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Dynamic quotes 
OFFON

BROOKFIELD PROPERTY REIT

(BPYU)
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BROD PROP6 375 : BROOKFIELD PROPERTY REIT INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/06/2021 | 04:05pm EDT
All references to numbered Notes are to specific footnotes to our Consolidated
Financial Statements included in this Quarterly Report and whose descriptions
are incorporated into the applicable response by reference. The following
discussion should be read in conjunction with such Consolidated Financial
Statements and related Notes. Capitalized terms used, but not defined, in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations have the same meanings as in such Notes.

Brookfield Property REIT Inc. ("the Company" or "BPYU") is an indirect
subsidiary of Brookfield Property Partners L.P. ("BPY"), one of the world's
largest commercial real estate companies. As used herein, the terms "we", "us"
and "our" refer to BPYU and its subsidiaries. BPYU, through its subsidiaries and
affiliates, is an owner and operator of retail properties.

Overview-Introduction


We own a property portfolio comprised primarily of Class A regional malls
(defined primarily by sales per square foot). As of June 30, 2021, we were the
owner, either entirely or with joint venture partners, of 119 retail properties
located throughout the United States comprising approximately 118 million square
feet of gross leasable area, or GLA.

Our primary objective is to be an owner and operator of best-in-class retail properties that provide an outstanding environment and experience for our communities, retailers and consumers. Our strategy includes:

•increasing the permanent occupancy of our regional mall portfolio by converting temporary leases to permanent leases and leasing vacant space;

•renewing or replacing expiring leases at greater rental rates;


•actively recycling capital through the disposition of assets; investing in
whole or partial interests in high-quality regional malls, anchor pads, and our
development pipeline and repaying debt; and

•continuing to execute on our existing redevelopment projects and seeking additional opportunities within our portfolio for redevelopment.


Despite the recent economic disruption caused by COVID-19, we expect that the
high quality nature of our stabilized properties and associated cash flows will
continue to be in demand from investors, although our ability to execute on
recycling of capital initiatives will likely be impacted in the short term.

As of June 30, 2021, the portfolio was 92.0% leased, compared to 94.8% leased at
June 30, 2020. On a suite-to-suite basis, the leases commencing occupancy in the
trailing 12 months exhibited initial rents that were 3.5% higher than the final
rents paid on expiring leases.

Overview-BPY Transaction of 2021


On April 1, 2021, Brookfield Asset Management Inc. ("Brookfield Asset
Management" or "BAM") announced an agreement to acquire all of the limited
partnership units of BPY that it does not already own ("BPY units") at a value
of $18.17 per BPY unit, or $6.5 billion in total value (the "BPY Transaction").
Under the agreement, BPY unitholders had the ability to elect to receive, per
BPY unit and subject to pro ration, a combination of (i) 0.3979 Class A limited
voting shares of BAM ("Brookfield Shares"), (ii) $18.17 in cash, and/or (iii)
0.7268 of BPY preferred units with a liquidation preference of $25.00 per unit.
Pro-ration will be based on a maximum cash consideration of approximately 50% of
the total value of the BPY units ($3.27 billion in total cash payable to public
unitholders), a maximum amount of Brookfield Shares equal to approximately 42%
of the total value of the BPY units (59.3 million Brookfield Shares payable to
public unitholders), and a maximum amount of BPY preferred units with a
liquidation value of approximately 8% of the total value of the BPY units ($500
million in liquidation preference of BPY preferred units payable to public
unitholders). The BPY Transaction closed on July 26, 2021. BPY unitholders who
failed to properly make an election, did not make an election prior to the
election deadline of 5:00 p.m. (Toronto time) on July 20, 2021 (or for
beneficial holders an earlier deadline that may have been set by their broker or
other intermediary), or elected to receive the default consideration received,
per BPY unit, approximately $12.38 in cash, 0.0913 BAM shares and 0.0657 BPY
preferred units (the "Default Consideration").

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In accordance with the terms of the Company's charter, any holders of the
Company's Class A stock ("BPYU Shareholders") at the closing of the BPY
Transaction were entitled to receive the same per Default Consideration as was
received by BPY unitholders who did not make an election, in the automatic
exchange for their shares of Class A Stock. The aggregate consideration of $6.5
billion payable to BPY unitholders in the BPY Transaction includes the amount
payable to the public holders of shares of the Company's Class A Stock. BPYU
Shareholders were not entitled to any other consideration or payment in
connection with the BPY Transaction, the BPY Transaction was not subject to a
vote of BPYU Shareholders and BPYU Shareholders were not entitled to appraisal
rights.

Any BPYU Shareholders who wished to elect their preferred form of consideration
rather than the Default Consideration, vote in favor of or against the BPY
Transaction and/or exercise dissent rights in respect of the BPY Transaction,
were entitled to convert their shares of Company Class A Stock into BPY units
(pursuant to the terms of the Company's charter) before the election deadline if
they wished to make an election and/or before the record date for the meeting of
BPY unitholders if they wished to vote in favor of or against the BPY
Transaction or exercise dissent rights.

As a result of the BPY Transaction, the Company's Class A Stock ceased trading
and was not listed on the Nasdaq Stock Market effective prior to the opening of
the market on July 27, 2021.

In addition, on July 20, 2021, in anticipation of the closing of the BPY
Transaction, the Company announced that it will be redeeming all of its
outstanding 6.375% Series A Cumulative Redeemable Preferred Stock (Nasdaq:
BPYUP) (the "BPYU Series A Preferred Stock") for cash on August 19, 2021 at its
par value of $25.00 per share, plus all accumulated and unpaid dividends
(whether or not declared) to, but not including, August 19, 2021, which equals
approximately $0.21250 per share, without interest, for total proceeds of
$25.21250. Upon redemption, the BPYU Series A Preferred Stock will no longer
trade on the Nasdaq Stock Market.

Overview-Financial


The COVID-19 pandemic has spread globally, and has caused a global economic
shutdown. The actions taken in response to the shutdown have interrupted
business activities and supply chains; disrupted travel; contributed to
significant volatility in the financial markets, resulting in a general decline
in equity prices and lower interest rates; impacted social conditions; and
adversely impacted local, regional, national and international economic
conditions, as well as the labor markets. Accordingly, we caution you that our
financial position and consolidated performance presented below may not be
indicative of our results in future periods as a result of the ongoing and
developing COVID-19 pandemic and its resulting impact on the global economy.

Net loss attributable to BPYU increased from $290.9 million for the six months
ended June 30, 2020 to $377.1 million for the six months ended June 30, 2021
primarily due to the increase in equity in loss of unconsolidated real estate
affiliates and the decrease in gains on the sale of unconsolidated properties
from the six months ended June 30, 2020 compared to the six months ended June
30, 2021.

See Non-GAAP Supplemental Financial Measures below for a discussion of funds from operations ("FFO"), along with a reconciliation to Net (loss) income attributable to BPYU.

Operating Metrics

The following table summarizes selected operating metrics for our portfolio.

June 30, 2021 (1) June 30, 2020 (1)


In-Place Rents Per Square Foot (all less anchors) (2)                  $          82.65          $          81.09
In-Place Rents Per Square Foot (<10K square feet) (2)                  $    

61.47 $ 62.13


Percentage Occupied for Total Retail Properties                                    91.1  %                   94.2  %
Percentage Leased for Total Retail Properties                                      92.0  %                   94.8  %




(1)   Metrics exclude properties acquired in the year ended December 31, 2020
and the six months ended June 30, 2021, reductions in ownership as a result of
sales or other transactions, and certain redevelopments and other properties.
(2)  Rent is presented on a cash basis and consists of base minimum rent and
common area costs.


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Lease Spread Metrics


The following table summarizes signed leases compared to expiring leases in the
same suite, for leases where (1) the downtime between new and previous tenant
was less than 24 months, (2) the occupied space between the previous tenant and
new tenant did not change by more than 10,000 square feet and (3) the new lease
is at least a year.
                                                                                     Term            Initial Rent         Expiring          Initial Rent
                                 # of Leases          SF (in thousands)           (in years)           PSF (1)          Rent PSF (2)           Spread                % Change
Trailing 12 Month
Commencements                        552                    1,923                    6.8             $   49.19          $   47.52          $       1.67                    3.5  %




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

Results of Operations

Three months ended June 30, 2021 and 2020

Rental revenues decreased $17.1 million, primarily due to the net impact of COVID rent relief of $20.2 million in the second quarter of 2021, which is related primarily to 2020 rents. This is partially offset due to the $1.2 million increase in termination income in the second quarter of 2021 compared to the second quarter of 2020.


Other property operating costs increased $13.4 million in the second quarter of
2021 compared to the second quarter of 2020, primarily due to the re-opening of
properties that were closed due the effects of the COVID-19 pandemic in second
quarter of 2020.

The provision for impairment of $71.5 million during the second quarter of 2020
is related to an impairment charge recorded on one operating property. There
were no impairment charges recorded during the second quarter of 2021 (Note 2).

Interest expense increased $4.7 million, primarily related to default interest
on properties for which the Company has suspended funding equity contributions
to make contractual interest and/or principal payments during the second quarter
of 2021 (Note 6).

Loss on extinguishment of debt of $1.3 million is related to fees incurred on
the payoff of mortgage debt at one operating property during second quarter of
2021 (Note 6). The gain on extinguishment of debt of $14.3 million is related to
the debt buyback transactions that occurred in the second quarter of 2020 (Note
6).

Equity in loss of Unconsolidated Real Estate Affiliates increased $16.2 million
during the second quarter of 2021, primarily related to the decrease in expenses
across the unconsolidated joint ventures (Note 5).

Unconsolidated Real Estate Affiliates - loss on investment during the second
quarter of 2021 is primarily related to the disposition of one equity accounted
investment (Note 3).

Six months ended June 30, 2021 and 2020

Rental revenues decreased $42.0 million primarily due to the net impact of COVID rent relief of $56.4 million in the six months ended June 30, 2021, which related primarily to 2020 rents. This is partially offset due to the $10.6 million increase in termination income during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.


Other property operating costs increased $12.5 million during the six months
ended June 30, 2021 compared to the six months ended June 30, 2020, primarily
due to the re-opening of properties that were closed due the effects of the
COVID-19 pandemic in the second quarter of 2020.

Provision for note receivable loss of $8.7 million during the six months ended
June 30, 2021 is primarily related to the write off of a note from our joint
venture partner that was deemed uncollectible.

The provision of impairment of $107.0 million during the six months ended
June 30, 2021 is related to an impairment charges recorded on three operating
properties. Specifically, $77.5 million of impairment was recognized for two
operating properties where the Company's expected holding period for assets
changed due to an increased probability of a near-term disposition and
$29.5 million of impairment was recognized based on an update to the Company's
estimated probability of obtaining concessions from the creditor at an operating
property for which the Company has suspended funding equity contributions to
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make contractual interest and/or principal payments. The provision for impairment of $71.5 million during the six months ended 2020 is related to an impairment charge recorded on one operating property (Note 2).


Gain from changes in control of investment properties of $1.8 million during the
six months ended June 30, 2021 is related to the conveyance of one operating
property (Note 3). Loss from changes in control of investment properties of
$15.4 million during the six months ended June 30, 2020 is related to the
acquisition of an additional interest at one operating property (Note 3).

Gain on extinguishment of debt of $11.8 million during the six months ended
June 30, 2021 is primarily related to the conveyance of interest of one
operating property (Note 3). The property was one of the properties where the
Company strategically skipped debt service during 2020. The gain on
extinguishment of debt of $14.3 million during the six months ended June 30,
2020 is related to the debt buyback transactions that occurred in the second
quarter of 2020 (Note 6).

Equity in loss of Unconsolidated Real Estate Affiliates decreased $13.4 million
during six months ended June 30, 2021, primarily related to the loss of revenues
across the unconsolidated joint ventures. Additionally, there was an impairment
charge of $3.4 million recorded on one unconsolidated operating property (Note
5).

Unconsolidated Real Estate Affiliates - loss on investment during the six months
ended June 30, 2021 is primarily related to the disposition of one equity
accounted investment (Note 3). The Unconsolidated Real Estate Affiliates - gain
on investment during the six months ended June 30, 2020 is primarily due to the
sales of remaining interests in ABG and Aeropostale (Note 3).

Liquidity and Capital Resources


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

We anticipate maintaining financial flexibility by managing our future
maturities and amortization of debt coming due at the corporate and property
levels. At June 30, 2021, we have debt coming due of $3.5 billion in the next
twelve months. We believe that we currently have sufficient liquidity to satisfy
all of our commitments in the form of $417.0 million of consolidated
unrestricted cash and $275.0 million of available capacity under our revolving
credit facility as of June 30, 2021, as well as refinancing options in the
market and anticipated cash provided by operations.

Our key financing objectives include:

•to obtain property-secured debt with laddered maturities; and •to minimize the amount of debt that is cross-collateralized and/or recourse to us.


We may raise capital through public or private issuances of debt securities,
preferred stock, Class A Stock, Common Units of BPR OP, LP ("BPROP"), or other
capital raising activities. In addition, we or our affiliates may repurchase our
shares or corporate debt and bonds.

We expect to be able to refinance the majority of debt obligations maturing in
the near term or to exercise contractual extension options thereon, although
there is no guarantee we will be able to do so. In certain instances, we plan to
seek certain modifications to mortgages, including lease restructuring approvals
and technical default waivers, and potentially interest deferrals.

In addition, certain debt obligations are subject to financial covenants. As a
result, in the shorter-term, the shutdown may negatively impact our ability to
meet such covenants. We are reviewing the financial covenants of each debt
instrument and, where applicable, working with our lenders to address debt
instruments which may potentially approach or breach covenant limits. Such
adjustments may include, but are not limited to, adjustment to the covenant
limits, interest payment holidays, and temporary suspension of covenant testing.

In order to maintain financial flexibility, we maintain capacity under our
Facility. As at June 30, 2021, the available capacity under such credit facility
was $275.0 million. We believe we will be able to continue to borrow funds on
the Facility when and as required.

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The Company entered into a new credit agreement (the "Credit Agreement") dated
as of August 24, 2018 consisting of a revolving credit facility (the
"Facility"), Term A-1 and A-2 loans, and a Term B loan. The Facility provides
for revolving loans of up to $1.5 billion and borrowings bear interest at a rate
equal to LIBOR plus 2.25%. The Facility is scheduled to mature in August 2022
and had outstanding borrowings of $1,225.0 million as of June 30, 2021.The Term
A-1 Loan had a total commitment outstanding of $900.0 million, with $700.0
million attributable to BPYU and $200.0 million attributable to an affiliate,
and is scheduled to mature in August 2021, bearing interest at a rate equal to
LIBOR plus 2.25%. During the six months ended June 30, 2021, BPYU paid off the
Term A-1 loan in the amount of $21.0 million. The Term A-2 Loan has a total
commitment outstanding of $2.0 billion and is scheduled to mature in August
2023, bearing interest at a rate equal to LIBOR plus 2.25%. During the six
months ended June 30, 2021, the Company made principal payments in the total
amount of $76.5 million, and the outstanding balance at June 30, 2021 was
$1,923.5 million. The Term B Loan has a total commitment outstanding of $2.0
billion and is scheduled to mature in August 2025 bearing interest at a rate
equal to LIBOR plus 2.50%. During the six months ended June 30, 2021, the
Company made a principal payment in the amount of $10.0 million. The total
outstanding balance of the Term B loan as of June 30, 2021 was $1,940.0 million.
The Term A-1, A-2, and B Loans are contractually obligated to be prepaid through
net proceeds from property level refinances and asset sales as outlined in the
Credit Agreement.

The Credit Agreement contains certain restrictive covenants which limit material
changes in the nature of our business conducted, including, but not limited to,
mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence
of additional indebtedness, dividends, transactions with affiliates, prepayment
of subordinated debt, negative pledges and changes in fiscal periods. In
addition, we are required to maintain compliance with certain financial
covenants related to a maximum net debt-to-value ratio and a minimum
fixed-charge-coverage ratio, as defined in the Credit Agreement.

On July 29, 2020, the Company entered into the First Amendment of its Credit Agreement in order to give effect to certain amendments, including, but not limited to the following:


•The lenders have agreed to certain covenant relief in respect of the financial
covenants through the fiscal quarter ending June 30, 2021 (the "Covenant Relief
Period"). The maximum total indebtedness to value ratio financial maintenance
covenant is being eliminated permanently. The minimum fixed charge coverage
ratio is being reduced to 1.20x during the Covenant Relief Period and increasing
to 1.35x thereafter.

•The Company agreed to maintain an ongoing liquidity covenant (set at $500
million) which will be tested as of the last day of each month against the
amount of unrestricted cash, undrawn available amounts under the Facility and
undrawn amounts under the new Brookfield Liquidity Facility. The Company will
enter into and maintain a $500 million Brookfield Liquidity Facility (the
"Brookfield Liquidity Facility") and prior to the date the Company demonstrates
compliance with the financial covenants in effect under the Credit Agreement
prior to the First Amendment, any interest and principal payments thereunder
must be paid-in-kind.

•The Company will be required to "match-fund" drawings under the Facility in
excess of $1.0 billion using proceeds of either the Brookfield Liquidity
Facility or issuances of qualified equity interests. The match-funding
requirement will be required to be made (i) monthly, whereby any drawing during
that month is in excess of the prior highest balance of the revolver (in excess
of $1.0 billion), (ii) within 10 business days of a request from the agent if as
of any day during a month, the excess draw amount would exceed $10 million and
(iii) at any time of request for a revolving loan that the excess would be $100
million or greater (which would be match-funded substantially concurrently with
the requested revolving loan draw).

•The Company will also be required to make additional prepayments of the Term A-2 loan with proceeds of certain equity, debt issuances and asset sales.


•The Company also agreed to a number of additional restrictions, including
restrictions on incurring additional indebtedness, making of certain restricted
payments and the use of proceeds under the revolving facility, which will apply
either through the end of the Covenant Relief Period - and in the case of
certain provisions, until the Company demonstrates compliance with the financial
covenants in effect under the Credit Agreement prior to the First Amendment.

As of June 30, 2021, we are not aware of any instances of non-compliance with
such covenants. Though there is potential for a risk of default, in the event
the Company fails to maintain compliance with its financial covenants, the
Credit Agreement provides for a cure period, during which the Company has the
opportunity to raise additional cash and reduce net debt balance, such as
through capital contributions from BPY, or disposition of assets. Management has
determined that in the event of a
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default, it is probable that these market-based alternatives would be available,
and that these actions would provide the necessary cash flows to prevent or cure
an event of default, although there is no guarantee that these market-based
alternatives would be available.

During the six months ended June 30, 2021, the Company suspended equity
contributions to make contractual interest and/or principal payments on twelve
consolidated and unconsolidated property level mortgages, including four
mortgages that are in maturity default. During the year ended December 31, 2020,
Company suspended equity contributions to make contractual interest and/or
principal payments on eighteen consolidated and unconsolidated property level
mortgages, including one mortgage that is in maturity default. The Company is
currently engaging in negotiations with the creditors on these mortgages to
obtain potential lender concessions or other relief. If the Company is
unsuccessful in obtaining concessions from these creditors, it is possible that
the property securing these loans would be transferred to the lenders. In such
circumstances, the carrying value of the property may no longer be recoverable
and may trigger an impairment charge. These mortgages are non-recourse and the
creditors do not have security claims against the Company aside from the
collateral property. During the six months ended June 30, 2021, the Company
accrued $24.1 million of default interest related to these mortgages per
contractual debt agreements. As of December 31, 2020, the Company has accrued
$46.6 million of default interest related to these mortgages per contractual
debt agreements.

As of June 30, 2021, the Company has suspended equity contributions to make contractual interest and/or principal payments on a total of $1.2 billion of property level mortgages and the related Investment in Real Estate securing these loans has a carrying value of $1.2 billion.


On June 1, 2021, the Company closed on a new loan at Fashion Place in the amount
of $290.0 million at LIBOR plus 3.53% which matures on June 9, 2026. The loan
replaced the previous loan in the amount of $226.7 million which matured on June
1, 2021. The origination of the loan incurred fees of $4.5 million, and upfront
reserve of $2.6 million.

On May 28, 2021, the Company paid off the loan at Deerbrook Mall in the amount
of $127.9 million. The transaction incurred debt extinguishment costs in the
total amount of $1.3 million.

On May 14, 2021, the Company closed on a new loan at Willowbrook Mall in the
amount of $155.0 million at LIBOR plus 3.68% which matures on June 9, 2026. The
new loan replaced the previous loan in the amount of $177.5 million which
matured on June 5, 2021. The origination of the loan incurred fees of
$3.9 million, and upfront reserve of $1.7 million.

On May 4, 2021, the Company closed on a new loan at Whalers Village in the
amount of $83.5 million at LIBOR plus 2.50% which matures on May 4, 2024. The
loan replaced the previous loan in the amount of $80.0 million which was
scheduled to mature on January 6, 2022. The origination of the loan incurred
fees of $0.9 million as well as an upfront minimum liquidity reserve of $2.5
million.

On April 20, 2021, the Company closed on a new $1.0 billion loan secured by
cross-collateralized mortgages at 16 properties with an interest rate of LIBOR
plus 3.25% which matures on April 20, 2024. The loan replaced the previous loan
which was encumbered by a $1.3 billion mortgage and matured on April 23,
2021.The origination of the loan incurred fees of $8.2 million as well as an
upfront working capital reserve of $5.0 million.

As of January 1, 2021, the Company conveyed North Point Mall to the lender in
satisfaction of $247.0 million in outstanding debt. Accordingly, the Company
recognized a gain of $13.1 million included in gain on extinguishment of debt on
our Consolidated Statements of Operations and Comprehensive Loss for the six
months ended June 30, 2021.

As of January 1, 2021, the Company conveyed Florence Mall to the lender in
satisfaction of $90.0 million in outstanding debt. Accordingly, the Company
recognized a loss of $4.2 million included in Unconsolidated Real Estate
Affiliates - gain (loss) on
investment, net on our Consolidated Statements of Operations and Comprehensive
Loss for the six months ended June 30, 2021.

On February 5, 2021 the Company closed on a new loan at Kenwood Towne Centre in
the amount of $210.0 million. The new loan matures on February 9, 2024, and
bears the interest rate at LIBOR plus 3.40%. The new loan replaced the previous
debt of $194.0 million which was scheduled to mature on February 9, 2021. The
origination of the new loan incurred fees of $5.0 million, which were
capitalized.

As of June 30, 2021, we had $8.4 billion of debt pre-payable at our proportionate share without penalty. We may pursue opportunities to refinance this debt at lower interest rates and longer maturities.

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As of June 30, 2021, our proportionate share of total debt aggregated $22.9
billion. Our total debt includes our consolidated debt of $16.0 billion and our
share of unconsolidated real estate affiliates debt of $6.9 billion. Of our
proportionate share of total debt, $6.9 billion is recourse to the Company or
its subsidiaries (including the Facility) due to guarantees or other security
provisions for the benefit of the note holder.

The amount of debt due in the next three years represents 42.3% of our total
debt at maturity. The maximum amount due in any one of the next ten years is no
more than $5.2 billion at our proportionate share or approximately 22.6% of our
total debt at maturity.

The following table illustrates the scheduled payments for our proportionate share of total debt as of June 30, 2021. The $206.2 million of junior subordinated notes are due in 2036, but we may redeem them any time after April 30, 2011 (Note 6). As we do not expect to redeem the notes prior to maturity, they are included in the consolidated debt maturing subsequent to 2026.

                     Consolidated      Unconsolidated
                          (Dollars in thousands)
Remainder of 2021   $  1,397,850      $       492,297
2022                   2,607,353            1,218,858
2023(1)                2,735,601            1,206,574
2024                   3,409,299            1,763,029
2025(2)                3,136,458              494,112
2026                   1,208,985              434,021
Subsequent             1,482,890            1,260,106
Total               $ 15,978,436      $     6,868,997





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

We believe we will be able to extend the maturity date, repay under our
available line of credit or refinance the consolidated debt that is scheduled to
mature in 2021. We also believe that the joint ventures will be able to
refinance the debt of our unconsolidated real estate affiliates upon maturity;
however, there can be no assurance that we will be able to refinance or
restructure such debt on acceptable terms or otherwise, or that joint venture
operations or contributions by us and/or our partners will be sufficient to
repay such loans.

Reserves


With respect to our consolidated properties, for the three and six months ended
June 30, 2021, our balance associated with potentially uncollectible revenues
decreased by $10.4 million and $14.1 million, respectively. With respect to our
Unconsolidated Real Estate Affiliates, for the three and six months ended
June 30, 2021, our balance associated with potentially uncollectible revenues
for our Unconsolidated Real Estate Affiliates increased by $5.9 million and
$4.3 million, respectively, which includes $3.3 million and $2.6 million,
respectively, for straight-line rent receivables. Of these amounts for the three
and six months ended June 30, 2021, our share totaled $2.3 million and
$1.7 million, respectively, which includes $1.6 million and $1.3 million,
respectively, for straight-line rent receivables.

With respect to our consolidated properties, for the year ended December 31,
2020, we have recorded $42.3 million, associated with potentially uncollectible
revenues, which includes $5.3 million, for straight-line rent receivables. With
respect to our Unconsolidated Real Estate Affiliates, for the year ended
December 31, 2020, our Unconsolidated Real Estate Affiliates have recorded
$68.7 million, associated with potentially uncollectible revenues, which
includes $8.6 million, for straight-line rent receivables. Of these amounts for
the year ended December 31, 2020, our share totaled $33.8 million, which
includes $4.2 million, for straight-line rent receivables.

As of June 30, 2021, the Company, including consideration of our share of
Unconsolidated Real Estate Affiliates, has collected approximately 89% of second
quarter rents. While working to preserve our profitability and cash flow, we are
also working with our tenants regarding requests for lease concessions and other
forms of assistance. The Company continues to make meaningful progress in its
negotiations with national and local tenants to secure rental payments, despite
a significant portion of the Company's tenants requesting rental assistance,
whether in the form of deferral or rent reduction. As of June 30, 2021, in
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response to the COVID-19 pandemic, the Company granted rent deferrals and rent
abatements of 1% and 3% of rents, respectively. The rent abatements granted were
considered lease modifications and will be recognized prospectively over the
remaining lease terms from the period of the rent that was abated. While we
anticipate that we may grant further rent concessions, such as the deferral or
abatement of lease payments, such rent concession requests are evaluated on a
case-by-case basis. Not all requests for rent relief will be granted as the
Company does not intend to forgo its legally enforceable contractual rights that
exist under its lease agreements.

Acquisitions and Joint Venture Activity

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


On July 26, 2021, BPYU issued 13,875,894 shares of Class A stock at $18.17 per
share for a total aggregate contribution of $252.1 million from a related
Brookfield Entity. These funds will be used to redeem the outstanding 6.375%
Series A Cumulative Redeemable Preferred Shares (the "BPYU Series A Preferred
Stock") for cash on August 19, 2021 at its par value of $25.00 per share, plus
all accumulated and unpaid dividends (whether or not declared) to, but not
including, August 19, 2021, which equals approximately $0.21250 per share, for
total proceeds of $25.21250. Upon redemption, the BPYU Series A Preferred Stock
will no longer trade on the Nasdaq Stock Market.

Developments and Redevelopments


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

We have development and redevelopment activities totaling approximately $459.0
million under construction and $390.0 million in the pipeline. We continue to
evaluate a number of other redevelopment projects to further enhance the quality
of our assets. Expected returns are based on the completion of current and
future redevelopment projects, and the success of the leasing and asset
management plans in place for each project. Expected returns are subject to a
number of variables, risks, and uncertainties including those disclosed within
Part II, Item 1A of this Quarterly Report and those previously disclosed in our
Annual Report. We also refer the reader to our disclosure related to
forward-looking statements, below. The following table illustrates our planned
redevelopments:
                                                                                                 Stabilized        Proportionate Cost (1)
         Property                  Location                        Description                      Year             Total         To-Date

Major Development Summary (in millions, at share unless otherwise noted)

Active redevelopments

                                                    Macy's Redevelopment for theater and
Tysons Galleria             McLean, VA              multi level small shop expansion                       2023 $        108    $      52
Alderwood                   Lynnwood, WA            Sears Redevelopment - Residential                      2023           13            9
                                                    Anchor Redevelopment for Retail and
Stonestown Galleria         San Francisco, CA       Entertainment                                          2023          151          115
Other Projects              Various                                                                   2022-2024          187          121
Active developments/redevelopments                                                                              $        459    $     297
In planning

                                                    Sears Redevelopment for Entertainment and
Oxmoor Center               Louisville, KY          Restaurants                                            2024 $         19    $       1
Cumberland                  Atlanta, GA             Residential                                            2025           77            -
Northridge                  Northridge, CA          Residential                                            2026           63            -
Ala Moana                   Honolulu, HI            Residential Tower                                      2026          174            2
Other Projects              Various                                                                   2023-2025           57           14
In planning                                                                                                     $        390    $      17
Total retail developments                                                                                       $        849    $     314



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

                                       54
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Our investment in these projects for the six months ended June 30, 2021
increased from December 31, 2020 in conjunction with the applicable development
plan and as projects near completion. The continued progression of redevelopment
projects resulted in increases to our investment to date. Prior to the COVID-19
pandemic, our current projects were generally progressing in accordance with
their timeline and budget. The impact of the pandemic and associated
restrictions that have been put in place by local governments may cause delays
in construction and may impact our ability to progress pre-leasing efforts.

Capital Expenditures, Capitalized Interest and Overhead (at share)


The following table illustrates our capital expenditures, capitalized interest,
and internal costs associated with leasing and development overhead, which
primarily relate to ordinary capital projects at our operating properties. In
addition, we incurred tenant allowances and capitalized leasing costs for our
operating properties as outlined below. Capitalized interest is based upon
qualified expenditures and interest rates; capitalized leasing and development
costs are based upon time expended on these activities. These costs are
amortized over lives which are consistent with the related asset.
                                                                               Six Months Ended June 30,
                                                                               2021                      2020
                                                                                 (Dollars in thousands)
Operating capital expenditures (1)                                    $      26,085                 $    71,624
Tenant allowances and capitalized leasing costs (2)                          46,640                      49,093
Capitalized interest and capitalized overhead                                10,659                      10,884
Total                                                                 $      83,384                 $   131,601



(1)Reflects only non-tenant operating capital expenditures. (2)Tenant allowances paid on 2.0 million square feet for the six months ended June 30, 2021 and 3.2 million square feet for the six months ended June 30, 2020.

Class A Stock Dividend


Our Board of Directors declared Class A Stock dividends during 2021 and 2020 as
follows:
   Declaration Date            Record Date             Payment Date         Dividend Per Share
   2021

   February 1              February 26, 2021       March 31, 2021          $            0.3325
   2020
   November 5              November 30, 2020       December 31, 2020       $            0.3325
   August 5                August 31, 2020         September 30, 2020      $            0.3325
   May 7                   May 29, 2020            June 30, 2020           $            0.3325
   February 5              February 28, 2020       March 31, 2020          $            0.3325



Class B Stock Dividend

Our Board of Directors did not declare dividends on Class B-1 Stock, Class B-2
Stock, or Series B Preferred Stock during the six months ended June 30, 2021 or
during the six months ended June 30, 2020.


Preferred Stock Dividends


On February 13, 2013, GGP issued, under a public offering, 10,000,000 shares of
6.375% Series A Cumulative Stock at a price of $25.00 per share. In connection
with the BPY Transaction of 2018, each share was converted into one share of
6.375% Series A Preferred Stock. Our Board of Directors declared preferred stock
dividends during 2021 and 2020 as follows:
                                       55
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Declaration Date            Record Date           Payment Date        Dividend Per Share
2021
May 6                   June 15, 2021           July 1, 2021         $            0.3984
February 1              March 15, 2021          April 1, 2021        $            0.3984
2020
November 5              December 15, 2020       January 1, 2021      $            0.3984
August 5                September 15, 2020      October 1, 2020      $            0.3984
May 7                   June 15, 2020           July 1, 2020         $            0.3984
February 5              March 15, 2020          April 1, 2020        $            0.3984


Summary of Cash Flows

Cash Flows from Operating Activities


Net cash (used in) provided by operating activities was $246.1 million for the
six months ended June 30, 2021 and $(154.6) million for the six months ended
June 30, 2020. Significant components of net cash (used in) provided by
operating activities include:

•in 2021, equity in loss of Unconsolidated Real Estate Affiliates of $74.7
million;
•in 2021, depreciation and amortization of $300.3 million;
•in 2021, provision for impairment of $107.0 million;
•in 2021, accounts and notes receivable, net of $165.9 million;
•in 2020, equity in loss of Unconsolidated Real Estate Affiliates of $61.3
million;
•in 2020, depreciation and amortization of $320.2 million;
•in 2020, provision for impairment of $71.5 million; and
•in 2020, accounts and notes payable, net of $(282.1) million.

Cash Flows from Investing Activities


Net cash (used in) provided by investing activities was $63.0 million for the
six months ended June 30, 2021 and $(102.4) million for the six months ended
June 30, 2020. Significant components of net cash (used in) provided by
investing activities include:

•in 2021, development of real estate and property improvements of $(124.5)
million;
•in 2021, proceeds from sales of investment properties and unconsolidated real
estate affiliates of $76.2 million;
•in 2021, contributions to unconsolidated real estate affiliates of $(36.6)
million;
•in 2021, distributions received from unconsolidated real estate affiliates in
excess of income of $147.5 million;
•in 2020, development of real estate and property improvements of $(159.5)
million;
•in 2020, proceeds from sales of investment properties and unconsolidated real
estate affiliates of $81.0 million;
•in 2020, contributions to unconsolidated real estate affiliates of $(54.9)
million; and
•in 2020, distributions received from unconsolidated real estate affiliates in
excess of income of $30.9 million.

Cash Flows from Financing Activities


Net cash (used in) provided by financing activities was $(22.2) million for the
six months ended June 30, 2021 and $270.3 million for the six months ended June
30, 2020. Significant components of net cash (used in) provided by financing
activities include:

•in 2021, proceeds from the refinancing or issuance of mortgages, notes and
loans payable of $480.6 million;
•in 2021, principal payments on mortgages, notes, and loans payable of $(832.8)
million;
•in 2021, buyback of Class A Stock of $(15.6) million;
•in 2021, issuance of Class B Stock of $378.5 million;
•in 2021, cash distributions paid to stockholders of $(13.5) million;
•in 2020, proceeds from the refinancing or issuance of mortgages, notes and
loans payable of $661.0 million;
•in 2020, principal payments on mortgages, notes, and loans payable of $(328.9)
million;
•in 2020, buyback of Class A Stock of $(15.9) million;
•in 2020, series K preferred units redemption of $(27.9) million;
•in 2020, payment received on note receivable of $31.7 million; and
                                       56
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•in 2020, cash distributions paid to stockholders of $(39.6) million.

Seasonality


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


Critical Accounting Policies


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

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

For the six months ended June 30, 2021, there were no significant changes to
these policies, except for the policies related to the application of lease
modification guidance in Accounting Standards Update ("ASU") 2016-02, Leases
("ASC 842", "Topic 842", or "the new leasing standard") as a result of the
COVID-19 pandemic as described in Note 2 and below.

Topic 842 - Lease Modification Q&A


Due to the business disruptions and challenges severely affecting the global
economy caused by the global economic shutdown, lessors may provide rent
deferrals and other lease concessions to lessees. In April 2020, the Financial
Accounting Standards Board staff issued a question and answer document (the
"Lease Modification Q&A") focused on the application of lease accounting
guidance to lease concessions provided as a result of the shutdown. Under
existing lease guidance, economic relief that is agreed to or negotiated outside
of the original lease agreement is typically considered a lease modification, in
which case both the lessee and lessor would be required to apply the respective
modification frameworks. However, if the lessee was entitled to the economic
relief because of either contractual or legal rights, the relief would be
accounted for outside of the modification framework. Although the original lease
modification guidance in Accounting Standards Codification ("ASC") 842, Leases
remain appropriate to address routine lease modifications, the Lease
Modification Q&A established a different framework to account for certain lease
concessions granted in response to the shutdown. The Lease Modification Q&A
allows the Company, if certain criteria have been met, to make an accounting
policy election to account for COVID-19 related lease concessions as either a
lease modification or a negative variable adjustment to rental revenue. Such
election is required to be applied consistently to leases with similar
characteristics and similar circumstances.

The Company has elected to apply such relief and will avail itself of the election to treat leases as lease modifications, thereby avoiding performing a lease by lease analysis for the lease concessions that were (1) granted as relief due to the shutdown and (2) result in the cash flows remaining substantially the same or less than the original contract.

Refer also to the accounting policies discussed in Note 2 of the Consolidated Financial Statements.


REIT Requirements

In order to remain qualified as a REIT for Federal income tax purposes, we must
distribute at least 90% of our taxable ordinary income to stockholders. We are
also subject to federal income tax to the extent we distribute less than 100% of
our REIT taxable income, including capital gains. See Note 8 to the Consolidated
Financial Statements for more detail on our ability to remain qualified as a
REIT.
                                       57
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Recently Issued Accounting Pronouncements

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

Non-GAAP Supplemental Financial Measures and Definitions

Funds From Operations ("FFO")


The Company determines FFO based upon the definition set forth by National
Association of Real Estate Investment Trusts ("Nareit"). The Company determines
FFO to be its share of consolidated net income (loss) attributable to common
stockholders and redeemable non-controlling common unit holders computed in
accordance with GAAP, adjusted for real estate related depreciation and
amortization, excluding gains and losses from extraordinary items, excluding
cumulative effects of accounting changes, excluding gains and losses from the
sales of, or any impairment charges related to, previously depreciated operating
properties, plus the allocable portion of FFO of unconsolidated joint ventures
based upon the Company's economic ownership interest, and all determined on a
consistent basis in accordance with GAAP.

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

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

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures


In order to provide a better understanding of the relationship between the
Company's non-GAAP financial measures of FFO, a reconciliation of GAAP net
income attributable to BPYU to FFO has been provided. The Company's non-GAAP
financial measure does not represent cash flow from operating activities in
accordance with GAAP and should not be considered as an alternative to GAAP net
income (loss) attributable to BPYU and is not necessarily indicative of cash
flow. In addition, the Company has presented such financial measures on a
consolidated and unconsolidated basis (at the Company's proportionate share) as
the Company believes that given the significance of the Company's operations
that are owned through investments accounted for by the equity method of
accounting, the detail of the operations of the Company's unconsolidated
properties provides important insights into the income and FFO produced by such
investments.


                                       58
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The following table reconciles GAAP net income attributable to BPYU to FFO for the three and six months ended June 30, 2021 and 2020:

                                                 Three Months Ended June 30,                     Six Months Ended June 30,
                                                   2021                  2020                    2021                    2020

Net loss Attributable to BPYU               $      (147,932)         $ (209,050)         $     (377,053)             $ (290,877)
Provision for impairment excluded from FFO
- Consolidated Properties                                 -              71,455                 106,991                  71,455
Provision for impairment excluded from FFO
- Unconsolidated Properties                               -              42,675                   3,405                  42,675
Unconsolidated Real Estate Affiliates -
gain on investment                                   13,637                   -                  17,848                       -
Gain on sales of investment properties               (3,591)                109                  (4,615)                 (6,650)
Above and below market ground rent                      939                 939                   1,878                   2,505
Preferred stock dividends                            (3,985)             (3,984)                 (7,969)                 (7,968)
Loss (gain) from changes in control of
investment properties and other                           -              15,433                  (1,824)                 15,433
Depreciation and amortization of
capitalized real estate costs -
Consolidated Properties                             143,953             158,139                 291,104                 310,727
Depreciation and amortization of
capitalized real estate costs -
Unconsolidated Properties                           109,563             112,534                 214,087                 230,193
Allocation of noncontrolling interests (1)          (21,146)            (39,079)                (57,946)                (65,348)
FFO                                         $        91,438          $  149,171          $      185,906              $  302,145



(1) Noncontrolling interest holders' share of adjustments including depreciation, impairment, gain (loss) from changes in control of investment properties and other, Unconsolidated Real Estate Affiliates - gain on investment and gain on sales of investment properties.

Forward-Looking Statements


Certain statements made in this section or elsewhere in this report may be
deemed "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended. Statements that
do not relate to historical or current facts or matters are forward-looking
statements. When used, the words "may," "will," "seek," "expects,"
"anticipates," "believes," "targets," "intends," "should," "estimates," "could,"
"continue," "assume," "projects," "plans," or similar expressions, are intended
to identify forward-looking statements. Although we believe the expectations
reflected in any forward-looking statement are based on reasonable assumptions,
we can give no assurance that our expectations will be attained, and it is
possible that actual results may differ materially from those indicated by these
forward-looking statements due to a variety of risks, uncertainties and other
factors. Accordingly, investors should use caution in relying on forward-looking
statements.

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


•the market price of BPY units and the combined business performance of BPY as a
whole;
•general volatility of conditions affecting the retail sector;
•the effects of the COVID-19 pandemic and the possibility of future outbreaks of
highly infectious or contagious diseases;
•our inability to acquire and maintain tenants or to lease space on terms
favorable to us;
•risks related to the bankruptcy or store closures of national tenants with
chains of stores in many of our properties;
•our inability to sell real estate quickly;
•risks related to perceptions by retailers and shoppers of the convenience and
attractiveness of our retail properties;
•risks related to the development, expansion and acquisitions of properties;
•risks related to competition in our business;
•risks related to natural disasters, pandemics/epidemics or terrorist attacks;
•risks related to cyber and data security breaches or information technology
failures;
•environmental uncertainties and related costs, including costs resulting from
uninsured potential losses;
•general risks related to inflation or deflation;
                                       59

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•discontinuation of LIBOR;
•risks relating to impairment charges for our real estate assets;
•risks related to conflicts of interest with BPY and our status as a "controlled
company" within the meaning of the rules of Nasdaq;
•our dependence on our subsidiaries for cash;
•risks related to our joint venture partners, including risks related to
conflicts of interests, potential bankruptcies, tax-related obligations and
financial support relating to such joint venture partners;
•our inability to maintain status as a REIT, and possible adverse changes to tax
laws;
•risks related to our indebtedness and debt restrictions and covenants;
•our inability to refinance, extend, restructure or repay near and indeterminate
debt;
•our inability to raise capital through financing activities or asset sales; and
•risks related to the structure and trading of Class A Shares.

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

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