be the same as the record and payment dates for the dividends or other distributions upon the BPY units. Pursuant to the terms of the Company's charter, all such dividends to holders of Class A Stock will be paid prior and in preference to any dividends or distributions on the Class B Stock, Series B Preferred Stock or Class C Stock will be fully declared and paid before any dividends are declared and paid or any other distributions are made on any Class B Stock, Series B Preferred Stock or Class C Stock. The holders of Class A Stock shall not be entitled to any dividends from BPR other than the Class A dividend.

Upon any liquidation, dissolution or winding up of the Company that is not a Market Capitalization Liquidation Event (as defined below) or substantially concurrent with the liquidation, dissolution or winding up of BPY, the holders of Class A Stock are entitled to a cash amount, for each share of Class A Stock, equal to the market price of one BPY unit (subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR) on the date immediately preceding announcement of such liquidation, dissolution or winding up, plus all declared and unpaid dividends. If, upon any such liquidation, dissolution or winding up, the assets of BPR are insufficient to make such payment in full, then the assets of BPR will be distributed among the holders of Class A Stock ratably in proportion to the full amounts to which they would otherwise be respectively entitled to receive.

If the market capitalization of the Class A Stock (i.e., if the price per share of Class A Stock, multiplied by the number of shares of Class A Stock outstanding) averages, over any period of 30 consecutive trading days, less than one (1) billion dollars, the BPR board will have the right to liquidate BPR’s assets and wind up BPR’s operations (a "Market Capitalization Liquidation Event"). Upon any Market Capitalization Liquidation Event, the holders of Class A Stock shall be entitled to a cash amount, for each share of Class A Stock, equal to the dollar volume-weighted average price of one BPY unit over the ten (10) trading days immediately following the public announcement of such Market Capitalization Liquidation Event, plus all declared and unpaid dividends. If, upon any such Market Capitalization Liquidation Event, the assets of BPR are insufficient to make such payment in full, then the assets of BPR will be distributed among the holders of Class A Stock ratably in proportion to the full amounts which they would otherwise be respectively entitled to receive. Notwithstanding the foregoing, upon any Market Capitalization Liquidation Event, BPY may elect to exchange all of the outstanding shares of the Class A Stock for BPY units on a one-for-one basis, subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR.

Holders of Class A Stock shall have the right to exchange all or a portion of their Class A Stock for cash at a price equal to the value of an equivalent number of BPY units, subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR. Upon receipt of a request for exchange, BPR will deliver a notice of exchange to BPY within one (1) business day and will have ten (10) business days to deliver the cash amount to the tendering holder. Upon receipt of the notice of exchange, BPY may elect to satisfy BPR’s exchange obligation by exchanging all of the shares of the Class A Stock tendered for BPY units on a one-for-one basis. This initial one-for-one conversion factor is subject to adjustment in the event of certain dilutive or other capital events by BPY or BPR. If so elected, BPY will have to satisfy such obligation within ten (10) business days from the date of the notice of exchange. If BPY exercises its right to assume the exchange obligation, units of BPY units will be delivered in exchange for the Class A Stock and such Class A Stock will automatically be converted into Class B Stock.

As there are certain events outside of the Company’s control whereby it could be required to redeem the Class A Stock for cash by the holders of the securities, the Class A Stock is included in redeemable equity. Accordingly, the Class A Stock are recorded at the greater of the carrying amount or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period to period is recorded within additional paid-in capital in the Company’s Consolidated Balance Sheets. There is no adjustment within additional paid-in capital for the Class A stock when the fair value is less than the carrying value.

Class B Stock

The Company’s shareholders approved the amendment and restatement of the Company’s charter at its annual stockholder meeting on June 19, 2019 (the “Restated Charter”), which became effective on June 26, 2019 and, among other things, authorized the Company’s issuance of up to 965,000,000 shares of a new class of stock called Class B-2 Stock. Each share of Class B-2 Stock shall have terms (including the same powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions) identical to the terms of a share of Class B-1 Stock other than voting rights. The following

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(Unaudited)

description sets forth certain general terms and provisions of the Company's Class B-1 Stock and Class B-2 Stock (together the "Class B Stock").

Pursuant to the Restated Charter and subject to the prior rights of holders of all classes, including the Class A Stock, and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Class B Stock entitles its holder to cumulative dividends per share in a cash amount at a rate of 6.5% per year of the Class B liquidation amount per share (which rate was 10.0% per year until the effective date of the Restated Charter on June 26, 2019) equal to $21.39 per share. On October 18, 2018, each holder of the Class B-1 Stock hereby irrevocably waived, all of its right, title and interest in and to 2.5% of the dividend rate, including without elimination all rights and entitlement to payment of such amounts. This partial dividend waiver resulted in a 7.5% effective rate per year of the Class B Liquidation Amount per share and was terminated upon the effectiveness of the Restated Charter. Dividends on the Class B Stock may also be paid by an in-kind distribution of additional shares of Class B Stock or any other class of shares of capital stock of BPR ranking junior to the Class A Stock. Dividends on the Class B Stock shall be cumulative and shall be payable quarterly in arrears, when, as and if declared by the Company's Board of Directors with respect to dividends on the Class B Stock.

Holders of the Class B Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPR has paid the aggregate dividends owed to the holders of Class A Stock and (b) the dividend coverage ratio (as defined below) is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange or (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor. The dividend coverage ratio is referred to as a ratio of (i) BPR’s funds from operations, as calculated in accordance with the definition of funds from operations used by the National Association of Real Estate Investment Trusts ("Nareit"), for the immediately preceding fiscal quarter, to (ii) the product of (a) the amount of the most recent regular quarterly distribution declared by BPY on each BPY unit, times (b) the number of shares of Class A Stock outstanding at such time.

Series B Preferred Stock

The following description sets forth certain general terms and provisions of the Series B Preferred Stock, par value $0.01 per share, of the Company (the "Series B Preferred Stock").

Pursuant to the Restated Charter and subject to the prior rights of holders of all classes, including the Class A Stock, Class B Stock and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Series B Preferred Stock will entitle its holder to cumulative dividends per share in a cash amount at a rate of 8.65% per year of the Class B liquidation amount per share (which rate was 10.0% until the effective date of the Restated Charter on June 26, 2019), with such Class B liquidation amount per share equal to $21.39. Dividends on the Series B Preferred Stock may also be paid by an in-kind distribution of additional shares of Series B Preferred Stock or any other class of shares of capital stock of BPR ranking junior to the Class A Stock and Class B Stock. Dividends on the Series B Preferred Stock shall be cumulative and shall be payable quarterly in arrears, when, as and if declared by the Company's Board of Directors with respect to dividends on the Series B Preferred Stock.

Holders of the Series B Preferred Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPR has paid the aggregate dividends owed to the holders of Class A Stock and Class B Stock and (b) the dividend coverage ratio (as defined below) is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange or (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor. The dividend coverage ratio is referred to as a ratio of (i) BPR’s funds from operations, as calculated in accordance with the definition of funds from operations used by Nareit, for the immediately preceding fiscal quarter, to (ii) the product of (a) the amount of the most recent regular quarterly distribution declared by BPY on each BPY unit, times (b) the number of shares of Class A Stock outstanding at such time.

Class C Stock

Class C Stock refers to the Company's Class C Stock, par value $0.01 per share, authorized as part of the BPY Transaction. Pursuant to the amended charter and subject to the prior rights of holders of all classes, including the holders of Class A Stock, Class B Stock, Series B Preferred Stock and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Class C Stock will entitle its holder to dividends when, as and if declared by the Company's Board of Directors out of any assets of BPR legally available therefore. The record and payment date for dividends on shares of Class C Stock shall be such date that the Company's Board of Directors shall designate.

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

Notwithstanding the foregoing, holders of the Class C Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPR has paid the aggregate dividends owed to the holders of Class A Stock and (b) the dividend coverage ratio is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange, (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor or (iv) unless and until the full cumulative dividends on the Class B Stock for all past dividend periods and any current dividend periods have been (or contemporaneously are) (a) declared or paid in cash or (b) declared and a sum sufficient for the payment thereof in cash is set apart for such payment.

Voting Rights



Stock Class	Authorized	Issued	Shares Outstanding	Votes per Share
Class A Stock	4,517,500,000	66,704,069	66,056,819	1:1
Class B-1 Stock	4,517,500,000	154,525,991	154,525,991	1:1
Class B-2 Stock	965,000,000	121,203,654	121,203,654	0:1
Series B Preferred Stock	425,000,000	202,438,184	202,438,184	1:1
Class C Stock	1,000,000,000	640,051,301	640,051,301	1:1

All share counts in table above are as of September 30, 2019.

Class A Stock Dividend

Our Board of Directors declared Class A Stock dividends during 2019 and 2018 as follows:



Declaration Date	Record Date	Payment Date	Dividend Per Share
2019
November 4	November 29	December 31	$	0.330
August 1	August 30	September 30	0.330
May 6	May 31	June 28	0.330
February 6	February 28	March 29	0.330
2018
October 31	November 30	December 31	$	0.315
August 28	August 31	September 28	0.315

Class A Stock Repurchases

On August 28, 2018, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time to time as market conditions warrant. On March 29, 2019, BPR purchased for cancellation 4,679,802 shares of Class A Stock at a purchase price of $20.30 per share, for an aggregate cost of approximately $95 million, excluding fees and expenses.

In the second quarter of 2019, BPR purchased 200,000 shares of Class A Stock at an average purchase price of $18.37 per share for an aggregate cost of approximately $3.68 million, which were subsequently canceled in July 2019.

Furthermore, there were 647,250 shares of Class A Stock that were purchased in relation to the 2019 restricted stock grant. These shares were purchased at an average purchase price of $19.40 per share for an aggregate cost of approximately $12.59 million.

In the third quarter of 2019, BPR purchased 197,225 shares of Class A Stock at an average purchase price of $18.56 per share for an aggregate cost of approximately $3.66 million, which were subsequently canceled in the quarter.

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

Class B Stock and Series B Preferred Stock Dividends

Our Board of Directors declared dividends on the Class B-1 Stock, Class B-2 Stock and the Series B Preferred Stock during 2019 as follows:

Class B-1 Stock Dividends



Declaration Date	Record Date	Payment Date	Average Dividend Per Share
2019
November 4	December 25	December 25	$	0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11 per share of the Class B-1 Stock.

Class B-2 Stock Dividends



Declaration Date	Record Date	Payment Date	Average Dividend Per Share
2019
November 4	December 25	December 25	$	0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11 per share of the Class B-2 Stock.

Combined Class B stock and Series B Preferred Stock (Prior to Restated Charter)



Declaration Date	Record Date	Payment Date	Average Dividend Per Share
2019
May 25	June 25	June 25	$	0.397
March 25	March 27	March 27	1.015

A dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from the date of issue to March 31, 2019 at the rate of 7.5% per annum payable on March 27, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on March 27, 2019 for a combined distribution total of approximately $467.3 million.

In the second quarter of 2019, a dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from March 31, 2019 to June 25, 2019 at the rate of 7.5% per annum payable on June 25, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on June 25, 2019 for a combined distribution total of approximately$183.8 million.

Class B-1 Stock Redemption

In the first quarter of 2019, BPR redeemed 10,496,703 shares of Class B-1 Stock held by BPR FIN 1 Subco LLC, a related party, for fair market value consideration of $224.5 million, being the redemption amount of the shares acquired at $21.39 per share.

Class B-2 Stock Exchange

On June 26, 2019, following the effectiveness of the Restated Charter, certain subsidiaries of BPR FIN 1 Subco LLC, a related party, exchanged an aggregate of 121,203,654 shares of Class B-1 Stock held by such subsidiaries for 121,203,654 shares of Class B-2 Stock.

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

Common Stock Dividend

Our Board of Directors declared common stock dividends during 2018 as follows:



Declaration Date (1)	Record Date	Payment Date	Dividend Per Share
2018
May 3	July 13	July 31	$	0.22
February 7	April 13	April 30	0.22

(1) Excludes the Pre-Closing Dividend (Note 1).

A Dividend Reinvestment Plan ("DRIP") provided eligible holders of GGP's common stock with a convenient method of increasing their investment in the Company by reinvesting all or a portion of cash dividends in additional shares. Pursuant to the DRIP, eligible stockholders who enrolled in the DRIP on or before the fourth business day preceding the record date for a dividend payment were able to have that dividend reinvested. As a result of the DRIP elections, no shares were issued during the nine months ended September 30, 2019 and September 30, 2018. The Company terminated the registration statement relating to the DRIP (File No. 333-172795) with the filing of a post-effective amendment on August 28, 2018.

Preferred Stock

On February 13, 2013, we issued, in a public offering, 10,000,000 shares of 6.375% Series A Cumulative Perpetual Preferred Stock (the "Pre-Merger Preferred Stock") at a price of $25.00 per share, resulting in net proceeds of $242.0 million after issuance costs. In connection with the BPY Transaction, each share of Pre-Merger Preferred Stock was converted into one share of 6.375% Series A cumulative redeemable preferred stock of BPR (the "Series A Preferred Stock"). The Series A Preferred Stock is recorded net of issuance costs within equity on our Consolidated Balance Sheets, and accrues a quarterly dividend at an annual rate of 6.375%. The dividend is paid in arrears in preference to dividends on our Class A Stock, and reduces net income available to stockholders, and therefore, earnings per share.

The Series A Preferred Stock does not have a stated maturity date but we may redeem the Series A Preferred Stock for $25.00 per share plus all accrued and unpaid dividends. Upon certain circumstances surrounding a change of control, holders of Series A Preferred Stock may elect to convert each share of their Series A Preferred Stock into a number of shares of Class A Stock or Class C Stock, at the option of the holder, equivalent to $25.00 plus accrued and unpaid dividends, but not to exceed a cap of 2.4679 shares of Class A Stock or Class C Stock (subject to certain adjustments related to splits, subdivisions, or combinations). The BPY Transaction did not meet the definition of a change in control per the certificate of designation governing the Series A Preferred Stock.

Our Board of Directors declared preferred stock dividends during 2019 and 2018 as follows:



Declaration Date	Record Date	Payment Date	Dividend Per Share
2019
November 4	December 13	January 1	$	0.3984
August 1	September 13	October 1	0.3984
May 6	June 14	July 1	0.3984
February 6	March 15	April 1	0.3984
2018
November 1	December 14	January 1	$	0.3984
July 31	September 17	October 1	0.3984
May 3	June 15	July 2	0.3984
February 7	March 15	April 2	0.3984

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Accumulated Other Comprehensive Loss

The following table reflects the components of accumulated other comprehensive loss as of September 30, 2019 and 2018:



	September 30, 2019			September 30, 2018
Net unrealized gains on financial instruments	$	12		$	132
Foreign currency translation	(87,530		)	(84,824		)
Accumulated other comprehensive loss	$	(87,518	)	$	(84,692	)

NOTE 10 EARNINGS PER SHARE

Class A Stock

Income available to Class A stockholders is limited to distributed income or dividends declared. Additionally, for purposes of allocating earnings to Class A Stock, the portion of the change in the carrying amount of Class A Stock that reflects a redemption in excess of fair value is considered a dividend to the Class A stockholders. As the Class A Stock redemption value approximates its fair value, basic and diluted earnings per share ("EPS") for Class A Stock is equivalent to the dividends declared for the period January 1, 2019 through September 30, 2019. There were 109,804,513 and 66,056,819 shares of Class A Stock outstanding as of December 31, 2018 and September 30, 2019, respectively. EPS is not presented for Class B Stock, Series B Preferred Stock or Class C Stock as these classes of stock are not publicly traded.

Common Stock

In 2018, basic EPS for common stock was computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS for common stock was computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of options and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation plans), were computed using the "treasury" method. The dilutive effect of the Preferred Units was computed using the "if-converted" method.

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

Information related to our EPS calculations is summarized as follows:



	July 1, 2018 through August 27, 2018			January 1, 2018 through August 27, 2018
Numerators - Basic:
Net income	$	3,698,966		$	3,860,424
Preferred Stock dividends	(3,984		)	(11,952		)
Allocation to noncontrolling interests	(39,240		)	(43,049		)
Net income attributable to common stockholders	$	3,655,742		$	3,805,423
Numerators - Diluted:
Distributions to Preferred Units	450			1,711
Net income attributable to common stockholders	3,656,192			3,807,134
Denominators:
Weighted-average number of common shares outstanding - basic	777,208			914,066
Effect of dilutive securities	3,822			3,831
Weighted-average number of common shares outstanding - diluted	781,030			917,897
Anti-dilutive Securities:
Effect of Common Units	5,438			7,662
Effect of LTIP Units	1,721			1,748
Weighted-average number of anti-dilutive securities	7,159			9,410

For the period July 1, 2018 through August 27, 2018 and the period January 1, 2018 through August 27, 2018, dilutive options and dilutive shares related to the Preferred Units are included in the denominator of dilutive EPS. Distributions to Preferred Units are included in the numerator of dilutive EPS.

Outstanding Common Units and LTIP Units have been excluded from the diluted earnings per share calculation because including such units would also require that the share of BPROP income attributable to such units be added back to the net income therefore resulting in no effect on EPS.

NOTE 11 STOCK-BASED COMPENSATION PLANS

The GGP Inc. 2010 Equity Plan (the "Equity Plan") was renamed as the Amended and Restated Brookfield Property REIT Inc. 2010 Equity Incentive Plan on August 28, 2018 in connection with the BPY Transaction. The Equity Plan provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation (collectively, the "Awards"). The Company's directors, officers and other employees and those of its subsidiaries and affiliates are eligible for the Awards. The Equity Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended. No participant may be granted more than 4,000,000 shares, or the equivalent dollar value of such shares, in any year. Options granted under the Equity Plan will be designated as either nonqualified stock options or incentive stock options. An option granted as an incentive stock option will, to the extent it fails to qualify as an incentive stock option, be treated as a nonqualified option. The exercise price of an option may not be less than the fair value of a share of BPR's Class A Stock on the date of grant. The term of each option will be determined prior to the date of grant, but may not exceed 10 years.

In connection with the BPY Transaction, the Equity Plan was amended and certain outstanding awards were modified. All outstanding GGP in and out of the money options were canceled and replaced with Class A Stock of BPR and BPY options, respectively. Certain existing appreciation only LTIP awards were canceled and replaced with substitute awards of a BPY affiliate. Outstanding restricted GGP shares were replaced with restricted shares of Class A Stock. As the awards were modified in conjunction with an equity restructuring, they were accounted for as modifications. Incremental compensation cost was measured as the excess of the fair value of the replacement awards over the fair value of the original awards immediately before the terms were modified. Total compensation cost measured at the date of modification was the grant-date fair value of the original awards for which the requisite service is expected to be rendered (or has already been rendered) plus the incremental cost associated with the replacement

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

awards. For vested awards, incremental compensation cost was recognized on the modification date. For unvested awards, incremental compensation cost is being recognized over the remaining service period.

Compensation expense related to stock-based compensation plans for the three and nine months ended September 30, 2019 and 2018 is summarized in the following table in thousands:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Stock options - Property management and other costs	$	10	$	41	$	40	$	188
Stock options - General and administrative	—		38		4		112
Restricted stock - Property management and other costs	1,477		5,952		4,601		9,056
Restricted stock - General and administrative	508		10,231		1,268		12,125
LTIP Units - Property management and other costs	51		552		206		1,187
LTIP Units - General and administrative	204		13,176		1,578		21,138
Total	$	2,250	$	29,990	$	7,697	$	43,806

The following tables summarize stock option, LTIP Unit and restricted stock activity for the Equity Plan for the nine months ended September 30, 2019 and 2018:



	2019				2018
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Stock options Outstanding at January 1,	1,011,523		$	19.71	14,427,103		$	17.84
Granted	—		—		1,068,818		19.70
Exercised	(773,642	)	17.91		(338,715	)	16.55
Forfeited	(13	)	26.05		(1,082	)	28.86
Expired	—		—		(55,917	)	23.27
Conversion effect (1)	—		—		(14,081,389	)	17.85
Stock options Outstanding at September 30,	237,868		$	25.59	1,018,818		$	19.76

(1)

In connection with the BPY Transaction, outstanding GGP in and out of the money options were canceled and replaced with Class A Stock of BPR and BPY options, respectively. The BPY options remain outstanding as of September 30, 2019 as they are held by employees of BPR subsidiaries. Stock compensation costs related to the grant of BPY option awards to employees of BPR subsidiaries are recognized as compensation expense with a corresponding capital contribution from BPY.



	2019				2018
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
LTIP Units Outstanding at January 1,	3,921,175		$	25.96	14,427,103		$	17.84
Granted (1)	—		—		1,068,818		19.70
Exercised	(1,715,722	)	28.34		(338,715	)	16.55
Forfeited	(19,793	)	22.42		(1,082	)	28.86
Expired	—		—		(55,917	)	23.27
Conversion effect (1)	—		—		(14,081,389	)	17.85
LTIP Units Outstanding at September 30,	2,185,660		$	24.12	1,018,818		$	19.76

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

(1)

In connection with the BPY Transaction, certain existing LTIP awards were canceled and replaced with substitute awards of a BPY affiliate. The substitute LTIP awards remain outstanding as of September 30, 2019 as they are held by employees of BPR subsidiaries. Stock compensation costs related to the grant of BPY affiliate LTIP awards to employees of BPR subsidiaries are recognized as compensation expense with a corresponding capital contribution from BPY.



	2019				2018
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Class A Restricted Stock Outstanding at January 1,	986,937		$	22.48	1,089,364		$	25.29
Granted	647,226		19.94		1,074,137		21.52
Vested	(401,528	)	22.60		(394,995	)	23.69
Forfeited	(39,776	)	21.16		(123,232	)	24.42
Conversion effect (1)	—		—		(635,698	)	24.52
Class A Restricted Stock Outstanding at September 30,	1,192,859		$	21.11	1,009,576		$	22.49


(1)	In connection with the BPY Transaction, outstanding restricted GGP shares were replaced with restricted shares of Class A Stock.

NOTE 12 ACCOUNTS RECEIVABLE, NET

The following table summarizes the significant components of accounts receivable, net.



	September 30, 2019			December 31, 2018
Trade receivables	$	96,542		$	97,329
Short-term tenant receivables	4,143			4,378
Straight-line rent receivable	142,232			137,387
Other accounts receivable	56			3,126
Total accounts receivable	242,973			242,220
Provision for doubtful accounts	(24,051		)	(19,658		)
Total accounts receivable, net	$	218,922		$	222,562

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(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 13 NOTES RECEIVABLE

The following table summarizes the significant components of notes receivable.



	September 30, 2019		December 31, 2018
Notes receivable	$	38,765	$	239,597
Accrued interest	5,785		17,340
Total notes receivable	$	44,550	$	256,937

During the period, the note receivable from our joint venture partners related to the acquisition of 730 Fifth Avenue in New York was satisfied as part of the transaction which included payment of principal of $249.5 million and interest of $54.7 million (Note 3).

On January 30, 2019, we entered into a revolving credit facility with BPY Bermuda Holdings IV Limited, a related party, in which we lent $330.0 million. The note had an interest rate of LIBOR plus 2.50% and matured on January 30, 2020. On March 25, 2019, the note was paid down in full.

NOTE 14 PREPAID EXPENSES AND OTHER ASSETS

The following table summarizes the significant components of prepaid expenses and other assets.



	September 30, 2019							December 31, 2018
	Gross Asset		Accumulated Amortization			Balance		Gross Asset		Accumulated Amortization			Balance
Intangible assets:
Above-market tenant leases, net	$	112,399	$	(84,842	)	$	27,557	$	160,363	$	(125,152	)	$	35,211
Below-market ground leases, net	—		—			—		61,983		(8,293		)	53,690
Real estate tax stabilization agreement, net	111,506		(56,126		)	55,380		111,506		(51,393		)	60,113
Total intangible assets	$	223,905	$	(140,968	)	$	82,937	$	333,852	$	(184,838	)	$	149,014
Remaining prepaid expenses and other assets:
Restricted cash						47,877							51,674
Security and escrow deposits						1,196							1,394
Prepaid expenses						32,008							39,816
Other non-tenant receivables						47,108							53,016
Right of use assets, net						116,039							—
Other						22,667							18,734
Total remaining prepaid expenses and other assets						266,895							164,634
Total prepaid expenses and other assets						$	349,832						$	313,648

Table of Contents

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 15 ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following table summarizes the significant components of accounts payable and accrued expenses.



	September 30, 2019							December 31, 2018
	Gross Liability		Accumulated Accretion			Balance		Gross Liability		Accumulated Accretion			Balance
Intangible liabilities:
Below-market tenant leases, net	134,320		(58,814		)	$	75,506	194,858		(76,825		)	$	118,033
Above-market ground leases, net	—		—			—		754		(73		)	681
Total intangible liabilities	$	134,320	$	(58,814	)	$	75,506	$	195,612	$	(76,898	)	$	118,714
Remaining accounts payable and accrued expenses:
Accrued interest						56,540							29,576
Accounts payable and accrued expenses						52,002							68,425
Accrued real estate taxes						61,331							59,877
Deferred gains/income						68,868							75,841
Accrued payroll and other employee liabilities						50,339							64,515
Construction payable						221,995							267,102
Tenant and other deposits						13,441							12,248
Lease liability right of use						71,214							—
Insurance reserve liability						12,053							12,281
Capital lease obligations						5,385							5,385
Conditional asset retirement obligation liability						2,240							2,484
Other						152,863							236,921
Total remaining Accounts payable and accrued expenses						768,271							834,655
Total Accounts payable and accrued expenses						$	843,777						$	953,369

NOTE 16 LITIGATION

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity.

The Company is subject to litigation related to the BPY Transaction. The Company cannot predict the outcome of pending litigation, nor can it predict the amount of time and expense that will be required to resolve such litigation.

NOTE 17 COMMITMENTS AND CONTINGENCIES

We lease land or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. Rental payments are expensed as incurred and have, to the extent applicable, been straight-lined over the term of the lease. The following is a summary of our contractual rental expense as presented in our Consolidated Statements of Comprehensive Income:

Table of Contents

Brookfield Property REIT Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(Dollars in thousands)
Contractual rent expense, including participation rent	$	3,475	$	1,982	$	9,667	$	6,323
Contractual rent expense, including participation rent and excluding amortization of above and below-market ground leases and straight-line rent	3,475		1,204		9,667		4,441

NOTE 18 SUBSEQUENT EVENTS

On October 25, 2019, the Company closed on a new loan on First Colony Mall for a total of $220.0 million with a 10-year fixed interest rate at 3.55% and a maturity date of November 1, 2029. This loan replaced the previous debt of $169.1 million with an interest rate of 4.50% that matured on November 1, 2019.

On November 1, 2019, the Company closed on a new loan on Natick Mall for a total of $505.0 million with a 5-year fixed interest rate at 3.72% and a maturity date of November 1, 2024. This loan replaced the previous debt of $419.4 million with an interest rate of 4.60% that matured on November 1, 2019.

On November 1, 2019, the Company completed the purchase of all of our joint venture partners' interests in Park Meadows, Shops at Merrick Park, Towson Town Center, and Perimeter Mall. This resulted in the Company obtaining 100% ownership of the entities. Concurrently, we sold all of our interest in Bridgewater Commons to the same joint venture partner. Additionally, we obtained a new loan for Park Meadows Mall for $700.0 million with a five-year fixed interest rate at 3.56% and a maturity date of November 1, 2024. This loan replaced the previous debt of $360.0 million with an interest rate at 4.60% that was scheduled to mature on December 1, 2023 and resulted in a $35.6 million prepayment penalty. We also obtained a new loan at Shops at Merrick Park for a total of $390.0 million with a five-year fixed interest rate of 3.90% and a maturity date of November 1, 2024. This loan replaced the previous debt of $161.0 million with an interest rate of 5.73% that was scheduled to mature on April 1, 2021 and resulted in a $8.0 million prepayment penalty.


ITEM 2	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references to numbered Notes are to specific footnotes to our Consolidated Financial Statements included in this Quarterly Report and whose descriptions are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as in such Notes.

Overview

GGP Inc., ("GGP" or the "Company") (now known as Brookfield Property REIT Inc. or "BPR"), a Delaware corporation, was organized in July 2010 and is an externally managed real estate investment trust, referred to as a "REIT".

BPR is an indirect subsidiary of BPY, one of the world's largest commercial real estate companies. As used herein, the terms "we", "us" and "our" refer to BPR and its subsidiaries. BPR, through its subsidiaries and affiliates, is an owner and operator of retail properties. As of September 30, 2019, we were the owner, either entirely or with joint venture partners, of 123 retail properties located throughout the United States comprising approximately 122 million square feet of gross leasable area, or GLA.

In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through BPR REIT Services LLC. ("BPRRS"), Brookfield Properties Retail Inc. ("BPRI") and General Growth Management, Inc. ("GGMI"). Each of GGMI and BPRI is a taxable REIT subsidiary ("TRS"), which earn real estate management and leasing fees, development fees, financing fees for other ancillary services for a majority of our unconsolidated real estate affiliates and for substantially all of our consolidated properties. BPRI also serves as a contractor to GGMI for these services. BPRRS generally provides financial, accounting, tax, legal, development, and other services to our consolidated properties.

Our primary business is owning and operating best-in-class retail properties that provide an outstanding environment and experience for our communities, retailers, consumers and stockholders. We own a property portfolio comprised primarily of Class A retail properties (defined primarily by sales per square foot). We provide management and other services to substantially all of our properties, including properties which we own through joint venture arrangements and which are unconsolidated for GAAP purposes. Our management operating philosophies and strategies are the same whether the properties are consolidated or unconsolidated.

As of September 30, 2019, the portfolio was 95.0% leased, compared to 95.7% leased at September 30, 2018. On a suite-to-suite basis, the leases commencing occupancy in the trailing 12 months exhibited initial rents that were 5.4% higher than the final rents paid on expiring leases.

We have identified approximately $1.1 billion of development and redevelopment projects within our portfolio, including re-development of anchor box spaces, over 80% of which is being invested into Class A retail properties. We currently expect to achieve stabilized returns of approximately 6-9% for all projects.

We believe our long-term strategy can provide our stockholders with a competitive risk-adjusted total return comprised of dividends and share price appreciation.

Financial Overview

Net income (loss) attributable to BPR decreased from $3.8 billion for the nine months ended September 30, 2018 to $(229.0) million for the nine months ended September 30, 2019 primarily due to gains related to joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. Our funds from operations ("FFO") decreased 63.1% from $1.3 billion for the nine months ended September 30, 2018 to $479.1 million for the nine months ended September 30, 2019 primarily due to joint ventures formed in conjunction with the BPY Transaction.

See Non-GAAP Supplemental Financial Measures below for a discussion of FFO, along with a reconciliation to Net income attributable to BPR.

Operating Metrics

The following table summarizes selected operating metrics for our portfolio.



	September 30, 2019 (1)			September 30, 2018 (1)
In-Place Rents Per Square Foot for Total Retail Properties (2)	$	80.16		$	78.31

Percentage Leased for Total Retail Properties	95.0		%	95.7		%


(1)	Metrics exclude properties acquired in the year ended December 31, 2018 and the nine months ended September 30, 2019, reductions in ownership as a result of sales or other transactions, and certain redevelopments and other properties.


(2)	Rent is presented on a cash basis and consists of base minimum rent and common area costs.

Lease Spread Metrics

The following table summarizes signed leases compared to expiring leases in the same suite, for leases where (1) the downtime between new and previous tenant was less than 24 months, (2) the occupied space between the previous tenant and new tenant did not change by more than 10,000 square feet and (3) the new lease is at least a year.



	# of Leases	SF (in thousands)	Term (in years)	Initial Rent PSF (1)(3)		Expiring Rent PSF (2)(3)		Initial Rent Spread (3)		% Change (3)
Trailing 12 Month Commencements	1,266	4,973	6.8	$	61.88	$	58.71	$	3.17	5.4	%



	# of Leases	SF (in thousands)	Term (in years)	Initial Rent PSF (1)(4)		Expiring Rent PSF (2)(4)		Initial Rent Spread (4)		% Change (4)
Trailing 12 Month Commencements	1,266	4,973	6.8	$	47.04	$	43.84	$	3.20	7.3	%


(1)	Represents initial annual rent over the lease consisting of base minimum rent and common area maintenance.


(2)	Represents expiring rent at end of lease consisting of base minimum rent and common area maintenance.


(3)	These metrics are weighted based on the operating income contribution of the properties.


(4)	These metrics are not weighted based on the operating income contribution of the properties.

Results of Operations

Three months ended September 30, 2019 and 2018

The following table is a breakout of the components of rental revenues:



	Three Months Ended September 30,
	2019			2018			$ Change			% Change
	(Dollars in thousands)
Components of Rental Revenues:
Base minimum rents	$	224,325		$	311,683		$	(87,358	)	(28.0	)%
Lease termination income	3,875			1,320			2,555			193.6	%
Straight-line rent	1,685			(1,359		)	3,044			(224.0	)%
Above and below-market tenant leases, net	(37		)	(1,661		)	1,624			(97.8	)%
Tenant recoveries	89,253			133,103			(43,850		)	(32.9	)%
Overage rent	2,865			4,681			(1,816		)	(38.8	)%
Less provision for doubtful accounts	(4,497		)	—			(4,497		)	—
Total rental revenues, net	$	317,469		$	447,767		$	(130,298	)	(29.1	)%

Base minimum rents decreased $87.4 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $83.5 million decrease in permanent base minimum rents during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

Tenant recoveries decreased $43.9 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $36.3 million decrease in tenant recoveries during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

Management fees and other corporate revenues increased $13.7 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $13.4 million increase in property management and leasing fees during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

Real estate taxes decreased $11.4 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $13.1 million decrease in real estate taxes during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

Other property operating costs decreased $21.1 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $19.8 million decrease in other property operating costs during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

The provision for impairment during the three months ended September 30, 2019 is related to an impairment charge recorded on one operating property (Note 2).

Depreciation and amortization decreased $36.2 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $36.6 million decrease in depreciation and amortization during the third quarter of 2019 compared to the third quarter of 2018.

Interest expense increased $36.1 million, primarily due to a $60.4 million increase in interest expense on the new credit agreement entered into during the third quarter of 2018 (Note 6). This was partially offset by the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The formation of the joint ventures resulted in a $32.4 million decrease in interest expense during the third quarter of 2019 compared to the third quarter of 2018 (Note 3).

The gain from changes in control of investment properties and other of $39.7 million during the three months ended September 30, 2019 is related to the acquisition of the remaining interest in 730 Fifth Ave (Note 3). The gain from changes in control of investment properties and other of $2.9 billion during the three months ended September 30, 2018 is due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018, the sale of an anchor box at The Oaks Mall and the sale of the commercial office unit at 685 Fifth Avenue (Note 3).

The loss on extinguishment of debt during the three months ended September 30, 2019 is due to a pre-payment penalty related to the refinancing of debt at one property (Note 6).

The benefit from income taxes of $14.0 million during the three months ended September 30, 2019 is primarily due to the recognition of deferred taxes related to certain transactions effectuated in the BPY Transaction.

The unconsolidated real estate affiliates - gain on investment during the three months ended September 30, 2019 is due to the 49.3% sale of our interest in Authentic Brands Group LLC ("ABG") (Note 3).

Nine months ended September 30, 2019 and 2018

The following table is a breakout of the components of rental revenues:



	Nine Months Ended September 30,
	2019			2018			$ Change			% Change
	(Dollars in thousands)
Components of Rental Revenues:
Base minimum rents	$	665,264		$	1,036,243		$	(370,979	)	(35.8	)%
Lease termination income	6,320			27,229			(20,909		)	(76.8	)%
Straight-line rent	5,633			(766		)	6,399			(835.4	)%
Above and below-market tenant leases, net	7,250			(4,889		)	12,139			(248.3	)%
Tenant recoveries	269,346			446,260			(176,914		)	(39.6	)%
Overage rent	9,159			14,853			(5,694		)	(38.3	)%
Less provision for doubtful accounts	(8,244		)	—			(8,244		)	—
Total rental revenues, net	$	954,728		$	1,518,930		$	(564,202	)	(37.1	)%

Base minimum rents decreased $371.0 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $347.7 million decrease in permanent base minimum rents during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

Tenant recoveries decreased $176.9 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $154.4 million decrease in tenant recoveries during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

Management fees and other corporate revenues increased $41.2 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $38.9 million increase in property management and leasing fees during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

Real estate taxes decreased $50.5 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $53.8 million decrease in real estate taxes during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

Other property operating costs decreased $80.1 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $77.9 million decrease in other property operating costs during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

The provision for impairment during the nine months ended September 30, 2019 is related to the impairment charges recorded on two operating properties and the provision for impairment during the nine months ended September 30, 2018 is related to impairment charges recorded on one operating property (Note 2).

Depreciation and amortization decreased $158.0 million, primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018. The joint ventures resulted in a $159.1 million decrease in depreciation and amortization during the first nine months of 2019 compared to the first nine months of 2018.

Interest expense increased $71.2 million, primarily due to a $201.5 million increase in interest expense on the new credit agreement entered into during the third quarter of 2018 (Note 6). This was partially offset by the joint ventures formed in conjunction with

the BPY Transaction in the third quarter of 2018. The formation of the joint ventures resulted in a $134.5 million decrease in interest expense during the first nine months of 2019 compared to the first nine months of 2018 (Note 3).

The gain from changes in control of investment properties and other of $39.7 million during the nine months ended September 30, 2019 is related to the acquisition of the remaining interest in 730 Fifth Ave (Note 3). The gain from changes in control of investment properties and other of $2.9 billion during the nine months ended September 30, 2018 is due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018, the sale of an anchor box at The Oaks Mall, the sale of the commercial office unit at 685 Fifth Avenue, and the sale of 49.9% joint venture interest in the Sears Box at Oakbrook Center (Note 3).

The loss on extinguishment of debt during the nine months ended September 30, 2019 is due to a pre-payment penalty related to the refinance at one property (Note 6).

Benefit from income taxes of $6.1 million during the nine months ended September 30, 2019 is primarily due to the recognition of deferred taxes related to certain transactions effectuated in the BPY Transaction.

Equity in income of unconsolidated real estate affiliates decreased $58.8 million, primarily due to a decrease in income recognition on condominiums.

The unconsolidated real estate affiliates - gain on investment during the nine months ended September 30, 2019 relates to the sale of our 12.0% interest in Bayside Marketplace and the 49.3% sale of our interest in ABG (Note 3). The unconsolidated real estate affiliates - gain on investment during the nine months ended September 30, 2018 is due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018 and the sale of a portion of our interest in Aeropostale (Note 3).

Liquidity and Capital Resources

Our primary source of cash is from the ownership and management of our properties and strategic dispositions. In addition, we will also use financings as a source of capital. We may generate cash from refinancings or borrowings under our revolving credit facility. Our primary uses of cash include payment of operating expenses, debt service, reinvestment in and redevelopment of properties, tenant allowances, dividends, share repurchases and strategic acquisitions.

We anticipate maintaining financial flexibility by managing our future maturities and amortization of debt. We believe that we currently have sufficient liquidity to satisfy all of our commitments in the form of $189.2 million of consolidated unrestricted cash and $1.2 billion of available credit under our credit facility as of September 30, 2019, as well as anticipated cash provided by operations.

Our key financing objectives include:


•	to obtain property-secured debt with laddered maturities; and


•	to minimize the amount of debt that is cross-collateralized and/or recourse to us.

We may raise capital through public or private issuances of debt securities, preferred stock, Class A Stock, Common Units of BPROP, share repurchases or other capital raising activities.

The Company entered into a new credit agreement (the "Agreement") dated as of August 24, 2018 consisting of a revolving credit facility (the "Facility"), Term A-1 and A-2 loans, and a Term B loan. The Facility provides for revolving loans of up to $1.5 billion and borrowings bear interest at a rate equal to LIBOR plus 225 basis points. The Facility is scheduled to mature in August 2022 and had outstanding borrowings of $315.0 million as of September 30, 2019. The Term A-1 Loan has a total commitment of $900.0 million, with $700.0 million attributable to BPR and $200.0 million attributable to an affiliate, and is scheduled to mature in August 2021 bearing interest at a rate equal to LIBOR plus 225 basis points. The Term A-2 Loan has a total commitment of $2.0 billion and is scheduled to mature in August 2023 bearing interest at a rate equal to LIBOR plus 225 basis points. The Term B Loan has a total commitment of $2.0 billion and is scheduled to mature in August 2025 bearing interest at a rate equal to LIBOR plus 250 basis points. The Term A-1, A-2, and B Loans are contractually obligated to be prepaid through net proceeds from property level refinances and asset sales as outlined in the Agreement. The Agreement contains certain restrictive covenants which limit material changes in the nature of our business conducted, including, but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required not to exceed a maximum net debt-to-value ratio and fixed charge coverage ratio. As of September 30, 2019, we are not aware of any instances of non-compliance with such covenants.

During the year ended December 31, 2018, we refinanced a consolidated mortgage note at 685 Fifth Avenue. The prior $340.0 million variable-rate consolidated mortgage note matured on July 1, 2018 and had an interest rate of LIBOR plus 2.75%. In connection with the refinancing, $100.0 million remained related to the commercial office unit and a new $275.0 million fixed-rate consolidated mortgage note with a term-to-maturity of 10.0 years and an interest rate of 4.53% was obtained on the retail unit. The $100.0 million was paid down in full in conjunction with the sale of the commercial office unit on July 13, 2018. In addition, we refinanced mortgage notes totaling $1.1 billion at nine properties. The prior loans totaling $1.2 billion had a weighted-average interest rate of 4.89%. The new loans have a weighted-average term-to-maturity of 5.1 years and a weighted-average interest rate of 5.21%. We also obtained new mortgage notes totaling $416.2 million at six properties with a weighted-average term-to-maturity of 4.6 years and a weighted-average interest rate of 4.72%.

On July 5, 2019, the Company closed on new loans on The Woodlands Mall for a total of $465.0 million, which consists of $425.0 million with an interest rate of 4.25% and $40.0 million with an interest rate of 5.50%. The loan has a weighted average interest rate of 4.36% which matures on August 1, 2029. The loan replaced the previous debt of $294.0 million on the property that had a weighted average interest rate of 4.83% and was scheduled to mature on June 10, 2023. In accordance with the previous debt agreement, the Company incurred a prepayment penalty of $27.5 million which is recorded as loss on extinguishment of debt.

On July 1, 2019, the Company closed on a one-year extension on 830 North Michigan Ave in the amount of $78.0 million at LIBOR plus 1.60% which matures on July 1, 2020. This loan replaces the previous debt of $85.0 million that matured on July 1, 2019 and includes principal repayment of $7.0 million made in conjunction with the extension.

On May 1, 2019, the Company and BPR Cumulus LLC, BPR Nimbus LLC and GGSI Sellco LLC (each, an indirect subsidiary of the Company) issued $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2026. The notes bear interest at an annual rate of 5.75% payable on May 15 and November 15 of each year, beginning on November 15, 2019 and will mature on May 15, 2026.

On March 25, 2019, the Company secured a $341.8 million subordinated unsecured note with Brookfield BPY Holdings Inc., a related party. The note bears interest at a rate equal to LIBOR plus 2.75% and is scheduled to mature on March 25, 2029. During the quarter ended September 30, 2019, the Company made a principal payment of $115.6 million in addition to the principal payment of $200.1 million made in the second quarter of 2019. The balance at September 30, 2019 was $26.1 million. The Company

borrowed an additional $70.5 million during the second quarter of 2019, with a maturity date of June 25, 2029. The balance at September 30, 2019 was $70.5 million.

As of September 30, 2019, we had $6.8 billion of debt pre-payable at our proportionate share without penalty. We may pursue opportunities to refinance this debt at lower interest rates and longer maturities.

As of September 30, 2019, our proportionate share of total debt aggregated $22.2 billion. Our total debt includes our consolidated debt of $14.5 billion and our share of unconsolidated real estate affiliates debt of $7.7 billion. Of our proportionate share of total debt, $4.8 billion is recourse to the Company or its subsidiaries (including the Facility) due to guarantees or other security provisions for the benefit of the note holder.

The amount of debt due in the next three years represents 26.0% of our total debt at maturity. The maximum amount due in any one of the next ten years is no more than $4.0 billion at our proportionate share or approximately of 18.7% our total debt at maturity.

The following table illustrates the scheduled payments for our proportionate share of total debt as of September 30, 2019. The $206.2 million of junior subordinated notes are due in 2036, but we may redeem them any time after April 30, 2011 (Note 6). As we do not expect to redeem the notes prior to maturity, they are included in the consolidated debt maturing subsequent to 2023.



	Consolidated		Unconsolidated
	(Dollars in thousands)
2019	$	—	$	303,898
2020	773,501		901,732
2021 (1)	2,817,677		755,451
2022	1,370,585		1,373,827
2023 (2)	2,933,024		1,181,407
Subsequent (3)	6,618,616		3,210,922
Total	$	14,513,403	$	7,727,237


(1)	Includes the Term A-1 Loan (Note 6).


(2)	Includes the Term A-2 Loan (Note 6).


(3)	Includes the Term B Loan (Note 6).

As of September 30, 2019, we do not have any consolidated debt that is scheduled to mature in 2019. We believe that the joint ventures will be able to refinance the debt of our unconsolidated real estate affiliates upon maturity; however, there can be no assurance that we will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

Acquisitions and Joint Venture Activity

From time-to-time we may acquire whole or partial interests in high-quality retail properties or make strategic dispositions. Refer to Note 3 for more information.

Developments and Redevelopments

We are currently redeveloping several consolidated and unconsolidated properties primarily to improve the productivity and value of the property, convert large-scale anchor boxes into smaller leasable areas and to create new in-line retail space and new restaurant venues. The execution of these redevelopment projects within our portfolio was identified as providing compelling risk-adjusted returns on investment.

We have development and redevelopment activities totaling approximately $525.0 million under construction and $556.0 million in the pipeline. We continue to evaluate a number of other redevelopment projects to further enhance the quality of our assets. Expected returns are based on the completion of current and future redevelopment projects, and the success of the leasing and asset management plans in place for each project. Expected returns are subject to a number of variables, risks, and uncertainties including those disclosed within Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018 (our "Annual Report"). We also refer the reader to our disclosure related to forward-looking statements, below. The following table illustrates our planned redevelopments:



			Stabilized Year	Proportionate Cost (1)
Property	Location	Description	Stabilized Year	Total		To-Date
Major Development Summary (in millions, at share unless otherwise noted)
Active redevelopments

Alderwood	Lynnwood, WA	Sears - Residential	2022	12		—
Northbrook Court	Northbrook, IL	Macy's Redevelopment (Retail)	2022	50		2
Stonestown Galleria	San Francisco, CA	Anchor Redevelopment for Retail and Entertainment	2022	149		27
Tysons Galleria	McLean, VA	Macy's Redevelopment	2021	108		4
Other Projects	Various		2020-2022	116		24
Active developments/redevelopments				$	435	$	57
In planning

Ala Moana	Honolulu, HI	Residential Tower	2025	153		—
Cumberland	Atlanta, GA	Residential	2024	19		—
North Point	Alpharetta, GA	Sears Redevelopment - Residential	2022	62		—
Northbrook Court	Northbrook, IL	Residential	2022	50		—
Northridge	Northridge, CA	Residential - Phase #1	2025	48		—
Oxmoor Center	Louisville, KY	Sears Redevelopment (both Phases + Restaurant Pads)	2022	30		1
Shops at Merrick Park	Coral Gables, FL	Hotel	2023	32		—
Other Projects	Various		2021-2025	162		2
In planning				$	556	$	3
Total retail developments				$	991	$	60


(1)	Costs are at BPR's ownership share post August 28, 2018, with closing of new joint venture partnerships.

Our investment in these projects for the nine months ended September 30, 2019 increased from December 31, 2018 in conjunction with the applicable development plan and as projects near completion. The continued progression of redevelopment projects resulted in increases to our investment to date.

Capital Expenditures, Capitalized Interest and Overhead (at share)

The following table illustrates our capital expenditures, capitalized interest, and initial direct costs associated with leasing and development, which primarily relate to ordinary capital projects at our operating properties. In addition, we incurred tenant allowances and capitalized leasing costs for our operating properties as outlined below. Capitalized interest is based upon qualified expenditures and interest rates; capitalized leasing and development costs are initial direct costs as incremental costs of a lease that would not have been incurred if the lease had not been obtained. These costs are amortized over lives which are consistent with the related asset.



	Nine Months Ended September 30,
	2019		2018
	(Dollars in thousands)
Operating capital expenditures (1)	$	122,537	$	107,488
Tenant allowances and capitalized leasing costs (2)	149,234		146,785
Capitalized interest and capitalized overhead	17,848		52,852
Total	$	289,619	$	307,125


(1)	Reflects only non-tenant operating capital expenditures.


(2)	Tenant allowances paid on 6.4 million square feet.

Class A Stock Dividend

Our Board of Directors declared Class A Stock dividends during 2019 as follows:



Declaration Date	Record Date	Payment Date	Dividend Per Share
2019
November 4	November 29	December 31	$	0.330
August 1	August 30	September 30	0.330
May 6	May 31	June 28	0.330
February 6	February 28	March 29	0.330
2018
October 31	November 30	December 31	$	0.315
August 28	August 31	September 28	0.315

Class B Stock Dividend

Our Board of Directors declared dividends on the Class B-1 Stock, Class B-2 Stock and the Series B Preferred Stock during 2019 as follows:

Class B-1 Stock Dividends



Declaration Date	Record Date	Payment Date	Average Dividend Per Share
2019
November 4	December 25	December 25	$	0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11 per share of the Class B-1 Stock.

Class B-2 Stock Dividends



Declaration Date	Record Date	Payment Date	Average Dividend Per Share
2019
November 4	December 25	December 25	$	0.110

On November 4, 2019, a partial dividend was declared in the amount of $.11 per share of the Class B-2 Stock.

Combined Class B stock and Series B Preferred Stock (Prior to Restated Charter)



Declaration Date	Record Date	Payment Date	Average Dividend Per Share
2019
May 25	June 25	June 25	$	0.397
March 25	March 27	March 27	1.015

In the quarter ended June 30, 2019, a dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from March 31, 2019 to June 25, 2019 at the rate of 7.5% per annum payable on June 25, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on June 25, 2019 for a combined distribution total of approximately$183.8 million.

Common Stock Dividends

GGP's Board of Directors declared common stock dividends during 2018 as follows:



Declaration Date (1)	Record Date	Payment Date	Dividend Per Share
2018
May 3	July 13	July 31	$	0.22
February 7	April 13	April 30	0.22

(1) Excludes the Pre-Closing Dividend (Note 1).

Preferred Stock Dividends

On February 13, 2013, GGP issued, under a public offering, 10,000,000 shares of 6.375% Series A Cumulative Stock at a price of $25.00 per share. In connection with the BPY Transaction, each share was converted into one share of 6.375% Series A Preferred Stock. Our Board of Directors declared preferred stock dividends during 2019 and 2018 as follows:



Declaration Date	Record Date	Payment Date	Dividend Per Share
2019
November 4	December 13	January 1	$	0.3984
August 1	September 13	October 1	0.3984
May 6	June 14	July 1	0.3984
February 6	March 15	April 1	0.3984
2018
November 1	December 14	January 1	$	0.3984
July 31	September 17	October 1	0.3984
May 3	June 15	July 2	0.3984
February 7	March 15	April 2	0.3984

Summary of Cash Flows

Cash Flows from Operating Activities

Net cash provided by operating activities was $252.2 million for the nine months ended September 30, 2019 and $488.2 million for the nine months ended September 30, 2018. Significant changes in the components of net cash provided by operating activities include:


•	in 2019, a decrease of cash inflows was primarily due to the joint ventures formed in conjunction with the BPY Transaction in the third quarter of 2018 (Note 3);


•	in 2019, gain from changes of investment properties and other, net of $(39.7) million; and


•	in 2018, gain from changes of investment properties and other, net of $(2.9) billion.

Cash Flows from Investing Activities

Net cash (used in) provided by investing activities was $(396.0) million for the nine months ended September 30, 2019 and $2.6 billion for the nine months ended September 30, 2018. Significant components of net cash used in investing activities include:


•	in 2019, development of real estate and property improvements of $(381.8) million;


•	in 2019, proceeds from repayment of loans to joint venture partners of $18.0 million;


•	in 2019, contributions to unconsolidated real estate affiliates of $(208.3) million;


•	in 2019, distributions received from unconsolidated real estate affiliates in excess of income of $269.5 million;


•	in 2019, loan to joint venture and joint venture partners of $(97.5) million;


•	in 2019, proceeds from loan to affiliates of $330.0 million;


•	in 2019, loans to affiliates of $(330.0) million;


•	in 2018, development of real estate and property improvements of $(587.4) million;


•	in 2018, proceeds from repayment of loans to joint venture partners of $82.0 million;


•	in 2018, contributions to unconsolidated real estate affiliates of $(102.1) million; and


•	in 2018, distributions received from unconsolidated real estate affiliates in excess of income of $343.0 million; and


•	in 2018, proceeds from sales of investment properties and unconsolidated real estate affiliates of $2.9 billion.

Cash Flows from Financing Activities

Net cash provided by (used in) financing activities was $82.2 million for the nine months ended September 30, 2019 and $(3.0) billion for the nine months ended September 30, 2018. Significant components of net cash provided by (used in) financing activities include:


•	in 2019, proceeds from the refinancing or issuance of mortgages, notes and loans payable of $4.7 billion, which includes a $1 billion bonds issuance;


•	in 2019, principal payments on mortgages, notes, and loans payable of $(3.4) billion;


•	in 2019, buyback of Class A Stock of $(114.9) million;


•	in 2019, buyback of Class B-1 Stock of $(224.5) million;


•	in 2019, cash distributions to noncontrolling interests in consolidated real estate affiliates of $(67.0) million


•	in 2019, cash distributions paid to stockholders of $(738.0) million;


•	in 2018, proceeds from the refinancing or issuance of mortgages, notes and loans payable of $6.6 billion;


•	in 2018, principal payments on mortgages, notes, and loans payable of $(1.2) billion;


•	in 2018, cash contributions from noncontrolling interests in consolidated real estate affiliates of $1.5 billion; and


•	in 2018, cash distributions paid to common stockholders of $(9.8) billion.

Seasonality

Although we have a year-long temporary leasing program, occupancies for short-term tenants and, therefore, rental income recognized, are higher during the fourth quarter of the year. In addition, the majority of our tenants have December or January lease years for purposes of calculating annual overage rent amounts. Accordingly, overage rent thresholds are most commonly achieved in the fourth quarter. As a result, revenue production is generally highest in the fourth quarter of each year.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated interim financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A disclosure of our critical accounting policies which affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements is included in our Annual Report in Management's Discussion and Analysis of Financial Condition and Results of Operations.

For the nine months ended September 30, 2019, there were no significant changes to these policies except for the policies related to the adoption of Accounting Standards Update ("ASU") 2016-02, Leases as of January 1, 2019 as described in Note 2 and below.

Leases

Effective January 1, 2019, we adopted the requirements of the new lease guidance which required lessees to recognize a liability to make lease payments and a right-of-use asset, initially measured at the present value of lease payments, for both operating and finance leases. For leases with a term of 12 months or less, lessees were permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. The guidance allowed lessors and lessees to make an accounting policy election, by class of underlying asset, to not separate non-lease components from lease components. The guidance also provided an optional transition method which allowed entities to initially apply the new guidance in the period of adoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings, if necessary. The Company elected to apply the alternative transition method and no cumulative-effect adjustment to the opening balance of retained earnings was deemed necessary to record.

Refer also to the accounting policies discussed in Note 2.

REIT Requirements

In order to remain qualified as a REIT for Federal income tax purposes, we must distribute at least 90% of our taxable ordinary income to stockholders. We are also subject to federal income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. See Note 8 to the Consolidated Financial Statements for more detail on our ability to remain qualified as a REIT.

Recently Issued Accounting Pronouncements

Refer to Note 2 of the Consolidated Financial Statements for recently issued accounting pronouncements.

Non-GAAP Supplemental Financial Measures and Definitions

Proportionate or At Share Basis

The following non-GAAP supplemental financial measures are all presented on a proportionate basis. The proportionate financial information presents the consolidated and unconsolidated properties at the Company's ownership percentage or "at share". This form of presentation offers insights into the financial performance and condition of the Company as a whole, given the significance of the Company's unconsolidated property operations that are owned through investments accounted for under GAAP using the equity method.

The proportionate financial information is not, and is not intended to be, a presentation in accordance with GAAP. The non-GAAP proportionate financial information reflects our proportionate economic ownership of each asset in our property portfolio that we do not wholly own. The amounts in the column labeled "Noncontrolling Interests" were derived on a property-by-property basis by including the share attributable to noncontrolling interests in each line item from each individual property. The Company does not have legal claim to the noncontrolling interest of assets, liabilities, revenue, and expenses. The amount of cash each noncontrolling interest receives is based on the specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions. The amounts in the column labeled "Unconsolidated Properties" were derived on a property-by-property basis by including our share of each line item from each individual entity. This provides visibility into our share of the operations of our joint ventures.

We do not control the unconsolidated joint ventures and the presentations of the assets and liabilities and revenues and expenses do not represent our legal claim to such items. The operating agreements of the unconsolidated joint ventures generally provide that partners may receive cash distributions (1) to the extent there is available cash from operations, (2) upon a capital event, such as a refinancing or sale or (3) upon liquidation of the venture. The amount of cash each partner receives is based upon specific provisions of each operating agreement and varies depending on factors including the amount of capital contributed by each partner and whether any contributions are entitled to priority distributions. Upon liquidation of the joint venture and after all liabilities, priority distributions and initial equity contributions have been repaid, the partners generally would be entitled to any residual cash remaining based on their respective legal ownership percentages.

We provide non-GAAP proportionate financial information because we believe it assists investors and analysts in estimating our economic interest in our unconsolidated joint ventures when read in conjunction with the Company's reported results under GAAP. Other companies in our industry may calculate their proportionate interest differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the non-GAAP proportionate financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.

Funds From Operations ("FFO")

The Company determines FFO based upon the definition set forth by Nareit. The Company determines FFO to be its share of consolidated net income (loss) attributable to Brookfield Property REIT Inc. computed in accordance with GAAP, adjusted for real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding cumulative effects of accounting changes, excluding gains and losses from the sales of, or any impairment charges related to, previously depreciated operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon the Company's economic

ownership interest, and all determined on a consistent basis in accordance with GAAP. The Company's presentation of FFO has been reflected on a proportionate basis.

The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry. FFO facilitates an understanding of the operating performance of the Company's properties between periods because it does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company's operating performance.

We calculate FFO in accordance with standards established by Nareit, which may not be comparable to measures calculated by other companies who do not use the Nareit definition of FFO or do not calculate FFO in accordance with Nareit guidance. In addition, although FFO is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

In order to provide a better understanding of the relationship between the Company's non-GAAP financial measures of FFO, a reconciliation of GAAP net income attributable to BPR to FFO has been provided. None of the Company's non-GAAP financial measures represents cash flow from operating activities in accordance with GAAP, none should be considered as an alternative to GAAP net income (loss) attributable to BPR and none are necessarily indicative of cash flow. In addition, the Company has presented such financial measures on a consolidated and unconsolidated basis (at the Company's proportionate share) as the Company believes that given the significance of the Company's operations that are owned through investments accounted for by the equity method of accounting, the detail of the operations of the Company's unconsolidated properties provides important insights into the income and FFO produced by such investments.

The following table reconciles GAAP net income attributable to BPR to FFO for the three and nine months ended September 30, 2019 and 2018:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Net (Loss) Income Attributable to BPR	$	(33,423	)	$	3,683,274		$	(228,988	)	$	3,840,924
Allocation of noncontrolling interests of the JV partner for impairment	—			—			(18,011		)	—
Redeemable noncontrolling interests	—			37,601			—			39,303
Provision for impairment excluded from FFO	38,941			6,757			223,287			45,866
Noncontrolling interests in depreciation	(24,763		)	(10,410		)	(75,498		)	(15,738		)
Unconsolidated Real Estate Affiliates - gain on investment	—			(3,692		)	(104,354		)	(3,692		)
Allocation of noncontrolling interests of partner to Consolidated and Unconsolidated Properties	586			(2,303		)	(4,916		)	(2,304		)
Gain on sales of investment properties	(5,093		)	(473,274		)	(10,640		)	(473,252		)
Preferred stock dividends	(3,984		)	(3,984		)	(11,952		)	(11,952		)
Gain from changes in control of investment properties and other	(39,712		)	(2,850,017		)	(39,712		)	(2,862,681		)
Depreciation and amortization of capitalized real estate costs - Consolidated Properties	115,490			151,494			343,054			492,870
Depreciation and amortization of capitalized real estate costs - Unconsolidated Properties	131,987			93,921			406,818			249,843
FFO	$	180,029		$	629,367		$	479,088		$	1,299,187

Forward-Looking Statements

Certain statements made in this section or elsewhere in this report may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities

Exchange Act of 1934, as amended. Statements that do not relate to historical or current facts or matters are forward-looking statements. When used, the words “may," "will," "seek," "expects," "anticipates," "believes," "targets," "intends," "should," "estimates," "could," "continue," "assume," "projects," "plans," or similar expressions, are intended to identify forward-looking statements. Although we believe the expectations reflected in any forward-looking statement are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Accordingly, investors should use caution in relying on forward-looking statements.

Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:


•	General volatility of conditions affecting the retail sector;


•	our inability to acquire and maintain tenants or to lease space on terms favorable to us;


•	risks related to the bankruptcy or store closures of national tenants with chains of stores in many of our properties;


•	our inability to sell real estate quickly;


•	risks related to perceptions by retailers and shoppers of the convenience and attractiveness of our retail properties;


•	risks related to the development, expansion and acquisitions of properties;


•	risks related to competition in our business;


•	risks related to natural disasters or terrorist attacks;


•	risks related to cyber and data security breaches or information technology failures;


•	environmental uncertainties and related costs, including costs resulting from uninsured potential losses;


•	general risks related to inflation or deflation;


•	risks relating to impairment charges for our real estate assets;


•	risks related to conflicts of interest with BPY and our status as a "controlled company" within the meaning of the rules of Nasdaq;


•	our dependence on our subsidiaries for cash;


•	risks related to our joint venture partners, including risks related to conflicts of interests, potential bankruptcies, tax-related obligations and financial support relating to such joint venture partners;


•	our inability to maintain status as a REIT, and possible adverse changes to tax laws;


•	risks related to our indebtedness and debt restrictions and covenants;


•	our inability to refinance, extend, restructure or repay near and indeterminate debt;


•	our inability to raise capital through financing activities; and


•	risks related to the BPY Transaction.

We discuss these and other risks and uncertainties in our Annual Report and our quarterly periodic reports filed with the Securities and Exchange Commission. The Company may update that discussion in its periodic reports, but otherwise takes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In July 2017, the Financial Conduct Authority (“FCA”) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR. The Company is not able to predict when LIBOR will cease to be published or precisely how SOFR will be calculated and published. Any changes adopted by FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

The Company has contracts that are indexed to LIBOR and is monitoring and evaluating the related risks, which include interest amounts on our variable rate debt and the swap rate for our interest rate swaps as discussed in Note 6 - Mortgages, Notes and Loans Payable. In the event that LIBOR is discontinued, the interest rates will be based on a fallback reference rate specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect the Company’s ability to borrow or maintain already outstanding borrowings or swaps, but the alternative reference rate could be higher and more volatile than LIBOR.

Certain risks arise in connection with transitioning contracts to an alternative reference rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require substantial negotiation with each respective counterparty.

If a contract is not transitioned to an alternative reference rate and LIBOR is discontinued, the impact is likely to vary by contract. If LIBOR is discontinued or if the method of calculating LIBOR changes from its current form, interest rates on our current or future indebtedness may be adversely affected.

While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

ITEM 4 CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the persons performing the functions of principal executive and principal financial officers for us pursuant to a Master Services Agreement, dated August 27, 2018, among us, Brookfield Asset Management Inc. and other parties thereto (the "Master Services Agreement") of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")).

Based on that evaluation, the persons performing the functions of principal executive and principal financial officers for us pursuant to the Master Services Agreement have concluded that our disclosure controls and procedures were effective at the end of the period covered by this report.

Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

ITEM 1A RISK FACTORS

There are no material changes to the risk factors previously disclosed in our Annual Report.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



Period	(a) Total number of shares (or units) purchased		(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
July 1 - July 31, 2019	$	—	$	—	$	—	(1)
August 1 - August 31, 2019	197,225		18.5583		197,225		(1)
September 1 - September 30, 2019	—		—		—		(1)
Total	$	197,225	$	18.5583	$	197,225	(2)


(1)	On August 28, 2018, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time to time as market conditions warrant.


(2)	As of September 30, 2019, the number of shares of Class A Stock comprising 10% of the Company's public float was greater than 5% of the Company's issued and outstanding Class A Stock, and was equal to 6,604,504 shares of Class A Stock. As of September 30, 2019, 6,207,279 shares of Class A Stock were available for repurchase under the Company's stock repurchase plan.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 OTHER INFORMATION

The other information presented below is being filed as a result of the Company's adoption of the new accounting guidance for lease accounting ("ASC 842") on January 1, 2019. As part of that adoption, the Company elected the available practical expedient, for all classes of assets, not to separate lease components in contracts from the nonlease components in those contracts, when recording revenues associated with operating leases where it is the lessor. Since the lease component is the predominant component under the Company's leases, combined revenues from both the lease and nonlease components are accounted for in accordance with ASC 842 and will be reported in all periods subsequent to the adoption of the new accounting guidance in a single caption, "rental revenues", on the Company's Consolidated Statements of Comprehensive Income. The presentation and disclosure of rental revenues have been adjusted to reflect these changes for the nine months ended September 30, 2019. Refer to Note 2 of Part I, Item 1 "Financial Statements" for further details on these updates to significant accounting policies.

This information is intended to assist investors in making comparisons of the Company's historical financial information with future financial information. The reported financial information below has been reclassified to conform to the current presentation.

The table below summarizes the reclassified presentation of our total revenues by year due to the adoption of the new leasing standard.



	Years Ended December 31,
	2018		2017		2016
Minimum rents	$	1,297,945	$	1,455,039	$	1,449,704
Tenant recoveries	540,376		643,607		668,081
Overage rents	29,659		34,874		42,534
Management fees and other corporate revenues	125,776		105,144		95,814
Other	70,278		89,198		90,313
Total revenues, as reported	$	2,064,034	$	2,327,862	$	2,346,446

The table below summarizes our total revenues as originally reported in our Annual Report to reflect the revised presentation of total combined rental revenues due to the adoption of the new leasing standard.



	Years Ended December 31,
	2018		2017		2016
Total rental revenues	$	1,867,980	$	2,133,520	$	2,160,319
Management fees and other corporate revenues	125,776		105,144		95,814
Other	70,278		89,198		90,313
Total revenues, as reported	$	2,064,034	$	2,327,862	$	2,346,446

ITEM 6 EXHIBITS



		Incorporated by Reference Herein
Exhibit Number	Description	Form	Exhibit	Filing Date	File No.

31.1*	Certification of Brian W. Kingston, Chief Executive Officer, Brookfield Property Group LLC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of Bryan K. Davis, Chief Financial Officer, Brookfield Property Group LLC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**	Certification of Brian W. Kingston, Chief Executive Officer, Brookfield Property Group LLC, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**	Certification of Bryan K. Davis, Chief Financial Officer, Brookfield Property Group LLC, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.SCH*	Inline XBRL Taxonomy Extension Schema Document

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document

104*	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).


*	Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	Brookfield Property REIT Inc.

Date: November 8, 2019	By:	/s/ Michelle Campbell
		Michelle Campbell
		Secretary

Date: November 8, 2019	By:	/s/ Bryan K. Davis
		Bryan K. Davis
		Chief Financial Officer*
		Brookfield Property Group LLC


*	Mr. Davis performs the functions of chief financial officer for Brookfield Property REIT Inc. (the "Company") pursuant to a Master Services Agreement, dated August 27, 2018, among Brookfield Asset Management Inc., the Company and certain other parties thereto.