424B3 1 tm2112801-13_424b3.htm 424B3 tm2112801-13_424b3 - none - 32.5940364s
 Filed pursuant to Rule 424(b)(3)
 Registration Nos. 333-255512,
 333-255512-01, 333-255512-02,
 333-255512-03, 333-25512-04,
 333-255512-05, 333-255512-06,
 333-255512-07, 333-255512-08,
 333-255512-09 and 333-255512-10
PROPOSED BUSINESS COMBINATION — YOUR VOTE IS VERY IMPORTANT
Dear Unitholder:
You are cordially invited to attend a special meeting (the “Meeting”) of the holders (the “BPY Unitholders”) of limited partnership units (the “BPY Units”) of Brookfield Property Partners L.P. (the “Partnership” or “BPY”) to be held virtually, on July 16, 2021 commencing at 11:00 a.m. (Toronto time).
At the Meeting, you will be asked to consider, pursuant to an interim order of the Ontario Superior Court of Justice (Commercial List) dated June 7, 2021, as the same may be varied (the “Interim Order”), and, if deemed advisable, approve, with or without variation, a resolution of BPY Unitholders (the “Arrangement Resolution”), the full text of which is attached as Appendix C to the accompanying circular/prospectus (the “Document”), an arrangement (the “Arrangement”) pursuant to section 182 of the Business Corporations Act (Ontario), as amended, being made pursuant to an Arrangement Agreement dated March 31, 2021 by and among Brookfield Asset Management Inc. (“BAM”), BPY Arrangement Corporation (“Purchaser Sub” and together with BAM, the “Purchaser Parties”) and the Partnership, whereby the Purchaser Parties have agreed to acquire, directly and indirectly, all of the issued and outstanding BPY Units and exchangeable limited partnership units of Brookfield Office Properties Exchange LP (“Exchange LP Units” and together with the BPY Units, “Units”).
You will also be asked to consider and, if deemed advisable, approve, with or without variation, a resolution of BPY Unitholders to amend (the “BPY LPA Amendment” and together with the Arrangement and the transactions contemplated by the BPY LPA Amendment and the Arrangement, the “Transaction”) the second amended and restated limited partnership agreement dated August 8, 2013, as amended, of the Partnership to provide for the Arrangement and the grant of dissent rights to registered BPY Unitholders in connection with the Transaction (together with the Arrangement Resolution, the “Transaction Resolutions”). The full text of the Transaction Resolutions is attached as Appendix C to the Document.
As more particularly described in the Document, BPY Unitholders and holders of Exchange LP Units (“Exchange LP Unitholders” and together with the BPY Unitholders, “Unitholders”) will receive a value of $18.17 per Unit, representing total consideration of $6.5 billion payable to the Unitholders other than BAM and any subsidiary of BAM (other than BPY and its subsidiaries) (the “Public Unitholders”). This price represents an increase of 10%, including the appreciation in the Class A Limited Voting Shares (the “BAM Shares”) in the capital of BAM, over the non-binding proposal made by BAM on January 3, 2021, a 26% premium to the unaffected BPY Unit price on December 31, 2020, and a 6% premium to the volume-weighted average price of BPY Units on the Nasdaq Stock Market (“Nasdaq”) since the announcement of BAM’s initial offer on January 4, 2021.
Unitholders will have the ability to elect to receive, per Unit, $18.17 in cash, 0.3979 of a BAM Share, or 0.7268 of a preferred unit to be issued by a subsidiary limited partnership of BPY, Brookfield Property Preferred L.P. (“New LP”), with a liquidation preference of $25.00 per unit (“New LP Preferred Unit”), subject to pro-ration. Pro-ration will be based on maximum cash consideration of approximately 50% of the total value of the Units ($3.27 billion in total cash payable to Public Unitholders), a maximum amount of BAM Shares equal to approximately 42% of the total value of the Units (59.3 million BAM Shares payable to Public Unitholders), and a maximum amount of New LP Preferred Units with a liquidation value of approximately 8% of the total value of the Units ($500 million in liquidation preference of New LP Preferred Units payable to Public Unitholders). If Unitholders collectively elect to receive in excess of $500 million in liquidation preference of New LP Preferred Units, the amount of New LP Preferred Units can increase to a maximum of $1.0 billion in liquidation preference, offset against the maximum amount of BAM Shares. The maximum amount of cash consideration would not be affected. These maximum consideration amounts include the amounts payable to BPYU Stockholders (as such term is defined below) as described below.
The BAM Shares are traded on the New York Stock Exchange (the “NYSE”) under the symbol “BAM” and on the Toronto Stock Exchange (the “TSX”) under the symbol “BAM.A”. On March 31, 2021, the last full trading day prior to the public announcement of the Transaction, the closing price of BAM Shares on the NYSE was $44.50 and on the TSX was C$55.90. On June 4, 2021, the most recent practicable date prior to the date of this Document, the closing price of BAM Shares on the NYSE was $50.06 and on the TSX was C$60.49. The implied value of the BAM Shares consideration to be received in exchange for each Unit will fluctuate based on the market price of BAM Shares until the completion of the Transaction because the total BAM Share consideration is payable in a fixed number of BAM Shares. We urge you to obtain current stock price quotations for BAM Shares.
There is currently no market for the New LP Preferred Units. New LP has applied to list the New LP Preferred Units on Nasdaq and the TSX. Listing on Nasdaq is subject to New LP fulfilling all of the requirements of Nasdaq. The TSX has conditionally approved the listing of the New LP Preferred Units. Listing is subject to New LP fulfilling all of the requirements of the TSX on or before August 26, 2021.
The Transaction was unanimously recommended by a special committee of the BPY Board of Directors composed entirely of independent directors (the “Special Committee”). The BPY Board of Directors (with Mr. Jeffrey Blidner abstaining because of his executive position at BAM) (the “Directors”), following receipt of the unanimous recommendation of a Special Committee, has unanimously determined that the Arrangement is fair to the Unaffiliated BPY Unitholders, that the Transaction is in the best interest of BPY and
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(continued from cover)
recommends that BPY Unitholders other than BAM and its affiliates vote FOR the Transaction Resolutions. The attached Document describes the background to the determinations and recommendations of the Directors, including the process and recommendations of the Special Committee.
This Document contains a detailed description of the Transaction and includes other information to assist you in considering the matters to be voted upon and which we encourage you to carefully consider. Please read carefully this entire Document, including “Risk Factors” beginning on page 45, for a discussion of the risks relating to the Transaction. If you require assistance, you should consult your own financial, legal or other professional advisors.
Voting and Elections
Your vote is important regardless of the number of BPY Units you own. Whether or not you plan to attend the Meeting, please take the time to vote by using the internet or by telephone as described in this Document or by completing the enclosed proxy card and mailing it in the enclosed envelope. Information about the Meeting, the Transaction and the other business to be considered at the Meeting is contained in this Document. You are urged to read this Document carefully.
If you are not registered as the holder of your BPY Units but hold your BPY Units through a broker or other intermediary, you should follow the instructions provided by your broker or other intermediary to vote your BPY Units. See the section in the Document entitled “Meeting and Voting Information” for further information on how to vote your BPY Units. If you hold your Units through a broker or other intermediary, please contact that broker or other intermediary for instructions and assistance in receiving the Transaction Consideration (as defined in the Document) in respect of your Units.
Registered BPY Unitholders have been sent a Letter of Transmittal and Election (printed on YELLOW paper) along with the Document and registered Exchange LP Unitholders have been sent a Letter of Transmittal and Election (printed on BLUE paper) along with the Document. The Letter of Transmittal and Election or a manually executed facsimile thereof, properly completed and duly executed in accordance with the instructions set out therein, together with all other required documents, must be received by AST Trust Company (Canada) at the office specified on the back page of the Letter of Transmittal and Election, no later than 5:00 p.m. (Toronto time) on the election deadline or your election will not be processed. Further information with respect to the election deadline is set forth under the heading “Description of the Transaction — Elections by Unitholders and Pro-ration” of the Document.
*   *   *   *   *
If the Transaction Resolutions are passed by the requisite BPY Unitholder approval thresholds at the Meeting, it currently is anticipated that the Transaction will be completed in the third quarter of 2021.
Your Vote is Important. Vote Today.
Sincerely,
/s/ Omar Carneiro da Cunha
Omar Carneiro da Cunha
Director
/s/ Stephen DeNardo
Stephen DeNardo
Director
/s/ Louis Joseph Maroun
Louis Joseph Maroun
Director
/s/ Lars Rodert
Lars Rodert
Director
Neither the U.S. Securities and Exchange Commission nor any state or Canadian securities regulatory authority has approved or disapproved the Transaction, approved or disapproved the securities to be issued under the Document, passed upon the merits or fairness of the Transaction or determined if the Document is truthful or complete. Any representation to the contrary is a criminal offense.
The Document is dated June 8, 2021 and is first being mailed to BPY Unitholders on or about June 17, 2021.

 
INFORMATION FOR STOCKHOLDERS OF BROOKFIELD PROPERTY REIT INC.
This Document is also being sent to holders of shares (“BPYU Shares”) of class A stock, par value $0.01 per share, of Brookfield Property REIT Inc. (“BPYU”) in connection with the notice of Transaction described below. All of the issued and outstanding BPYU Shares will be exchanged for the “BPY Units Amount” pursuant to Article IV, Section C(3)(h) of the certificate of incorporation of BPYU (the “BPYU Certificate of Incorporation”) and, in lieu of delivering a BPY Unit, each outstanding BPYU Share will exchanged for the Default Consideration (as defined herein) (subject to pro-ration) (the “BPYU Mandatory Exchange”). Holders of BPYU Shares (“BPYU Stockholders”) are not entitled to vote on the Transaction Resolutions. BPYU Stockholders were provided a notice of the Transaction dated April 21, 2021, which included instructions on how to exchange their BPYU Shares for BPY Units so that they are able to vote, make elections as to the Transaction consideration and exercise dissent rights with respect to the Transaction. Any BPYU Stockholder that does not exchange their BPYU Shares and hold BPY Units on or prior to July 20, 2021 (the “election deadline”) (further described under “Voting and Elections” below) will receive at closing the same per share consideration as will be received by Public Unitholders who have not made an election, being a combination of approximately 50% cash, 42% BAM Shares and 8% New LP Preferred Units (each subject to pro-ration and adjustment as described herein). The aggregate consideration of $6.5 billion payable to the Public Unitholders in the Transaction includes the amount payable to BPYU Stockholders. The Transaction will not be subject to a vote of BPYU Stockholders and BPYU Stockholders are not entitled to vote at the Meeting or exercise dissent rights. Any BPYU Stockholders who wish to elect their preferred form of consideration rather than the default pro-rated amounts are encouraged to convert their BPYU Shares into BPY Units as soon as possible. BPYU will not process exchange requests by holders of BPYU Shares received after the day that is ten business days prior to the Effective Date, which corresponds to the ten business-day delivery period for exchange requests set forth in the BPYU Certificate of Incorporation. The Effective Date is expected to be as soon as reasonably practicable following receipt of the Final Order. Instructions on how BPYU Stockholders can convert BPYU Shares into BPY Units can be found at https://bpy.brookfield.com/bpyu/stock-and-dividends/exchange-bpyu-for-bpy. The information contained on, or available through, BPYU’s website is not incorporated by reference into this Document.
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BROOKFIELD PROPERTY PARTNERS L.P.
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
NOTICE IS HEREBY GIVEN that a special meeting (the “Meeting”) of the holders (“BPY Unitholders”) of limited partnership units (“BPY Units”) of Brookfield Property Partners L.P. (the “Partnership”) will be held on July 16, 2021 at 11:00 a.m. (Toronto Time). The Meeting will be a virtual meeting conducted via live audio webcast. BPY Unitholders can access the Meeting by visiting www.virtualshareholdermeeting.com/BPY2021. The Meeting is being held for the following purposes:
1.
to consider, pursuant to an interim order of the Ontario Superior Court of Justice (Commercial List) dated June 7, 2021, as the same may be varied (the “Interim Order”), and, if deemed advisable, approve, with or without variation, a resolution of BPY Unitholders (the “Arrangement Resolution”), the full text of which is attached as Appendix C to the accompanying circular/prospectus (the “Document”), to approve an arrangement (the “Arrangement”) pursuant to section 182 of the Business Corporations Act (Ontario) as amended, (the “OBCA”) being made pursuant to an Arrangement Agreement dated March 31, 2021, the full text of which is attached as Appendix B to this Document, by and among Brookfield Asset Management Inc. (“BAM”), BPY Arrangement Corporation (“Purchaser Sub” and together with BAM, the “Purchaser Parties”) and the Partnership whereby the Purchaser Parties have agreed to acquire, directly and indirectly, all of the issued and outstanding BPY Units and exchangeable limited partnership units (“Exchange LP Units”) of Brookfield Office Properties Exchange LP (“Exchange LP”), all as more particularly described and set forth in this Document; and
2.
to consider and, if deemed advisable, approve, with or without variation, a resolution of BPY Unitholders to amend (the “BPY LPA Amendment” and together with the Arrangement and the transactions contemplated by the BPY LPA Amendment and the Arrangement, the “Transaction”) the second amended and restated limited partnership agreement dated August 8, 2013, as amended, of the Partnership to provide for the Arrangement and the grant of dissent rights to registered BPY Unitholders in connection with the Transaction (together with the Arrangement Resolution, the “Transaction Resolutions”), the full text of which is attached as Appendix C to this Document.
Any other business that may properly come before the Meeting or any adjournment thereof will also be considered.
Pursuant to the BPY LPA Amendment, registered BPY Unitholders (“Registered BPY Unitholders”) will be granted the right to dissent in respect of the Transaction and be paid the fair value of their BPY Units. These dissent rights and the procedures for their exercise are described in this Document under the heading “Rights of Dissenting BPY Unitholders”. Only Registered BPY Unitholders are entitled to exercise rights of dissent. Non-registered BPY Unitholders and holders of Exchange LP Units and BPYU Shares are not entitled to exercise rights of dissent. Failure to follow exactly the procedures set forth in the BPY LPA Amendment will result in the loss or unavailability of any right of dissent. Registered BPY Unitholders considering exercising their rights of dissent should consult their legal counsel and tax and investment advisors.
The Document accompanying this notice provides additional information relating to the matters to be dealt with at the Meeting and includes the full text of the Transaction Resolutions, the BPY LPA Amendment and the Interim Order, attached as Appendix C, Appendix D and Appendix F, respectively, which are incorporated by reference into and form part of this notice.
You have the right to vote at the Meeting if you are a holder of BPY Units as at the close of business on June 8, 2021. The Document tells you how to exercise your right to vote your BPY Units.
Registered BPY Unitholders have been sent a Letter of Transmittal and Election (printed on YELLOW paper) along with the Document and registered holders of Exchange LP Units have been sent a Letter of Transmittal and Election (printed on BLUE paper) along with the Document. The Letter of Transmittal and Election or a manually executed facsimile thereof, properly completed and duly executed in accordance with the instructions set out therein, together with all other required documents, must be received by AST Trust Company (Canada) at the office specified on the back page of the Letter of Transmittal and Election, no later than 5:00 p.m. (Toronto time) on July 20, 2021 or your election will not be processed. Further information
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with respect to the election deadline is set forth under the heading “Description of the Transaction — Elections by Unitholders and Pro-ration” of the Document.
By Order of the Board of Directors of Brookfield Property Partners Limited, as general partner and on behalf of Brookfield Property Partners L.P.
/s/ Jane Sheere
Jane Sheere
Secretary
Hamilton, Bermuda
June 8, 2021
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REFERENCES TO ADDITIONAL INFORMATION
This proxy circular/prospectus (this “Document”) incorporates by reference important business and financial information about BPY and BAM from documents that are not included in or delivered with this Document. This information is available to you without charge upon your oral or written request. You can obtain the documents incorporated by reference into this Document by requesting them in writing or by telephone from the appropriate entity at the following addresses and telephone numbers:
Brookfield Asset Management Inc.
Brookfield BPY Holdings Inc.
Brookfield BPY Retail Holdings II Inc.
181 Bay Street, Suite 300
Toronto, Ontario M5J 2T3
Attention: Investor Relations
Email: enquiries@brookfield.com
Telephone: (416) 359-8647
Brookfield Property Partners L.P.
Brookfield Property Preferred L.P.
BPY Bermuda Holdings Limited
BPY Bermuda Holdings II Limited
BPY Bermuda Holdings IV Limited
BPY Bermuda Holdings V Limited
BPY Bermuda Holdings VI Limited
73 Front Street, 5th Floor
Hamilton, Bermuda HM 12
Attention: Investor Relations
Email: bpy.enquiries@brookfield.com
Telephone: (855) 212-8243
If you would like to request documents, please do so by July 5, 2021 in order to receive them before the Meeting.
This Document also incorporates by reference certain information with respect to BPYU. You may request a copy of filings made by BPYU with the SEC, at no cost, by writing or telephoning BPYU’s investor relations department at: Brookfield Property REIT Inc., Attention: Investor Relations, Brookfield Place, 250 Vesey Street, 15th Floor, New York, New York 10281; Telephone: (855) 212-8243; Email: bpy.enquiries@brookfield.com.
For a more detailed description of the information incorporated by reference into this Document and how you may obtain it, see the section entitled “Where You Can Find More Information; Incorporation by Reference,” beginning on page vii of this Document. You are urged to read this Document, including any documents incorporated by reference into this Document, and its annexes carefully and in their entirety.
ABOUT THIS DOCUMENT
This Document, which forms part of a registration statement on Form F-4 filed by BAM, New LP and the Guarantors (as defined herein) with the SEC, constitutes a prospectus of BAM, New LP, and the Guarantors for purposes of the Securities Act of 1933, as amended (the “U.S. Securities Act”), with respect to the BAM Shares and New LP Preferred Units (and related Guarantees (as defined herein)) to be issued in connection with the Transaction. This Document also constitutes a management information circular for BPY for the solicitation of proxies in connection with the Meeting. In addition, it constitutes a notice of meeting with respect to the Meeting.
This Document also constitutes a prospectus of BAM, New LP, and the Guarantors with respect to the BAM Shares and New LP Preferred Units (and related Guarantees) to be issued to holders of the BPYU Shares pursuant to Article IV, Section C(3)(h) of the fourth amended and restated certificate of incorporation of BPYU effective as of June 26, 2019 (the “BPYU Certificate of Incorporation”).
You should rely only on the information contained or incorporated by reference into this Document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this Document. This Document is dated June 8, 2021. You should not assume that the information contained in this Document is accurate as of any other date. You should not assume that the information incorporated by reference into this Document is accurate as of any date other than the date of or date contemplated by such incorporated document. Neither the mailing of this Document nor the issuance of BAM Shares or the New LP Preferred Units (and related Guarantees), as applicable, in connection with the matters described in this Document will create any implication to the contrary.
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This Document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities or the solicitation of a proxy in any jurisdiction in which, or from any person with respect to whom, it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this Document regarding BAM has been provided by BAM, information contained in this Document regarding BPY, New LP and the other Guarantors has been provided by BPY and information contained in this Document regarding BPYU has been provided by BPYU.
In this Document, “BPY”, “Partnership”, or “Brookfield Property Partners”, refers to Brookfield Property Partners L.P. and its consolidated subsidiaries, unless otherwise noted or the context requires otherwise.
This Document explains the business to be considered at the Meeting referred to in the accompanying notice of meeting (the “Notice”) to be held virtually on July 16, 2021 at 11:00 a.m. (Toronto time). The Meeting will be a virtual meeting conducted via live audio webcast. Holders of BPY Units (“BPY Unitholders”) can access the Meeting by visiting www.virtualshareholdermeeting.com/BPY2021. The Meeting is being held to consider and, if deemed advisable, approve, with or without variation, the Transaction Resolutions.
You have the right to vote at the Meeting if you are a holder of BPY Units as at the close of business on June 8, 2021 (the “Record Date”). The Document tells you how to exercise your right to vote your BPY Units.
Only BPY Unitholders will be entitled to vote on the Transaction Resolutions. For greater certainty, holders of Exchange LP Units (Exchange LP Unitholdersand together with the BPY Unitholders, “Unitholders) and holders of BPYU Shares (“BPYU Stockholders) will not be entitled to vote on the Transaction Resolutions or exercise rights of dissent. Exchange LP Unitholders will be entitled to elect their preferred form of consideration. BPYU Stockholders who wish to elect their preferred form of consideration are encouraged to convert their BPYU Shares into BPY Units as soon as possible. Instructions on how BPYU Stockholders can convert BPYU Shares can be found at https://bpy.brookfield.com/bpyu/stock-and-dividends/exchange-bpyu-for-bpy. The information contained on, or available through, this website is not incorporated by reference into the Document. Exchange LP Unitholders and BPYU Stockholders may attend the Meeting as guests by visiting www.virtualshareholdermeeting.com/BPY2021.
The solicitation of proxies by this Document is being made by or on behalf of the management of Brookfield Property Group LLC (“Brookfield Property Group”), one of the service providers of BPY and the total cost of solicitation will be borne by the Partnership. The solicitation will be made primarily by mail, but proxies may also be solicited personally or by telephone by regular employees of the Partnership at nominal cost.
The information in this Document is given as at June 8, 2021, unless otherwise indicated.
No person has been authorized to give information or to make any representations in connection with the Arrangement pursuant to section 182 of the OBCA involving the Purchaser Parties and BPY or any other matters described herein other than those contained or incorporated by reference in this Document and, if given or made, any such information or representations should not be relied upon in making a decision as to how to vote on the Transaction Resolutions, or be considered to have been authorized by the Purchaser Parties or BPY.
Pursuant to National Instrument 54-101 — Communication with Beneficial Owners of Securities of a Reporting Issuer, BPY is indirectly sending proxy-related materials to all objecting and non-objecting beneficial owners
This Document does not constitute an offer to buy or sell, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized, or in which the person making such an offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such an offer or solicitation.
You should not construe the contents of this Document as legal, tax, investment or financial advice and should consult with your own professional advisors as to the relevant legal, tax, investment, financial or other matters in connection herewith.
Currency and Exchange Rate Information
All dollar amounts in this Document are expressed in U.S. dollars and references to “$”, “US$”, “dollars”, “USD” or “U.S. dollars” in this Document refer to U.S. dollars. On June 4, 2021, the Bank of Canada daily exchange rate for U.S. dollars was US$1.00 = C$1.2084.
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Service of Process and Enforceability of Civil Liabilities
BPY is a partnership existing under the laws of Bermuda. BAM is a corporation formed by articles of amalgamation dated August 1, 1997 and is organized pursuant to articles of amalgamation under the OBCA dated January 1, 2005. You should be aware the disclosure requirements applicable to this Document may be different from those of the United States. The historical financial information of BPY and BAM that is included or incorporated by reference herein is prepared in U.S. dollars and has been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Boards (“IFRS”), which differ from United States generally accepted accounting principles in certain material respects and, thus, may not be comparable to financial statements of U.S. companies. The enforcement by you of civil liabilities under United States federal and state securities laws may be affected adversely by the fact that BPY and the Purchaser Parties are incorporated or otherwise established and located outside the United States, that some of the officers and directors of the BPY General Partner and the Purchaser Parties are non-residents of the United States, that some of the experts named in this Document are non-residents of the United States, and that some of the assets of the BPY and the Purchaser Parties and the persons referred to above are located outside the United States. You may not be able to sue BPY or the Purchaser Parties, or their respective officers or directors, as applicable, in a foreign court for violations of United States federal or state securities law. It may be difficult to compel a foreign issuer and its affiliate to subject themselves to a United States court’s jurisdiction.
Neither the SEC nor any state or Canadian securities regulatory authority has approved or disapproved of the Transaction or the securities to be delivered in connection with the Transaction, passed upon the merits or fairness of the Transaction, or passed upon the adequacy or accuracy of the disclosure in the Document. Any representation to the contrary is a criminal offense.
Forward-Looking Statements and Information
This Document contains “forward-looking statements” and “forward-looking information” within the meaning of applicable securities laws and regulations. Forward-looking statements include statements that are predictive in nature or depend upon or refer to future events or conditions, include statements regarding BPY’s and BAM’s operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”, “forecasts”, “likely”, or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”.
Although BPY and BAM believe that their anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond BPY’s and BAM’s control, which may cause their actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements and information.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, most of which are difficult to predict and many of which are beyond BAM’s and BPY’s control. In addition to factors previously disclosed in BAM’s and BPY’s reports filed with securities regulators in Canada and the United States and those identified elsewhere in this Document, the following factors, among others, could cause actual results to differ materially from forward-looking statements and information or historical performance: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of BAM and BPY to terminate the Arrangement Agreement; the outcome of any legal proceedings that may be instituted against BAM, BPY or their respective unitholders, shareholders or directors; the ability to meet closing conditions to the Transaction; a delay in closing the Transaction; the ability to obtain approval by Unaffiliated BPY Unitholders on the expected terms and schedule; and general political, economic and market conditions. For a more detailed discussion of these factors, also see the information under “Business Environment and Risks” in the BAM Annual Report and under Item 3.D. “Risk
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Factors” in the BPY Annual Report, and in each case any material updates to these factors contained in any of BAM’s or BPY’s future filings.
BAM and BPY caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on BAM’s and BPY’s forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Please keep this cautionary note in mind as you read this Document.
Except as required by law, BAM and BPY undertake no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.
Where You Can Find More Information; Incorporation by Reference
This Document is being made available in respect of the Transaction. In connection with the Transaction, BAM, New LP and the Guarantors have filed a registration statement on Form F-4 to register with the SEC the BAM Shares and the New LP Preferred Units (and related Guarantees) to be issued to BPY Unitholders, Exchange LP Unitholders and BPYU Stockholders. This Document is a part of that registration statement and constitutes a prospectus of BAM, New LP and the Guarantors in addition to being a management information circular for BPY. The registration statement, including the attached annexes and exhibits, contains additional relevant information about BAM, New LP and the Guarantors, and the BAM Shares and the New LP Preferred Units (and related Guarantees). The rules and regulations of the SEC allow BAM and BPY to omit certain information included in the registration statement from this Document. Certain information regarding BPYU is also incorporated by reference in this Document.
BAM, BPY and BPYU file or furnish reports and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, available at www.sec.gov. A free copy of this Document, as well as other filings containing information about BAM, BPY and BPYU, and their subsidiaries, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from BPY by accessing BPY’s website at http://bpy.brookfield.com, from BAM by accessing BAM’s website at http://bam.brookfield.com and from BPYU’s website at http://bpy.brookfield.com/bpyu. Copies of the Document can also be obtained, free of charge, by directing a request to Investor Relations, Brookfield Property Partners L.P., 73 Front Street, 5th Floor, Hamilton, Bermuda HM 12, by calling (855) 212-8243 or by sending an e-mail to bpy.enquiries@brookfield.com or to Brookfield Investor Relations by calling (416) 359-8647 or by sending an e-mail to enquiries@brookfield.com.
Because the Transaction is a “going private” transaction, BPY and the Purchaser Parties have filed with the SEC a Transaction Statement on Schedule 13E-3 with respect to the Transaction. The Schedule 13E-3, including any amendments and exhibits filed or incorporated by reference as a part of it, is available for inspection as set forth above. The reports, opinions or appraisals filed as exhibits to the Schedule 13E-3 will also be made available for inspection and copying at the principal executive offices of BPY during regular business hours by any interested holder of BPY Units or any representative who has been so designated in writing. The Schedule 13E-3 will be amended to report promptly any material change in the information set forth in the most recent Schedule 13E-3 filed with the SEC. You are urged to read the entire Schedule 13E-3 carefully, including the exhibits, in connection with your consideration of the Transaction.
The SEC allows BPY, BAM and BPYU to “incorporate by reference” into this Document information that BPY, BAM and BPYU file with the SEC, which means that important information can be disclosed to you by referring you to those documents and those documents will be considered part of this Document. The information incorporated by reference is an important part of this Document. Certain information that is subsequently filed with the SEC will automatically update and supersede information in this Document and in earlier filings with the SEC. Any statement so modified or superseded will not be deemed, except as so updated or superseded, to constitute a part of this Document. Some documents or information, such as information furnished by BPY or BAM on Form 6-K, unless expressly stated otherwise therein, or certain information furnished by BPYU on Form 8-K, are deemed furnished and not filed in accordance with SEC rules. None of those documents and none of that information is incorporated by reference into this Document. This Document also contains summaries of certain provisions contained in some of the BPY, BAM or BPYU
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documents described in this Document, but reference is made to the actual documents for complete information. All of these summaries are qualified in their entirety by reference to the actual documents.
The following documents, which have been filed with the securities regulatory authorities in Canada and/or filed with, or furnished to, the SEC, as applicable, are specifically incorporated by reference in this Document:
1.
2.
Exhibits 99.1 and 99.2 of BPY’s Form 6-K filed on EDGAR on May 7, 2021, which includes BPY’s unaudited condensed consolidated financial statements, together with management’s discussion and analysis thereon, as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020;
3.
4.
5.
6.
7.
8.
9.
In addition, all documents filed by BPY, BAM and BPYU with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the U.S. Exchange Act after the date of filing of the registration statement on Form F-4 of which this Document forms a part and before the date of the Meeting will be deemed to be incorporated by reference into this Document and made a part of this Document from the date of filing; provided, however, that BPY and BAM are not incorporating any information furnished by BPY or BAM on Form 6-K, unless specifically stated otherwise.
BAM has supplied all information contained in or incorporated by reference into this Document relating to BAM, and BPY has supplied all such information contained in or incorporated by reference into this Document relating to BPY.
You should not rely on information that purports to be made by or on behalf of BPY, BAM or BPYU other than the information contained in or incorporated by reference into this Document. None of BPY, BAM or BPYU has authorized anyone to provide you with information on behalf of BPY, BAM or BPYU,
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respectively, that is different from what is contained in this Document. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this Document or solicitations of proxies are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this Document does not extend to you.
This Document is dated June 8, 2021. You should not assume that the information contained in this Document is accurate as of any date other than that date, or that the information incorporated by reference into this Document is accurate as of any date other than the date of such information, and neither its mailing to BPY Unitholders, Exchange LP Unitholders or BPYU Stockholders nor the issuance of BAM Shares or New LP Preferred Units (and related Guarantees) in the Transaction will create any implication to the contrary.
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TABLE OF CONTENTS
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SUMMARY
This Summary summarizes the material information presented in greater detail elsewhere in this Document. You should read carefully this entire Document, its annexes and the documents referred to or incorporated by reference in this Document. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Glossary of Terms attached as Appendix A.
Brookfield Property Partners L.P.
Brookfield Property Partners, through BPY and its subsidiary BPYU, is one of the world’s premier real estate entities, with approximately $88 billion in total assets. BPY owns and operates iconic properties in the world’s major markets, and its global portfolio includes office, retail, multifamily, logistics, hospitality, triple net lease, manufactured housing and student housing. BPY is the flagship listed real estate company of BAM.
BPY’s principal executive offices are located at 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda and its telephone number is +441-294-3309.
BPYU’s principal executive offices are located at Brookfield Place, 250 Vesey Street, 15th Floor, New York, New York 10281 and its telephone number is (212) 417-7000.
The Purchaser Parties
BAM
BAM is a leading global alternative asset manager with approximately $600 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit. BAM owns and operates long-life assets and businesses, many of which form the backbone of the global economy. Utilizing its global reach, access to large-scale capital and operational expertise, BAM offers a range of alternative investment products to investors around the world — including public and private pension plans, endowments and foundations, sovereign wealth funds, financial institutions, insurance companies and private wealth investors.
BAM’s principal executive offices are located at Brookfield Place, 181 Bay Street Toronto, Ontario, Canada M5J 2T3, and its telephone number is (416) 363-9491.
Purchaser Sub
Purchaser Sub was formed primarily to participate as a purchaser in the Transaction. It does not currently conduct any business or own any significant assets.
Purchaser Sub’s principal executive offices are located at Brookfield Place, 181 Bay Street Toronto, Ontario, Canada M5J 2T3, and its telephone number is (416) 363-9491.
New LP and the Guarantors
New LP is a Bermuda exempted limited partnership formed primarily to issue the New LP Preferred Units. Its general partner is Brookfield Property L.P. (the “New LP General Partner”), a Bermuda exempted limited partnership registered in Bermuda that has its registered office in Bermuda and is a subsidiary of BPY. New LP’s principal executive offices are located at 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda and its telephone number is +441-294-3309.
New LP does not currently conduct any business or own any significant assets. New LP will issue the New LP Preferred Units in connection with the Transaction. The New LP Preferred Units will be guaranteed by BPY, the New LP General Partner, Brookfield BPY Holdings Inc., an Ontario corporation (“CanHoldco”), Brookfield BPY Retail Holdings II Inc., an Ontario corporation (“CanHoldco 2”), BPY Bermuda Holdings Limited, a Bermuda company (“Bermuda Holdco”), BPY Bermuda Holdings II Limited, a Bermuda company (“Bermuda Holdco 2”), BPY Bermuda Holdings IV Limited, a Bermuda company (“Bermuda Holdco 4”), BPY Bermuda Holdings V Limited, a Bermuda company (“Bermuda Holdco 5”) and BPY Bermuda Holdings VI Limited (“Bermuda Holdco 6” and, collectively with CanHoldco, CanHoldco 2, Bermuda Holdco, Bermuda Holdco 2, Bermuda Holdco 4 and Bermuda Holdco 5, the “Holding Entities” and collectively with
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BPY and the New LP General Partner, the “Guarantors”). The New LP General Partner owns, directly or indirectly, all of the common shares of the Holding Entities.
The principal executive office for each of CanHoldco and CanHoldco 2 is located at Suite 300, Brookfield Place, 181 Bay Street, Toronto, Ontario M5J 2T3 and the telephone number for each is (416) 363-9491. The principal executive office for each of Bermuda Holdco, Bermuda Holdco 2, Bermuda Holdco 4, Bermuda Holdco 5, Bermuda Holdco 6 and the New LP General Partner is located at 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda and the telephone number for each is +441-294-3309.
The Transaction
Acquisition of Units
The Arrangement is being implemented pursuant to the Plan of Arrangement. See “Description of the Transaction” and the Plan of Arrangement which is attached as Appendix E to this Document for more detailed information on the process of the Arrangement, including the process of the acquisition of the Units not owned by BAM and any subsidiary of BAM, other than BPY and its subsidiaries (“Brookfield”).
Elections and Types of Consideration
The principal purpose of the Meeting is for BPY Unitholders to consider the proposed acquisition by the Purchaser Parties, directly or indirectly, pursuant to the BPY LPA Amendment and in accordance with the Plan of Arrangement of 100% of the BPY Units for consideration per BPY Unit of one of the following (subject to pro-ration, as described herein):
1.
0.3979 BAM Shares (the “BAM Share Consideration”);
2.
$18.17 in cash (the “Cash Consideration”); or
3.
0.7268 New LP Preferred Units (“New LP Preferred Unit Consideration” and together with the BAM Share Consideration and the Cash Consideration, hereinafter referred to as the “Types of Consideration”).
The Purchaser Parties, directly or indirectly, will also acquire 100% of the Exchange LP Units pursuant to the Plan of Arrangement. Exchange LP Unitholders may also elect for each Exchange LP Unit the Type of Consideration (subject to pro-ration, as described herein). Unitholders who fail to make an election will be deemed to have elected to receive 50.4678% of the Cash Consideration, 41.8104% of the BAM Share Consideration and 7.7218% of the New LP Preferred Unit Consideration (together, the “Default Consideration”). In addition, all of the issued and outstanding BPYU Shares will be acquired by way of an exchange of the BPYU Shares for the “BPY Units Amount” ​(as defined in the BPYU Certificate of Incorporation) pursuant to Article IV, Section C(3)(h) of the BPYU Certificate of Incorporation. In accordance with such section, in lieu of delivering a BPY Unit, the Purchaser Parties have elected to provide, or cause to be provided, the Default Consideration (subject to pro-ration) in exchange for each outstanding BPYU Share at the closing of the Transaction.
The BAM Shares are co-listed on the New York Stock Exchange (“NYSE”) under the symbol “BAM” and the Toronto Stock Exchange (“TSX”) under the symbol “BAM.A.” Further information with respect to BAM and the BAM Shares is set forth in “Information Concerning the Purchaser Parties — BAM” and in the BAM Annual Report that is incorporated into and forms part of this Document. New LP has applied to have the New LP Preferred Units listed on Nasdaq and the TSX. Listing on Nasdaq is subject to New LP fulfilling all of the requirements of Nasdaq. The TSX has conditionally approved the listing of the New LP Preferred Units. Listing is subject to New LP fulfilling all of the requirements of the TSX on or before August 26, 2021. For information on New LP and the New LP Preferred Units, please see “Information Concerning New LP and the New LP Preferred Units”.
The New LP Preferred Units will be guaranteed by the Guarantors. The Guarantors will irrevocably and unconditionally guarantee in full, on a joint and several basis (each, a “Guarantee” and collectively, the “Guarantees”), the payment of (the “New LP Preferred Unit Guaranteed Obligations”):
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1.
all accumulated, accrued and unpaid distributions that have been declared on the New LP Preferred Units out of funds legally available for such distributions;
2.
the applicable redemption price, plus all accumulated, accrued and unpaid distributions to the date of redemption, with respect to any New LP Preferred Units called for redemption by New LP;
3.
$25.00 per New Preferred Unit upon the maturity of the New LP Preferred Units plus all accumulated, accrued and unpaid distributions to the maturity date; and
4.
upon a voluntary or involuntary dissolution, winding-up or termination of New LP, the aggregate of the liquidation preference of $25.00 and all accumulated, accrued and unpaid distributions on the New LP Preferred Units, whether or not declared, without regard to whether New LP has sufficient assets to make full payment as required on liquidation.
Unless the context otherwise requires, references to “New LP Preferred Units” include both the New LP Preferred Units and the related Guarantees and references to “New LP Preferred Unit Consideration” include both the New LP Preferred Unit Consideration and the related Guarantees. Unitholders must choose only one of the Types of Consideration for each Unit they hold.
For Unitholders other than BAM and any subsidiary of BAM, other than BPY and its subsidiaries (“Public Unitholders”), the Types of Consideration are subject to, and pro-ration will be based on, an aggregate maximum of 59,279,337 BAM Shares (the “Total BAM Share Consideration”), maximum aggregate Cash Consideration of $3,267,869,417 (the “Total Cash Consideration”) and an aggregate maximum of 20,000,000 New LP Preferred Units (the “Threshold New LP Preferred Unit Consideration” and together with the Total BAM Share Consideration and the Total Cash Consideration, the “Transaction Consideration”); provided that if Public Unitholders elect to receive in excess of 20 million New LP Preferred Units, the amount of New LP Preferred Units can increase to an aggregate maximum of 40 million New LP Preferred Units, with such increase being offset against the Total BAM Share Consideration. The Total Cash Consideration will not be affected. These maximum consideration amounts include the amounts payable to BPYU Stockholders.
The Type of Consideration and amount of each Type of Consideration provided to Unitholders and BPYU Stockholders is subject to adjustment for pro-ration and fractional BAM Shares and fractional New LP Preferred Units, as described herein. See “Description of the Transaction — Elections by Unitholders”.
Registered BPY Unitholders have been sent a Letter of Transmittal and Election (printed on YELLOW paper) along with this Document, and Registered Exchange LP Unitholders have been sent a Letter of Transmittal and Election (printed on BLUE paper) along with this Document. The Letter of Transmittal and Election or a manually executed facsimile thereof, properly completed and duly executed in accordance with the instructions set out therein, together with all other required documents, must be received by the Depositary at the office specified on the back page of the Letter of Transmittal and Election, no later than 5:00 p.m. (Toronto time) on July 20, 2021 (the “election deadline”) or your election will not be processed. Further information with respect to the election deadline is set forth under the heading “Description of the Transaction — Elections by Unitholders and Pro-ration” of the Document.
Pro-Ration
If the aggregate amounts elected (or deemed to be elected) by Public Unitholders, together with the amounts owing to BPYU Stockholders, for one or more Types of Consideration are in excess of the corresponding maximum amount listed above, the remaining Type(s) of Consideration will be undersubscribed (with each undersubscribed Type of Consideration hereinafter referred to as an “Undersubscribed Type of Consideration”) and, in such case, pro-ration will occur in accordance with the following:
Pro-ration of ONE Type of Consideration
In the event that the aggregate elections (or deemed elections) by Public Unitholders, together with the amounts owing to BPYU Stockholders, for ONE Type of Consideration are in excess of such Type of Consideration’s corresponding maximum amount listed above (and such Type of Consideration is the only Type of Consideration in excess of its corresponding maximum amount),
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such holders will be provided that Type of Consideration on a pro-rata basis, and, to account for the shortfall created by pro-rating the amount of such Type of Consideration, will also be provided, and deemed to have elected to receive, the same relative proportions of each of the two Undersubscribed Types of Consideration (for greater certainty, such relative proportions will be calculated based on the total dollar value available for each type of Undersubscribed Types of Consideration) such that the aggregate amount of each Type of Consideration provided to Unitholders will equal each Type of Consideration’s corresponding maximum amount listed above.
Pro-ration of TWO Types of Consideration
In the event that the aggregate elections (or deemed elections) by Public Unitholders, together with the amounts owing to BPYU Stockholders, for TWO Types of Consideration are in excess of the corresponding maximum amounts listed above, such holders will be provided each of those two Types of Consideration on a pro-rata basis, and, to account for the shortfall created by pro-rating such Types of Consideration, will also be provided, and deemed to have elected to receive, an amount of the Undersubscribed Type of Consideration such that the aggregate amount of each Type of Consideration provided to Unitholders will equal each Type of Consideration’s corresponding maximum amount listed above.
BPYU Stockholders
As described above, the Transaction Consideration payable to the Public Unitholders includes the amount payable to BPYU Stockholders. Subject to pro-ration, BPYU Stockholders will be entitled to receive the Default Consideration for each BPYU Share. Any BPYU Stockholders who wish to elect their preferred form of consideration are encouraged to convert their BPYU Shares into BPY Units as soon as possible. Instructions on how BPYU Stockholders can convert their BPYU Shares can be found at https://bpy.brookfield.com/bpyu/stock-and-dividends/exchange-bpyu-for-bpy.
Brookfield’s BPY Units
Pursuant to the terms of the Plan of Arrangement, Brookfield will have 100% of the BPY Units it holds purchased, directly and indirectly, by the Purchaser Parties and will receive the same proportions of the Cash Consideration, the BAM Share Consideration and the New LP Preferred Unit Consideration that are received by the holders of Units and BPYU Shares, other than BAM and its affiliates, except that, because of corporate law restrictions in the OBCA, it will receive exchangeable limited partnership units of an Ontario limited partnership that are exchangeable for, and economically equivalent to, BAM Shares instead of the BAM Share Consideration.
The Partnership and the Purchaser Parties’ pro-ration (which will include any adjustments deemed necessary by the Partnership and the Purchaser Parties to avoid the issuance of fractional Types of Consideration) shall be final and binding on all parties.
Default Consideration
Failure to Properly Complete the Election Forms
Registered BPY Unitholders have been sent a Letter of Transmittal and Election (printed on YELLOW paper) along with this Document, and Registered Exchange LP Unitholders have been sent a Letter of Transmittal and Election (printed on BLUE paper) along with this Document.
The Letter of Transmittal and Election or a manually executed facsimile thereof, properly completed and duly executed in accordance with the instructions set out therein, together with all other required documents, must be received by the Depositary at the office specified on the back page of the Letter of Transmittal and Election, no later than 5:00 p.m. (Toronto time) on July 20, 2021 or your election will not be received.
The Depositary or your broker or other financial advisor can assist you in completing the Letter of Transmittal and Election.
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If you are a beneficial Unitholder, you should communicate as soon as possible with your broker or other intermediary and follow their instructions. It is important that you act in their recommended time frame so as to provide enough time for your broker or other intermediary to meet the July 20, 2021 deadline.
If you do not complete and return the enclosed Letter of Transmittal and Election, or provide instructions to your broker or other intermediary, you will be deemed to have elected the Default Consideration pursuant to the Plan of Arrangement.
You will not receive any Transaction Consideration until you properly submit a Letter of Transmittal and Election or comply with the instructions of your broker or other intermediary.
BPYU Stockholders
In addition, pursuant to Article IV, Section C(3)(h) of the BPYU Certificate of Incorporation and pursuant to BAM and BPY’s notice of election to deliver the “BPY Units Amount” ​(as defined in the BPYU Certificate of Incorporation) dated April 21, 2021, and subject to pro-ration as described herein, BPYU Stockholders will automatically receive the Default Consideration in exchange for their BPYU Shares. This exchange will occur concurrently with the closing of the Transaction and there is no action required on the part of BPYU Stockholders. BPYU Stockholders are not entitled to vote at the Meeting, make an election or exercise dissent rights. BPYU Stockholders who wish to make an election with respect to the Type of Consideration they receive must exchange their BPYU Shares and hold BPY Units prior to the election deadline. BPYU will not process exchange requests by holders of BPYU Shares received after the day that is ten business days prior to the Effective Date, which corresponds to the ten business-day delivery period for exchange requests set forth in the BPYU Certificate of Incorporation. The Effective Date is expected to be as soon as reasonably practicable following receipt of the Final Order.
Dissenting BPY Unitholders
Any Registered BPY Unitholder who properly exercises their Dissent Rights (the “Dissenting BPY Unitholder”) but is not ultimately entitled, for any reason, to be paid the fair value for its BPY Units by BPY pursuant to the Plan of Arrangement, will be deemed to have elected to exchange their registered BPY Units for the Default Consideration pursuant to the Plan of Arrangement.
For further information on the Dissent Rights of Registered BPY Unitholders, see “Rights of Dissenting BPY Unitholders”.
Recommendation of the Special Committee and the BPY Board of Directors
The Transaction was unanimously recommended by a special committee of the board of directors (the “BPY Board of Directors”) of the BPY General Partner, composed entirely of independent directors (the “Special Committee”). The BPY Board of Directors (with Mr. Jeffrey Blidner abstaining because of his executive position at BAM) (the “Directors”), following receipt of and based upon the unanimous recommendation of a Special Committee, has unanimously determined that the Arrangement is fair to the Unaffiliated BPY Unitholders and that the Transaction is in the best interest of BPY and recommends that Unaffiliated BPY Unitholders vote in favor of the Transaction Resolutions.
Reports, Opinions, Appraisals and Negotiations
The Transaction is a “business combination” within the meaning of Multilateral Instrument 61-101 — Protection of Minority Security Holders in Special Transactions, as amended or replaced from time to time (“MI 61-101”). As a result, MI 61-101 requires that a formal valuation of (i) the securities that are the subject of the Transaction and (ii) subject to certain exceptions, any non-cash consideration be prepared by an independent valuator. The Special Committee retained Lazard Frères & Co. LLC (“Lazard”) as the independent valuator to value the BPY Units and the New LP Preferred Units and to provide a fairness opinion to the Special Committee in respect of the Transaction. The Special Committee has concluded that a valuation of the BAM Shares is not required under MI 61-101 because (i) the BAM Shares trade on a
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“published market” ​(within the meaning of MI 61-101), (ii) BPY has no knowledge of any material information concerning BAM or the BAM Shares that has not been generally disclosed, (iii) a liquid market for the BAM Shares exists, (iv) the maximum number of BAM Shares issuable in the Transaction constitutes less than 25% of the number of outstanding BAM Shares, (v) the BAM Shares to be issued at the closing of the Transaction will be freely tradeable, and (vi) Lazard is of the opinion that a valuation of the BAM Shares is not required.
The Valuation and the Fairness Opinion were provided for the use of the Special Committee for the purposes of evaluating the Transaction and the fairness of the Transaction Consideration offered in the Arrangement.
On March 31, 2021, at a meeting of the Special Committee held to evaluate the Arrangement, Lazard delivered an oral opinion to the Special Committee which was subsequently confirmed by delivery of the Valuation and the Fairness Opinion, to the effect that, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations set forth therein, Lazard was of the opinion that, as of March 31, 2021, (i) the fair market value of the BPY Units was in the range of $14.00 to $18.50 per BPY Unit, (ii) the fair market value of the New LP Preferred Units was expected to be approximately $25.00 per New LP Preferred Unit and (iii) the Transaction Consideration to be paid to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to such Unaffiliated BPY Unitholders.
A summary of the Valuation and the Fairness Opinion is included in the Special Factors, “Summary of Valuation and the Fairness Opinion”. A copy of the Valuation is appended hereto as Appendix H, and a copy of the Fairness Opinion is attached hereto as Appendix I.
Position of the Purchaser Parties Regarding the Fairness of the Transaction
Under SEC rules, the Purchaser Parties are required to provide certain information regarding their positions as to the substantive and procedural fairness of the Transaction to the Unaffiliated BPY Unitholders. The Purchaser Parties are making the statements included in this section solely for purposes of complying with the requirements of these rules. Their views as to the fairness of the Transaction should not be construed as a recommendation to any Unaffiliated BPY Unitholders as to how such Unaffiliated BPY Unitholders should vote to approve the Transaction.
The Purchaser Parties believe that the Arrangement and the Transaction are fair to Unaffiliated BPY Unitholders. In arriving at their position as to the fairness of the Transaction, the Purchaser Parties considered the factors discussed in the Special Factors, “Position of the Purchaser Parties Regarding the Fairness of the Transaction”.
BPY Unitholder Approval
The Meeting is scheduled to take place on July 16, 2021. Pursuant to the BPY LPA, the Interim Order, and the provisions of MI 61-101, the requisite approval for the Transaction Resolutions will require the affirmative vote of: (i) the holders of at least a majority of the BPY Units represented in person or by proxy at the Meeting (the “Standard Approval Threshold”) and (ii) the holders of at least a majority of the BPY Units represented in person or by proxy at the Meeting, excluding (A) the votes of BPY Units held directly or indirectly by BAM and its subsidiaries (including BPY) and (B) other votes required to be excluded for the purposes of “minority approval” under MI 61-101 (the “Majority of the Minority Threshold” and together with the Standard Approval Threshold, the “BPY Unitholder Approval Threshold”). BAM and its subsidiaries (including BPY) beneficially own BPY Units entitled to 31.3% of the votes that may be cast towards achieving the Standard Approval Threshold but such BPY Units will not be entitled to cast any votes towards achieving the Majority of the Minority Threshold.
Court Approval
As required under the OBCA, the Arrangement requires court approval. Subject to the terms of the Arrangement Agreement, and if the BPY Unitholder Approval Threshold is obtained at the Meeting, Purchaser Sub will apply to the Court for the Final Order. The application for the Final Order is scheduled to
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take place virtually on July 20, 2021 at 9:30 a.m. (Toronto time) or as soon thereafter as counsel may be heard. See “Description of the Transaction — Court Approval and Completion of the Arrangement”.
Timing
Pursuant to the terms of the Plan of Arrangement, the Arrangement will be effective on the date on which the Certificate of Arrangement is issued, which is currently expected to be in the third quarter of 2021 and, pursuant to the terms of the Plan of Arrangement, the BPY LPA Amendment will be effective on the same date.
Exchange LP will stop accepting retraction requests by holders of Exchange LP Units on the day that is five business days prior to the Effective Date, which corresponds to the five business-day delivery period for retraction requests set forth in the Exchange LP LPA. In addition, BPYU will not process exchange requests by holders of BPYU Shares received after the day that is ten business days prior to the Effective Date, which corresponds with the ten business-day delivery period for exchange requests set forth in the BPYU Certificate of Incorporation. The Effective Date is expected to be as soon as reasonably practicable following receipt of the Final Order. BPYU Stockholders who wish to elect their preferred form of consideration rather than the default pro-rated amounts are encouraged to convert their BPYU Shares into BPY Units as soon as possible.
Conditions to the Arrangement Becoming Effective
In order for the Arrangement to become effective, certain conditions must be satisfied or waived, including, but not limited to:

the Transaction Resolutions shall have received the BPY Unitholder Approval Threshold at the Meeting in accordance with the Interim Order;

there shall not be in force any order restraining or enjoining the consummation of the Arrangement or an action pending to enjoin from a Governmental Entity;

all consents, orders, regulations and approvals, including regulatory and judicial approvals and orders, required or necessary for the completion of the Arrangement shall have been obtained or received from the persons, authorities or bodies having jurisdiction in the circumstances, and none of such consents, orders, regulations or approvals shall contain terms or conditions that are unsatisfactory or unacceptable to BAM or BPY, each acting reasonably;

BPY shall have received the opinion(s) of counsel as contemplated under the BPY LPA;

the Final Order shall have been granted in form and substance satisfactory to BAM and BPY, each acting reasonably, and shall not have been set aside or modified in a manner unacceptable to such parties on appeal or otherwise;

the BAM Shares and the New LP Preferred Units shall have been approved for listing on the NYSE and Nasdaq, respectively, subject to official notice of issuance and on the TSX; listing is subject to the approval of the TSX in accordance with its applicable listing requirements;

the accuracy of representations and warranties made in the Arrangement Agreement and compliance by the Purchaser Parties and BPY with the covenants set forth in the Arrangement Agreement in all material respects;

there shall not have occurred any BPY Material Adverse Effect or any BAM Material Adverse Effect (as each such term is defined in the Arrangement Agreement); and

the holders of not more than 5% of the outstanding BPY Units shall have exercised Dissent Rights with respect to the Arrangement as provided for in the BPY LPA Amendment.
See “The Arrangement — The Arrangement Agreement — Conditions Precedent to the Arrangement”.
Treatment of BPY Units Following Completion of the Transaction
Following completion of the Transaction, each BPY Unit acquired by the Purchaser Parties will be retained, other than those BPY Units that are purchased indirectly by way of a redemption by BPY for cash, which will be cancelled.
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Treatment of BPY Preferred Units and BPY Notes
There are no changes being made to BPY’s Class A Cumulative Redeemable Perpetual Preferred Units (the “BPY Preferred Units”), Series 1, 2 and 3, which will not be affected by the Transaction and will continue to be listed on Nasdaq. In addition, the Medium Term Notes, Series 1, 2, 3, 4 and 5 (the “BPY Notes”) issued by Brookfield Property Finance ULC and guaranteed by, amongst others, BPY, will remain outstanding following the consummation of the Transaction and will not be affected by the Transaction.
Treatment of Preference Shares of Brookfield Office Properties Inc.
There are no changes being made to the Class AAA Preference Shares in the capital of Brookfield Office Properties Inc., certain series of which trade on the TSX.
Treatment of Preferred Shares of Brookfield Property Split Corp.
There are no changes being made to any of the Class A Senior Preferred Shares of Brookfield Property Split Corp., which trade on the TSX.
Rights of Dissenting BPY Unitholders
The BPY LPA Amendment provides Registered BPY Unitholders with Dissent Rights in connection with the Transaction. Although the BPY LPA Amendment will not be effective until approved by the requisite BPY Unitholders and implemented pursuant to the Plan of Arrangement, Registered BPY Unitholders will be able to exercise dissent rights in the manner set forth in the BPY LPA Amendment as if it were in force prior to its approval. Registered BPY Unitholders who are considering exercising their Dissent Rights should carefully review the description of such rights set forth in this Document, as well as the BPY LPA Amendment. Any Registered BPY Unitholder who properly dissents from the Transaction in compliance with the BPY LPA Amendment will, in the event the Transaction is completed, be deemed to have transferred their BPY Units to BPY for cancellation and will only be entitled to be paid the fair value of their BPY Units, and will not be entitled to any other payment or consideration, including any other payments that would be payable under the Transaction had such Registered BPY Unitholder not exercised their Dissent Rights. The fair value may be the same as, more than or less than the Transaction Consideration.
For a description of certain Canadian and U.S. federal income tax considerations applicable to Registered BPY Unitholders considering exercising their rights of dissent, please see “Certain Canadian Federal Income Tax Considerations — Holders Resident in Canada — Dissenting Resident Holders”, “Certain Canadian Federal Income Tax Considerations — Holders Not Resident in Canada — Dissenting Non-Resident Holders” “Certain United States Federal Income Tax Considerations — Consequences to U.S. Holders — Disposition of BPY Units Pursuant to the Arrangement” and “Certain United States Federal Income Tax Considerations — Consequences to Non-U.S. Holders — Disposition of BPY Units Pursuant to the Arrangement”.
A Registered BPY Unitholder who wishes to exercise Dissent Rights must provide to BPY prior to 11:00 a.m. (Toronto time) on July 14, 2021, or otherwise at least two days prior to the date of the Meeting (or any postponement(s) or adjournment(s) of the Meeting), a written objection to the Transaction. It is important that Registered BPY Unitholders who wish to exercise Dissent Rights strictly comply with this requirement. In addition, a Registered BPY Unitholder who wishes to exercise his, her or its Dissent Rights must vote his, her or its BPY Units at the Meeting, either in person or by proxy, against the Transaction (and, for greater certainty, a Registered BPY Unitholder who voted for or abstained from voting for the Transactions Resolutions or who has withdrawn its objection will not be considered to be a Dissenting BPY Unitholder). Further, a vote against the Transaction Resolutions shall not constitute the required written objection as described in this paragraph.
Only Registered BPY Unitholders may exercise Dissent Rights. A Registered BPY Unitholder’s failure to follow exactly the procedures set forth in the terms of the BPY LPA Amendment will result in the loss of Dissent Rights. Due exercise of the Dissent Rights requires that certain deadlines be observed and BPY intends to enforce such deadlines strictly. Registered BPY Unitholders considering exercising Dissent Rights should seek the advice of their legal counsel and tax and investment advisors and should carefully review the description of such rights set forth in this Document, as well as the BPY LPA Amendment, and comply with the provisions of the BPY LPA
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Amendment. Non-registered BPY Unitholders and holders of Exchange LP Units and BPYU Shares are not entitled to exercise Dissent Rights. SeeRights of Dissenting BPY Unitholdersin this Document.
Listings
The Purchaser Parties intend to apply to Nasdaq and the TSX to de-list the BPY Units from trading after the completion of the Transaction. After the BPY Units are de-listed from trading on Nasdaq and the TSX, BPY is expected to remain a reporting issuer under Canadian Securities Laws and continue to be subject to the reporting obligations under the U.S. Exchange Act following completion of the Transaction. In addition, the Purchaser Parties intend to apply to Nasdaq to de-list the BPYU Shares from trading in connection with the completion of the BPYU Mandatory Exchange.
New LP has applied to list the New LP Preferred Units on Nasdaq and the TSX. The TSX has conditionally approved the listing of the New LP Preferred Units and the BAM Shares to be issued in connection with the Transaction. Prior to the completion of the Transaction, BAM will apply to the NYSE to list the BAM Shares to be issued in connection with the Transaction. These listings are subject to BAM and New LP fulfilling all of the listing requirements of the TSX, the NYSE and Nasdaq, as applicable. The approval for listing of the BAM Shares and the New LP Preferred Units on the NYSE and Nasdaq, respectively, and on the TSX, is a condition to the closing of the Transaction.
Exchange LP as a Reporting Issuer
Exchange LP is currently a reporting issuer under Canadian Securities Laws. Upon completion of the Transaction, all of the securities of Exchange LP, including the Exchange LP Units being acquired pursuant to the Transaction, will be held privately. The Purchaser Parties intend to file an application pursuant to National Policy 11-206 — Process for Cease to be a Reporting Issuer Applications for Exchange LP to cease being a reporting issuer under Canadian Securities Laws after the completion of the Transaction.
Summary Risk Factors
In evaluating the Transaction, you should carefully read this Document in its entirety, including all of the annexes hereto and the other information included and incorporated by reference herein, including the matters addressed in the section entitled “Forward-Looking Statements and Information” beginning on page vi of this Document. You should especially consider the factors described under the section entitled “Risk Factors” beginning on page 45 of this Document and Part 6 — “Business Environment and Risks” of the BAM Annual Report and Item 3.D “Risk Factors” in the BPY Annual Report, each of which is incorporated herein by reference. Below please find a summary of the risks that are more fully described in “Risk Factors” in this Document.
Risk Factors Relating to the Transaction

Risks relating to the fixed Exchange Ratio and the market price of BAM Shares and/or BPY Units;

Risks relating to the market price for BAM Shares and New LP Preferred Units following the closing of the Transaction;

Risks relating to the form of, and rights attached to, the consideration to be received in the Transaction;

Risks relating to the inability to sell Units after the election deadline;

Risks relating to the inability of Exchange LP Unitholders and BPYU Stockholders to vote at the Meeting and/or exercise dissent rights and the inability of BPYU Stockholders to make an election in respect of consideration;

Risks relating to the reduced economic ownership interest of current BPY Unitholders in BAM after the closing of the Transaction;

Risks relating to the receipt of the approval of the Transaction Resolutions by BPY Unitholders;

Risks relating to the timely completion of the conditions precedent to the Transaction;

Risks relating to lawsuits challenging the Transaction;
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Risks relating to the differing interests of BPY’s directors and executive officers in the Transaction;

Risks relating to utility of the fairness opinion received by the Special Committee from its financial advisor after the date of such opinion;

Risks relating to BPY’s and BAM’s operating results after the Transaction; and

Risks relating to the failure to complete the Transaction.
Risk Factors Specific to the New LP Preferred Units

Risks relating to the tenor and ranking of the New LP Preferred Units;

Risks relating to the declaration of distributions under the terms of the New LP Preferred Units and the Guarantee;

Risks relating to the limited voting rights of holders of New LP Preferred Units;

Risks relating to the restrictions placed on New LP Preferred Units by current and future indebtedness;

Risks relating to the ability to sell or transfer the New LP Preferred Units;

Risks relating to market interest rates and the corresponding value of New LP Preferred Units;

Risks relating to the redemption of New LP Preferred Units and the corresponding return thereon;

Risks relating to the value of New LP Preferred Units following a Change of Control Triggering Event or a Delisting Transaction Triggering Event;

Risks relating to New LP’s ability to issue New LP Parity Securities and incur additional indebtedness;

Risks relating to the terms of the New LP Preferred Units changing, under certain limited circumstances, without the approval of holders of New LP Preferred Units;

Risks relating to the rating of the New LP Preferred Units; and

Risks relating to liability for the repayment of distributions under Bermuda law.
Risks Relating to Taxation

Risks relating to Canadian and United States taxation laws.
Accounting Treatment
BAM prepares its consolidated financial statements in accordance with IFRS and BAM currently consolidates BPY. BPY Units not owned by BAM are currently recognized as non-controlling interests in the consolidated financial statements of BAM. Under IFRS, changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are considered equity transactions (i.e., transactions with owners in their capacity as owners) with any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid attributed to the owners of the parent. Accordingly, any difference between the fair value of the cash paid, BAM Shares and New LP Preferred Units issued in exchange for BPY Units will be reflected as an adjustment in the consolidated statements of changes in equity of BAM. No gain or loss will be recognized in BAM’s consolidated statement of comprehensive income upon completion of the Transaction.
Certain Canadian Federal Income Tax Considerations
Please see “Certain Canadian Federal Income Tax Considerations” for a summary of certain Canadian income tax considerations for the Transaction.
Certain United States Federal Income Tax Considerations
Please see “Certain United States Federal Income Tax Considerations” for a summary of certain U.S. federal income tax considerations for the Transaction.
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Entitlement to Distributions and Dividends
Unitholders will no longer receive any distributions on their Units and BPY’s distribution reinvestment plan (the “BPY DRIP”) was terminated effective May 7, 2021.
The initial dividend for the BAM Shares issued under the Transaction is expected to be payable at the end of BAM’s third quarter and the initial dividend for the New LP Preferred Units issued under the Transaction is expected to be payable at the end of BPY’s third quarter.
The distributions for the BPY Preferred Units, Series 1, 2 and 3 will continue to be paid in the ordinary course.
Comparison of Rights
Upon completion of the Transaction, BPY Unitholders may become holders of BAM Shares (“BAM Shareholders”) and/or New LP Preferred Unitholders. See “Comparison of Rights of BPY Unitholders and BPYU Stockholders that Become BAM Shareholders and/or New LP Preferred Unitholders” for a summary of those instances where the rights and protections of BAM Shareholders and New LP Preferred Unitholders differ materially from the current rights and protections of BPY Unitholders.
Equity Awards
Please see “Special Factors — Interests of Certain Persons in The Transaction — BPY Options, Tracking Share Options, DSUs and Restricted BPY Units” and “Special Factors — Interests of Certain Persons in The Transaction — Restricted BPYU Shares” for details on the exchange that will occur upon the consummation of the Transaction of any options and other share based compensation awards outstanding at BPY and BPYU for cash and/or converted into certain interests in BAM.
Interests of Certain Persons relating to the Transaction
In considering the recommendation of the BPY Board of Directors with respect to the Transaction, BPY Unitholders should be aware that certain directors and senior officers of BPY have certain interests in connection with the Transaction that may present them with actual or potential conflicts of interest in connection with the Transaction, see “Special Factors — Interests of Certain Persons in The Transaction”, and, as set forth in greater detail under “Arrangements, Agreements or Understandings; Other Benefits to Insiders, Affiliates and Associates”, certain directors and/or officers of Brookfield may have an interest in the Canadian Purchase Transactions.
Litigation Relating to the Transaction
On April 30, 2021, a purported BPY unitholder filed an action in the United States District Court for the Southern District of New York captioned Stein v. Brookfield Property Partners L.P., et al. (the “Stein Action”) naming as defendants BPY and the members of the board of directors of the BPY General Partner. The complaint alleges generally that the defendants violated Sections 14(a) and 20(a) of the Exchange Act by filing a preliminary registration statement on Form F-4 with the SEC that was materially misleading and omitted material information. The complaint seeks, among other things, injunctive relief, attorney’s and expert fees and expenses, and money damages. The defendants have not yet answered or otherwise responded to the complaint.
Other lawsuits challenging the Transaction may be filed. If additional similar complaints are filed, absent new or significantly different allegations, the Partnership will not disclose such additional filings. The outcomes of the pending actions and any additional future litigation are uncertain. Such litigation, if not resolved, could prevent or delay completion of the Transaction and result in substantial costs to BAM and BPY, including any costs associated with the indemnification of directors and officers. One of the conditions to the closing of the Transaction is the absence of any court or other governmental authority enacting, issuing, enforcing or entering any law or order (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the Transaction. Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the Transaction on the agreed-upon terms, then such injunction may prevent the Transaction from being completed, or from being completed within the expected timeframe.
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MEETING AND VOTING INFORMATION
Who Can Vote
As of June 1, 2021, BPY had 436,892,036 outstanding BPY Units. If you are a BPY Unitholder of record at the close of business on the Record Date, you will be entitled to one vote in respect of each such BPY Unit held on all matters that come before the Meeting or any adjournment thereof. Exchange LP Unitholders and BPYU Stockholders will not be entitled to vote at the Meeting. Exchange LP Unitholders and BPYU Stockholders may attend the Meeting as guests by visiting www.virtualshareholdermeeting.com/BPY2021.
For a description of the procedures to be followed to direct the voting of BPY Units that are held in the name of a bank, trust company, securities dealer, broker, trustee or other person (each, an “Intermediary”), please refer to the answer to the question “If my BPY Units are not registered in my name but are held in the name of an Intermediary, how do I vote my BPY Units?” on page 15 of this Document.
Principal BPY Unitholders
To BPY’s knowledge, the only person or entity beneficially owning, directly or indirectly, or exercising control or direction over, securities of BPY entitled to vote at the Meeting carrying more than 10% of the votes attached to any class of outstanding securities of BPY is Brookfield, which, directly or indirectly, owned 136,662,808 BPY Units as of June 7, 2021, being approximately 31.3% of the outstanding BPY Units, representing 31.3% of the votes that may be cast towards the Transaction Resolutions.
Questions and Answers on Voting
The questions and answers below are intended to address briefly some commonly asked questions regarding the Transaction. These questions and answers may not address all questions that may be important to you. To better understand these matters, and for a more complete description of the terms of the Transaction including certain risks relating thereto, you should carefully read this Document, including each of the attached annexes, as well as the documents that have been incorporated by reference into this Document. See the section entitled “Where You Can Find More Information; Incorporation by Reference” beginning on page vii of this Document.
Q:
What am I voting on?
A:
BPY Unitholders as at the close of business on June 8, 2021 are voting on the Transaction Resolutions. The Transaction Resolutions must receive enough votes to meet the BPY Unitholder Approval Threshold.
Brookfield holds 31.3% of the outstanding BPY Units, representing 31.3% of the votes that may be cast towards the Transaction Resolutions. Brookfield will cause all of its BPY Units to be voted in favor of the Transaction Resolutions. The BPY Units held by Brookfield may be counted only towards the Standard Approval Threshold. The votes of Brookfield and others are excluded for the purpose of determining whether the Transaction Resolutions receive enough votes to meet the Majority of the Minority Threshold. Of the BPY Units outstanding, 297,530,901 BPY Units can be voted in respect of the Majority of the Minority Threshold.
Q:
Who is entitled to vote?
A:
BPY Unitholders as at the close of business on June 8, 2021 are entitled to vote. Each BPY Unit entitles the BPY Unitholder to one vote on the Transaction Resolutions. For greater clarity, holders of Exchange LP Units and BPYU Shares as of such date are not entitled to vote on the Transaction Resolutions. All directors and officers of BPY have confirmed they intend to vote in favor of the Transaction Resolutions. See “Beneficial Ownership of and Trading in Securities” for the ownership of BPY Units by the directors and officers of BPY.
Q:
How do I vote?
A:
Registered BPY Unitholders can vote their BPY Units at the Meeting online or by proxy. The Meeting will be held virtually to allow greater participation. BPY Unitholders can access the Meeting by visiting www.virtualshareholdermeeting.com/BPY2021. To participate in the Meeting, you will need the 16-digit control number included on your proxy card or on the instructions that accompany your proxy materials.
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BPY Units held in your name as the BPY Unitholder of record may be voted electronically during the Meeting. However, even if you plan to attend the virtual Meeting, the Partnership recommends that you vote your BPY Units in advance, so that your vote will be counted if you later decide not to attend the Meeting. Voting by proxy can be completed by way of telephone voting or via the Internet, or by returning the proxy card included with this Document. Sending in a proxy card will not prevent a Registered BPY Unitholder from voting online at the Meeting. Such Registered BPY Unitholder’s vote will be taken and counted at the Meeting. If you are attending the Meeting, please log-on to the Meeting in advance to ensure that your vote will be counted. The Meeting platform is fully supported across browsers and devices running the most updated version of applicable software plug-ins. You should ensure that you have a strong, preferably high-speed, internet connection wherever you intend to participate in the Meeting from. Online check-in will begin starting 15 minutes prior at 11:00 a.m. (Toronto Time). You should allow ample time for check-in procedures.
If your BPY Units are held in the name of an Intermediary, please refer to the answer to the question “If my BPY Units are not registered in my name but are held in the name of an Intermediary, how do I vote my BPY Units?” on page 15 for voting instructions.
Q:
Are BPY Unitholders entitled to Dissent Rights?
A:
Yes. Under the BPY LPA Amendment, Registered BPY Unitholders are entitled to Dissent Rights only if they follow the procedures specified in the BPY LPA Amendment. If you wish to exercise Dissent Rights, you should review the requirements summarized in this Document carefully and consult with your legal advisor. A Registered BPY Unitholder who votes in favor of the Transaction Resolutions will not be considered a Dissenting BPY Unitholder with respect to BPY Units voted in favor of the Transaction Resolutions. For greater clarity, Non-Registered BPY Unitholders, Exchange LP Unitholders and BPYU Stockholders are not entitled to exercise Dissent Rights. See “Rights of Dissenting BPY Unitholders”.
Q:
What if I sign the form of proxy enclosed with this Document?
A:
Signing the enclosed form of proxy gives authority to the members of management of Brookfield Property Group to vote your BPY Units at the Meeting.
Q:
Can I appoint someone other than members of the management of Brookfield Property Group to vote my BPY Units?
A:
Yes. You have the right to appoint a person or company other than the members of the management of Brookfield Property Group to be your proxyholder; the person or entity does not need to be another BPY Unitholder. This right may be exercised by appointing a proxyholder by following the instructions on your form of proxy in accordance with the timelines provided. You are encouraged to complete this appointment online at www.proxyvote.com. Enter the name of the other person attending the Meeting on your behalf in the space provided and provide a unique eight (8) character “APPOINTEE IDENTIFICATION NUMBER” USING ALL BOXES for your appointee to access the Meeting. You may choose to direct how your appointee shall vote on matters that may come before the Meeting or any adjournment or postponement thereof. Unless you instruct otherwise your appointee will have full authority to attend, vote, and otherwise act in respect of all matters that may come before the Meeting or any adjournment or postponement thereof, even if these matters are not set out in the proxy form or this Document. You can also change your appointee online at www.proxyvote.com.
You MUST provide your appointee the EXACT NAME and an EIGHT (8) CHARACTER APPOINTEE IDENTIFICATION NUMBER in order for them to access the Meeting. Appointees can only be validated at the Meeting using the EXACT NAME and EIGHT (8) CHARACTER APPOINTEE IDENTIFICATION NUMBER you enter below.
Make sure that the person you appoint is aware that he or she has been appointed and attends the Meeting, otherwise your vote will not be taken into account.
Proxies must be received before 5:00 p.m. (Toronto time) on the day before the Meeting.
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Q:
What do I do with my completed proxy?
A:
Voting by proxy can be completed by way of telephone voting or via the Internet, or by returning the proxy card included with this Document. Sending in a proxy card will not prevent a Registered BPY Unitholder from voting online at the Meeting. Such BPY Registered BPY Unitholder’s vote will be taken and counted at the Meeting. If you are attending the Meeting, and would like to vote your BPY Units, please log-on to the virtual Meeting in advance to ensure that your vote will be counted.
Q:
How will my BPY Units be voted if I give my proxy?
A:
The person or company named on the form of proxy must vote for or against your BPY Units in accordance with your directions on any ballot that may be called for, or you can let your proxyholder decide for you. If you specify a choice with respect to any matter to be acted upon, your BPY Units will be voted accordingly. In the absence of such directions, proxies received by members of the management of Brookfield Property Group will be voted in favor of the Transaction Resolutions.
Q:
What if amendments are made to these matters or if other matters are brought before the Meeting?
A:
The person or company named in the form of proxy will have discretionary authority with respect to amendments or variations to matters identified in the Notice and with respect to other matters that may properly come before the Meeting. As of the date of this Document, Brookfield Property Partners Limited (the “BPY General Partner”) knows of no such amendment, variation or other matter expected to come before the Meeting. If any other matters properly come before the Meeting, the person or company named in the form of proxy will vote on them in accordance with their best judgment.
Q:
If I change my mind, can I submit another proxy or take back my proxy once I have given it?
A:
Yes. A Registered BPY Unitholder who has given a proxy may revoke it as to any matter on which a vote shall not already have been cast pursuant to the authority conferred by such proxy and may do so by an instrument in writing, including another proxy, duly executed by the Registered BPY Unitholder or by his or her attorney duly authorized in writing, deposited with the Partnership as provided above. A Registered BPY Unitholder may also revoke a proxy in any other manner permitted by law, but prior to the exercise of such proxy in respect of any particular matter. A non-registered holder of BPY Units that are beneficially owned by such holder (a “Non-Registered BPY Unitholder”) may revoke a voting instruction form or a waiver of the right to receive Meeting Materials and to vote previously given to an Intermediary at any time by written notice to the Intermediary, except that an Intermediary is not required to act on a revocation of a voting instruction form or of a waiver of the right to receive materials and to vote that is not received by the Intermediary at least seven days prior to the Meeting.
Q:
Who counts the votes?
A:
Broadridge Financial Solutions, Inc. will count and tabulate the votes including by proxy.
Q:
If I need to contact the transfer agent, how do I reach it?
A:
For general BPY Unitholder enquiries, you can contact AST Trust Company (Canada) at:
AST Trust Company (Canada)
1 Toronto Street, Suite 1200
Toronto, ON M5C 2V6
or by telephone: (416) 682-3860
within Canada and the United States toll free at: 1-800-387-0825
or by email: inquiries@astfinancial.com
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Q:
If my BPY Units are not registered in my name but are held in the name of an Intermediary, how do I vote my BPY Units?
A:
In many cases, BPY Units owned by a Non-Registered BPY Unitholder are registered either:

in the name of an Intermediary that the Non-Registered BPY Unitholder deals with in respect of the BPY Units such as, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered registered retirement savings plans, registered retirement income funds, registered education savings plans and similar plans; or

in the name of a depositary (such as CDS Clearing and Depository Services Inc. (“CDS”)) of which the Intermediary is a participant.
Non-Registered BPY Unitholders will have received from their Intermediary a voting instruction form, the purpose of which is to direct the voting for the number of BPY Units they beneficially own. Every Intermediary provides its own signing and return instructions and deadlines, which Non-Registered BPY Unitholders should follow carefully, so that their BPY Units will be voted at the Meeting. Non-Registered BPY Unitholders should contact their Intermediary promptly if they need assistance. The Meeting will be held entirely online to allow greater participation. Non-Registered BPY Unitholders should follow the instructions provided on their voting instruction form in order to access the Meeting being held at www.virtualshareholdermeeting.com/BPY2021.
Non-registered BPY Unitholders that wish to attend and vote online at the Meeting, or appoint another person to attend on their behalf, must appoint themselves, or their appointee, as proxyholder by following the instructions on the voting instruction form in accordance with the timelines provided by their Intermediary. Non-Registered BPY Unitholders are encouraged to complete this appointment online at www.proxyvote.com.
To appoint themselves, or another person as their appointee, as proxyholder, Non-Registered BPY Unitholders must follow the instructions very carefully including:

inserting an “Appointee Name” and designating an eight character “Appointee Identification Number” online at www.proxyvote.com or in the spaces provide in the voting instruction form; and

using the EXACT Appointee Name and eight character Appointee Identification Number to access the Meeting. Appointees can only be validated at the Meeting using the EXACT Appointee Name and eight character Appointee Identification Number entered by the Non-Registered BPY Unitholder. If a Non-Registered BPY Unitholder DOES NOT CREATE AN EIGHT CHARACTER “APPOINTEE IDENTIFICATION NUMBER”, THEIR APPOINTEE WILL NOT BE ABLE TO ACCESS THE MEETING AND VOTE AT THE MEETING.
Non-Registered BPY Unitholders must complete this appointment on www.proxyvote.com or using their voting instruction form including creating an eight character “Appointee Identification Number” before the proxy deadline, which is 11:00 a.m. (Toronto Time) on July 14, 2021.
Make sure that the person appointed is aware that he or she has been appointed and attends the Meeting, otherwise such Non-Registered BPY Unitholder’s vote will not be taken into account.
Non-Registered BPY Unitholders who have not appointed themselves as proxyholder will be able to use the 16-digit control number located on their voting instruction form to attend the Meeting online in real-time and submit questions but will not be able to vote at the Meeting.
In accordance with the requirements of National Instrument 54-101 — Communication with Beneficial Owners of Securities of a Reporting Issuer, the Partnership has distributed copies of the accompanying Notice and this Document (collectively, the “Meeting Materials”) to the Registered BPY Unitholders, to the Depositary and Intermediaries for onward distribution to Non-Registered BPY Unitholders.
If the Non-Registered BPY Unitholder does not wish to attend and vote at the Meeting (or have another person attend and vote on his or her behalf), the voting instruction form must be completed, signed and returned in accordance with the directions on the form. Voting instruction forms in some cases permit the completion of the voting instruction form by telephone or through the Internet.
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SPECIAL FACTORS
Background to the Transaction
As part of BAM’s ongoing focus on building long term value, the BAM Board of Directors regularly reviews and assesses BPY’s long-term goals and opportunities, industry trends, competitive environment and short- and long-term performance, with the goal of maximizing unitholder value. The BAM Board of Directors also discusses on an ongoing basis the price of BPY Units and BPY Unitholder total returns, both on an absolute basis and relative to BPY’s peers. The BAM Board of Directors also considers potential risks that BPY faces in execution, including challenging global economic conditions, potentially unfavorable investment environments in the real estate market, general market conditions and trends, the highly competitive environment, and other factors.
Beginning in December 2020, members of management of BAM began assessing the feasibility of acquiring the BPY Units not already owned by BAM, including the related structuring, financing and tax considerations for a potential transaction.
On January 1, 2021, a special meeting of the BAM Board of Directors was called for January 3, 2021 to consider whether to authorize the management of BAM to pursue such a transaction.
On January 3, 2021, the BAM Board of Directors authorized management of BAM to pursue a transaction to acquire all of the BPY Units that BAM did not already own.
On January 3, 2021, the BPY Board of Directors received an unsolicited non-binding proposal from BAM to acquire all of the issued and outstanding BPY Units not owned by BAM and its affiliates for a price of $16.50 per BPY Unit, with each Unitholder being entitled to elect to receive any of $16.50 in cash, 0.40 BAM Shares or 0.66 New LP Preferred Units per BPY Unit (subject to pro-ration) (the “Proposed Transaction”). The Proposed Transaction contemplated that pro-ration of elected consideration would be based on maximum cash consideration of $2.95 billion (50% of the total value), a maximum of 59.5 million BAM Shares, and a maximum value of $500 million of New LP Preferred Units (which could be increased, based on elections received, to $1 billion, offset against the BAM Shares). BAM’s proposal also stated that it was not prepared to pursue any alternative transaction that would result in BAM selling its BPY Units or an acquisition by a third party of the BPY Units not owned by BAM and its affiliates.
At a BPY Board of Directors meeting held later that day, the BPY Board of Directors formed the Special Committee, consisting of Omar Carneiro da Cunha, Stephen DeNardo, Louis Joseph Maroun and Lars Rodert, with a mandate to, among other things, review and consider the Proposed Transaction. Once the Special Committee’s legal counsel was appointed, the mandate was reviewed with them and it was determined that it should be broadened. As a result, the BPY Board of Directors subsequently approved a mandate granting exclusive authority to the Special Committee to examine, review and evaluate the Proposed Transaction, and its implications for BPY and its stakeholders, including the Unaffiliated BPY Unitholders, and consider the financial implications of alternatives to the Proposed Transaction and pursue them to the extent feasible in light of BAM’s statement that it was not interested in selling its equity position in BPY, and to conduct or supervise the conduct of negotiations of the structure and terms of the Proposed Transaction, to make recommendations to the BPY Board of Directors with respect thereto and to ensure that the interests of Unaffiliated BPY Unitholders be taken into account in the context of that process.
On January 4, 2021, Mr. Maroun contacted representatives of Goodmans LLP (“Goodmans”) about the possibility of advising a committee of independent directors of BPY in respect of the Proposed Transaction.
In connection with the adoption of a broader mandate, the Special Committee directed its legal counsel to conduct a review of the independence of each of the members of the Special Committee. Legal counsel conducted interviews with each of the members of the Special Committee to verify their independence and the findings of those interviews were shared with the Special Committee, and subsequently the other independent directors of the BPY Board of Directors. Following review and consideration, the determination was made that no member of the Special Committee had a material relationship with BPY, BAM or their respective affiliates or a material interest in the Proposed Transaction that would be reasonably expected to interfere with the exercise of his independent judgement or to compromise his ability to discharge his duties as a member of the Special Committee. In connection with the ratification of the composition of the Special
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Committee, the findings of the independence review also were shared with the BPY Board of Directors and the BPY Board of Directors determined that, notwithstanding Mr. Maroun’s directorship with an affiliate of BAM, Mr. Maroun was free from interference and undue influence by persons with a conflict of interest in respect of the Proposed Transaction and noted that Mr. Maroun possessed experience and expertise that was expected to be beneficial to the Special Committee’s role in the Proposed Transaction, there were additional mechanisms to ensure that the interests of Unaffiliated BPY Unitholders would be appropriately taken into account and that a special committee of entirely “independent directors” ​(for purposes of Part 7 of MI 61-101) is advisable, but not required, in connection with the Proposed Transaction.
Prior to the first formal meeting of the Special Committee on January 6, 2021, the members of the Special Committee had a number of informal meetings to discuss the engagement of legal and financial advisors and the process for considering the Proposed Transaction.
On January 6, 2021, the Special Committee held its first formal meeting. At the meeting, the Special Committee unanimously resolved to engage Goodmans as its legal advisor, after confirming with Goodmans that it had no legal conflict that would prevent it from acting as counsel to the Special Committee in respect of the Proposed Transaction, following disclosure of the nature and extent of Goodmans’ involvement with BPY and BAM and its other affiliates. Having understood the nature of Goodmans’ relationships with BPY and BAM and its other affiliates, the Special Committee concluded that such relationships would not prevent Goodmans from providing full, open and competent advice as independent counsel to the Special Committee. At a meeting of the Special Committee on January 7, 2021, the Special Committee engaged Latham & Watkins LLP (“Latham”) as U.S. counsel following a discussion regarding the independence and qualifications of Latham, including disclosure of the nature and extent of Latham’s involvement with BPY and BAM and its other affiliates, and on February 3, 2021, the Special Committee engaged MJM Limited as special Bermuda counsel. The Special Committee also received advice from Richards, Layton & Finger, PA on matters of Delaware law during the course of the Special Committee’s review, consideration and negotiation of the Proposed Transaction.
During the January 6 and January 8, 2021 meetings, the Special Committee received legal advice from Goodmans regarding its duties and responsibilities and the legal requirements of the Proposed Transaction, including the application of MI 61-101, and the requirement under MI 61-101 for a formal valuation prepared by an independent financial advisor. During the meetings, Goodmans reviewed the criteria for determining the independence of an independent valuator under MI 61-101.
Shortly after the establishment of the Special Committee, members of the Special Committee identified an extensive list of potential financial advisors and selected five to provide proposals in respect of the Proposed Transaction based on their experience, qualifications, reputations and independence from BPY and BAM, and the Special Committee’s decision to exclude from the selection process U.S. and Canadian bank-owned dealers with a significant involvement or relationships with BAM. Each of the five financial advisors confirmed their independence with reference to relevant regulatory requirements, including MI 61-101, and demonstrated that they had the requisite expertise, qualifications and capacity for this engagement.
Between January 6 and January 11, 2021, members of the Special Committee met with and received and evaluated the proposals from each of the five potential financial advisors. Each of the potential financial advisors outlined their qualifications and experience for the mandate and each provided disclosure outlining every interaction such advisor had with BAM and/or any of its affiliates in the prior five years, including mandates acting for and opposite such entities. Goodmans and Latham conducted interviews with each of the proposed financial advisors regarding their independence based on their disclosure and, on January 11, 2021, reviewed the findings with the Special Committee. After numerous discussions with each of the potential financial advisors and deliberation among the members of the Special Committee, including with counsel, at a meeting of the Special Committee held on January 13, 2021, the Special Committee resolved to retain Lazard as independent financial advisor to provide the formal valuation required by MI 61-101 and strategic advice in respect of the Proposed Transaction.
On January 11, 2021, Torys LLP (“Torys”), counsel to BAM, provided an initial draft of a term sheet in respect of the Proposed Transaction, which provided an initial outline of, among other things, the contemplated objectives, approvals and structure of the Proposed Transaction. Thereafter, in parallel with the Special Committee’s consideration of the Proposed Transaction, the Special Committee’s legal advisors
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conducted due diligence regarding various aspects of the Proposed Transaction and commenced discussions and negotiations with Torys regarding the structure, terms, documentation and implementation of the Proposed Transaction, which continued throughout the process and included revisions and refinements to the proposed transaction structure. On March 5, 2021, Torys provided an initial draft of the Arrangement Agreement to Goodmans and Latham and thereafter held discussions and negotiations and exchanged drafts of the Arrangement Agreement and the other key documents necessary to give effect to the Proposed Transaction.
Throughout the process, Lazard reviewed extensive information regarding BPY and its business, operations, properties, assets, financial performance and condition, operating results and prospects, including BPY’s five-year business plan, and analyzed the financial terms of the Proposed Transaction and the value range of the BPY Units and the potential value of the New LP Preferred Units. Lazard was provided with access to all requested information and met with BPY management to review the information, including BPY’s five-year business plan.
Throughout the process, the Special Committee met on at least a weekly basis and held 22 formal meetings, during which meetings the Special Committee:

received ongoing updates on the work performed to date and a general timetable for the preparation of the formal valuation and fairness opinion and information, analysis and advice from its independent legal advisors regarding the duties and responsibilities of the Special Committee in fulfilling its mandate, the terms of the Proposed Transaction and the legal requirements applicable to the Proposed Transaction;

periodically provided updates to the other independent directors of the BPY Board of Directors, keeping them apprised, in a manner consistent with their role and duties as members of the Special Committee, of the Special Committee’s evaluation and consideration of the Proposed Transaction;

received advice and analysis from Lazard on, among other things, the financial terms of the Proposed Transaction and the prospects of BPY based upon the business plan provided by BPY and Lazard’s perspectives on market conditions and associated valuation implications;

evaluated and discussed, with the assistance of its independent legal and financial advisors, the terms of the Proposed Transaction (including the relevant definitive documents) and the relative benefits and risks of the Proposed Transaction compared to the continued execution of the BPY’s business plan, including those described below under the heading “Recommendation of the Special Committee of BPY Board of Directors”;

with the assistance of its independent legal and financial advisors, conducted the negotiations with BAM and its advisors; and

made recommendations to the BPY Board of Directors with respect to the foregoing.
In addition to the Special Committee meetings, on February 2, 2021, the full BPY Board of Directors met to receive an update from management regarding BPY’s annual financial results and a five-year business plan of BPY’s anticipated financial performance under the status quo.
In addition to its formal meetings, the Special Committee members had additional informal discussions among themselves, as well as with their independent legal and financial advisors. None of the representatives of BAM were present during any of the Special Committee’s meetings or participated in the Special Committee’s decision-making process.
On March 5, 2021, Lazard reviewed its preliminary analysis of the value range for the BPY Units and the potential value of the New LP Preferred Units.
On March 19, 2021, the Special Committee provided an update to the other independent directors of the BPY Board of Directors and, following this update and the other directors having left the meeting, the Special Committee reviewed with Lazard and its legal advisors alternative strategies and tactics in respect of negotiations with BAM in light of the preliminary valuation analysis provided by Lazard and the Special Committee’s assessment of the on-going prospects for any risks attendant to BPY’s business plan. Following discussion, the Special Committee determined that representatives of Lazard should contact the designated
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representative of BAM to negotiate consideration mix and price. The Special Committee also determined, in order to maintain a consistent approach, that any communication that might occur between BAM and the Special Committee directly should be facilitated through Mr. Maroun.
Also on March 19, 2021, Matthew Lustig, Chairman of Investment Banking, North America, Head of Real Estate & Lodging for Lazard, contacted Justin Beber, Managing Partner, Head of Corporate Strategy & Chief Legal Officer of BAM, to review the Special Committee’s views on the Proposed Transaction from a financial perspective. As an initial negotiating position, Mr. Lustig expressed the view that simply based, in part, on the current trading prices of the BPY Units and BAM Shares relative to the date of the announcement of the Proposed Transaction, a transaction price at or above $20.00 per BPY Unit could be supported. Mr. Lustig also indicated that the Special Committee would be prepared to consider a different mix of consideration if BAM could increase its price to that level. Mr. Beber, who was joined on the call by Nicholas Goodman, Chief Financial Officer of BAM, shared BAM’s perspective that the price of $16.50 per BPY Unit properly valued the BPY Units, including with reference to, among other factors, current implied capitalization rates among BPY’s peers. Over the course of discussions held between BAM and Lazard on March 19, 2021, March 20, 2021 and March 21, 2021, each of BAM and Lazard shared their perspectives for their outlooks on an appropriate price for the Proposed Transaction.
On March 23, 2021, Mr. Beber and Mr. Goodman contacted Mr. Lustig to arrange a time to further discuss the financial terms of the Proposed Transaction. During a telephone conversation on March 25, 2021 among Mr. Lustig, Alex Russo, a colleague of Mr. Lustig, Mr. Beber and Mr. Goodman, Mr. Beber presented an updated price proposal from BAM in respect of the Proposed Transaction of $17.50 per BPY Unit that would add $135 million in cash, in the aggregate, to the offer price (or $0.38 per BPY Unit), and holding all other parameters of the Proposed Transaction constant (including the fixed exchange ratio of 0.40 BAM Shares), resulting in a $1.00 increase to the total offer price when factoring in the increased current trading price of BAM Shares since January 3, 2021. BAM noted that $17.50 per BPY Unit accorded with the current trading price of the BPY Units, based on its 30-day volume-weighted average price. Mr. Lustig indicated that the Special Committee had a meeting scheduled for March 26, 2021, at which the Special Committee would consider BAM’s revised proposal.
At the Special Committee meeting held on March 26, 2021, after consulting with Lazard and its legal advisors, the Special Committee directed Mr. Lustig to advise BAM that the Special Committee was not prepared to recommend the Proposed Transaction at the $17.50 per BPY Unit revised purchase price.
Mr. Lustig, Mr. Beber and Mr. Goodman had a discussion in the afternoon of March 26, 2021 in which Mr. Lustig communicated to BAM the Special Committee’s position. He further noted that, although not able to support BAM’s revised offer, the Special Committee was desirous of reaching a successful transaction.
On the morning of March 27, 2021, Mr. Beber contacted Mr. Lustig by email to schedule a follow-up discussion from the March 26, 2021 call. Mr. Beber noted that Brian Kingston, Chief Executive Officer of Brookfield Property Group, would be contacting Mr. Maroun as well. Messrs. Beber, Goodman, Lustig and Russo convened a telephone call in the afternoon of March 27, 2021, in which Messrs. Beber and Goodman presented a further updated price proposal of $18.00 per BPY Unit that contemplated an additional aggregate increase of $150 million in cash (or an aggregate increase of $285 million in cash from the initial proposal), and a decreased exchange ratio from 0.4 BAM Shares to 0.3941 BAM Shares, thereby fixing the value per BAM Share at $45.67, being its closing price on March 26, 2021. BAM indicated that this revised proposal left no ability for BAM to do more to increase the price of the Proposed Transaction. In addition, BAM noted that its original proposal had contemplated closing the Proposed Transaction sooner in the second quarter than was now expected and, as such, BAM’s further updated proposal also included the cessation of all distributions following the distribution to be paid on March 31, 2021. Finally, Mr. Beber indicated that, should this revised proposal be acceptable, it was BAM’s intention to formalize and announce the transaction prior to the opening of markets on March 29, 2021.
Also on March 27, 2021, Mr. Kingston contacted Mr. Maroun, at the direction of BAM, to ensure that the messages communicated by Mr. Beber to Mr. Lustig on that day were properly understood by the Special Committee, both in terms of firmness of pricing and urgency of timing. Later that day, Mr. Maroun called Mr. Kingston to describe the process that the Special Committee and BPY Board of Directors would need to undertake before any transaction could be agreed, which made it difficult to achieve a targeted announcement
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prior to market open on March 29, 2021 given that the significant financial terms had not yet been agreed at that point. While Mr. Kingston confirmed that timing was an important factor for BAM, the March 29, 2021 timeline was not intended to be regarded as a deadline provided that the parties were able to reach agreement in principle by then. No negotiations regarding the financial or other terms of the Proposed Transaction took place between Mr. Maroun and Mr. Kingston on those calls.
At a meeting held in the morning on March 28, 2021, the Special Committee met with its independent legal and financial advisors to evaluate BAM’s revised proposed purchase price of $18.00 per BPY Unit, including the cessation of distributions after March 31, 2021. The Special Committee, with the assistance of its advisors, determined that it was not prepared to recommend the Proposed Transaction at that price and on those terms and that all matters necessary to announce a transaction could not properly be completed prior to market open on March 29, 2021. The Special Committee also noted that the market likely had an expectation that, if a transaction was to be completed, BPY Unitholders would receive regular distributions until closing. On that basis, the Special Committee directed Lazard to communicate to BAM that it would be prepared to recommend the Proposed Transaction at a price of $18.44 per BPY Unit (with no distributions after the March 2021 distribution), which amount reflected an increase, in part, to account for a potential June 2021 distribution in the amount of $0.33 per BPY Unit not being made.
In the afternoon of March 28, 2021, Mr. Lustig communicated the Special Committee’s views to Mr. Beber and Mr. Goodman and the Special Committee’s counter proposal of $18.44 per BPY Unit. Mr. Lustig further noted that, while the Special Committee was desirous of moving expeditiously, any announcement would require more time in order to finalize all transaction documentation and convene a meeting of all independent members of the BPY Board of Directors.
Mr. Beber and Mr. Goodman contacted Mr. Lustig later on March 28, 2021 and advised that, subject to the Special Committee’s concurrence that there would be no further distributions paid beyond March 31, 2021, BAM would be prepared to agree to a price of $18.17 per BPY Unit (based on a value of the BAM Shares as of market close on March 26, 2021), which contemplated an additional aggregate increase of $60 million of cash. Pursuant to such revised proposal, each BPY Unitholder would be entitled to elect to receive any of $18.17 in cash, 0.3979 BAM Shares or 0.7268 of New LP Preferred Units per BPY Unit, subject to pro-ration of elected consideration based on maximum cash consideration of $3.27 billion (50% of the total value), a maximum of 59.3 million BAM Shares (approximately 42% of the total value, based on a price per BAM Share of $45.67 (the closing price per BAM Share on March 26, 2021)), and a maximum value of $500 million in liquidation preference of New LP Preferred Units. Mr. Beber made it clear that BAM was not prepared to agree to a higher price, indicating that this represented BAM’s best and final offer and that BAM was prepared to maintain the status quo and pursue the continued execution of BPY’s business plan as a public entity if the Special Committee determined not to proceed with the Proposed Transaction on these terms.
Later that day, the Special Committee again met with its legal and financial advisors to evaluate BAM’s proposed revised purchase price of $18.17 per BPY Unit. After discussion, the Special Committee directed Lazard to advise BAM that it would consider the revised proposal and intended to provide its response on the following day.
At a meeting held on March 29, 2021, the Special Committee met with its independent legal and financial advisors to further evaluate BAM’s proposed revised purchase price of $18.17 per BPY Unit. The Special Committee, with the assistance of its advisors, reviewed the relative benefits and risks associated with the Proposed Transaction as compared to the status quo, including the factors set out below. During the meeting, the Special Committee also received an update regarding the status of the legal documentation for the Proposed Transaction. Following discussion, the Special Committee determined that it would be prepared to proceed with the Proposed Transaction on the final terms presented by BAM, subject to receiving Lazard’s formal valuation and fairness opinion, satisfactory negotiation of definitive documentation in respect of the Proposed Transaction and approval of the Proposed Transaction by the BPY Board of Directors. The Special Committee directed Lazard to communicate the Special Committee’s position to BAM.
At a meeting of the Special Committee held on March 30, 2021, the Special Committee, with assistance from its legal and financial advisors, provided the other independent directors with a further update of the BPY Board of Directors with respect to the Proposed Transaction and responded to various questions.
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Following departure of the other independent directors of the BPY Board of Directors, the Special Committee considered the matters raised by the other directors.
On March 31, 2021, the Special Committee met in the morning and again invited the other independent directors of the BPY Board of Directors. At that meeting, Lazard reviewed its updated preliminary analysis of the value range for the BPY Units and the potential value of the New LP Preferred Units for the benefit of the other independent directors and to further provide them with the benefit of more detailed analysis.
Between March 29, 2021 and March 31, 2021, the Special Committee and its legal and financial advisors, with the assistance of BAM’s legal advisors, finalized the terms of the definitive documentation for the Proposed Transaction.
In the afternoon of March 31, 2021, the Special Committee met again to consider the Proposed Transaction, including the proposed purchase price of $18.17 per BPY Unit. During the meeting, the Special Committee received advice from its legal advisors with respect to the duties and responsibilities of the Special Committee in making its determinations and recommendations to the BPY Board of Directors, as well as the terms of the transaction documents. Lazard orally delivered its formal valuation of the BPY Units, being a range of $14.00 to $18.50 per BPY Unit (implying a total enterprise value of $67.6 to $72.1 billion), and the New LP Preferred Units and delivered its verbal fairness opinion to the effect that, subject to the various assumptions, qualifications and limitations to be set forth in its written fairness opinion, as of March 31, 2021, the consideration being offered to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to the Unaffiliated BPY Unitholders. The Special Committee once again reviewed the relative benefits and risks associated with the Proposed Transaction as compared to the status quo, including the factors set out below, and, after receiving advice from its independent legal and financial advisors, unanimously resolved to make the recommendations set forth below.
The Arrangement Agreement was finalized and executed by BAM, BPY and Purchaser Sub on March 31, 2021, and the Arrangement was publicly announced on April 1, 2021.
The Transaction is the result of arm’s-length negotiations conducted between members of the Special Committee and its financial and legal advisors with representatives of BAM and its legal advisors.
The Purchaser Parties’ Purpose and Structure of the Transaction; Reasons for the Transaction
Under the SEC rules governing “going private” transactions, the Purchaser Parties may be deemed to be affiliates of BPY and are required to express their reasons for entering into the Arrangement Agreement and the Transaction to BPY Unitholders. The Purchaser Parties are making the statements included in this section solely for purposes of complying with the requirements of these rules.
The Transaction is being implemented pursuant to the Plan of Arrangement. Pursuant to the Transaction, the Purchaser Parties will, subject to Court approval and compliance with applicable Laws, acquire all of the Units. If the Transaction is approved and completed, Unitholders and BPYU Stockholders will be entitled to receive the Transaction Consideration.
The purpose of the Transaction is to enable the Purchaser Parties to acquire all of the outstanding BPY Units. Brookfield holds approximately 31.3% of the outstanding BPY Units, representing 31.3% of the votes that may be cast towards achieving the Standard Approval Threshold (but not towards achieving the Majority of the Minority Threshold).
In order for the Transaction to be completed, (i) the Transaction Resolutions must be duly approved (see “Description of the Transaction — Required BPY Unitholder Approval for the Transaction”), (ii) the Arrangement must be approved by the Court pursuant to the Final Order, (iii) all conditions precedent to the Arrangement set forth in the Arrangement Agreement must be satisfied or waived by the appropriate party (see “Description of the Transaction — Summary of Arrangement Agreement”); and (iv) the Final Order and related documents, in the form prescribed by the OBCA, must be filed with the OBCA Director.
The Purchaser Parties spent considerable time and resources considering a variety of alternative transaction structures. The Purchaser Parties ultimately determined that the structure of the Transaction is preferable to other transaction structures because it gives Unaffiliated BPY Unitholders the option to
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(i) immediately realize value and liquidity in respect of a portion of their investment, (ii) participate in the future success of BAM through ownership of BAM Shares or (iii) maintain a dividend that more closely reflects the existing BPY distribution (as compared to the current dividend payable on the BAM Shares) through ownership of a New LP Preferred Unit.
If the Purchaser Parties are unable to effectuate the Transaction, the Purchaser Parties may evaluate other available alternatives. These alternatives could include, to the extent permitted by applicable Laws, purchasing additional BPY Units: (i) in the open market; (ii) in privately negotiated transactions; or (iii) in a take-over bid or exchange offer or otherwise. Any additional purchases of BPY Units could be at a price greater than, equal to or less than the price to be paid for BPY Units under the Transaction and could be for cash or securities or other consideration.
In determining the structure of the Transaction, the Purchaser Parties, individually and collectively, particularly considered the following material factors:

The Transaction would permit the Purchaser Parties to acquire 100% of the BPY Units.

The Transaction would provide Unaffiliated BPY Unitholders with an opportunity to exchange their BPY Units for an interest in BAM, with the amounts of BAM Shares to be issued dependent on the elections of Unaffiliated BPY Unitholders and subject to pro-ration.

The Transaction would provide BPY Unitholders with an opportunity to exchange their BPY Units for New LP Preferred Units with a distribution rate that more closely reflects the existing BPY distribution (as compared to the current dividend payable on the BAM Shares), with amounts of New LP Preferred Units dependent on the elections of BPY Unitholders and subject to pro-ration.
A number of beliefs and factors were considered in the decision by the Purchaser Parties to undertake the Transaction, including the following material factors:

The belief that completing the Transaction would increase BAM’s exposure to BPY’s real estate portfolio, which is one of the world’s premier real estate portfolios, with a number of development projects in supply constrained markets.

The belief that full ownership of BPY would maximize the value of the combined business, by diversifying BAM’s cashflow and enhancing the ability to sell some of BPY’s mature, lower growth assets and reinvest proceeds in geographies and real estate sectors with higher risk-adjusted rates of return.

The belief that it would be more advantageous for BAM to operate BPY as a wholly-owned subsidiary rather than a majority owned public company, due to increased operating flexibility that wholly-owned subsidiary status would provide.

BAM’s familiarity with the business, operations, properties, assets, financial condition, business strategy, and prospects of BPY, the nature of the real estate industry in general, industry trends, the regulatory and legislative environment relevant to the industries in which BPY and BAM operate, and global and national economic and market conditions, both on a historical and on a prospective basis.

A plan of arrangement is a transaction structure commonly used for privatizations.
The Purchaser Parties’ Plans for BPY After the Transaction; Certain Effects of the Transaction
Plans for BPY After the Transaction
The Purchaser Parties are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules under the U.S. Exchange Act.
If all of the BPY Units are acquired pursuant to the Transaction, the Purchaser Parties would plan to review BPY and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel to determine what changes, if any, would be desirable, to best organize the activities of BPY. The Purchaser Parties expressly reserve the right to make any such changes that they deem necessary or appropriate in light of their review or in light of future developments.
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Subsequent to the completion of the Transaction, the Purchaser Parties intend to apply to Nasdaq and the TSX to de-list the BPY Units from trading. In addition, the Purchaser Parties intend to apply to Nasdaq to de-list the BPYU Shares from trading in connection with the completion of the BPYU Mandatory Exchange.
After the BPY Units are de-listed from trading on Nasdaq and the TSX, BPY is expected to remain a reporting issuer under Canadian Securities Laws and continue to be subject to the reporting obligations under the U.S. Exchange Act following completion of the Transaction.
Certain Effects of the Transaction
Following the consummation of the Transaction, BAM’s interest in BPY’s net book value and net earnings will increase due to the number of BPY Units acquired under the Transaction, and BAM will be entitled to benefits resulting from that interest, including cash flow generated by BPY’s operations and any future increase in BPY’s value. Similarly, BAM will also bear the risk of losses generated by BPY’s operations and any decrease in the value of BPY after acquiring all outstanding BPY Units.
If the Transaction is consummated, Brookfield’s ownership interest in BPY would increase from 62.25%, on a fully exchanged basis prior to the date of the Arrangement Agreement, to 100%. Based on BPY’s consolidated financial statements as of March 31, 2021, the completion of the Transaction would result in (1) an increase of approximately $9.6 billion, or 62%, from BAM’s existing interest in BPY’s net book value of approximately $25.2 billion as of March 31, 2021, and (2) on a pro forma basis an increase of approximately $98 million, or 62%, to BAM’s existing interest in BPY’s net income of approximately $731 million for the three months ended March 31,2021.
Describing the BPY Units on a “fully exchanged” basis throughout this Document assumes the exchange of all of the issued and outstanding securities that are exchangeable into BPY Units, including the exchange of the issued and outstanding redemption-exchange units (the “REUs”) of Brookfield Property L.P. (the “Property Partnership”), the exchange of the issued and outstanding class A preferred limited partnership units of the Property Partnership (the “Property Partnership Units”), Series 1, 2 and 3 that are exchangeable into BPY Units in accordance with the terms of the limited partnership agreement of the Property Partnership and the Exchange LP Units.
Recommendation of the BPY Board of Directors
As described above under the section entitled “Special Factors — Background to the Transaction”, the BPY Board of Directors established the Special Committee and approved a mandate granting exclusive authority to the Special Committee to examine, review and evaluate the Proposed Transaction, and its implications for BPY and its stakeholders, including the Unaffiliated BPY Unitholders, and consider the financial implications of alternatives to the Proposed Transaction and pursue them to the extent feasible in light of BAM’s statement that it was not interested in selling its equity position in BPY, and to conduct or supervise the conduct of negotiations of the structure and terms of the Proposed Transaction, to make recommendations to the BPY Board of Directors with respect thereto and to ensure that the interests of Unaffiliated BPY Unitholders be taken into account in the context of that process.
With the assistance of its legal and financial advisors, the Special Committee evaluated the Arrangement Agreement and, on March 31, 2021, the Special Committee unanimously (i) determined that the Transaction is in the best interests of BPY and fair to the Unaffiliated BPY Unitholders; (ii) recommended that the BPY Board of Directors determine the Transaction is in the best interests of BPY and fair to the Unaffiliated BPY Unitholders; and (iii) recommended that the BPY Board of Directors approve the Transaction and recommend that the Unaffiliated BPY Unitholders vote in favor of the Transaction Resolutions.
The Special Committee engaged its own legal and financial advisors and received advice throughout the negotiations from such advisors. Since the members of the Special Committee are independent and free from interference and undue influence by persons with a conflict of interest in respect of the Transaction, the Special Committee believed that it could effectively represent the interests of the Unaffiliated BPY Unitholders in negotiating the terms of the Transaction.
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The BPY Board of Directors (with Jeffrey Blidner, a director who has interests that present actual or potential conflicts of interest in connection with the Transaction, abstaining from voting on any resolution, approval or recommendation in connection with the Transaction) adopted the Special Committee’s analyses and discussions as to the fairness of the Transaction to Unaffiliated BPY Unitholders as described above as its own and, following the unanimous recommendation of the Special Committee, has (i) determined that the Arrangement is fair to Unaffiliated BPY Unitholders and that the transactions contemplated in the Arrangement are in the best interests of BPY, (ii) approved the Arrangement and the execution and performance of the Arrangement Agreement and (iii) recommended to the Unaffiliated BPY Unitholders that they vote their BPY Units in favor of the Arrangement.
Accordingly, the BPY Board of Directors (with Jeffrey Blidner, a director who has interests that present actual or potential conflicts of interest in connection with the Transaction, abstaining from voting on any resolution, approval or recommendation in connection with the Transaction) has unanimously determined that, based on the recommendation of the Special Committee and the considerations described above, the Arrangement is fair to Unaffiliated BPY Unitholders and the Transaction is in the best interests of BPY and therefore unanimously recommends that Unaffiliated BPY Unitholders vote in favor of the Transaction Resolutions.
Mr. Blidner declared his interest in and did not participate in deliberations on, and abstained from voting in respect of resolutions relating to, the Transaction. See the Special Factors section of this Document entitled “Interests of Certain Persons in the Transaction”.
In adopting the Special Committee’s recommendation and concluding that the Consideration is fair to the Unaffiliated BPY Unitholders, the BPY Board of Directors considered and relied upon the same factors and considerations that the Special Committee relied upon as described in “Recommendation of the Special Committee of the BPY Board of Directors — Reasons for Recommendation”, and adopted the Special Committee’s analyses in their entirety.
After being advised of Brookfield’s intent to undertake the Canadian Purchase Transactions (as defined and described in the section entitled “Arrangements, Agreements or Understandings; Other Benefits to Insiders, Affiliates and Associates — Canadian Purchase Transactions”), on April 21, 2021, the Special Committee met to review such transactions. The Special Committee concluded, based upon, among other things, advice and input from its legal and financial advisors, that its determination as to fairness of the Transaction to the Unaffiliated BPY Unitholders would not change if the Canadian Purchase Transactions, which are separate and distinct from the Transaction, are consummated. The Special Committee makes no recommendation as to the distinct Canadian Purchase Transactions, and Lazard expressed no opinion as to the consideration to be received by any Canadian Taxable Holders in the Canadian Purchase Transactions, if any.
The recommendation of the BPY Board of Directors is not, and is not intended to be, investment advice to any particular BPY Unitholder. Each BPY Unitholder’s circumstances are different. Each BPY Unitholder should consider the Transaction carefully and come to its own conclusions as to whether to vote in favor of or against the Transaction Resolutions. A BPY Unitholder who is in doubt as to how to respond should consult with its own investment advisor, stockbroker, bank manager, trust company manager, accountant, lawyer or other professional advisor as to how to respond to the Transaction having regard to its own particular circumstances. Further, BPY Unitholders are advised that the exchange of their BPY Units as result of the consummation of the Transaction may have tax consequences and they should consult their own professional tax advisors. The recommendation of the BPY Board of Directors set forth above is not, and is not intended to be, a recommendation to the holders of any other class of securities of BPY other than the BPY Units.
Position of the Purchaser Parties Regarding the Fairness of the Transaction
The Purchaser Parties are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules under the U.S. Exchange Act. Their views as to the fairness of the Transaction should not be construed as a recommendation to any Unaffiliated BPY Unitholder as to how such Unaffiliated BPY Unitholder should vote on the proposal to approve the Transaction. The Purchaser Parties attempted to negotiate the terms of the Transaction that would be most favorable to them, and not Unaffiliated BPY Unitholders.
The Purchaser Parties believe that the Transaction is substantively and procedurally fair to the Unaffiliated BPY Unitholders. In reaching this conclusion, the Purchaser Parties noted that the Special
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Committee consists of independent directors, that the Plan of Arrangement must be approved by a majority of the votes cast by Unaffiliated BPY Unitholders present or represented by proxy at the Meeting and that the Plan of Arrangement is subject to the approval of the Court. The Purchaser Parties further note the conclusions in the Valuation and the Fairness Opinion delivered to the Special Committee, the recommendations of the Special Committee and the BPY Board of Directors and the factors considered by, and the analyses and conclusions made by, the Special Committee and the BPY Board of Directors and expressly adopted these factors, analyses and conclusions.
Recommendation of the Special Committee of the BPY Board of Directors
Information Considered
In reaching its determination and in making its recommendations, the Special Committee considered and relied upon extensive information, advice and analysis obtained by it in the course of its process, including:

information concerning the business, operations, properties, assets, financial performance and condition, operating results and prospects of BPY and its business, including BPY’s most recent annual results;

information concerning BPY’s five-year business plan, the plan’s assumptions regarding operations, strategy and value and the risks and uncertainties inherent therein, and BPY’s anticipated financial performance under the status quo alternative and recent changes in the industry;

the impact of BPY’s high leverage level and BPY’s capital expenditure needs;

the impact and status of general industry, regulatory, economic and market conditions and trends relevant to BPY’s businesses (including the impact of shifts to online shopping on regional mall valuations and the current and potential impact of COVID-19 on the office and retail segments);

the differences between the valuations implied by Lazard’s analyses and the valuations underlying the presentation of net asset value (NAV) derived from amounts in BPY’s financial statements prepared in accordance with IFRS;

the effect of Brookfield’s control position in respect of BPY, including its existing management arrangements and the economic and other impacts of its terms, specifically, that the management agreement has limited termination rights in favor of BPY, although its net fees are generally comparable to market levels;

the terms of the legal documentation for the Transaction and how they compared to the terms of similar transactions in the North American marketplace;

advice provided by the Special Committee’s independent legal and financial advisors relating to the relative benefits and risks associated with the Transaction;

information and advice concerning the value expected to be achieved for BPY and its stakeholders (including Unaffiliated BPY Unitholders) over the short, medium and long term as a result of the continued execution of BPY’s five-year business plan under the status quo;

advice that any alternative involving a special distribution to BPY Unitholders, including a recapitalization, would not be available given the leverage profile of BPY;

the information, analysis, assumptions, qualifications and limitations relied on by Lazard in conducting its financial analysis, formal valuation of the BPY Units and New LP Preferred Units and the fairness opinion; and

the views of the other independent directors of BPY regarding the impact of the Transaction on BPY.
Role of Management
Certain information and analysis received and relied upon by the Special Committee and its advisors was prepared by BPY’s management. In light of management potential or perceived conflict of interest, the Special Committee and its independent legal and financial advisors carefully scrutinized and analyzed such information and analysis (and the underlying assumptions) in conducting their own analysis and reaching their own conclusions.
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Benefits of the Transaction
In reaching its determination and making its recommendations, the Special Committee considered a number of substantive benefits associated with the Transaction, including the following material benefits:
1.
The proposed purchase price of $18.17 per BPY Unit is at the high end of the fair market value range for the BPY Units as determined by Lazard in the Valuation.
2.
The proposed purchase price of $18.17 per BPY Unit represents a 25.6% premium to the unaffected closing price per BPY Unit on Nasdaq on December 31, 2020, a 10.1% premium to the price per BPY Unit offered in Brookfield’s initial proposal and a 6% premium to the volume-weighted average trading price for the BPY Units on Nasdaq since the announcement made on January 4, 2021.
3.
The Transaction provides BPY Unitholders with the option to elect to receive per BPY Unit $18.17 in cash, 0.3979 BAM Shares or 0.7268 New LP Preferred Units, subject to pro-ration. BPY Unitholders who receive cash for their BPY Units will immediately realize a fair value for their investment and the payment in cash provides certainty of value for their BPY Units. BPY Unitholders who receive BAM Shares will have the opportunity to participate in any increase in value of BPY’s assets and the increase in value of the current assets of Brookfield. BPY Unitholders who receive New LP Preferred Units will maintain a distribution that more closely reflects the existing BPY distribution (as compared to the current dividend payable on the BAM Shares).
4.
Because the exchange ratio of 0.3979 BAM Shares (the “Exchange Ratio”) is fixed in connection with the Transaction and will not fluctuate as a result of changes in the value of BPY or Brookfield, an increase in the value of the BAM Shares would increase the value to be realized in respect of the BAM Share consideration to be paid in connection with the Transaction (recognizing that the inverse is also true as indicated below).
5.
The Transaction represents the best prospect for maximizing BPY Unitholder value over the short to medium term given current and expected macroeconomic conditions in North America (including economic uncertainty resulting from the ongoing COVID-19 pandemic and shifts to online shopping) and their potential impact on BPY.
6.
Canadian BPY Unitholders who make an election in respect of the receipt of BAM Shares should be able to obtain a full or partial deferral of capital gains for Canadian federal income tax purposes.
7.
The Fairness Opinion delivered by Lazard to the Special Committee to the effect that, as of March 31, 2021 and based upon and subject to the assumptions made, procedures followed, matters considered and other qualifications and limitations set forth therein, the Transaction Consideration to be paid to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to such Unaffiliated BPY Unitholders.
8.
The terms and conditions of the Transaction do not prohibit the BPY Board of Directors from taking any action that would be consistent with its obligation to properly discharge its fiduciary duties, including changing its recommendation to Unaffiliated BPY Unitholders regarding the Transaction without any obligation to pay a break fee.
9.
Given BAM’s confirmation that it is not prepared to pursue any alternative transactions that would result in the selling of its interest in BPY or the acquisition by a third party of the BPY Units that Brookfield does not already own, it is highly unlikely that a competing offer for equal or greater consideration could emerge.
10.
The likelihood (subject to BPY Unitholder approval, including Unaffiliated BPY Unitholder approval) that the Transaction will be completed, given the limited number of conditions, including the absence of any financing condition.
11.
If the required vote is not obtained at the meeting of BPY Unitholders, Brookfield will reimburse BPY for all of its reasonable fees, costs and expenses incurred in connection with the Transaction.
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Procedural Safeguards
The Special Committee also believes that adequate procedural safeguards were and are present to ensure the fairness of the Transaction to BPY and the Unaffiliated BPY Unitholders, including:
1.
In accordance with MI 61-101 (i) the Special Committee was required to, and did, select and retain Lazard and supervise the preparation of the formal valuation of the BPY Units and the New LP Preferred Units and (ii) the Transaction must be approved by (A) not less than a majority of the votes cast by BPY Unitholders present in person or represented by proxy at a special meeting and (B) at least a majority of the votes cast by the Unaffiliated BPY Unitholders at a special meeting.
2.
The fact that the process was conducted by, and under the oversight of, the Special Committee, which was comprised solely of independent directors, and advised by experienced, qualified and independent financial and legal advisors.
3.
The Special Committee and its independent legal and financial advisors engaged in extensive analysis and robust negotiations in order to obtain the best available terms for BPY, including the Unaffiliated BPY Unitholders.
4.
The Special Committee was able to negotiate a significantly higher purchase price (including three increases in the purchase price) relative to the original purchase price proposed in Brookfield’s initial proposal.
5.
Completion of the Transaction is subject to the court’s approval as to its fairness to all stakeholders (including Unaffiliated BPY Unitholders) at a hearing at which stakeholders (including Unaffiliated BPY Unitholders) are entitled to be heard by the court.
6.
BPY Unitholders have been provided with the right to exercise dissent rights and to be paid fair value for their BPY Units.
Risks and Potentially Negative Factors
The Special Committee also considered a number of risks and other potentially negative factors concerning the Transaction, including the following:
1.
BPY Unitholders will not be entitled to receive any distributions in respect of their BPY Units after the payment of the March 2021 distribution.
2.
The fact that no alternative transaction can be completed without the consent of BAM, and that BAM has indicated that is it not willing to support any alternative transaction. As a result, BPY did not solicit offers from other parties, as the Transaction is the only viable transaction that will provide Unaffiliated BPY Unitholders with a substantial premium for their BPY Units.
3.
There can be no certainty that all conditions to the Transaction will be satisfied. BAM has the right to terminate the Transaction under certain limited circumstances. The failure to complete the Transaction could negatively impact the price of BPY Units or otherwise adversely affect the business of BPY.
4.
The Transaction will be a partially taxable transaction for Canadian and fully taxable for U.S. federal income tax purposes and, as a result, BPY Unitholders will generally be required to pay taxes on any gain that results from the receipt of some or all of the consideration.
5.
Because the Exchange Ratio is fixed in connection with the Transaction and will not fluctuate as a result of changes in the value of BPY or BAM, a decline in the value of the BAM Shares would decrease the value to be realized in respect of the BAM Share consideration to be paid in connection with the Transaction.
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6.
In light of the total amount of cash, BAM Shares and New LP Preferred Units available and the value of the cash consideration compared to the value of the BAM Shares and New LP Preferred Units, a BPY Unitholder may receive consideration with a different aggregate value and a different combination of cash, BAM Shares and New LP Preferred Units than the BPY Unitholder elects to receive.
The Special Committee did not retain an unaffiliated representative to act solely on behalf of the Unaffiliated BPY Unitholders for purposes of negotiating the terms of the Transaction. However, the Special Committee retained Lazard as independent financial advisor to prepare the Valuation and Fairness Opinion.
The foregoing factors are not intended to be exhaustive, but include the material factors considered by the Special Committee in making its determinations and recommendations. The Special Committee did not consider it practicable to, and did not, assign specific weights to any of the factors considered in reaching their determinations and recommendations, and individual members of the Special Committee may have given different weights to different factors. The above factors are not presented in any order of priority.
Recommendations of the Special Committee
As a result of the foregoing process and after having carefully considered and weighed all relevant benefits, risks and other factors (including those set forth above), the Special Committee unanimously

determined that the Transaction is in the best interests of BPY and fair to the Unaffiliated BPY Unitholders;

recommended that the BPY Board of Directors determine the Transaction is in the best interests of BPY and fair to the Unaffiliated BPY Unitholders; and

recommended that the BPY Board of Directors approve the Transaction and recommend that the Unaffiliated BPY Unitholders vote in favor of the Transaction Resolutions.
Remuneration
For their services in reviewing and considering the Transaction on behalf of BPY, the independent directors of the BPY Board of Directors, other than the members of the Special Committee, determined that BPY will pay $100,000 to each of the members of the Special Committee. Such payments are not contingent upon the completion of the Transaction.
Interests of Certain Persons in the Transaction
Interlocking Directors and Officers. In considering the Transaction and any position taken by BPY with respect to the Transaction, BPY Unitholders should be aware that certain directors of the BPY Board of Directors have interests in connection with the Transaction, which may present them with certain actual or potential conflicts of interest. Jeffrey M. Blidner has served as a director of BAM since May 2013. Mr. Blidner is a Vice Chairman of BAM. Mr. Blidner is also Chairman of the general partner of Brookfield Renewable Partners L.P. and the general partner of Brookfield Business Partners L.P. and a director of BPY and the general partner of Brookfield Infrastructure Partners L.P. Accordingly, Jeffrey M. Blidner declared his interest in and did not participate in deliberations on, and abstained from voting in respect of resolutions relating to, the Transaction. Louis J. Maroun has served as a director of the general partner of Brookfield Renewable Partners L.P., which is another subsidiary of BAM, since August 2011. The BPY Board of Directors considered Mr. Maroun’s inclusion on the Special Committee in light of MI 61-101, the Companion Policy to MI 61-101 and Multilateral CSA Staff Notice 61-302 — Staff Review and Commentary on MI 61-101, noting that a special committee of entirely “independent directors” ​(for purposes of Part 7 of MI 61-101) is advisable, but not required, in connection with the Transaction, and determined that (i) Mr. Maroun possessed experience and expertise that was expected to be beneficial to the Special Committee’s role in the Transaction, (ii) notwithstanding his directorship with an affiliate of Brookfield, Mr. Maroun is free from interference and undue influence by persons with a conflict of interest in respect of the Transaction and (iii) there were additional mechanisms to ensure that the interests of Unaffiliated BPY Unitholders would be appropriately taken into account. See also “Beneficial Ownership of and Trading in Securities” for the ownership of BPY Units by the directors and officers of BPY and the Purchaser Parties.
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Certain Interests of the Purchaser Parties.   The Purchaser Parties have certain interests that present actual or potential conflicts of interest in connection with the Transaction, including that their financial interests with regard to the Transaction Consideration are generally adverse to the financial interests of the Unaffiliated BPY Unitholders being asked to vote in favor of the Transaction Resolutions. Due to the nature of the Transaction, it was determined at the outset of the transaction that it would be appropriate for members of the BPY Board of Directors who are also members of the BAM Board of Directors or officers of Brookfield, or otherwise have interests that present actual or potential conflicts of interest in connection with the transaction to have no role in reviewing and considering the transaction on behalf of BPY. Accordingly, Jeffrey M. Blidner declared his interest in and did not participate in deliberations on, and abstained from voting in respect of resolutions relating to, the Transaction.
Financial Interests.   The interests of the Purchaser Parties in respect of the Transaction are different from the interests of Unaffiliated BPY Unitholders because such entities have an interest in acquiring the Units for as low a price as possible and Unitholders have an interest in selling their Units for as high a price as possible. The interests of the directors, officers and other affiliates of the Purchaser Parties in the Transaction may be the same as or different from the interests of Unitholders. For example, while in general the interests of the Purchaser Parties’ respective directors and officers in respect of the Transaction will be aligned with such entities’ respective interests, some of such persons own Units or hold BPY Options or Tracking Share Options exercisable for Units, which Units, including Units acquired following an exercise of BPY Options or Tracking Share Options, they are entitled to deposit to the Transaction for the same price per Unit that is available to Unitholders, and/or hold Restricted BPY Units or DSUs with a value derived from the value of the Units.
BPY Options, Tracking Share Options, DSUs and Restricted BPY Units.   Certain officers of BPY hold BPY Options, Tracking Share Options, DSUs and Restricted BPY Units. All vested BPY Options and Tracking Share Options may be exercised in accordance with their terms, and holders of BPY Units acquired thereby may vote at the Meeting or exercise Dissent Rights pursuant to the Plan of Arrangement. Pursuant to the Plan of Arrangement, options and other share based compensation awards outstanding at BPY will be exchanged for cash and/or converted into the following interests in BAM:

BPY Options and Tracking Share Options, whether vested or unvested, will be exchanged for a cash payment equal to the in the money value in accordance with their terms (i.e., the value of the Cash Consideration, less the applicable strike price of the Option).

DSUs will be exchanged for awards in respect of BAM at the Exchange Ratio, and the other terms and conditions of the DSUs will be substantially the same before and after such exchange.

Unvested Restricted BPY Units and Restricted Canadian BPY Units will be transferred to BAM in exchange for the BAM Share Consideration, and such BAM Shares will be subject to the same transfer restrictions, vesting, forfeiture and other terms and conditions as were applicable to the Restricted BPY Units prior to such exchange.
Restricted BPYU Shares.   Certain officers of BPY and BPYU hold restricted BPYU Shares granted under and subject to the terms of the Brookfield Property Group Restricted BPR Class A Stock Plan, as amended. Each holder of such restricted BPYU Shares will be able to elect to receive the Default Consideration or a number of BAM Shares having an equal value. The pro-rated Default Consideration or BAM Shares received in exchange for such holders’ unvested restricted BPYU Shares at the closing of the Transaction will be restricted and subject to the same transfer restrictions, vesting, forfeiture and other terms and conditions of the Brookfield Property Group Restricted BPR Class A Stock Plan that were applicable to the unvested restricted BPYU Shares prior to the closing of the Transaction.
Indemnification.   BPY expects that all rights to indemnification, advancement of expenses and exculpation currently in effect in favor of the present and former BPY Board of Directors and officers of the BPY General Partner, including on the terms provided in the BPY LPA, with respect to matters occurring prior to the consummation of the Transaction will survive the consummation of the Transaction and continue in full force and effect thereafter.
Insofar as indemnification for liabilities arising under the U.S. Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrants
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have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the U.S. Securities Act and is therefore unenforceable.
Summary of the Valuation and the Fairness Opinion
The following constitutes only a summary of the Valuation and the Fairness Opinion which were prepared by Lazard for the use of the Special Committee in connection with the Transaction. The Valuation has been prepared as of March 31, 2021 for the use of the Special Committee and for inclusion in this Document. The Fairness Opinion has been prepared as of March 31, 2021 for the use of the Special Committee and for inclusion in this Document. The following summaries are qualified in their entirety by the full text of the Valuation and the Fairness Opinion. A copy of the Valuation is attached hereto as Appendix H and a copy of the Fairness Opinion is attached hereto as Appendix I to this Document. The Valuation and the Fairness Opinion are incorporated by reference herein. BPY Unitholders are urged to read the full text of the Valuation and the Fairness Opinion and should consider the same in their entirety. Neither the Valuation nor the Fairness Opinion constitutes a recommendation to any BPY Unitholder as to how such BPY Unitholder should vote with respect to the Transaction Resolutions or any other matter.
Lazard was formally engaged by the Special Committee through an engagement agreement between the Special Committee and Lazard effective as of January 18, 2021. Pursuant to the engagement agreement, Lazard was paid certain fees by BPY for its services as advisor and independent valuator, including a fee upon delivery of the Valuation and the Fairness Opinion, no part of which was contingent upon the conclusions reached in the Valuation or the Fairness Opinion, or upon the completion of the Transaction. In addition, BPY agreed to reimburse Lazard for its reasonable expenses and to indemnify Lazard in respect of certain liabilities that might arise in connection with its engagement.
Lazard has been involved in a significant number of transactions involving private and publicly traded companies and has extensive experience in preparing valuations and fairness opinions. Lazard is independent of all “interested parties” ​(as defined in MI 61-101) to the Transaction, in accordance with the requirements of MI 61-101. Neither Lazard nor any of its “affiliated entities” ​(as defined in MI 61-101): (a) is an “associated entity” or “affiliated entity” or “issuer insider” of any “interested party” ​(as such terms are defined for the purposes of MI 61-101); (b) is an advisor to any “interested party” in connection with the Transaction; (c) will receive compensation that will depend in whole or in part on the conclusions reached in the Valuation or the Fairness Opinion or on the completion of the Transaction; (d) is a manager or co-manager of a soliciting dealer group for the Transaction (or a member of a soliciting dealer group for the Transaction providing services beyond the customary soliciting dealer’s functions or receiving more than the per security or per security holder fees payable to the other members of the group); (e) is the external auditor of the Company or any “interested party”; or (f) has any other material financial interest in the completion of the Transaction.
The Special Committee considered the nature and extent of Lazard’s previous financial advisory mandates for Brookfield, BPY and its subsidiaries in the last three years and certain other relationship disclosure provided by Lazard. Lazard advised the Special Committee that it and its affiliates have in the past provided and in the future may provide certain investment banking services to Brookfield, for which it has received and may receive compensation, including, during the past two years, having providing advisory services to an affiliate of BAM in connection with an acquisition and certain restructuring matters in which an affiliate of BAM was a lender. The Special Committee assessed all such mandates and determined that they were not material and would not reasonably interfere with the exercise of Lazard’s independent judgment in respect of the Transaction. Lazard also orally confirmed its qualifications to act as the independent valuator pursuant to MI 61-101, which was subsequently confirmed in its engagement agreement. Based on the foregoing, Lazard has been determined to be qualified and independent for the purposes of MI 61-101 in providing the Valuation and the Fairness Opinion.
At the meeting of the Special Committee on March 31, 2021, Lazard delivered an oral opinion, which was subsequently confirmed in writing, to the effect that, as of March 31, 2021 and based upon and subject to the assumptions made, procedures followed, matters considered and other qualifications and limitations set forth therein, the Transaction Consideration to be paid to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to such Unaffiliated BPY Unitholders.
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At the meeting of the Special Committee on March 31, 2021, Lazard also delivered an oral formal valuation of each of the BPY Units and the New LP Preferred Units, which was subsequently confirmed in writing. Lazard concluded that, as of March 31, 2021, and based upon and subject to the assumptions made, procedures followed, matters considered and other qualifications and limitations set forth therein, (i) the fair market value of the BPY Units was in the range of $14.00 to $18.50 per BPY Unit and (ii) the fair market value of the New LP Preferred Units was expected to be approximately $25.00 per New LP Preferred Unit.
Scope of Review
In connection with the Valuation, Lazard:
(i)
reviewed the financial terms and conditions of a draft, dated March 31, 2021, of the Arrangement Agreement;
(ii)
reviewed certain publicly available historical business and financial information relating to BPY and BAM;
(iii)
reviewed various financial forecasts and other data provided to Lazard by management of BPY relating to the business of BPY (the “Forecasts”);
(iv)
held discussions with members of the senior management of BPY with respect to the business and prospects of BPY;
(v)
reviewed public information with respect to certain other entities in lines of business Lazard believed to be generally relevant in evaluating the business of BPY;
(vi)
reviewed the financial terms and historical trading prices of preferred equity securities of certain other entities in lines of business Lazard believed to be generally relevant in evaluating the New LP Preferred Units;
(vii)
reviewed the financial terms of certain business combinations involving entities in lines of business Lazard believed to be generally relevant in evaluating the business of BPY;
(viii)
reviewed historical stock prices and trading volumes of BPY Units, BPY preferred equity securities and BAM Shares; and
(ix)
conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.
Lazard was not, to the best of its knowledge, denied access by BPY or its general partner to any material information it requested. Lazard requested certain asset-level information from BPY to confirm its understanding of the Forecasts, but was not provided such information. However, Lazard concluded, based on its experience and professional judgement, that having access to such information was not material to its analysis.
Valuation Assumptions and Limitations
The Valuation is subject to the assumptions and limitations set out below.
With the Special Committee’s acknowledgement and agreement as provided for in Lazard’s engagement agreement, Lazard assumed and relied upon, without independent verification, the accuracy and completeness of the information and data publicly available (including on SEDAR and/or EDGAR, supplied or otherwise made available to, or reviewed by or discussed with, Lazard by or on behalf of the Special Committee, BPY, BAM or any other participant in the Transaction or otherwise reviewed by Lazard, including the certificate identified below (collectively, the “Information”). The Valuation is conditional upon such accuracy and completeness. With respect to the Forecasts utilized in Lazard’s analyses, Lazard assumed, with the consent of the Special Committee, that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments as to the future financial performance of BPY. Lazard assumed no responsibility for and expressed no view as to any such forecasts or the assumptions on which they are based, including with respect to the potential effects of the COVID-19 pandemic on such forecasts or assumptions. Subject to the exercise of professional judgment and except as expressly described in the Valuation, Lazard has not attempted
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to verify independently the accuracy or completeness of any of the Information and has not made any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of BPY or BAM, nor has Lazard been furnished with any such evaluation or appraisal. Lazard has assumed the accuracy and fair presentation of, and relied upon, BPY’s audited financial statements and the reports of the auditors thereon and BPY’s unaudited interim financial statements.
Senior officers of BPY, in their capacities as officers of BPY and the general partner and not in their individual capacities, represented to Lazard in a certificate dated the date of the Valuation that:
(a)
BPY has no information or knowledge of any facts not specifically provided to Lazard relating to BPY, its subsidiaries (as defined in National Instrument 62-104 Take-Over Bids and Issuer Bids of the Canadian Securities Administrators) or its or their assets, liabilities, affairs, business, operations, prospects or condition (financial or otherwise) which would reasonably be expected to affect the Valuation in any material respect;
(b)
subject to (d) below regarding budgets, forecasts, projections and estimates, the information and data and other material as filed under BPY’s profile on SEDAR or EDGAR and/or supplied or otherwise made available to Lazard by or on behalf of BPY (the “BPY Information”) provided orally by, or in the presence of, an officer of BPY or its general partner or in writing by BPY, its general partner or any of their respective subsidiaries or representatives to Lazard for the purpose of preparing the Valuation is, or in the case of historical BPY Information, was at the date of preparation, complete, true and accurate in all material respects, and does not and did not contain any untrue statement of a material fact in respect of BPY, its subsidiaries or the Transaction and does not and did not omit to state a material fact in respect of BPY, its subsidiaries or the Transaction necessary to make the BPY Information or any statement therein not misleading in light of the circumstances under which the BPY Information was provided or any such statement was made;
(c)
since the date on which such BPY Information was provided to Lazard, except as disclosed in writing to Lazard, there has been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of BPY and its subsidiaries, taken as a whole, and no change has occurred in the BPY Information or any part thereof which would have or which would reasonably be expected to have a material effect on the Valuation and there is no plan or proposal by BPY for any material change in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of BPY or any of its subsidiaries which has not been disclosed to Lazard;
(d)
with respect to any portion of the BPY Information that constitute budgets, forecasts, projections, and/or estimates, such budgets, forecasts, projections and/or estimates: (i) were prepared using the assumptions identified therein, which in the reasonable belief of management of BPY are (or were at the time of preparation and continue to be) reasonable in the circumstances; (ii) were prepared on a basis reflecting the best currently available estimates and judgements of management of BPY as to matters covered thereby at the time thereof; (iii) reasonably present the views of management of BPY of the financial prospects and forecasted performance of BPY and its subsidiaries and are consistent, in all material respects, with the historical operating experience of BPY and its subsidiaries; and (iv) are not, in the reasonable belief of management of BPY, misleading in any material respect in light of the assumptions used or in light of any developments since the time of their preparation;
(e)
all financial material, documentation and other data concerning the Transaction, BPY or its subsidiaries, including any projections or forecasts provided to Lazard by or on behalf of BPY, were prepared on a basis consistent in all material respects with the accounting policies applied in the most recent audited consolidated financial statements of BPY;
(f)
the contents of any and all documents prepared in connection with the Transaction for filing with regulatory authorities or delivery or communication to securityholders of BPY have been, are and will be true, complete and correct in all material respects and have not and will not contain any misrepresentation (as defined in the Securities Act (Ontario)) and such documents have complied, comply and will comply with all requirements under applicable laws;
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(g)
to the best of their knowledge, after reasonable inquiry, there are no “prior valuations” ​(as defined in MI 61-101) of BPY, or of its securities or material assets, which have been prepared as of a date within two years preceding the date of the Valuation;
(h)
since the dates on which BPY Information was provided to Lazard (or filed on SEDAR and/or EDGAR), no material transaction has been entered into by BPY or any of its subsidiaries which has not been disclosed to Lazard;
(i)
to the best of their knowledge, after reasonable inquiry, there have been no written or verbal offers for, or proposed transactions involving, all or a material part of the properties and assets owned by, or the securities of, BPY or of any of its subsidiaries and no negotiations have occurred relating to any such offers or transactions within two years preceding the date on which the proposed acquisition of the BPY Units was first publicly announced which have not been disclosed to Lazard;
(j)
other than as disclosed in the BPY Information, neither BPY nor any of its subsidiaries has any material contingent liabilities and there are no actions, suits, claims, proceedings, investigations, or inquiries pending or, to the best of such officers’ knowledge, threatened against or affecting the Transaction, BPY or any of its subsidiaries at law or in equity or before or by any federal, national, provincial, state, municipal or other governmental department, commission, bureau, board, agency or instrumentality which would reasonably be expected to, in any way, materially adversely affect the Transaction or BPY and its subsidiaries, taken as a whole;
(k)
the representations and warranties made by BPY and, to the best of their knowledge, by the Purchaser Parties in the Agreement relating to the Transaction are true and correct in all material respects; and
(l)
to the best of their knowledge, after reasonable inquiry, there are no agreements, undertakings, commitments or understandings (whether written or oral, formal or informal) relating to the Transaction, except as have been disclosed to Lazard.
The Valuation has been provided solely for the use of the Special Committee (in its capacity as such) in connection with its evaluation of the Transaction. The Valuation is not intended to be, and does not constitute, a recommendation to the members of the Special Committee as to whether they should approve the Transaction or to any holder of a security of BPY or its affiliates as to whether or how such holder should vote in respect of the Transaction or otherwise, or whether to take any other action with respect to the Transaction. In advising the Special Committee and preparing the Valuation, Lazard was not authorized to, and Lazard did not, solicit indications of interest from third parties regarding a potential transaction with BPY. The Valuation does not address the relative merits of the Transaction as compared to other transactions or business strategies that might be available to BPY or the merits of the underlying decision by BPY to engage in the Transaction. Lazard expressed no opinion with respect to the future trading prices of securities of BPY, BAM or any of their affiliates.
The Valuation is rendered as of March 31, 2021 on the basis of securities markets, economic and general business and financial conditions prevailing on that date and the condition and prospects, financial and otherwise, of BPY and its affiliates as they were reflected in the Information provided to Lazard. Any changes therein may affect the Valuation and, although Lazard reserves the right to change or withdraw the Valuation in such event, Lazard disclaims any undertaking or obligation to advise any person of any such change that may come to its attention after such date or to change or withdraw the Valuation. Lazard further notes that the current volatility and disruption in the credit and financial markets relating to, among other things, the COVID-19 pandemic, may or may not have an effect on BPY or the Purchaser Parties and Lazard expressed no opinion as to the effects of such volatility or such disruption on BPY or the Purchaser Parties. In its analysis in connection with the preparation of the Valuation, Lazard made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which are beyond the control of Lazard, BPY or BAM.
Lazard assumed, with the consent of the Special Committee, that the Transaction will be consummated on the terms described in the Arrangement Agreement, without any waiver or modification of any material terms or conditions. Representatives of the Special Committee advised Lazard, and Lazard assumed, that the
33

 
Arrangement Agreement, when executed, would conform to the draft reviewed by Lazard in all material respects. Lazard also assumed, with the consent of the Special Committee, that obtaining the necessary governmental, regulatory or third party approvals and consents for the Transaction would not have an adverse effect on BPY, BAM or the Transaction. Lazard did not express any opinion as to any tax or other consequences that might result from the Transaction, nor did Lazard’s opinion address any legal, tax, regulatory or accounting matters, as to which Lazard understood that BPY obtained such advice as it deemed necessary from qualified professionals. Lazard relied upon, without independent verification, the assessment of the Special Committee and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Lazard expressed no view or opinion as to any terms or other aspects of the Transaction, including, without limitation, the form or structure of the Transaction, any agreements or arrangements entered into in connection with, or contemplated by, the Transaction or the election which holders of BPY Units (other than BAM and its affiliates) may make in respect of the Type of Consideration to receive. Lazard assumed, with the consent of the Special Committee, that adjustments (if any) to the Consideration will not be material in any respect to its analyses or opinion. In addition, Lazard expressed no view or opinion as to the fairness of the amount or nature of, or any other aspects relating to, the compensation to any officers, directors or employees of any parties to the Transaction, or class of such persons, relative to the consideration payable to holders of BPY Units or otherwise.
The preparation of a valuation is a complex process and is not necessarily amenable to partial analysis or summary description. Lazard believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by Lazard, without considering all factors and analyses together, could create an incomplete view of the process underlying the Valuation. Accordingly, the Valuation should be read in its entirety.
Overview of BPY
BPY was established on January 3, 2013 as a Bermuda exempted limited partnership registered under the Bermuda Limited Partnership Act and the Bermuda Exempted Partnerships Act. BPY is BAM’s primary vehicle to make investments across all strategies in real estate, with approximately $88 billion in total assets as of the date of the Valuation.
As of the date of the Valuation, BPY’s core office portfolio (“Core Office”) consisted of interests in 135 high-quality office properties totaling approximately 96 million square feet, located primarily in the world’s leading commercial markets such as New York, London, Los Angeles, Washington, D.C., Sydney, Toronto, and Berlin, as well as approximately 8 million square feet of active office and multifamily developments and office redevelopments. As of the date of the Valuation, BPY’s core retail portfolio (“Core Retail”) consisted of 122 best-in-class retail properties containing over 120 million square feet in the United States. As of the date of the Valuation, BPY’s limited partnership investments portfolio (“LP Investments”) included its equity invested in real estate opportunity funds sponsored by BAM and/or one or more of its subsidiaries (other than BPY) which target high quality assets with operational upside across various real estate sectors, including office, retail, multifamily, logistics, hospitality, triple net lease, manufactured housing and student housing.
Certain wholly-owned subsidiaries of BAM provide management and administration services to BPY under long-term arrangements. The BPY Units trade on the TSX under the symbol “BPY.UN” and on the Nasdaq under the symbol “BPY”.
Definition and Approach to Fair Market Value
The Valuation is based upon techniques and assumptions that Lazard considered appropriate in the circumstances for the purposes of arriving at an opinion as to the fair market value of the BPY Units and New LP Preferred Units.
Lazard approached the Valuation in accordance with MI 61-101 which, in the case of a business combination such as the Transaction, requires the valuator to make a determination as to the “fair market value” of the affected securities (i.e., the BPY Units) and any non-cash consideration that does not meet the criteria in s. 6.3(2) of MI 61-101 for an exemption from valuation (i.e., the New LP Preferred Units). Lazard understood that it was determined by BPY that the BAM Shares are exempt from valuation due to being
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liquid securities of a Canadian reporting issuer, as well as meeting the other applicable criteria set out in s. 6.3(2) of MI 61-101 (including receiving an oral opinion from Lazard that the valuation of the BAM Shares is not required).
MI 61-101 defines “fair market value” as the monetary consideration that, in an open and unrestricted market, a prudent and informed buyer would pay a prudent and informed seller, each acting at arm’s length with the other and under no compulsion to act. In accordance with MI 61 101, Lazard made no downward adjustment to the fair market value to reflect the liquidity of the securities, the effect of the Transaction on the securities, or the fact that the BPY Units not held by BAM and its affiliates do not form part of a controlling interest. Consequently, in respect of the BPY Units, the Valuation provides a conclusion on a per security basis with respect to BPY’s “en bloc” value, being the price at which all of the BPY Units could be sold to one or more buyers at the same time.
Valuation of the BPY Units
Valuation Approach and Methodologies
In determining the fair market value of the BPY Units, Lazard primarily relied on a sum-of-the-parts valuation analysis based on discounted cash flow (“DCF”) and comparable entity public trading analysis approaches. Lazard also reviewed and considered valuation reference points such as the average discount to net asset value (“NAV”) calculated pursuant to IFRS (“IFRS NAV”), historical trading analysis, equity research analysts’ price targets of the BPY Units, comparable entity trading premium/discounts to consensus NAV and a premiums paid analysis.
The summary of the analyses and reviews provided below includes information presented in tabular format. To fully understand Lazard’s analyses and reviews, the tables must be read together with the full text of each summary. The tables alone do not constitute a complete description of Lazard’s analyses and reviews. Considering the data in the tables below without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Lazard’s analyses and reviews.
Application of Valuation Methodologies to the BPY Units
Lazard performed a sum-of-the-parts analysis of BPY. A sum-of-the-parts valuation analysis reviews an entity’s operating performance and outlook on a segment-by-segment basis to determine an implied market value for the enterprise as a whole.
BPY is made up of four segments:

Core Office;

Core Retail;

LP Investments; and

undeveloped land, condominium and other assets (“Land & Other”).
Lazard performed the sum-of-the-parts valuation analysis by (i) performing a DCF analysis for the Core Office and Core Retail segments, using the BPY-marked values for the LP Investment segment and using BPY’s book values of the Land & Other segment and (ii) applying comparable entity trading multiples to perform a valuation analysis of the Core Office and Core Retail segments, using the BPY-marked values for the LP Investment segment and using BPY’s book values of the Land & Other segment. For the LP Investments and Land & Other segments, such aggregate values were $12.5 billion and $1.0 billion, respectively, as of December 31, 2020 (being the last date for which such information was available), in each case as provided by BPY management.
Discounted Cash Flow Analysis
A discounted cash flow analysis is a valuation methodology used to derive an intrinsic valuation of an entity by calculating the present value of its estimated future cash flows. “Future cash flows” refers to projected unlevered free cash flows of an entity (calculated by beginning with earnings before interest, taxes, depreciation
35

 
and amortization (“EBITDA”) and adjusting for certain other income and expenses, and subtracting capital expenditures). “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting the future cash flows or amounts by a discount rate that is intended to take into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, capital structure, expected returns and other appropriate factors. Lazard calculated the discounted cash flow value for the Core Office and Core Retail segments as the sum of the net present value, as of December 31, 2020, of each of:

the estimated future cash flows that each applicable segment is expected by management of BPY to generate for each of fiscal years 2021 through 2024; and

the estimated value of each applicable segment at the end of fiscal year 2024, known as the “terminal value”.
The following is a summary of the unlevered free cash flow projections, excluding synergies, based on BPY management projections and used in the discounted cash flow analysis:
Core Office:
($ in MMs at Share)
Year 1
Year 2
Year 3
Year 4
Year 5
Cash NOI
$ 1,237 $ 1,301 $ 1,330 $ 1,425 $ 1,488
Other Income and Fee Revenue
366 237 230 164
G&A Expense
(370) (381) (385) (398)
Net Property (Acquisitions) / Disposals
4,429 2,757 1,042 1,212
Development Costs
(1,029) (600) (206) (52)
Maintenance and Growth Capex, TIs, LCs
(496) (359) (297) (218)
Change in Working Capital
(20) (75) 255 (51)
Cash Taxes
(166) (104) (95) (54)
Unlevered Free Cash Flow
$ 3,952 $ 2,776 $ 1,874 $ 2,027
Core Retail:
($ in MMs at Share)
Year 1
Year 2
Year 3
Year 4
Year 5
Cash NOI
$ 1,419 $ 1,436 $ 1,373 $ 1,377 $ 1,409
Other Income and Fee Revenue
159 150 152 153
G&A Expense
(311) (341) (363) (376)
Net Property (Acquisitions) / Disposals
2,149 2,373 592 474
Development Costs
Maintenance and Growth Capex, TIs, LCs
(431) (417) (351) (343)
Change in Working Capital
66 118 27 3
Cash Taxes
(14) (3) (3) (3)
Unlevered Free Cash Flow
$ 3,038 $ 3,315 $ 1,427 $ 1,285
Lazard then selected and applied a range of capitalization rates of 5.25% to 6.25% (in the case of the Core Office segment) and 6.0% to 6.5% (in the case of the Core Retail segment) to the respective segment’s estimated share of recurring 2025 net operating income, as provided by BPY management, to calculate the terminal value of each segment as of December 31, 2024. Lazard selected the range of capitalization rates applied to the terminal year net operating income based on its analysis of the implied historical capitalization rates of the select comparable entities (as defined below), as adjusted based on its professional judgment and experience, and further informed by reported capitalization rates for select asset-level transactions.
For its discounted cash flow calculations, Lazard applied discount rates ranging from 5.0% to 6.0% (in the case of the Core Office segment) and 6.25% to 7.25% (in the case of the Core Retail segment) to the respective segment’s estimated share of future cash flows, as provided by BPY management. Such discount rates were based on its estimated range of the weighted average cost of capital for each of the Core Office and
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Core Retail segments, derived from a number of factors using the Capital Asset Pricing Model, taking into account certain metrics, including, among others, the applicable risk-free rate of return, unlevered risk profile, cost of long-term debt and leverage ratio of each of the Core Office and Core Retail segments and the respective select comparable entities for each segment.
Lazard then calculated an enterprise value range for a valuation date of December 31, 2020 for BPY by taking the sum of the estimated discounted cash flows (including the net present value of the implied terminal value) for the Core Office and Core Retail segments and adjusting for the value of the LP Investments and Land & Other segments and an amount in respect of net tangible other assets as of December 31, 2020 (being the last date for which such information was available), as provided by BPY management.
Lazard then calculated an equity value range for BPY by taking the implied enterprise value range and (i) subtracting the outstanding principal amount of BPY’s share of asset-level debt, (ii) subtracting the outstanding principal amount of BPY’s share of corporate debt, (iii) subtracting the outstanding principal amount due to the holders of BPY’s capital securities, as adjusted for mandatorily convertible securities, (iv) subtracting the outstanding principal amount due to the holders of preferred equity, (v) subtracting the outstanding amount due in respect of BPY’s first quarter dividend, and (vi) adding BPY’s cash and cash equivalents, in each case as provided by BPY management as of December 31, 2020. Lazard divided the resulting equity value range by 1,006,104,628, the fully diluted number of BPY Units outstanding as of December 31, 2020, as provided by BPY management, to estimate an implied price range per BPY Unit.
Implied Price Per BPY Unit Range
$12.91 – $19.64
Comparable Entities Public Trading Analysis
Lazard also applied comparable entity multiples to perform a valuation analysis of the Core Office and Core Retail segments.
Lazard reviewed various financial multiples and ratios of selected publicly traded entities that Lazard believed, based on its experience with entities operating in the office and retail segments and its professional judgment, to be relevant for purposes of this analysis, considered such entities’ property portfolios, operations, lines of business, markets, sizes and geographies, and applied such multiples to the applicable estimated FFO for 2021 for the Core Office and Core Retail segments as set forth in the financial projections prepared by BPY management.
The selected group of entities Lazard reviewed (the “select comparable entities”), were:
Core Office: Core Retail:

Boston Properties, Inc.

Vornado Realty Trust

Douglas Emmett, Inc.

Kilroy Realty Corporation

SL Green Realty Corp.

JBG SMITH Properties

Hudson Pacific Properties, Inc.

Paramount Group, Inc.

Allied Properties REIT

Dream Office REIT

Derwent London Plc

Great Portland Estates Plc

CLS Holdings Plc

DEXUS

alstria office REIT-AG

Simon Property Group, Inc.

The Macerich Company
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Lazard selected the entities reviewed in this analysis because, among other things, the select comparable entities operate businesses similar to the applicable segment of BPY. However, no selected entity is identical to the applicable segment of BPY and certain of these entities may have characteristics that are materially different from those of such segments. Accordingly, Lazard believes that purely quantitative analyses are not, in isolation, determinative in the context of the Transaction and that qualitative judgments concerning differences between the businesses, financial and operating characteristics and prospects of each segment of BPY and the select comparable entities are also relevant.
For each of the select comparable entities, Lazard calculated the ratio of such entity’s closing trading price, as of (i) March 26, 2021 (the last trading day before the announcement of the Transactions), (ii) December 31, 2020 (the last trading day prior to the announcement that BAM was pursuing the Transaction), and (iii) on an average basis as observed over historical one-year, three-year and five-year periods to each entity’s estimated FFO for the next 12-month period (the “NTM FFO”). The NTM FFO estimates for the select comparable entities used by Lazard in its analysis were based on publicly available equity research estimates.
Lazard then observed the average of these ratios across the select comparable entities. The following table summarizes the results of this review for the select comparable entities:
BPY
Select Core
Office
Comparable
Entities
Select Core
Retail
Comparable
Entities
As of March 26, 2021*
15.7x 15.7x 8.8x
As of December 31, 2020**
11.9x 14.0x 6.8x
1-Year Average
10.7x 13.3x 5.7x
3-Year Average
11.7x 16.3x 9.9x
5-Year Average
13.3x 16.6x 12.2x
*
The last trading day before the announcement of the Transaction.
**
The last trading day prior to the announcement that BAM was pursuing the Transaction.
Lazard then selected and applied a range of FFO multiples of (i) 14.0x to 17.0x for the Core Office segment and 8.5x to 12.0x for the Core Retail segment, in each case to the applicable segment’s estimated 2021 FFO, as set forth in the Forecasts provided by BPY management, and (ii) 15.0x to 18.0x for the Core Office segment and 9.0x to 11.5x for the Core Retail segment for the 3-year average, to the applicable segment’s estimated 2021 FFO, as set forth in the Forecasts provided by BPY management. Lazard selected the range of FFO multiples applied to each of the Core Office and Core Retail segments based on its analysis of the FFO multiples of the select comparable entities as of March 26, 2021, the last trading day prior to the announcement of the Transaction, and based on its professional judgment and experience.
From this analysis, Lazard estimated an implied equity value ranges for BPY by taking the sum of implied equity value ranges for the Core Office and Core Retail segments and adjusting for the equity value of the LP Investments and Land & Other segments and an amount in respect of net tangible other assets as of December 31, 2020 (being the last date for which such information was available), as provided by BPY management. Lazard then subtracted (i) the outstanding principal amount of BPY’s share of corporate debt, (ii) the outstanding principal amount due to the holders of BPY’s capital securities, as adjusted for mandatorily convertible securities, (iii) the outstanding principal amount due to the holders of preferred equity and (iv) the outstanding amount due in respect of BPY’s first quarter dividend, and added BPY’s cash and cash equivalents, in each case as provided by BPY management as of December 31, 2020. Lazard divided the resulting equity value ranges by 1,006,104,628, the fully diluted number of BPY Units outstanding as of December 31, 2020, as provided by BPY management, to estimate implied price ranges per BPY Unit.
Implied Price
Per BPY
Unit Range
Current NTM FFO
$12.99 - $16.26
NTM FFO 3-Year Average
$13.75 - $16.52
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Other Valuation Reference Points
Lazard also reviewed the following valuation reference points.
Average IFRS NAV Discount
BPY has historically traded at a consistent and significant discount to its IFRS NAV per BPY Unit. BPY’s average trading discount to IFRS NAV per BPY Unit from inception until the announcement by BAM on January 4, 2021 that it was pursuing the transaction was 29.7%. Its average trading discount to IFRS NAV per BPY Unit for the year ended December 31, 2020 was 52.3%. Based on these data points and BPY’s IFRS NAV per BPY Unit as of December 31, 2020 of $26.65, a range of value for a BPY Unit of $12.71 to $18.73 is implied.
Historical Trading Analysis
Lazard reviewed historical trading prices of the BPY Units on the TSX and Nasdaq for the 52 weeks ending December 31, 2020, the last trading day prior to BAM announcing its intention to pursue the Transaction. Over this twelve-month period, the BPY Units traded in a band achieving a low of $7.25 and a high of $19.99 per BPY Unit.
Equity Research Analysts’ Price Targets
Lazard reviewed five available public market trading price targets for BPY Units published by equity research analysts prior to and following BAM announcing its intention to pursue to the Transaction. Equity research analyst price targets reflect each analyst’s estimate of the future public market trading price of the BPY Units at the time the price target is published. Of the reviewed price targets issued prior to BAM announcing its intention to pursue the Transaction, the lowest price target was $12.00 and the highest was $18.00. Following BAM’s announcement, the lowest price target was $17.00 and the highest was $18.00.
Comparable Entity Trading Premium/Discounts to Consensus NAV
Lazard compared the closing price of the equity securities of the select comparable entities as of March 26, 2021 to their respective NAV estimates based on research analyst consensus estimates as of such date (“Consensus NAV”), where available, to determine whether such securities traded at a premium or discount to Consensus NAV. All such securities were found to be trading at a discount to Consensus NAV, with the minimum discount to Consensus NAV being 0.2% and the maximum discount being 43.9%. Based on these data points and BPY’s consensus NAV estimate per BPY Unit as of December 31, 2020 of $19.27, a range of value for a BPY Unit of $10.80 to $19.24 is implied.
Premiums Paid Analysis
Lazard reviewed the transaction premiums paid over the unaffected security price for 35 completed change of control transactions for North American real estate targets over the past ten years with a total transaction value greater than $1 billion and cash consideration greater than 50%. Lazard calculated the 25th percentile and 75th percentile premia by comparing, to the extent publicly available, the per share acquisition price to the relevant target entity’s closing share price on the date prior to the announcement of the transaction, or other relevant date as referenced in public filings for the respective transaction, referred to as the “undisturbed date”. Based on a premium range of 14.6% to 29.7% implied by the 25th and 75th percentiles of such transactions and the closing price per BPY Unit on December 31, 2020, the last trading day before BAM announced its intention to pursue the Transaction, of $14.47, a range of value for the BPY Units of $16.58 to $18.77 was implied.
Benefits to BAM of Acquiring BPY Units Held by Holders Other than the Purchaser Parties and Their Affiliates
In accordance with MI 61-101, in arriving at its opinion of the value of the BPY Units Lazard reviewed and considered whether any distinctive material value would accrue to the Purchaser Parties through the acquisition of all of the BPY Units not already held by them or their affiliates in the Transaction. Based on the
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Information and discussions with BPY management, Lazard were not aware of any material specific operational or financial benefits that would accrue to the Purchaser Parties, such as the earlier use of available tax losses, lower income tax rates, increased revenues, higher asset utilization or any other operational or financial benefits, other than the elimination of public company costs and certain duplicative management expenses.
Fair Market Value of the BPY Units
In arriving at an opinion of fair market value of the BPY Units, Lazard did not attribute any particular weight to any specific factor but have made qualitative judgments based on its experience in rendering such opinions and on circumstances prevailing as to the significance and relevance of each factor. Lazard did, however, ascribe the greatest amount of importance to the sum-of-the-parts discounted cash flow analysis.
Based upon and subject to the foregoing, in addition to other factors considered relevant, Lazard was of the opinion that, as of March 31, 2021, the fair market value of the BPY Units, on an “en bloc” basis, was in the range of $14.00 to $18.50 per BPY Unit.
Valuation of the New LP Preferred Units
Valuation Approach and Methodologies
In determining the fair market value of the New LP Preferred Units, Lazard relied on a comparable securities public trading analysis.
Application of Valuation Methodologies to the New LP Preferred Units
Lazard reviewed the proposed terms of the New LP Preferred Units to identify their key features, including that they will be 60-year term preferred units with a liquidation preference/par value of $25.00 and a distribution rate intending to match the yield on the existing BPY perpetual preferred units (to be determined at the time the registration statement registering the New LP Preferred Units is declared effective).
Lazard reviewed the market price of the following existing BPY perpetual preferred units with a liquidation preference/par value of $25.00 relative to such par value.
Security Name
Coupon
Liquidation
Preference
Market Price
(% of par)
BPY PF 6.5%
6.500% $ 25.00 99.80%
BPY PFD 6.375%
6.375% $ 25.00 99.32%
BPY PFD A SER 3
5.750% $ 25.00 93.20%
Lazard also reviewed the available market prices of other existing BPY perpetual preferred units issued by BPY’s various subsidiaries, which varied due to their terms and available liquidity, among other factors.
Lazard further reviewed the market price of over 50 series of preferred securities of North American real estate entities with a total enterprise value greater than $5 billion. For each of these securities Lazard calculated the estimated first and last dollar leverage levels on a net debt to total enterprise value and net debt plus preferred to total enterprise value basis across all of each issuer’s outstanding securities as of March 26, 2021. Lazard then observed the average market prices as a percentage of par value and coupon rates for these securities stratified by net debt plus preferred to total enterprise value.
Fair Market Value of the New LP Preferred Units
Based upon and subject to the foregoing, in addition to other factors considered relevant, Lazard was of the opinion that, as of March 31, 2021, the fair market value of the New LP Preferred Units was approximately $25.00 per New LP Preferred Unit.
Prior Valuations
To the knowledge of the directors and senior officers of BPY General Partner, after reasonable enquiry, other than the Valuation, there have been no “prior valuations” ​(as defined in MI 61-101) prepared in respect
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of BPY, the BPY Units, any material assets of BPY or the New LP Preferred Units during the 24 months prior to the date of this Circular.
Certain Unaudited Financial Projections
BPY does not as a matter of course make public projections as to future sales, earnings or other results. However, the management of Brookfield Property Group has prepared the financial projections of BPY set forth below and provided such projections to Lazard in connection with its preparation of the Valuation and the Fairness Opinion. Such financial projections were also provided to BAM. The accompanying financial projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of management of Brookfield Property Group, were prepared on a reasonable basis, reflect the best currently available estimates and judgments, and present, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of BPY. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this document are cautioned not to place undue reliance on the financial projections.
Neither BPY’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the financial projections.
In developing the financial projections, management of Brookfield Property Group made numerous assumptions with respect to BPY for the relevant forecast period (fiscal 2021 through fiscal 2025). The assumptions and estimates underlying the financial projections are inherently uncertain and, though considered reasonable by the management of Brookfield Property Group as of the date of their preparation, are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective financial information. See the risk factors in the BPY Annual Report, which is incorporated herein by reference. Accordingly, there can be no assurance that the prospective results are indicative of the future performance of BPY or that actual results will not differ materially from those presented in the financial projections. Inclusion of the financial projections in this Document should not be regarded as a representation by any person that the results contained in the financial projections will be achieved.
The financial projections do not take into account any circumstances or events occurring after the date they were prepared, and except as may be required in order to comply with applicable law, none of BPY or, to BPY’s knowledge, any of its representatives intends to update, or otherwise revise, the financial projections, or the specific portions presented herein, to reflect circumstances existing after the date when they were made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. Neither BPY nor any of its affiliates or representatives has made or makes any representation to any person regarding the ultimate performance of BPY compared to the information contained in the financial projections contained herein.
Measures in these financial projections include those considered as non-IFRS financial measures. Non-IFRS financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with IFRS, and non-IFRS financial measures as used by BPY may not be comparable to similarly titled amounts used by other companies.
This table should be read in conjunction with BPY’s Annual Report incorporated by reference into this Document, and other publicly available information. In developing the projections, management of Brookfield Property Group made numerous assumptions with respect to BPY for the periods presented below, including the following assumptions:

financial information was prepared on an IFRS accounting basis using proportionate numbers, thereby resulting in NOI and FFO, each as defined below, including contributions from equity-accounted investments that would not otherwise be included in such line items based on IFRS accounting principles alone;
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the projections did not contemplate a privatization or other similar transaction;

calculations are bottom-up calculations based on individual business plans submitted by each reporting entity, broken into the Core Office, Core Retail and LP Investments segments;

constant exchange rates were assumed, with the key rates being GBP (1.340), EUR (1.195), CAD (0.760), AUD (0.740), BRL (0.185);

in the Core Office segment, same-property NOI compound annual growth rate, which we refer to as CAGR, is 4.0%, with the substantial completion of our existing development projects and an ordinary-course level of investment activity, including the disposal of mature assets;

in the Core Retail segment, target a 2.7% cumulative annual NOI growth rate over five years; complete active and development projects with $225 million of development spending through 2021 and actively restocking the pipeline targeting an average return of 6.0% to 8.0%;

in the LP Investments segment, estimates are based on the exit date for each investment given the finite life fund structure with most existing investments being exited over the period covered and assuming no participation by BPY in future real estate fund launches during the projections periods;

new investments are made to reinvest excess proceeds from disposition and distribution activity in the existing segments commencing in 2022 (what is referred to as Core Reinvestment below), based on the following assumptions: 5.2% capitalization rate; 60% NOI margin; 53% loan-to value; 4.0% debt costs; and 2.5% per annum fair value growth; specific assets or asset classes have not been identified;

general and administrative expenses (excluding management fees), which include compensation related to employees of subsidiaries, professional fees (including accounting, legal, etc.), facilities and technology and travel costs, and are expected to decline at low-single digit rates over the period covered, in part as a result of disposition activity;

includes required fees to BAM associated with the Master Services Agreement, which, covers “corporate” functions based on the following assumptions: (i) the base fee and equity enhancement distribution fee grow in line with projected growth in capitalization, which is partially offset by management and incentive fees related to BPY investments in BAM opportunistic funds, which are creditable against the payments under the Master Services Agreement, and (ii) the incentive fee (payable on BPY distributions in excess of $1.10 per BPY Unit) is fully offset by fund fees over the period covered;

assuming paydown of BPY’ bilateral facilities to maintain $1.5 billion of available liquidity under these facilities and roll over maturing bonds on consistent terms during the period;

upon maturity of Property Partnership Units, Series 1 and 2 , the projections assume that BAM upon maturity on December 31, 2021 and December 31, 2024, respectively, will exercise its call right to convert these series into a new series of preferred units on terms consistent with Property Partnership Units, Series 3;

the number of issued and outstanding BPY Units is assumed to remain unchanged during the period covered; and

with respect to distributions on BPY Units, annual distributions of $1.33 per BPY Unit are assumed
Summary of NOI & FOI By Business Segment(2)
Accrual NOI(1)
2020A
2021B
2022B
2023B
2024B
2025B
Core Office
$ 1,283 $ 1,340 $ 1,341 $ 1,380 $ 1,424 $ 1,416
Core Retail
1,524 1,417 1,413 1,356 1,366 1,422
LP Investments
431 579 624 418 319 179
Core Reinvestment
126 343 517 744
Total NOI
$ 3,238 $ 3,337 $ 3,504 $ 3,496 $ 3,627 $ 3,761
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FFO(1) & Corporate Items
2020A
2021B
2022B
2023B
2024B
2025B
Core Office FFO
$ 495 $ 671 $ 619 $ 636 $ 609 $ 748
Core Retail FFO
521 484 560 584 610 685
LP Investment FFO
64 223 369 285 281 242
Core Reinvestment FFO
74 204 309 447
Corporate G&A
(118) (193) (249) (280) (296) (304)
Corporate Interest Expense
(255) (276) (265) (259) (253) (248)
Total FFO
$ 707 $ 910 $ 1,107 $ 1,170 $ 1,261 $ 1,570
(1)
BPY defines NOI, or net operating income, as revenues from BPY’s commercial properties operations less direct commercial property expenses and revenues from BPY’s hospitality operations less direct hospitality expenses. BPY defines FFO, or funds from operations, as net income, prior to fair value gains, net, depreciation and amortization of real estate assets, and income taxes less non-controlling interests of others in operating subsidiaries and properties therein. When determining FFO, BPY includes its proportionate share of the FFO of unconsolidated partnerships and joint ventures and associates, as well as gains (or losses) related to properties developed for sale. NOI and FFO do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. For a reconciliation of NOI and FFO to the comparable IFRS measures for the year ended December 31, 2020, see BPY’s Annual Report on Form 20-F incorporated by reference into this Document.
(2)
For a description of BPY’s business segments, see BPY’s Annual Report incorporated by reference into this Document.
Dissent Rights; Rule 13e-3
Dissent Rights
Under the BPY LPA Amendment, each Registered BPY Unitholder will have the right to exercise dissent rights for payment of fair value of their BPY Units.
The following summarizes provisions of the BPY LPA Amendment regarding dissent rights that would be applicable in connection with the Transaction.
The Transaction
Registered BPY Unitholders have the right to dissent in respect of the Transaction and demand payment of the fair value of their BPY Units. The exercise of such right of dissent, if certain procedures are complied with by the Registered BPY Unitholder, could lead to a judicial determination of fair value required to be paid to such Dissenting BPY Unitholder for its BPY Units. The fair value so determined could be more or less than the amount paid per BPY Unit pursuant to the Transaction. The exact terms and procedures of the rights of dissent available to Registered BPY Unitholders are more fully described in this Document. See “Rights of Dissenting BPY Unitholders”.
Rule 13e-3
Under the SEC rules governing “going privatetransactions, each of the Purchaser Parties may be deemed an affiliate of BPY and therefore the Transaction contemplated in this Document constitutes a “going privatetransaction under Rule 13e-3 under the U.S. Exchange Act. Rule 13e-3 under the U.S. Exchange Act requires, among other things, that certain financial information concerning BPY and certain information relating to the fairness of the Transaction to Unaffiliated BPY Unitholders be filed with the SEC and disclosed to BPY Unitholders prior to consummation of the Transaction. The Purchaser Parties have provided or incorporated by reference such information in this document and a Transaction Statement on Schedule 13e-3 and the respective exhibits thereto filed with the SEC. If permitted by applicable Laws, subsequent to the completion of the Transaction, the Purchaser Parties intend to apply to Nasdaq and the TSX to de-list the BPY Units from trading. The BPY preferred units will not be affected by the Transaction and are expected to remain listed on Nasdaq, and the New LP Preferred Units are expected to be listed on Nasdaq and the TSX, subject to customary approvals of each exchange; therefore, BPY is expected to remain a reporting issuer under Canadian Securities Laws and continue to be subject to the reporting obligations under the U.S. Exchange Act following completion of the Transaction.
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Governance of BPY following the Transaction
As of the date hereof, there has been no determination made by the Purchaser Parties with respect to the composition or structure of the BPY Board of Directors or the governance structure and practices of BPY following consummation of the Transaction.
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RISK FACTORS
You should carefully consider the following risk factors in connection with your consideration of the Transaction. Such risks may not be the only ones facing BPY, the Purchaser Parties and each of their respective subsidiaries. Additional risks and uncertainties not presently known may also materially and adversely affect the business, operations, financial condition or prospects of BPY, the Purchaser Parties and each of their respective subsidiaries. For risks relating to the BAM Shares, BAM’s business and BAM’s relationship with BPY, see the risks described see the risks described in Part 6 of the BAM Annual Report under the heading “Business Environment and Risks”.
The New LP Preferred Units are subject to a number of risks. Before deciding whether to elect to receive New LP Preferred Unit Consideration, Unitholders should consider carefully the risks relating to New LP Preferred Units.
Risk Factors Relating to the Transaction
The Exchange Ratio is fixed and will not be adjusted in the event of any change in the price of either the BAM Shares, or the BPY Units. Because the market price of the BAM Shares may fluctuate, the value of the consideration received by BPY Unitholders that receive BAM Shares is uncertain.
Because the Exchange Ratio is fixed, the value of the BAM Share Consideration will depend on the market price of BAM Shares at the effective time of the Transaction. The Exchange Ratio will not be adjusted for changes in the market price of BAM Shares or BPY Units between the date of signing the Arrangement Agreement and the completion of the Transaction. There will be a lapse of time between the date BPY Unitholders vote to approve the Transaction Resolutions contemplated by this Document, and the date on which BPY Unitholders entitled to receive BAM Shares actually receive those shares. The implied value of the BAM Share Consideration has fluctuated since the date of the Public Announcement and will continue to fluctuate from the date of this Document to the effective time of the Transaction and thereafter. The closing price per BPY Unit as of the last trading day preceding the Public Announcement, on the TSX and Nasdaq was C$18.41 and $14.47, respectively. The closing price per BPY Unit has fluctuated as high as C$22.78 and $18.88 on the TSX and Nasdaq, respectively, and as low as C$21.47 and $17.53 on the TSX and Nasdaq, respectively, between the date of the Public Announcement and June 4 , 2021. The closing price per BAM Share as of the last trading day preceding the Public Announcement, on the TSX and NYSE was C$52.62 and $41.27, respectively. The closing price per BAM Share has fluctuated as high as C$61.15 and $50.75 on the TSX and NYSE, respectively, and as low as C$54.27 and $43.96 on the TSX and NYSE, respectively, between the date of the Public Announcement and June 4, 2021. Accordingly, at the time of the Meeting, the value of the portion of the Transaction Consideration to be paid in BAM Shares will not be known. Share and unit price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in BAM’s and BPY’s respective operations and prospects, cash flows, and financial position, market assessments of the likelihood that the Transaction Resolutions will be approved, and the timing of the Transaction. Moreover, the issuance of additional BAM Shares in the Transaction could depress the per share price of BAM Shares.
BPY Unitholders are urged to obtain current market quotations for BAM Shares and BPY Units before making a decision on whether to approve the Transaction Resolutions and when making an election decision.
The market price for BAM Shares and New LP Preferred Units following the closing of the Transaction may be affected by factors different from those that historically have affected BPY Units.
Upon completion of the Transaction, BPY Unitholders who elect the BAM Share Consideration and/or the New LP Preferred Unit Consideration will become holders of BAM Shares and/or New LP Preferred Units (subject to the election and pro-ration mechanisms described in this Document). BAM’s businesses differ from those of BPY, and accordingly the results of operations of BAM will be affected by some factors that are different from those currently affecting the results of operations of BPY. Further, as holders of New LP Preferred Units, you will only be entitled to distributions from New LP, when and if declared by the board of directors of the general partner of New LP, and the liquidation value of the New LP Preferred Units upon dissolution, liquidation or winding-up of New LP. For a discussion of the businesses of BAM and BPY and of important factors and risks to consider in connection with those businesses, see the documents
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incorporated by reference in this Document and referred to in the section entitled “About This Document — Where You Can Find More Information; Incorporation by Reference” of this Document.
Unitholders may receive a form of consideration different from what they elect.
Although each Unitholder may elect to receive consideration per Unit in the form of cash, BAM Shares, or New LP Preferred Units, the Type of Consideration will be pro-rated as necessary to ensure that the Total BAM Share Consideration, Total Cash Consideration and Threshold New LP Preferred Unit Consideration are not exceeded. Accordingly, some of the consideration Unitholders receive in the Transaction may differ from the Type of Consideration they elect and such difference may be significant. This may result in, among other things, tax consequences that differ from those that would have resulted if Unitholders had received solely the form of consideration that they elected. The relative proportion of cash, BAM Shares and New LP Preferred Units that a Unitholder receives may also have a value that is higher or lower than the relative proportion of cash, BAM Shares and New LP Preferred Units that the Unitholder elected to receive. A discussion of the pro-ration mechanism can be found under the heading “The Transaction — Pro-Ration” of this Document.
At the time BPY Unitholders vote on the Transaction Resolutions and at the time Unitholders make an election, they will not know the amount of cash, the number of BAM Shares or the number of New LP Preferred Units they will receive as a result of the Transaction.
After a Unitholder has made an election in respect of their Units, they will not be able to sell those Units unless they revoke their election prior to the election deadline.
To be effective, a form of election must be properly completed, signed and submitted to the Depositary by 5:00 p.m., (Toronto time), on the date of the election deadline. After a Unitholder has submitted a Letter of Transmittal and Election, under the terms of the election, he or she will not be able to transfer any Units covered by his or her form of election, unless he or she revokes his or her election by written notice received by the Depositary prior to the election deadline. Any subsequent transfer of Units with respect to which an election has been made shall automatically revoke such election. If the Meeting is delayed to a subsequent date, the election deadline shall be similarly delayed to a subsequent date, and BAM and BPY shall promptly announce any such delay and, when determined, the rescheduled election deadline.
Exchange LP Unitholders and BPYU Stockholders will not be entitled to vote at the Meeting or exercise Dissent Rights and BPYU Stockholders will not be entitled to make an election.
Exchange LP Unitholders and BPYU Stockholders are not entitled to vote at the Meeting or exercise Dissent Rights. In addition, BPYU Stockholders are not entitled to make an election. Subject to pro-ration, BPYU Stockholders will be entitled to receive the Default Consideration for each BPYU Share they hold. This may result in, among other things, BPYU Stockholders receiving one or more Types of Consideration that differs from what they would have elected to receive if they were entitled to make an election; this may also result in different tax consequences. In order to make an election, BPYU Stockholders must exchange their BPYU Shares for BPY Units by the deadlines described herein. A discussion of the treatment of BPYU Shares can be found under the heading “The Transaction — Default Consideration — BPYU Stockholders” of this Document.
Current BPY Unitholders will generally have a reduced economic ownership interest in BAM than they now have in BPY, after the Transaction.
BAM expects to issue to Unitholders and BPYU Stockholders 59,279,337 BAM Shares in the Transaction. Based on the number of BPY Units and BAM Shares outstanding as of June 1, 2021, upon the completion of the Transaction, current BAM shareholders and former Unitholders and BPYU Stockholders are expected to own approximately 96% and 4%, respectively, of the BAM Shares. After the completion of the Transaction, each Unitholder and BPYU Stockholders that receives BAM Shares and is not already a shareholder of BAM will become a shareholder of BAM with a percentage economic ownership that will be smaller than such securityholder’s percentage economic ownership of BPY or BPYU prior to the Transaction. As a result of this reduced ownership percentage, each such securityholder will generally have less of an economic interest in BAM after the Transaction than they now have in BPY or BPYU, as applicable. For more
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information on the rights of BAM shareholders, see the section entitled “Comparison of Rights of BPY Unitholders and BPYU Stockholders that Become BAM Shareholders and/or New LP Preferred Unitholders” of this Document.
The Transaction is subject to the approval of the Transaction Resolutions by BPY Unitholders. Failure to obtain this approval would prevent completion of the Transaction.
Before the Transaction can be completed, BPY Unitholders must consider and, if deemed advisable, approve the Transaction Resolutions. There can be no assurance that the BPY Unitholder Approval Threshold will be obtained. Failure to obtain the required BPY Unitholder Approval Threshold may result in a material delay in, or the abandonment of, the Transaction. Any delay in completing the Transaction may materially adversely affect the timing and amount of benefits that are expected to be achieved from the Transaction.
The Transaction is subject to a number of conditions to the obligations of both BAM and BPY to complete the Transaction, which, if not fulfilled, or not fulfilled in a timely manner, may result in termination of the Arrangement Agreement.
The obligation of the parties to complete the Transaction is subject to customary conditions precedents, including, without limitation: (a) the Transaction Resolutions shall have received the BPY Unitholder Approval Threshold at the Meeting in accordance with the Interim Order; (b) there shall not be in force any order restraining or enjoining the consummation of the Arrangement nor an action pending to enjoin from a Governmental Entity; (c) all consents, orders, regulations and approvals, including regulatory and judicial approvals and orders, required or necessary for the completion of the Arrangement shall have been obtained or received from the persons, authorities or bodies having jurisdiction in the circumstances, and none of such consents, orders, regulations or approvals shall contain terms or conditions that are unsatisfactory or unacceptable to BAM or BPY, each acting reasonably; (d) the Form F-4 of which this Document is a part shall have been declared effective by the SEC and under the U.S. Securities Act, no stop order suspending the effectiveness of the Form F-4 shall have been issued by the SEC and shall be in effect, and no proceedings for that purpose shall have been initiated by the SEC that have not been withdrawn; (e) BPY shall have received the opinion(s) of counsel as contemplated in Section 14.3.4 of the BPY LPA; (f) the final order of the Court pursuant to Section 182(5) of the OBCA (the “Final Order”) shall have been granted in form and substance satisfactory to BAM and the Partnership, each acting reasonably, and shall not have been set aside or modified in a manner unacceptable to such parties on appeal or otherwise; (g) the BAM Shares and the New LP Preferred Units shall have been approved for listing on NYSE and Nasdaq, respectively, subject to official notice of issuance and, on the TSX, subject to satisfaction of the customary listing conditions; (h) the accuracy of representations and warranties made in the Arrangement Agreement and compliance by the Purchaser Parties and BPY with the covenants set forth in the Arrangement Agreement in all material respects; (i) there shall not have occurred any BPY Material Adverse Effect or any BAM Material Adverse Effect; and (j) holders of not more than 5% of the outstanding BPY Units shall have exercised Dissent Rights with respect to the Arrangement as provided for in the proposed amendments to the BPY LPA described in the Arrangement Resolution.
Many of the conditions to completion of the Transaction are not within either BAM’s or BPY’s control, and neither entity can predict when or if these conditions will be satisfied. If any of these conditions are not satisfied or waived by the mutual consent of the applicable party prior to September 30, 2021, the Arrangement Agreement may be terminated. Although the Purchaser Parties and BPY have agreed in the Arrangement Agreement to do all such acts and things as are necessary or desirable, and to reasonably cooperate with each other, in order to give effect to the Arrangement use reasonable best efforts, subject to certain limitations, to complete the Transaction as promptly as practicable, these and other conditions to the completion of the Transaction may fail to be satisfied. In addition, satisfying the conditions to and completion of the Transaction may take longer, and could cost more, than BAM and BPY expect. Neither BPY nor BAM can predict whether and when these other conditions will be satisfied. Any delay in completing the Transaction may adversely affect the benefits that BAM and BPY expect to achieve if the Transaction are completed within the expected timeframe.
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Lawsuits challenging the Transaction may be filed against BPY and BAM, and an adverse judgment in any such lawsuit or any future similar lawsuits may prevent the Transaction from becoming effective or from becoming effective within the expected timeframe.
Interested parties may file lawsuits against BPY, BAM, affiliates and/or the directors and officers of either entity in connection with the Transaction. One of the conditions to the closing of the Transaction is that no injunction or order of any court or other governmental authority of competent jurisdiction enjoining, prohibiting or rendering illegal the consummation of the Transaction or the transactions contemplated by the Arrangement Agreement be in effect. If any plaintiff were successful in obtaining an injunction prohibiting the defendants from completing the Transaction on the agreed upon terms, then such injunction may prevent the Transaction from becoming effective or from becoming effective within the expected timeframe and could result in significant costs to BPY and/or BAM, including any cost associated with the indemnification of directors and officers. The defense or settlement of any lawsuit or claim that remains unresolved at the time the Transaction are completed may adversely affect BAM’s or BPY’s business, financial condition, results of operations and cash flow.
BPY’s directors and executive officers have interests in the Transaction that may be different from, or in addition to, the interests of BPY Unitholders generally.
In considering the recommendation of the BPY Board of Directors that BPY Unitholders approve the Transaction Resolutions, BPY Unitholders should be aware and take into account the fact that certain directors and executive officers of the General Partner and Brookfield Property Group have interests in the Transaction that may be different from, or in addition to, the interests of BPY Unitholders generally and that may create potential conflicts of interest. These interests include, among others, the right to accelerated vesting of certain equity awards in certain circumstances and rights to continuing indemnification and directors’ and officers’ liability insurance. See the section entitled “Special Factors — Interests of Directors and Executive Officers of the General Partner and Brookfield Property Group in the Transaction” in this Document. The BPY Board of Directors was aware of and considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation of, the Transaction, in approving the Arrangement Agreement and in recommending that BPY Unitholders approve Transaction Resolutions. The BPY Board of Directors established an Special Committee comprised solely of independent directors and empowered the Special Committee, on behalf of, and acting solely in the interests of the holders of BPY Units (other than BAM), to investigate, review, evaluate, negotiate the terms and conditions of, and determine the fairness of, the Transaction and to recommend to the BPY Board of Directors what action, if any, should be taken with respect to the Transaction.
The fairness opinion received by the Special Committee from its financial advisor prior to the execution of the Arrangement Agreement does not reflect changes, circumstances, developments or events that may have occurred or may occur after the date of the opinion.
Lazard, the independent valuator retained by the Special Committee in connection with the Transaction, delivered to the Special Committee the Fairness Opinion stating that, based upon and subject to the assumptions made, procedures followed, matters considered and other qualifications and limitations set forth therein, as of March 31, 2021, the Transaction Consideration to be paid to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to such Unaffiliated BPY Unitholders.
The Fairness Opinion of Lazard does not reflect changes, circumstances, developments or events that may have occurred or may occur after the date of the opinion, including changes in the operations and prospects of BAM and BPY or their respective operating companies, regulatory or legal changes, general market and economic conditions and other factors that may be beyond the control of BAM and BPY and that may alter the value of BAM and BPY or the prices of the BAM Shares, New LP Preferred Units or BPY Units at the effective time of the Transaction. The implied value of the Types of Consideration has fluctuated since, and could be materially different from its implied value as of, the date of the Fairness Opinion. The Fairness Opinion does not speak as of the time the Transaction will be completed or as of any date other than the dates of such opinion. Lazard does not have an obligation or responsibility to update, revise or reaffirm its opinions based on circumstances, developments or events that may have occurred or may occur after the date of the opinion. The opinion of Lazard is attached as Appendix I to this Document.
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BPY’s operating results after the Transactions may differ materially from the pro forma information and forecasts presented in this Document.
The pro forma information and the BPY forecasts described in this Document are presented for illustrative purposes only and are not necessarily indicative of what BPY’s actual financial condition or results of operations will be when the Transaction is completed on the dates indicated. The pro forma information described in this Document reflects adjustments based upon preliminary estimates that may change and assumptions about the Transactions that may prove incorrect over time. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this Document. BPY’s operating results after the Transactions may be materially different from those shown in the pro forma information presented in this Document, which represents only a combination of BAM’s and BPY’s respective historical results.
Similarly, the BPY forecasts presented in this Document are not necessarily indicative of BPY’s future results. None of the forecasts included in this Document have been prepared with a view toward public disclosure other than to certain parties involved in the Transaction or toward complying with SEC guidelines or generally accepted accounting principles. The forecasts were based on numerous variables and assumptions which are inherently uncertain and may be beyond the control of BPY, and exclude, among other things, transaction-related expenses. Important factors that may affect actual results and results of BPY’s operations, or could lead to such projections and forecasts not being achieved include, but are not limited to: successful management and retention of key personnel, unexpected expenses, conflicts of interest between BAM’s and BPY’s businesses and general economic conditions. As such, these forecasts should not be relied upon as an indicator of actual past or future results.
Failure to complete the Transaction could negatively impact the price of BAM Shares or Units and have a material adverse effect on their results of operations, cash flows and financial position.
If the Transaction is not completed for any reason, including as a result of BPY Unitholders failing to approve the Transaction Resolutions, the ongoing businesses of BAM and BPY may be materially adversely affected and, without realizing any of the benefits of having completed the Transaction, BAM and BPY would be subject to a number of risks, including the following:

BAM and BPY may experience negative reactions from the financial markets, including negative impacts on their respective share or unit prices;

BAM and BPY will still be required to pay certain costs relating to the Transaction, such as legal, accounting, financial advisor and printing fees;

the Arrangement Agreement places certain restrictions on the conduct of BPY’s business pursuant to the terms of the Arrangement Agreement, which may have delayed or prevented BPY from undertaking business opportunities that, absent the Arrangement Agreement, may have been pursued;

matters relating to the Transaction require substantial commitments of time and resources by each entity’s management, which could have resulted in the distraction of each entity’s management from ongoing business operations and pursuing other opportunities that could have been beneficial to the companies; and

litigation related to any failure to complete the Transaction or related to any enforcement proceeding commenced against BAM or BPY to perform their respective obligations under the Arrangement Agreement.
If the Transaction are not completed, the risks described above may materialize and they may have a material adverse effect on BAM’s or BPY’s results of operations, cash flows, financial position and stock prices.
The BAM Shares or New LP Preferred Units to be received by Unitholders upon completion of the Transaction will have different rights from Units.
Upon completion of the Transaction, Unitholders will no longer hold a direct economic interest in BPY. Instead, certain former Unitholders will become shareholders of BAM or unitholders of New LP and their
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rights as BAM shareholders or New LP unitholders will be governed by the terms of the BAM articles, the BAM bylaws and the New LP Partnership Agreement, as applicable. The terms of the BAM articles, the BAM bylaws, and the New LP Partnership Agreement are in certain respects materially different than the terms of the BPY LPA and Exchange LPA, which currently govern the rights of Unitholders. See the section entitled “Comparison of Rights of BPY Unitholders and BPYU Stockholders that Become BAM Shareholders and/or New LP Preferred Unitholders” of this Document for a discussion of the different rights associated with BAM Shares and New LP Preferred Units.
Other Risk Factors Relating to BAM and BPY
As a result of the Transaction, BAM’s and BPY’s businesses are and will be subject to the risks described above. In addition, BAM and BPY are, and following completion of the Transaction, each of BAM and BPY will continue to be, subject to the risks described in the BAM Annual Report and the BPY Annual Report, as updated from time to time in their subsequent filings with the SEC, including those incorporated by reference into this Document.
Risk Factors Specific to the New LP Preferred Units
The New LP Preferred Units represent a 60-year interest in New LP, and investors should not expect New LP to redeem any New LP Preferred Units on any date that the New LP Preferred Units become redeemable by New LP or on any particular date thereafter.
Unless redeemed by New LP prior to July 26, 2081, the New LP Preferred Units will mature on July 26, 2081 at which time each New LP Preferred Unitholder will be entitled to receive $25.00 per New LP Preferred Unit, together with all accrued (whether or not declared) and unpaid distributions up to but excluding such date of maturity (less any tax required to be deducted and withheld by New LP). The New LP Preferred Units are not redeemable at the option of New LP Preferred Unitholders under any circumstances. The New LP Preferred Units may be redeemed by New LP at its option (i) following the occurrence of a Change of Control Triggering Event, a Delisting Transaction Triggering Event, and/or a Change in Tax Law, in whole, out of funds legally available for such redemption, at a redemption price in cash of $25.00 per New LP Preferred Unit plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption, whether or not declared, (ii) prior to July 26, 2026, following the occurrence of a Ratings Event, in whole but not in part, out of funds legally available for such redemption, at a redemption price in cash of $25.50 per New LP Preferred Unit plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption, whether or not declared, or (iii) at any time on or after July 26, 2026, at New LP’s option, in whole or in part, out of funds legally available for such redemption, at a redemption price in cash of $25.00 per New LP Preferred Unit plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption, whether or not declared. Any decision New LP makes at any time to redeem the New LP Preferred Units will depend upon, among other things, New LP’s evaluation of its capital position, the terms and circumstances of any Change of Control, Ratings Event or Delisting Transaction, as applicable, and general market conditions at that time. As a result, the holders of the New LP Preferred Units may be required to bear the financial risks of an investment in the New LP Preferred Units until July 26, 2081.
The New LP Preferred Units will also rank junior to all of New LP’s existing and future indebtedness with respect to assets available to satisfy claims against New LP, and rank pari passu with New LP Parity Securities. Any decision New LP may make at any time to redeem the New LP Preferred Units will be determined by the New LP General Partner in its sole discretion and will depend upon, among other things, an evaluation of New LP’s capital position, the composition of its equity, its outstanding indebtedness and general market conditions at that time.
The New LP Preferred Units are subordinated to New LP’s existing and future debt obligations and New LP Senior Securities, as well as existing and future debt obligations of the Partnership’s subsidiaries that are not Guarantors and any capital stock of the Partnership’s subsidiaries that are not Guarantors held by others. Your interests could be diluted by the issuance of additional units of New LP, including additional New LP Preferred Units, and by other transactions.
The New LP Preferred Units are subordinated to all of New LP’s existing and future indebtedness and New LP Senior Securities, and rank pari passu with the New LP Parity Securities. As of June 7, 2021, New LP
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had no debt and no credit facilities in place. New LP may incur debt under credit facilities, or other existing or future debt arrangements. The payment of principal and interest on New LP’s debt will reduce cash available for distribution to its limited partners, including the New LP Preferred Unitholders. In addition, the New LP Preferred Units will be structurally subordinated to all existing and future debt obligations of the Partnership’s subsidiaries that are not Guarantors and any capital stock of the Partnership’s subsidiaries that are not Guarantors held by others as to the payment of distributions and amounts payable upon liquidation.
The issuance of any New LP Senior Securities or additional New LP Parity Securities (including additional series of New LP Class A Units and any other obligations of New LP that rank on parity with the New LP Preferred Units) would dilute the interests of the New LP Preferred Unitholders and could affect its ability to pay distributions on, redeem, or pay the liquidation preference on the New LP Preferred Units. Future issuances and sales of New LP Senior Securities, New LP Parity Securities or New LP Junior Securities, or the perception that such issuances and sales could occur, may cause prevailing market prices for the New LP Preferred Units to decline and may adversely affect New LP’s ability to raise additional capital in the financial markets at times and prices favorable to it.
The declaration of distributions on the New LP Preferred Units will be at the discretion of the New LP General Partner.
The declaration of distributions on the New LP Preferred Units will be at the discretion of the New LP General Partner. New LP Preferred Unitholders will not have a right to distributions on such units unless declared by the New LP General Partner. The declaration of distributions will be at the discretion of the New LP General Partner even if New LP has sufficient funds, net of its liabilities, to pay such distributions. This may result in New LP Preferred Unitholders not receiving the full amount of distributions that they expect to receive, or any distributions, and may make it more difficult to resell New LP Preferred Units or to do so at a price that the holder finds attractive. The New LP General Partner will not allow New LP to pay a distribution (i) unless there is sufficient cash available, (ii) which would render New LP unable to pay its debts as and when they come due, or (iii) which, in the opinion of the New LP General Partner, would or might leave New LP with insufficient funds to meet any future or contingent obligations. In addition, although unpaid distributions are cumulative, New LP is not required to accumulate cash for purpose of making distributions to the New LP Preferred Unitholders or any other preferred units it may issue, which may limit the cash available to make distributions on the New LP Preferred Units.
The payment of distributions under the Guarantee is limited and uncertain.
The payment of distributions under the Guarantee is limited to certain circumstances. Although the New LP Preferred Units carry cumulative dividends, New LP may not be in a position pursuant to law to declare and pay such distributions as contemplated in this Document. While the payment of such distributions has been guaranteed by BPY, such Guarantee is only triggered when such distributions are declared by the New LP General Partner or, upon the redemption, retraction or liquidation, dissolution or winding-up of New LP. The tax treatment of a payment under the Guarantee may differ from the tax treatment of the payment if it had been made by New LP.
Payment under the Guarantee will also depend, to a large extent, on the receipt by BPY of sufficient funds from its indirect subsidiaries as BPY does not have any significant assets of its own. Each Guarantor has agreed pursuant to the Guarantee that, as long as distributions on New LP Preferred Units are in arrears, such Guarantor will not declare of pay, or set apart for payment, any dividends or distributions on any of its Guarantor Preferred Securities if the full, cumulative distributions payable on the New LP Preferred Units are in arrears. A failure by a Guarantor to pay such distributions or dividends may have an adverse effect on BPY, New LP and the market value of the New LP Preferred Units.
The New LP Preferred Units have extremely limited voting rights.
Except as set forth in the New LP Partnership Agreement or as otherwise required by Bermuda law, New LP Preferred Unitholders generally will have no voting rights. For example, New LP may sell, exchange or otherwise dispose of all or substantially all of its assets in a single transaction or a series of related transactions without the approval of New LP Preferred Unitholders. Although the New LP Preferred Unitholders are entitled to limited protective voting rights with respect to certain matters, as described in
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Information Concerning New LP, the New LP Preferred Units and the Guarantors — Description of the New LP Preferred Units and Guarantees — Voting Rights,” the New LP Preferred Units will generally vote as a separate class, or along with all other classes or series of the New LP Parity Securities or other preferred units that New LP may issue upon which like voting rights have been conferred and are exercisable. As a result, the voting rights of New LP Preferred Unitholders may be significantly diluted, and the holders of such other classes or series of New LP Parity Securities that New LP may issue in the future, may be able to control or significantly influence the outcome of any vote.
The terms of New LP’s current and future indebtedness currently do or may restrict its ability to make distributions on the New LP Preferred Units or to redeem the New LP Preferred Units.
Distributions will only be paid if the distribution is not restricted or prohibited by law or the terms of any New LP Senior Securities, including New LP’s current and future indebtedness. The instruments governing the terms of current or future financing or the refinancing of any borrowings currently do or may contain covenants that restrict New LP’s ability to make distributions on the New LP Preferred Units or redeem the New LP Preferred Units. The New LP Preferred Units place no restrictions on New LP’s ability to incur indebtedness containing such restrictive covenants.
Your ability to transfer the New LP Preferred Units at a time or price you desire may be limited by the absence of an active trading market, which may not develop.
The New LP Preferred Units are a new class of New LP’s securities and do not have an established trading market. In addition, New LP Preferred Unitholders seeking liquidity of the New LP Preferred Units prior to its maturity date will be limited to selling their New LP Preferred Units in the secondary market absent redemption by New LP. Although New LP has applied to list the New LP Preferred Units on Nasdaq and the TSX, and the TSX has conditionally approved the listing of the New LP Preferred Units on the TSX, there can be no assurance that Nasdaq will accept the New LP Preferred Units for listing and that New LP will be able to satisfy all listing requirements of Nasdaq and the TSX. Even if the New LP Preferred Units are approved for listing by Nasdaq and/or the TSX, an active trading market on Nasdaq and/or the TSX for the New LP Preferred Units may not develop or, even if it develops, may not last, in which case the trading price of the New LP Preferred Units could be adversely affected and your ability to transfer your New LP Preferred Units will be limited. If an active trading market does develop on Nasdaq and/or the TSX, the New LP Preferred Units may trade at prices lower than $25.00. The trading price of the New LP Preferred Units would depend on many factors, including:

prevailing interest rates;

the market for similar securities;

general economic and financial market conditions;

New LP’s corporate credit ratings, the credit ratings of the New LP Preferred Units and the corporate credit ratings of the Guarantors and their securities;

New LP’s and any of the Guarantor’s issuance of debt or other preferred securities or the incurrence of additional indebtedness; and

New LP’s and any of the Guarantor’s financial condition, results of operations and prospects.
The Partnership and New LP intend to make a market in the New LP Preferred Units pending any listing of the New LP Preferred Units on Nasdaq and/or the TSX, but they are not obligated to do so and may discontinue market-making at any time without notice.
Market interest rates may adversely affect the value of the New LP Preferred Units.
One of the factors that will influence the price of the New LP Preferred Units will be the distribution yield on the New LP Preferred Units (as a percentage of the price of the New LP Preferred Units) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of the New LP Preferred Units to expect a higher distribution yield, and higher interest rates would likely increase New LP’s borrowing costs and potentially decrease funds
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available for distribution to New LP’s limited partners, including the holders of the New LP Preferred Units. Accordingly, higher market interest rates could cause the market price of the New LP Preferred Units to decrease.
New LP has no control over a number of factors, including economic, financial and political events, that impact market fluctuations in interest rates, which have in the past and may in the future experience volatility.
Redemption may adversely affect your return on the New LP Preferred Units.
On or after July 26, 2026, New LP will have the right, at its option, to redeem at a price of $25.00 per New LP Preferred Unit, plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date fixed for redemption, whether or not declared, some or all of the New LP Preferred Units, as defined and described under “Information Concerning New LP, the New LP Preferred Units and the Guarantors — Description of the New LP Preferred Units and Guarantees — Redemption — Optional Redemption on or after July 26, 2026.” In addition, prior to July 26, 2026, New LP may redeem the New LP Preferred Units after the occurrence of a Ratings Event, as defined and described in “Information Concerning New LP, the New LP Preferred Units and the Guarantors — Description of the New LP Preferred Units and Guarantees — Redemption — Optional Redemption upon a Ratings Event”, at a price of $25.50 per New LP Preferred Unit, plus declared and unpaid distributions. New LP will also be able to redeem all but not less than all of the New LP Preferred Units following the occurrence of a Change of Control Triggering Event, a Delisting Transaction Triggering Event and/or a Change in Tax Law out of funds legally available for such redemption, at a redemption price in cash of $25.00 per New LP Preferred Unit plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption, whether or not declared. To the extent that New LP redeems the New LP Preferred Units at times when prevailing interest rates may be relatively low compared to rates at the time of issuance of the New LP Preferred Units, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the distribution rate of the New LP Preferred Units.
Upon a Change of Control Triggering Event or a Delisting Transaction Triggering Event, New LP is not required to redeem the New LP Preferred Units, and it may not be able to redeem the New LP Preferred Units or pay the increased distribution rate per annum if it fails to redeem them.
New LP is not required to redeem the New LP Preferred Units, and even if it should decide to redeem the New LP Preferred Units, since the New LP Preferred Units will rank pari passu with the New LP Parity Securities, and junior to the New LP Senior Securities and to all of New LP’s existing and future indebtedness, upon a Change of Control Triggering Event or a Delisting Transaction Triggering Event, New LP may not have sufficient financial resources available or be permitted under its existing and future indebtedness to redeem the New LP Preferred Units, or pay the increased distribution rate per annum described under “Information Concerning New LP, the New LP Preferred Units and the Guarantors — Description of the New LP Preferred Units and Guarantees — Redemption — Optional Redemption upon a Change of Control Triggering Event” and “— Optional Redemption upon a Delisting Transaction Triggering Event.” Even if New LP is able to pay the increased distribution rate per annum, increasing the per annum distribution rate by 5.00% may not be sufficient to compensate New LP Preferred Unitholders for the impact of the Change of Control Triggering Event or a Delisting Transaction Triggering Event on the market price of the New LP Preferred Units.
New LP’s ability to issue New LP Parity Securities and ability to incur additional indebtedness in the future could adversely affect the rights of New LP Preferred Unitholders of New LP Preferred Units.
The New LP Preferred Units will rank pari passu with New LP Parity Securities. New LP is allowed to issue New LP Parity Securities without any vote of the holders of the New LP Preferred Units, except where the cumulative distributions on the New LP Preferred Units or any New LP Parity Securities are in arrears. The issuance of any New LP Parity Securities would have the effect of reducing the amounts available to the holders of the New LP Preferred Units issued pursuant to the Transaction upon New LP’s liquidation, dissolution or winding-up if it does not have sufficient funds to pay all liquidation preferences of the New LP Preferred Units and other New LP Parity Securities in full. It also would reduce amounts available to make distributions on the New LP Preferred Units issued pursuant to the Transaction if New LP does not have
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sufficient funds to pay distributions on all outstanding New LP Parity Securities. In addition, future issuances and sales of New LP Parity Securities or the perception that such issuances and sales or entry could occur, may cause prevailing market prices for the New LP Preferred Units to decline and may adversely affect New LP’s ability to raise additional capital in the financial markets at times and prices favorable to it.
In addition, the terms of the New LP Preferred Units do not limit New LP’s ability to incur indebtedness. As a result, New LP and its subsidiaries may incur indebtedness that will rank senior to the New LP Preferred Units. The incurrence of indebtedness or other liabilities that will rank senior to the New LP Preferred Units may reduce the amount available for distributions and the amount recoverable by holders of New LP Preferred Units.
Under certain limited circumstances, the terms of the New LP Preferred Units may change without your consent or approval.
Under the terms of the New LP Preferred Units, at any time following a Tax Event, New LP may, without the consent of any New LP Preferred Unitholders, vary the terms of the New LP Preferred Units such that they remain securities, or exchange the New LP Preferred Units for new securities, which in would eliminate the substantial probability that New LP or any Successor Entity would be required to pay any additional amounts with respect to the New LP Preferred Units as a result of a Change in Tax Law. However, New LP’s exercise of this right is subject to certain conditions, including that the terms considered in the aggregate cannot be less favorable to New LP Preferred Unitholders than the terms of the New LP Preferred Units prior to being varied or exchanged. See “Information Concerning New LP, the New LP Preferred Units and the Guarantors — Description of the New LP Preferred Units and Guarantees — Substitution or Variation”.
A change in the rating of the New LP Preferred Units could adversely affect the market price of the New LP Preferred Units.
In connection with Transaction, New LP expects that the New LP Preferred Units will receive a rating from a Rating Agency. Rating agencies revise their ratings from time to time and could lower or withdraw any rating issued with respect to the New LP Preferred Units. Any real or anticipated downgrade or withdrawal of any ratings of the New LP Preferred Units could have an adverse effect on the market price or liquidity of the New LP Preferred Units.
Ratings reflect only the views of the issuing rating agency or agencies and are not recommendations to purchase, sell or hold any particular security, including the New LP Preferred Units, and there is no assurance that any rating will apply for any given period of time or that a rating may not be adjusted or withdrawn. In addition, ratings do not reflect market prices or suitability of a security for a particular investor, and any future rating of the New LP Preferred Units may not reflect all risks related to New LP and its business or the structure or market value of the New LP Preferred Units. The assignment of a new rating that is lower than the existing rating or a downgrade or potential downgrade in the rating assigned to New LP, its subsidiaries, the New LP Preferred Units or any of its other securities could adversely affect the trading price and liquidity of the New LP Preferred Units.
New LP cannot be sure that any rating agency will maintain its rating once issued. New LP does not undertake any obligation to obtain a rating, maintain the rating once issued or to advise New LP Preferred Unitholders of any change in ratings. A failure to obtain a rating or a negative change in a rating once issued could have an adverse effect on the market price or liquidity of the New LP Preferred Units.
Rating agencies may change rating methodologies, and their ratings may not reflect all risks.
The rating agencies that currently or may in the future publish a rating for New LP or the New LP Preferred Units may from time to time in the future change the methodologies that they use for analyzing securities with features similar to the New LP Preferred Units. If the rating agencies change their practices for rating securities in the future, and the ratings of the New LP Preferred Units are subsequently lowered, the trading price and liquidity of the New LP Preferred Units could be adversely affected.
In addition, credit ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above and incorporated by reference herein and other factors that may affect the
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value of the New LP Preferred Units. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time. In addition, prior to July 26, 2026, New LP may redeem the New LP Preferred Units upon occurrence of a Ratings Event. See “Information Concerning New LP, the New LP Preferred Units and the Guarantors — Description of the New LP Preferred Units and Guarantees — Redemption — Optional Redemption upon a Ratings Event.
New LP Preferred Unitholders may have liability to repay distributions.
Under certain circumstances, New LP Preferred Unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 11 of the Bermuda Limited Partnership Act, New LP may not return (or release) any part of a limited partner’s capital contribution (a “Capital Withdrawal”) nor make a distribution from the assets of New LP if New LP has reasonable grounds for believing that the Capital Withdrawal or distribution would cause New LP to be unable to repay its liabilities as they become due (“Impermissible Capital Withdrawal”).
Bermuda law provides that for a period of six years from the date of an Impermissible Capital Withdrawal, limited partners who received the Impermissible Capital Withdrawal will be liable to the limited partnership (or where the partnership is dissolved to its creditors) for the amount of the contribution wrongfully returned or released. Bermuda law also provides that for a period of one year from the date of a Capital Withdrawal made in accordance with the provisions of the Bermuda Limited Partnership Act, a limited partner who received the Capital Withdrawal will be liable to the limited partnership (or where the partnership is dissolved to its creditors) for the amount of the contribution returned or released.
General Tax Risk Factors Relating to the Transaction
New LP Preferred Unitholders may be subject to non-U.S. and U.S. state and local taxes and return filing requirements as a result of owning New LP Preferred Units.
Based on its expected assets and method of operation, New LP does not expect any holder of New LP Preferred Units, solely as a result of owning such units, to be subject to any additional income taxes imposed on a net basis or additional tax return filing requirements in any jurisdiction in which New LP engages in activity or owns property. However, New LP’s method of operation and current structure may change, and there can be no assurance that, solely as a result of owning New LP Preferred Units, a New LP Preferred Unitholder will not be subject to certain taxes, including non-U.S., state, and local income taxes, unincorporated business taxes and estate, inheritance, or intangible taxes imposed by the various jurisdictions in which New LP does business or owns property now or in the future, even if the New LP Preferred Unitholders do not reside in any of these jurisdictions. Consequently, a New LP Preferred Unitholder may also be required to file non-U.S., state, and local income tax returns in some or all of these jurisdictions. Further, a New LP Preferred Unitholder may be subject to penalties for failure to comply with these requirements. It is a New LP Preferred Unitholder’s responsibility to file all U.S. federal, state, and local and non-U.S. tax returns that may be required of the holder.
The U.S. Internal Revenue Service (“IRS”) or Canada Revenue Agency (“CRA”) may not agree with certain assumptions and conventions that New LP uses to comply with applicable U.S. and Canadian federal income tax laws or to report income, gain, loss, deduction, and credit to holders of partnership interests in New LP, including New LP Preferred Unitholders.
The New LP General Partner will apply certain assumptions and conventions to comply with applicable tax laws and to report income, gain, deduction, loss, and credit to holders of partnership interests in New LP, including New LP Preferred Unitholders, in a manner that reflects the unitholders’ beneficial ownership of partnership items, taking into account variation in ownership interests during each taxable year because of trading activity. However, the IRS or CRA may not agree that these assumptions and conventions comply with all aspects of the applicable tax requirements. A successful IRS or CRA challenge to such assumptions or conventions could adversely affect the amount of tax benefits available to holders of partnership interests in New LP and could require that items of income, gain, deduction, loss, or credit, including interest deductions, be adjusted, reallocated, or disallowed in a manner that adversely affects New LP Preferred Unitholders.
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Holders of New LP Preferred Units may be exposed to transfer pricing risks.
To the extent that New LP enters into transactions or arrangements with parties with whom it does not deal at arm’s length, including Brookfield, the relevant tax authorities may seek to adjust the quantum or nature of the amounts received or paid by New LP if they consider that the terms and conditions of such transactions or arrangements differ from those that would have been made between persons dealing at arm’s length. This could result in more tax (and penalties and interest) being paid by New LP, and therefore the return to investors could be reduced. For Canadian tax purposes, a transfer pricing adjustment may in certain circumstances result in a dividend being deemed to be paid by a Canadian resident to a non-arm’s length non-resident, which deemed dividend is subject to Canadian withholding tax.
If the relevant tax authority were to assert that an adjustment should be made under the transfer pricing rules to an amount that is relevant to the computation of the income of New LP, such assertion could result in adjustments to amounts of income allocated to holders of New LP Preferred Units by New LP for tax purposes. In addition, New LP could also be liable for transfer pricing penalties in respect of transfer pricing adjustments unless reasonable efforts were made to determine, and use, arm’s length transfer prices. Generally, reasonable efforts in this regard are only considered to be made if contemporaneous documentation has been prepared in respect of such transactions or arrangements that support the transfer pricing methodology.
United States Tax Risk Factors Relating to the Transaction
If New LP were to be treated as a corporation for U.S. federal income tax purposes, the value of the New LP Preferred Units might be adversely affected.
The value of the New LP Preferred Units depends in part on the treatment of New LP as a partnership for U.S. federal income tax purposes. For New LP to be treated as a partnership for U.S. federal income tax purposes, under present law, 90% or more of New LP’s gross income for every taxable year must consist of qualifying income, as defined in Section 7704 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and New LP must not be required to register, if it were a U.S. corporation, as an investment company under the Investment Company Act of 1940 and related rules. Although the New LP General Partner intends to manage the affairs of New LP so that New LP will not need to be registered as an investment company if it were a U.S. corporation and so that it will meet the 90% test described above in each taxable year, New LP may not meet these requirements, or current law may change so as to cause, in either event, New LP to be treated as a corporation for U.S. federal income tax purposes. If New LP were treated as a corporation for U.S. federal income tax purposes, adverse U.S. federal income tax consequences could result, as described below in greater detail under the heading “Certain United States Federal Income Tax Considerations — Consequences to U.S. Holders — Ownership and Disposition of New LP Preferred Units Received Pursuant to the Arrangement or the BPYU Mandatory Exchange — Partnership Status of New LP.
U.S. backup withholding tax may apply if any New LP Preferred Unitholder fails to comply with U.S. tax reporting rules, and such excess withholding tax cost may be an expense borne by New LP and, therefore, by all holders of partnership interests in New LP on a pro‑rata basis.
U.S. backup withholding tax may apply with respect to any New LP Preferred Unitholder who fails to timely provide New LP (or the applicable broker, clearing agent, nominee, or other intermediary) with an IRS Form W-9 or an appropriate IRS Form W-8, as applicable. See the discussion below under the heading “Certain United States Federal Income Tax Considerations — Consequences to U.S. Holders — Ownership and Disposition of New LP Preferred Units Received Pursuant to the Arrangement or the BPYU Mandatory Exchange — Backup Withholding.” To the extent that any New LP Preferred Unitholder fails to timely provide the applicable form (or such form is not properly completed), New LP might treat such U.S. backup withholding taxes as an expense, which generally would be borne indirectly by all holders of partnership interests in New LP on a pro‑rata basis (including holders of equity interests who fully comply with their U.S. tax reporting obligations).
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The New LP partnership structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. The tax characterization of the New LP partnership structure is also subject to potential legislative, judicial, or administrative change and differing interpretations, possibly on a retroactive basis.
The U.S. federal income tax treatment of New LP Preferred Unitholders depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. New LP Preferred Unitholders should be aware that the U.S. federal income tax rules, particularly those applicable to partnerships, are constantly under review by the Congressional tax-writing committees and other persons involved in the legislative process, the IRS, the U.S. Treasury Department, and the courts, frequently resulting in changes which could adversely affect the value of the New LP Preferred Units or cause New LP to change the way it conducts its activities. For example, changes to the U.S. federal tax laws and interpretations thereof could make it more difficult or impossible for New LP to be treated as a partnership that is not taxable as a corporation for U.S. federal income tax purposes, change the character or treatment of portions of New LP’s income, reduce the net amount of distributions available to holders of partnership interests in New LP, or otherwise affect the tax considerations of owning New LP Preferred Units. In addition, New LP’s organizational documents and agreements permit the New LP General Partner to modify the New LP Partnership Agreement, without the consent of New LP Preferred Unitholders, to address such changes. These modifications could have a material adverse effect on New LP Preferred Unitholders.
New LP’s delivery of required tax information for a taxable year may be subject to delay, which could require a New LP Preferred Unitholder who is a U.S. taxpayer to request an extension of the due date for such taxpayer’s income tax return.
New LP has agreed to use commercially reasonable efforts to provide U.S. tax information (including IRS Schedule K-1 information needed to determine a New LP Preferred Unitholder’s allocable share of New LP’s income, gain, losses, and deductions, if any) no later than 90 days after the close of each calendar year. However, providing this U.S. tax information to New LP Preferred Unitholders will be subject to delay in the event of, among other reasons, the late receipt of any necessary tax information from other entities. It is therefore possible that, in any taxable year, a New LP Preferred Unitholder that is a U.S. taxpayer will need to apply for an extension of time to file such taxpayer’s tax returns. See the discussion below under the heading “Certain United States Federal Income Tax Considerations — Consequences to U.S. Holders — Ownership and Disposition of New LP Preferred Units Received Pursuant to the Arrangement or the BPYU Mandatory Exchange — Information Returns and Audit Procedures.
If the IRS makes an audit adjustment to New LP’s income tax returns, it may assess and collect any taxes (including penalties and interest) resulting from such audit adjustment directly from New LP, in which case cash available for distribution to holders of partnership interests in New LP, including New LP Preferred Unitholders, might be substantially reduced.
If the IRS makes an audit adjustment to New LP’s income tax returns, it may assess and collect any taxes (including penalties and interest) resulting from such audit adjustment directly from New LP instead of holders of New LP Preferred Units or holders of other partnership interests in New LP. New LP may be permitted to elect to have the New LP General Partner, New LP Preferred Unitholders, and other holders of partnership interests in New LP take such audit adjustment into account in accordance with their interests in New LP during the taxable year under audit. However, there can be no assurance that New LP will choose to make such election or that it will be available in all circumstances. If New LP does not make the election, and New LP pays taxes, penalties, or interest as a result of an audit adjustment, then cash available for distribution might be substantially reduced. As a result, holders of partnership interests in New LP, including New LP Preferred Unitholders, might bear some or all of the cost of the tax liability resulting from such audit adjustment, even if these holders did not own partnership interests in New LP during the taxable year under audit.
Treatment of distributions on the New LP Preferred Units as guaranteed payments for the use of capital gives rise to uncertain U.S. federal income tax consequences for New LP Preferred Unitholders.
The U.S. federal income tax treatment of distributions on the New LP Preferred Units is uncertain. The New LP General Partner will treat New LP Preferred Unitholders as partners entitled to guaranteed payments
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for the use of capital on their New LP Preferred Units, although the IRS may disagree with this treatment. If the New LP Preferred Units are not partnership interests, they would likely constitute indebtedness for U.S. federal income tax purposes, and distributions on the New LP Preferred Units would constitute ordinary interest income.
Based on the treatment of the New LP Preferred Units as partnership interests, the New LP General Partner will treat distributions on the New LP Preferred Units as guaranteed payments for the use of capital that generally will be taxable to U.S. Holders (as defined below) as ordinary income for U.S. federal income tax purposes. Although a U.S. Holder will recognize taxable income from the accrual of such a guaranteed payment even in the absence of a contemporaneous cash distribution, New LP anticipates accruing and making the guaranteed payment distributions on a quarterly basis. Otherwise, New LP Preferred Unitholders generally are not expected to share in New LP’s items of income, gain, loss, or deduction, nor will New LP allocate any share of its nonrecourse liabilities, if any, to New LP Preferred Unitholders. Upon the sale of New LP Preferred Units, a U.S. Holder will be required to recognize gain or loss equal to the difference between the amount realized by the holder and the holder’s tax basis in the New LP Preferred Units sold. The amount realized generally will equal the sum of the cash and the fair market value of other property the holder receives in exchange for such New LP Preferred Units. The tax basis of a U.S. Holder in New LP Preferred Units initially will be the fair market value of the New LP Preferred Units on the date the holder disposes of BPY Units pursuant to the Arrangement or exchanges BPYU Shares for the Default Consideration pursuant to the BPYU Mandatory Exchange (as applicable).
The ownership and disposition of New LP Preferred Units by U.S. Holders that are tax-exempt organizations raises tax issues unique to them. The treatment of guaranteed payments for the use of capital to tax-exempt New LP Preferred Holders is not certain. Depending on the circumstances, such payments may be treated as unrelated business taxable income (“UBTI”) for U.S. federal income tax purposes.
Investment in the New LP Preferred Units by Non-U.S. Holders (as defined below) gives rise to tax issues unique to such holders. The New LP General Partner will treat distributions on the New LP Preferred Units as guaranteed payments made from sources outside the United States for U.S. federal income tax purposes, and the New LP General Partner generally does not expect to withhold U.S. federal income tax on such guaranteed payments made to Non-U.S. Holders, provided that New LP is not engaged in a trade or business within the United States. However, the tax treatment of guaranteed payments for source and withholding tax purposes is uncertain, and the IRS may disagree with this treatment. As a result, it is possible that the IRS could assert that Non-U.S. Holders would be subject to U.S. federal income and withholding tax on their share of New LP’s ordinary income from sources within the United States, even if distributions on the New LP Preferred Units are treated as guaranteed payments. If, contrary to expectation, distributions on the New LP Preferred Units are not treated as guaranteed payments, then a Non-U.S. Holder might be subject to a withholding tax of up to 30% on the gross amount of certain U.S.-source income of New LP, such as interest income, which is not effectively connected with a U.S. trade or business.
Based on New LP’s organizational structure, as well as its expected income and assets, the New LP General Partner currently believes that New LP is unlikely to earn income treated as effectively connected with a U.S. trade or business, including effectively connected income attributable to the sale of a “United States real property interest,” as defined in the Code. If, contrary to expectation, New LP were deemed to be engaged in a U.S. trade or business, then a Non-U.S. Holder of New LP Preferred Units generally would be required to file a U.S. federal income tax return, and distributions to the holder might be treated as “effectively connected income” ​(which would subject the holder to U.S. net income taxation and possibly “branch profits” tax in the case of a corporate Non-U.S. Holder) and might be subject to withholding tax imposed at the highest effective U.S. tax rate applicable to such Non-U.S. Holder. If New LP were engaged in a U.S. trade or business, then gain or loss from the sale of New LP Preferred Units by a Non-U.S. Holder generally would be treated as effectively connected with such trade or business to the extent that the Non-U.S. Holder would have had effectively connected gain or loss had New LP sold all of its assets at their fair market value as of the date of such sale. In such case, any such effectively connected gain generally would be taxable at regular U.S. federal income tax rates, and the amount realized from such sale generally would be subject to a 10% U.S. federal withholding tax.
Prospective New LP Preferred Unitholders are urged consult their own tax advisers regarding the U.S. federal income tax consequences of the ownership and disposition of New LP Preferred Units in light of their particular circumstances.
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Under the Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment Act of 2010 (“FATCA”), certain payments made or received by New LP may be subject to a 30% federal withholding tax, unless certain requirements are met.
Under FATCA, a 30% withholding tax may apply to certain payments of U.S.-source income made to New LP or by New LP to a New LP Preferred Unitholder, unless certain requirements are met. See the discussion below under the heading “Certain United States Federal Income Tax Considerations — Consequences to U.S. Holders — Ownership and Disposition of New LP Preferred Units Received Pursuant to the Arrangement or the BPYU Mandatory Exchange — Foreign Account Tax Compliance.” To ensure compliance with FATCA, information regarding ownership of New LP Preferred Units may be reported to the IRS or to a non-U.S. governmental authority. New LP Preferred Unitholders are urged to consult their own tax advisers regarding the consequences under FATCA of owning New LP Preferred Units.
Canadian Tax Risk Factors Relating to the Transaction
Eligible Canadian Holders who wish to defer all or a portion of any capital gain that would otherwise be realized on the disposition of BPY Units or, in the case of an Eligible Canadian Holder that is an Exchange LP Unitholder, Exchange LP Units, pursuant to the Arrangement must elect pursuant to the Arrangement to dispose of their BPY Units or Exchange LP Units, as applicable, to BAM for BAM Shares on a tax-deferred rollover basis and must also make and file a Joint Tax Election (as defined herein) in respect of such disposition.
Eligible Canadian Holders who wish to defer all or a portion of any capital gain that would otherwise be realized on the disposition of BPY Units or, in the case of an Eligible Canadian Holder that is an Exchange LP Unitholder, Exchange LP Units, pursuant to the Arrangement must elect pursuant to the Arrangement to dispose of their BPY Units or Exchange LP Units, as applicable, to BAM in consideration for BAM Shares on a tax-deferred rollover basis. Such Eligible Canadian Holders must also make a Joint Tax Election with BAM in the form prescribed by the Tax Act (or any applicable provincial income tax law) and must file such Joint Tax Election in the manner and within the time prescribed by the Tax Act (or any applicable provincial income tax law).
Unless a valid Joint Tax Election is made, an Eligible Canadian Holder who disposes of BPY Units or Exchange LP Units, as applicable, to BAM in consideration for BAM Shares pursuant to the Arrangement will be considered to have disposed of its BPY Units or Exchange LP Units, as applicable, for proceeds of disposition equal to the aggregate of the fair market value, at the time of the disposition, of the BAM Shares received and the amount of any cash received in lieu of fractional BAM Shares. See “Certain Canadian Federal Income Tax Considerations” for further detail with respect to such a disposition of BPY Units.
Eligible Canadian Holders should be aware that even if they elect pursuant to the Arrangement to dispose of BPY Units or Exchange LP Units, as applicable, to BAM in consideration for BAM Shares on a tax-deferred rollover basis, the Type of Consideration will be pro-rated as necessary to ensure that the Total BAM Share Consideration, Total Cash Consideration and Threshold New LP Preferred Unit Consideration is not exceeded. Accordingly, some of the consideration Eligible Canadian Holders receive in the Transaction may differ from the Type of Consideration they elect and such difference may be significant. A discussion of the proration mechanism can be found under the heading “The Transaction — Pro-Ration” of this Document.
Eligible Canadian Holders who wish to defer any capital gain that would otherwise be realized on the disposition of their BPY Units or Exchange LP Units, as applicable, pursuant to the Arrangement should consult their own tax advisors.
Eligible Canadian Holders who elect pursuant to the Arrangement to dispose of BPY Units or Exchange LP Units, as applicable, to BAM in consideration for BAM Shares on a tax-deferred rollover basis are responsible for the validity, proper completion and timely filing of the Joint Tax Election.
Eligible Canadian Holders who wish to defer all or a portion of any capital gain that would otherwise be realized on the disposition of BPY Units or Exchange LP Units, as applicable, pursuant to the Arrangement by making the election pursuant to the Arrangement to dispose of BPY Units or Exchange LP Units, as applicable, to BAM in consideration for BAM Shares on a tax-deferred rollover basis will need to make the
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necessary Joint Tax Election with BAM. However, neither BAM nor any of its directors, officers, agents, advisors or representatives, shall be responsible for the proper completion of any election form and, except for the obligation of BAM to sign and return duly completed Joint Tax Election that is received on or prior to the Tax Election Date (as defined herein), neither BAM, nor any of its directors, officers, agents, advisors or representatives shall be responsible for any taxes, interest or penalties resulting from the failure of an Eligible Canadian Holder to properly complete or file such Joint Tax Election in the form and manner and within the time prescribed by the Tax Act (or any applicable provincial income tax law). BAM agrees only to deliver an executed copy of the Joint Tax Election containing the relevant information to Eligible Canadian Holders who have submitted, on or before the Tax Election Date, all of the relevant information through the website https://bpy.brookfield.com/~/media/Files/B/Brookfield-BPY-IR-V2/brookfield-asset-management-joint-tax-election-information.pdf, that will be made available for this purpose, provided that the information provided complies with the rules under the Tax Act described herein). See “Certain Canadian Federal Income Tax Considerations — Holders Resident in Canada — Disposition of BPY Units Pursuant to the Arrangement — Eligible Resident Holders Who Elect to Dispose of their BPY Units to BAM on a Tax-Deferred Rollover Basis” for further details regarding the Joint Tax Election with respect to the disposition of BPY Units on a tax-deferred rollover basis. The Elected Amount (as defined herein) in such election may not be less than the amount of any cash received by the Eligible Canadian Holder, including cash in lieu of fractional BAM Shares that would otherwise be issued by BAM to the Eligible Canadian Holder on the disposition of BPY Units or Exchange LP Units, as applicable, to BAM in consideration for BAM Shares pursuant to the Arrangement. Eligible Canadian Holders who wish to defer any capital gain that would otherwise be realized on the disposition of their BPY Units or Exchange LP Units, as applicable, pursuant to the Arrangement should consult their own tax advisors.
Resident Holders (as defined herein) who also hold BPY Preferred Units on the Effective Date may realize a greater capital gain (or reduced capital loss) for Canadian federal income tax purposes on the disposition (other than pursuant to a deemed disposition resulting from the BPY LPA Amendment) of their BPY Units pursuant to the Arrangement than they otherwise would if they did not hold any BPY Preferred Units on the Effective Date.
Resident Holders who also hold BPY Preferred Units on the Effective Date will not cease to be a partner of BPY as a result of the Arrangement. As a result, no portion of the share of the income (or loss) of BPY for Canadian federal income tax purposes for the fiscal year of BPY that includes the Effective Date that is allocated to such holders will be added (or deducted) in the computation of the adjusted cost base of such holders’ BPY Units that are disposed of pursuant to the Arrangement. Instead, the share of the income (or loss) of BPY for Canadian federal income tax purposes for the fiscal year of BPY that includes the Effective Date that is allocated to such holders will generally be added (or deducted) in the computation of the adjusted cost base of such holders’ BPY Preferred Units immediately following the end of BPY’s fiscal year in which the Effective Date occurs or, if earlier, immediately prior to the time that such holders dispose of all of their BPY Preferred Units and cease to be a partner of BPY for purposes of the Tax Act. Consequently, such holders may have a lower adjusted cost base of the BPY Units that are disposed of pursuant to the Arrangement (other than pursuant to a deemed disposition resulting from the BPY LPA Amendment) than otherwise would be the case if such holders did not hold any BPY Preferred Units at the time of the disposition of their BPY Units pursuant to the Arrangement (other than pursuant to a deemed disposition resulting from the BPY LPA Amendment). Such holders may therefore realize a greater capital gain (or reduced capital loss) for Canadian federal income tax purposes on the disposition of their BPY Units pursuant to the Arrangement (other than pursuant to a deemed disposition resulting from the BPY LPA Amendment) than otherwise would be the case if they did not hold any BPY Preferred Units at the time of the disposition of their BPY Units pursuant to the Arrangement (other than a disposition resulting from the BPY LPA Amendment). Such holders who make a Joint Tax Election in respect of BPY Units disposed of to BAM in consideration for BAM Shares pursuant to the Arrangement may have a lower adjusted cost base of such BAM Shares than otherwise would be the case if they did not hold any BPY Preferred Units at the time of such disposition pursuant to the Arrangement. Holders of BPY Units who also hold BPY Preferred Units on the Effective Date should consult their own tax advisors with respect to the Canadian federal income tax consequences to them of holding BPY Preferred Units on the Effective Date in their own particular circumstances.
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Resident Holders may be subject to Canadian federal income tax consequences that are different than as described in “Certain Canadian Federal Income Tax Considerations” if, contrary to the view of counsel, the BPY LPA Amendment results in a deemed disposition of BPY Units held by such holders at the time of the BPY LPA Amendment pursuant to the Arrangement.
If, contrary to the view of counsel, the BPY LPA Amendment results in a deemed disposition of the BPY Units held by Resident Holders at the time of such BPY LPA Amendment, a Resident BPY Unitholder will generally realize a capital gain (or capital loss) equal to the amount by which the deemed proceeds of disposition (being the aggregate fair market value of such BPY Units at the time of such deemed disposition), exceed (or are less than) the aggregate adjusted cost base to the Resident BPY Unitholder of such BPY Units. Immediately following such deemed disposition, the adjusted cost base of such Resident BPY Unitholder’s BPY Units held at that time should generally be equal to the aggregate fair market value thereof at that time. As a result of such BPY Units having an adjusted cost base equal to fair market value, the Resident BPY Unitholder generally should not realize a further capital gain on the actual disposition pursuant to the Arrangement of BPY Units held by such Resident BPY Unitholder after the BPY LPA Amendment. In addition, as discussed under “Certain Canadian Federal Income Tax Considerations — Resident Holders — Allocation of Income (or Loss) from BPY”, the share of the income (or loss) of BPY for tax purposes for the fiscal year of BPY that includes the Effective Date that is allocated to such Resident BPY Unitholder will generally be added (or deducted) in the computation of the adjusted cost base of the Resident BPY Unitholder’s BPY Units immediately prior to the time that such Resident BPY Unitholder disposes of all of its BPY Units pursuant to the Arrangement and ceases to be a partner of BPY (other than on a deemed disposition of BPY Units as a result of the BPY LPA Amendment) for purposes of the Tax Act. If, as a result of this adjusted cost base adjustment, the aggregate adjusted cost base of the Resident BPY Unitholder’s BPY Units held after the time of the BPY LPA Amendment exceeds the aggregate proceeds of disposition received for such BPY Units pursuant to the Arrangement, then the Resident BPY Unitholder should generally realize a capital loss that may offset in whole or in part any capital gain that arose on the deemed disposition of the Resident BPY Unitholder’s BPY Units as a result of the BPY LPA Amendment, subject to the detailed rules in the Tax Act relating to the deduction of capital losses. The taxation of capital gains and capital losses is discussed under “Certain Canadian Federal Income Tax Considerations — Resident Holders — Taxation of Capital Gains and Capital Losses”. The adjusted cost base adjustment rules are complex and Resident Holders should consult their own tax advisors with respect to the application of these rules as a result of the Arrangement in their particular circumstances. The consequences for Resident Holders who hold BPY Preferred Units on the Effective Date will be different. Resident BPY Unitholder who hold BPY Preferred Units on the Effective Date should see the immediately preceding risk factor.
New LP Preferred Units and BAM Shares may or may not continue to be “qualified investments” under the Tax Act for Registered Plans (as defined herein).
Provided that the New LP Preferred Units are listed on a “designated stock exchange” ​(which currently includes the TSX and Nasdaq), the New LP Preferred Units will be “qualified investments” under the Tax Act for a trust governed by a registered retirement savings plan (“RRSP”), deferred profit sharing plan, registered retirement income fund (“RRIF”), registered education savings plan (“RESP”), registered disability savings plan (“RDSP”) and a tax-free savings account (“TFSA”) (all as defined in the Tax Act and collectively referred to herein as “Registered Plans”). However, there can be no assurance that the New LP Preferred Units will continue to be listed on a “designated stock exchange”.
Provided that the BAM Shares are listed on a “designated stock exchange” ​(which currently includes the TSX and the NYSE) or BAM is a “public corporation” ​(and not a “mortgage investment corporation” as defined in the Tax Act), the BAM Shares will be “qualified investments” under the Tax Act for Registered Plans. However, there can be no assurance that the foregoing conditions will continue to be met.
There can also be no assurance that tax laws relating to “qualified investments” will not be changed. Taxes may be imposed in respect of the acquisition or holding of non-qualified investments by Registered Plans and certain other taxpayers and with respect to the acquisition or holding of “prohibited investments” as defined in the Tax Act, by a RRSP, RRIF, TFSA, RDSP or RESP.
Generally, the New LP Preferred Units will not be a “prohibited investment” for a trust governed by an RRSP, RRIF, TFSA, RDSP or RESP provided that the annuitant under the RRSP or RRIF, the holder of the
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TFSA or RDSP or the subscriber of the RESP, as the case may be, deals at arm’s length with New LP for purposes of the Tax Act and does not have a “significant interest” as defined in the Tax Act for purposes of the prohibited investment rules, in New LP or the New LP Preferred Units are “excluded property” as defined in the Tax Act for purposes of the prohibited investment rules.
Generally, the BAM Shares will not be not be a “prohibited investment” for a trust governed by an RRSP, RRIF, TFSA, RDSP or RESP, provided that the annuitant under the RRSP or RRIF, the holder of the TFSA or RDSP or the subscriber of the RESP, as the case may be, deals at arm’s length with BAM for purposes of the Tax Act and does not have a “significant interest” as defined in the Tax Act for purposes of the prohibited investment rules, in BAM, or the BAM Shares are “excluded property” as defined in the Tax Act for purposes of the prohibited investment rules.
Holders of New LP Preferred Units and BAM Shareholders who will hold New LP Preferred Units or BAM Shares, as the case may be, in an RRSP, RRIF, TFSA, RDSP or RESP should consult with their own tax advisors regarding the application of the foregoing prohibited investment rules having regard to their particular circumstances.
The Canadian federal income tax consequences to holders of New LP Preferred Units could be materially different in certain respects from those described in the section of this Circular titled Certain Canadian Federal Income Tax Considerations if New LP is a “SIFT partnership”, as defined in the Tax Act.
Under the rules in the Tax Act applicable to a “SIFT partnership” ​(the “SIFT Rules”) certain income and gains earned by a “SIFT partnership” will be subject to income tax at the partnership level at a rate similar to a corporation, and allocations of such income and gains to its partners will be taxed as a dividend from a “taxable Canadian corporation”, as defined in the Tax Act. In particular, a “SIFT partnership” will generally be required to pay a tax on the total of its income from businesses carried on in Canada, income from “non-portfolio properties”, as defined in the Tax Act, other than taxable dividends, and taxable capital gains from dispositions of “non-portfolio properties”. “Non-portfolio properties” include, among other things, equity interests or debt of corporations, trusts or partnerships that are resident in Canada, and of non-resident persons or partnerships the principal source of income of which is one or any combination of sources in Canada (other than a “portfolio investment entity” as defined in the Tax Act), that are held by the “SIFT partnership” and have a fair market value that is greater than 10% of the equity value of such entity, or that have, together with debt or equity that the “SIFT partnership” holds of entities affiliated (within the meaning of the Tax Act) with such entity, an aggregate fair market value that is greater than 50% of the equity value of the “SIFT partnership”. The tax rate that is applied to the above mentioned sources of income and gains is set at a rate equal to the “net corporate income tax rate”, plus the “provincial SIFT tax rate”, each as defined in the Tax Act.
A partnership will be a “SIFT partnership” throughout a taxation year if at any time in the taxation year (i) it is a “Canadian resident partnership” as defined in the Tax Act, (ii) “investments”, as defined in the Tax Act, in the partnership are listed or traded on a stock exchange or other public market and (iii) it holds one or more “non-portfolio properties”. For these purposes, a partnership will be a “Canadian resident partnership” at a particular time if (a) it is a “Canadian partnership” as defined in the Tax Act at that time, (b) it would, if it were a corporation, be resident in Canada (including, for greater certainty, a partnership that has its central management and control located in Canada) or (c) it was formed under the laws of a province. A “Canadian partnership” for these purposes is a partnership all of whose members are resident in Canada or are partnerships that are “Canadian partnerships”.
Under the SIFT Rules, New LP could be a “SIFT partnership” if it is a “Canadian resident partnership”. New LP will be a “Canadian resident partnership” if its central management and control is located in Canada. This determination is a question of fact and is expected to depend on where the New LP General Partner is located and exercises central management and control of the partnership. The New LP General Partner will take appropriate steps so that the central management and control of New LP is not located in Canada such that the SIFT Rules should not apply to New LP at any relevant time. However, no assurance can be given in this regard. If New LP is a “SIFT partnership”, the Canadian federal income tax consequences to holders of New LP Preferred Units could be materially different in certain respects from those described in the section of this Circular titled Certain Canadian Federal Income Tax Considerations. In addition, there can be no assurance that the SIFT Rules will not be revised or amended in the future such that the SIFT Rules will apply.
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New LP Preferred Unitholders (as defined herein) may be required to include imputed amounts in their income for Canadian federal income tax purposes in accordance with section 94.1 of the Tax Act.
Section 94.1 of the Tax Act contains rules relating to interests in entities that are not resident or deemed to be resident in Canada for purposes of the Tax Act or not situated in Canada (and certain exempt foreign trusts as defined in subsection 94(1) of the Tax Act), other than a “controlled foreign affiliate” ​(as defined in the Tax Act) of the taxpayer (“Non-Resident Entities”), that could in certain circumstances cause income to be imputed to New LP Preferred Unitholders for Canadian federal income tax purposes, either directly or by way of allocation of such income imputed to New LP. See “Certain Canadian Federal Income Tax Considerations — Holders Resident in Canada — Holding and Disposing of New LP Preferred Units — Computation of Income or Loss”.
Foreign tax credits for Canadian federal income tax purposes for New LP Preferred Unitholders will be limited if the Foreign Tax Credit Generator Rule (as defined herein) apply in respect of the foreign “business income tax” or “non-business income tax”, each as defined in the Tax Act, paid by New LP to the government of a foreign country.
Under the Foreign Tax Credit Generator Rules, the foreign “business-income tax” or “non-business-income tax” for Canadian federal income tax purposes for any taxation year may be limited in certain circumstances. If the Foreign Tax Credit Generator Rules apply, the allocation to a New LP Preferred Unitholder of foreign “business income tax” or “non-business income tax” paid by New LP, and therefore, such unitholder’s foreign tax credits for Canadian federal income tax purposes, will be limited. See “Certain Canadian Federal Income Tax Considerations — Holders Resident in Canada — Holding and Disposing of New LP Preferred Units — Computation of Income or Loss”.
Non-Resident New LP Unitholders (as defined herein), may be subject to Canadian federal income tax with respect to any Canadian source business income earned by New LP if New LP were considered to carry on business in Canada.
If New LP were considered to carry on business in Canada for purposes of the Tax Act, Non-Resident New LP Unitholders would be subject to Canadian federal income tax on their share of any Canadian source business income earned or considered to be earned by New LP, subject to the potential application of the safe harbour rule in section 115.2 of the Tax Act and any relief that may be provided by any relevant income tax treaty or convention.
The New LP General Partner intends to manage the affairs of New LP, to the extent possible, so that it does not carry on business in Canada and is not considered or deemed to carry on business in Canada for purposes of the Tax Act. Nevertheless, because the determination of whether New LP is carrying on business and, if so, whether that business is carried on in Canada, is a question of fact that is dependent upon the surrounding circumstances, the CRA, might contend that New LP carries on business in Canada for purposes of the Tax Act.
If New LP is considered to carry on business in Canada or is deemed to carry on business in Canada for the purposes of the Tax Act, Non-Resident New LP Unitholders that are corporations would be required to file a Canadian federal income tax return for each taxation year in which they are a Non-Resident New LP Unitholder regardless of whether relief from Canadian taxation is available under an applicable income tax treaty or convention. Non-Resident New LP Unitholders who are individuals would only be required to file a Canadian federal income tax return for any taxation year in which they are allocated income from New LP from carrying on business in Canada that is not exempt from Canadian taxation under the terms of an applicable income tax treaty or convention.
Non-Resident New LP Unitholders may be subject to Canadian federal income tax on capital gains realized by New LP on dispositions of “taxable Canadian property” as defined in the Tax Act.
A Non-Resident New LP Unitholder will be subject to Canadian federal income tax on its proportionate share of capital gains realized by New LP on the disposition of “taxable Canadian property” other than “treaty protected property”, as defined in the Tax Act. “Taxable Canadian property” includes, but is not limited to, property that is used or held in a business carried on in Canada and shares of corporations that are
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not listed on a “designated stock exchange”, as defined in the Tax Act, if more than 50% of the fair market value of the shares is derived from certain Canadian properties during the 60-month period immediately preceding the particular time. Property of New LP generally will be “treaty-protected property” to a Non-Resident New LP Unitholder if the gain from the disposition of the property would, because of an applicable income tax treaty or convention, be exempt from tax under the Tax Act. New LP is not expected to realize capital gains or losses from dispositions of “taxable Canadian property”. However, no assurance can be given in this regard. Non-Resident New LP Unitholders will be required to file a Canadian federal income tax return in respect of a disposition of “taxable Canadian property” by New LP unless the disposition is an “excluded disposition” for the purposes of section 150 of the Tax Act. However, Non-Resident New LP Unitholders that are corporations will still be required to file a Canadian federal income tax return in respect of a disposition of “taxable Canadian property” that is an “excluded disposition” for the purposes of section 150 of the Tax Act if tax would otherwise be payable under Part I of the Tax Act by such Non-Resident New LP Unitholders in respect of the disposition but is not because of an applicable income tax treaty or convention (otherwise than in respect of a disposition of “taxable Canadian property” that is “treaty-protected property” of the corporation). In general, an “excluded disposition” is a disposition of property by a taxpayer in a taxation year where: (a) the taxpayer is a non-resident of Canada at the time of the disposition; (b) no tax is payable by the taxpayer under Part I of the Tax Act for the taxation year; (c) the taxpayer is not liable to pay any amounts under the Tax Act in respect of any previous taxation year (other than certain amounts for which the CRA holds adequate security); and (d) each “taxable Canadian property” disposed of by the taxpayer in the taxation year is either: (i) “excluded property” ​(as defined in subsection 116(6) of the Tax Act); or (ii) property in respect of the disposition of which a certificate under subsection 116(2), (4) or (5.2) of the Tax Act has been issued by the CRA. Non-Resident New LP Unitholders should consult their own tax advisors with respect to the requirements to file a Canadian federal income tax return in respect of a disposition of “taxable Canadian property” by New LP.
Non-Resident New LP Unitholders may be subject to Canadian federal income tax on capital gains realized on the disposition of New LP Preferred Units if New LP Preferred Units are “taxable Canadian property”.
Any capital gain arising from the disposition or deemed disposition of New LP Preferred Units by a Non-Resident New LP Unitholder will be subject to taxation in Canada, if, at the time of the disposition or deemed disposition, the New LP Preferred Units are “taxable Canadian property” of the Non-Resident New LP Unitholder, unless the New LP Preferred Units are “treaty-protected property” to such Non-Resident New LP Unitholder. In general, New LP Preferred Units will not constitute “taxable Canadian property” of any Non-Resident New LP Unitholder at the time of disposition or deemed disposition, unless (a) at any time during the 60-month period immediately preceding the disposition or deemed disposition, more than 50% of the fair market value of the New LP Preferred Units was derived, directly or indirectly (excluding through a corporation, partnership or trust, the shares or interests in which were not themselves “taxable Canadian property”), from one or any combination of: (i) real or immovable property situated in Canada; (ii) “Canadian resource properties”, as defined in the Tax Act; (iii) “timber resource properties”, as defined in the Tax Act; and (iv) options in respect, of or interests in, or for civil law rights in, such property, whether or not such property exists, or (b) the New LP Preferred Units are otherwise deemed to be “taxable Canadian property”. Since New LP’s assets are expected to consist only of debt of CanHoldco and certain U.S. corporations, the New LP Preferred Units are not at any relevant time expected to be “taxable Canadian property” of any Non-Resident New LP Unitholder at any time but no assurance can be given in this regard. See “Certain Canadian Federal Income Tax Considerations — Holders Not Resident in Canada — Taxable Canadian Property”. Even if the New LP Preferred Units constitute “taxable Canadian property”, the New LP Preferred Units will be “treaty protected property” if the gain on the disposition of the New LP Preferred Units is exempt from tax under the Tax Act under the terms of an applicable income tax treaty or convention. If the New LP Preferred Units constitute “taxable Canadian property”, Non-Resident New LP Unitholders will be required to file a Canadian federal income tax return in respect of a disposition of New LP Preferred Units unless the disposition is an “excluded disposition” ​(as discussed above). If the New LP Preferred Units constitute “taxable Canadian property”, Non-Resident New LP Unitholders should consult their own tax advisors with respect to the requirement to file a Canadian federal income tax return in respect of a disposition of New LP Preferred Units.
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Non-Resident New LP Unitholders may be subject to Canadian federal income tax reporting and withholding tax requirements on the disposition of “taxable Canadian property”.
Non-Resident New LP Unitholders who dispose of “taxable Canadian property”, other than “excluded property” and certain other property described in subsection 116(5.2) of the Tax Act (or who are considered to have disposed of such property on the disposition of such property by New LP) are obligated to comply with the procedures set out in section 116 of the Tax Act and obtain a certificate pursuant to the Tax Act. In order to obtain such certificate, the Non-Resident New LP Unitholder is required to report certain particulars relating to the transaction to CRA not later than 10 days after the disposition occurs. The New LP Preferred Units are not expected to be “taxable Canadian property” and New LP is not expected to dispose of property that is “taxable Canadian property” but no assurance can be given in this regard.
Payments of interest (other than interest not subject to Canadian federal withholding tax) by residents of Canada to New LP will be subject to Canadian federal withholding tax and New LP may be unable to apply a reduced rate taking into account the residency or entitlement to relief under an applicable income tax treaty or convention of holders of New LP Preferred Units.
New LP will be deemed to be a non-resident person in respect of certain amounts paid or credited or deemed to be paid or credited to it by a person resident or deemed to be resident in Canada, including interest. Interest (other than interest not subject to Canadian federal withholding tax) paid or deemed to be paid by a person resident or deemed to be resident in Canada to New LP will be subject to withholding tax under Part XIII of the Tax Act at the rate of 25%. However, the CRA’s administrative practice in similar circumstances is to permit the rate of Canadian federal withholding tax applicable to such payments to be computed by looking through the partnership and taking into account the residency of the partners (including partners who are resident in Canada) and any reduced rates of Canadian federal withholding tax that any non-resident partners may be entitled to under an applicable income tax treaty or convention, provided that the residency status and entitlement to treaty benefits can be established. Under the Treaty a Canadian resident payer is required in certain circumstances to look-through fiscally transparent partnerships, such as New LP, to the residency and Treaty entitlements of their partners and take into account the reduced rates of Canadian federal withholding tax that such partners may be entitled to under the Treaty.
While the New LP General Partner expects CanHoldco to look-through New LP in determining the rate of Canadian federal withholding tax applicable to amounts paid or deemed to be paid by CanHoldco to New LP, New LP may be unable to accurately or timely determine the residency of the holders of New LP Preferred Units for purposes of establishing the extent to which Canadian federal withholding taxes apply or whether reduced rates of withholding tax apply to some or all of the holders of New LP Preferred Units. In such a case, CanHoldco will withhold Canadian federal withholding tax from all payments made to New LP that are subject to Canadian federal withholding tax at the rate of 25%. Holders of New LP Preferred Units who are resident in Canada for Canadian federal income tax purposes will be entitled to claim a credit for such taxes against their Canadian federal income tax liability, but holders of New LP Preferred Units who are not resident in Canada for Canadian federal income tax purposes will need to take certain steps to receive a refund or credit in respect of any such Canadian federal withholding taxes withheld equal to the difference between the withholding tax at a rate of 25% and the withholding tax at the reduced rate they are entitled to under an applicable income tax treaty or convention. See “Certain Canadian Federal Income Tax Considerations — Holders Not Resident in Canada — Holding and Disposing of New LP Preferred Units — Taxation of Income and Loss” for further detail. Holders of New LP Preferred Units should consult their own tax advisors concerning all aspects of Canadian federal withholding taxes.
Risks Relating to Taxation of BAM
For general tax risks relating to the taxation of BAM, see “Business Environment and Risks — n) Tax” in Part 6 of the BAM Annual Report.
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SUPPLEMENTAL FINANCIAL INFORMATION
The information below is being provided pursuant to Rule 13-01 of Regulation S-X. The Partnership and the other Guarantors will fully and unconditionally guarantee, on a joint and several basis, the New LP Preferred Units as described under “Information Concerning New LP and the New LP Preferred Units — Description of the New LP Preferred Units and Guarantees”. The following tables present summarized financial information for the New LP, BPY and the other Guarantors on a combined basis, after eliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries:
(in millions of US dollars)
Three months
ended
March 31, 2021
Year Ended
December 31, 2020
Statement of Income Data
Revenue(1) 1 7
Revenue — from non-guarantor subsidiaries
117 478
Dividend income — from non-guarantor subsidiaries
95 473
Operating profit
96 580
Net income
172 451
(1)
Total revenue of the Partnership and its controlled subsidiaries for the three months ended March 31, 2021 and the year ended December 31, 2020 was $1,450 and $6,593, respectively.
March 31, 2021
December 31, 2020
Balance Sheet Data
Current assets(1)
128 141
Current assets — due from non-guarantor subsidiaries
8,874 8,472
Long-term assets(1)
88 64
Long-term assets — due from non-guarantor subsidiaries
478
Current liabilities
162 257
Current liabilities — due to related parties
1,741 830
Current liabilities — due to non-guarantor subsidiaries
6,754 6,864
Long-term liabilities
920 1,572
Long-term liabilities — due to related parties
33 42
Preferred equity and capital securities
2,386 2,378
Non-controlling interests
5 5
(1)
Total assets of the Partnership and its controlled subsidiaries as of March 31, 2021 and December 31, 2020 were $107,674 and $107,951, respectively.
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DESCRIPTION OF THE TRANSACTION
The principal purpose of the Meeting is for BPY Unitholders to consider the proposed acquisition, directly or indirectly, by the Purchaser Parties pursuant to the Transaction of 100% of the Units for consideration per Unit of the BAM Share Consideration, the Cash Consideration or the New LP Preferred Unit Consideration.
The Transaction is being implemented pursuant to the Plan of Arrangement. The following description is qualified in its entirety by reference to the full text of the Plan of Arrangement, which is attached as Appendix E to this Document.
Transaction Steps
Commencing at the Effective Time, the following shall occur and shall be deemed to occur in the following order without any further act or formality:
(a)
simultaneously:
(i)
each BPY Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, notwithstanding the terms of the BPY Stock Option Plans or any applicable grant agreement in relation thereto, be surrendered by the holder thereof to BPY in exchange for, subject to Section 5.4 of the Plan of Arrangement, a cash payment from BPY equal to the amount (if any) by which the Cash Consideration exceeds the exercise price of such BPY Option, multiplied by the number of BPY Units subject to such BPY Option, and each such BPY Option shall immediately be cancelled and terminated and, for greater certainty, where such amount is zero or negative, such BPY Option shall be cancelled without any consideration, and none of BPY, BAM or Purchaser Sub shall be obligated to pay the holder of such BPY Option any amount in respect of such BPY Option; and
(ii)
each Tracking Share Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, notwithstanding the terms of the Tracking Share Option Plan or any applicable grant agreement in relation thereto, be surrendered by the holder thereof to BPO ETS in exchange for, subject to Section 5.4 of the Plan of Arrangement, a cash payment from BPO ETS equal to the amount (if any) by which the Cash Consideration exceeds the exercise price of such Tracking Share Option, multiplied by the number of Tracking Shares subject to such Tracking Share Option, and each such Tracking Share Option shall immediately be cancelled and terminated and, for greater certainty, where such amount is zero or negative, such Tracking Share Option shall be cancelled without any consideration, and none of BPO ETS, BPY, BAM or Purchaser Sub shall be obligated to pay the holder of such Tracking Share Option any amount in respect of such Tracking Share Option,
and, with respect to each BPY Option and Tracking Share Option that is surrendered, as of the effective time of such surrender: (A) the holder thereof shall cease to be the holder of such BPY Option or Tracking Share Option, as applicable, (B) the holder thereof shall cease to have any rights as a holder in respect of such BPY Option or Tracking Share Option, as applicable, or under the BPY Stock Option Plans or the Tracking Share Option Plan, as applicable, other than the right to receive the consideration to which such holder is entitled, (C) such holder’s name shall be removed from the applicable register, and (D) all agreements, grants and similar instruments relating thereto shall be cancelled;
(b)
the DSUs outstanding immediately prior to the Effective Time shall be continued on the same terms and conditions as were applicable immediately prior to the Effective Time, except that the terms of such DSUs shall be amended so as to substitute BAM Shares for the Tracking Shares or BPY Units, as applicable, subject to such DSUs and the number of DSUs held by each participant under the DSU Plans as of the Effective Time shall be amended to be equal to (i) the number of DSUs held by the participant immediately prior to the Effective Time, multiplied by (ii) the Exchange Ratio;
(c)
BAM will purchase each unvested Restricted BPY Unit and each Restricted Canadian BPY Unit and (i) such Restricted BPY Unit shall be deemed to be transferred by the holder thereof to BAM in
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exchange for the BAM Share Consideration, (ii) the name of such holder shall be removed from the register of holders of BPY Units in respect of such BPY Units, (iii) BAM shall be recorded as the registered holder of the BPY Units so transferred and shall be deemed to be the legal and beneficial owner thereof, free and clear of any liens, claims or encumbrances, and (iv) such BAM Shares shall be subject to the same transfer restrictions, vesting, forfeiture and other terms and conditions as were applicable to such Restricted BPY Units immediately prior to the Effective Time;
(d)
BAM will purchase each BPY Unit in respect of which a valid election has been made by an Eligible Canadian Holder and (i) subject to pro-ration in accordance with Section 3.3 of the Plan of Arrangement, each such BPY Unit shall be deemed to be transferred by such Eligible Canadian Holder to BAM in exchange for the BAM Share Consideration, (ii) the name of such Eligible Canadian Holder shall be removed from the register of holders of BPY Units in respect of such BPY Units and (iii) BAM shall be recorded as the registered holder of the BPY Units so transferred and shall be deemed to be the legal and beneficial owner thereof, free and clear of any liens, claims or encumbrances;
(e)
the Applicable Acquiror will purchase each BPY Unit held by a BAM Holder, other than those BPY Units transferred pursuant to paragraphs (c) and (d) above and (i) each such BPY Unit shall be deemed to be transferred by such holder to the Applicable Acquiror in exchange for the Cash Consideration, the New LP Preferred Unit Consideration or the BAM Exchange LP Consideration (in each case as deemed to be elected and subject, in each case, to pro-ration in accordance with the Plan of Arrangement), (ii) the name of such holder shall be removed from the register of holders of BPY Units in respect of such BPY Units and (iii) the Applicable Acquiror shall be recorded as the registered holder of the BPY Units so transferred and shall be deemed to be the legal and beneficial owner thereof, free and clear of any liens, claims or encumbrances;
(f)
the BPY LPA Amendment will become effective and binding on the parties thereto;
(g)
Purchaser Sub will make a loan to CanHoldco in the principal amount equal to the Total Public New Preferred Unit Amount, which will be evidenced by the issuance of Note A (as such term is defined in the Plan of Arrangement);
(h)
CanHoldco and/or one or more other subsidiaries of BPY, as set forth in the Pre-Closing Notice, will transfer an aggregate cash amount equal to the Total Public New Preferred Unit Amount to the Property Partnership to repay the intercompany obligations owing to the Property Partnership set forth in the Pre-Closing Notice;
(i)
Property Partnership will purchase from BPY and cancel such number of managing general partner units of the Property Partnership as is equal to the Total BPY Unit Redemption Amount divided by the Cash Consideration, in exchange for the payment of a cash amount equal to the Total BPY Redemption Amount to BPY;
(j)
Purchaser Sub will transfer Note A to New LP and, as payment therefor, New LP will issue a number of New LP Preferred Units equal to the Total Public New LP Preferred Units to Purchaser Sub;
(k)
concurrently with the transfer and issuance in paragraph (j), the Property Partnership will transfer the receivables set forth in the Pre-Closing Notice to New LP and, as payment therefor, New LP will issue to the Property Partnership such number of New LP General Partner Units as set out in the Pre-Closing Notice;
(l)
BAM will issue such number of BAM Shares equal to the BAM Shares Payable to BPYU Stockholders to the Property Partnership and, as payment therefor, the Property Partnership will issue to BAM the number of REUs equal to the number of BAM Shares Payable to BPYU Stockholders divided by the Exchange Ratio;
(m)
each outstanding BPY Unit held by a Dissenting BPY Unitholder shall be deemed to be transferred by the holder thereof to BPY without any further act or formality on its part, and, in consideration therefor, BPY shall be deemed to have issued to the Dissenting BPY Unitholder a debt-claim to be paid the aggregate fair value of those BPY Units in accordance with Article 4 of the Plan of
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