UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the transition period from _____________________ to __________________

Commission File Number: 001-36135

________________________

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

(Exact name of registrant as specified in its charter)


Maryland						46-2616226
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

250 Vesey Street, 15th Floor

New York, NY, 10281

(Address of principal executive offices and zip code)

(212) 417-7000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share	DTLA-P	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

☑

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~May~~August 65, 2022, none of the registrant’s common stock was traded on any public market.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~MARCH~~JUNE 3130, 2022

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			Page
PART I—FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited).
		Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	1
		Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	1
		Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	3
		Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021	3
		Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2022 and 2021	4
		Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2022 and 2021	4
		Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	5
		Consolidated Statements of Cash Flows for the three and six months ended June 30, 2022 and 2021	5
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Conditionand Results of Operations.	3032
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	4651
	Item 4.	Controls and Procedures.	4651
PART II—OTHER INFORMATION
	Item 1.	Legal Proceedings.	4752
	Item 1A.	Risk Factors.	4752
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	4752
	Item 3.	Defaults Upon Senior Securities.	4752
	Item 4.	Mine Safety Disclosures.	4752
	Item 5.	Other Information.	4752
	Item 6.	Exhibits.	4853
	Signatures		4853

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 (as set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act). Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding our 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 Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or “we”) believes that its 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 its control, which may cause Brookfield DTLA’s actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to:

•Risks incidental to the ownership and operation of real estate properties, including local real estate conditions;

•The impact or unanticipated impact of general economic, political and market factors in the regions in which Brookfield DTLA or any of its subsidiaries does business, including the ongoing effect of COVID-19 pandemic on our business.

•The ability to enter into new leases or renew leases on favorable terms;

•Business competition;

•Dependence on tenants’ financial condition;

•The use of debt to finance Brookfield DTLA’s business or that of its subsidiaries;

•The behavior of financial markets, including fluctuations in interest rates;

•Uncertainties of real estate development or redevelopment;

•Global equity and capital markets and the availability of equity and debt financing and refinancing within these markets;

•Risks relating to Brookfield DTLA’s insurance coverage;

•Risks relating to trends in the office real estate industry including employee work-from home arrangements;

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•The possible impact of international conflicts and other developments, including terrorist acts;

•Potential environmental liabilities;

•Changes in tax laws and other tax-related risks;

•Dependence on management personnel;

•Illiquidity of investments in real estate;

•Operational and reputational risks;

•Risks related to climate change;

•Catastrophic events, such as earthquakes or pandemics/epidemics;

•Other factors that are described in Part I, “Item IA. Risk Factors” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022, and Part II, “Item IA. Risk Factors” in this Report; and

•Other risks and factors detailed from time to time in reports filed by Brookfield DTLA with the United States Securities and Exchange Commission.

Brookfield DTLA cautions that the foregoing list of important factors that may affect future results is not exhaustive. When relying on Brookfield DTLA’s forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, Brookfield DTLA undertakes 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.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

	March 31, 2022		December 31, 2021
	June 30, 2022		December 31, 2021
ASSETS
Investments in Real Estate:
Land	$	222,555	$	222,555
Buildings and improvements	2,309,~~211~~851		2,308,836
Tenant improvements	~~421~~433,~~774~~508		418,460
Investments in real estate, gross	2,~~953~~965,~~540~~914		2,949,851
Less: accumulated depreciation	~~602~~624,~~224~~457		580,403
Investments in real estate, net	2,~~351~~341,~~316~~457		2,369,448
Investment in unconsolidated real estate joint venture	43,~~404~~782		43,191
Cash and cash equivalents	4926,~~162~~100		38,901
Restricted cash	3841,~~509~~769		49,322
Rents, deferred rents and other receivables, net	128,~~370~~278		125,625
Intangible assets, net	1413,~~744~~462		16,023
Deferred charges, net	5756,~~033~~439		57,529
Due from affiliates	7,~~522~~716		10,062
Prepaid and other assets, net	136,~~305~~592		12,377
Total assets	$	2,~~703~~665,~~365~~595	$	2,722,478
LIABILITIES AND DEFICIT
Liabilities:
Secured debt, net	$	2,~~257~~259,~~654~~417	$	2,255,921
Accounts payable and other liabilities	7768,~~906~~196		77,612
Due to affiliates	12,~~641~~091		1,782
Intangible liabilities, net	43,~~077~~653		4,455
Total liabilities	2,~~341~~333,~~278~~357		2,339,770
Commitments and Contingencies (See Note 14)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited; in thousands, except share amounts)

	March 31, 2022		December 31, 2021
	June 30, 2022		December 31, 2021
LIABILITIES AND DEFICIT (continued)
Mezzanine Equity:
7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value, 9,730,370 shares issued and outstanding as of March 31, 2022 and December 31, 2021	$	470,214	$	465,577
7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value, 9,730,370 shares issued and outstanding as of June 30, 2022 and December 31, 2021	$	474,851	$	465,577
Noncontrolling Interests:
Series A-1 preferred interest	~~456~~461,~~757~~060		452,454
Senior participating preferred interest	20,~~736~~240		21,191
Series B preferred interest	~~170~~157,~~570~~432		177,290
Total mezzanine equity	1,~~118~~113,~~277~~583		1,116,512
Stockholders’ Deficit:
Common stock, $0.01 par value, 1,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021	—		—
Common stock, $0.01 par value, 1,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	203,869		203,369
Accumulated deficit	(~~885~~898,~~749~~708)		(865,927)
Noncontrolling interests	(7486,~~310~~506)		(71,246)
Total stockholders’ deficit	(~~756~~781,~~190~~345)		(733,804)
Total liabilities and deficit	$	2,~~703~~665,~~365~~595	$	2,722,478

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands)

	For the Three Months Ended				For the Six Months Ended
	March 31,
	June 30,				June 30,
	2022		2021		2022		2021
Revenue:
Lease income	$	65,~~129~~393	$	6462,~~238~~737	$	130,522	$	126,975
Parking	67,~~548~~994		56,~~188~~183		14,542		11,371
Interest and other	~~344~~335		~~266~~290		679		556
Total revenue	7273,~~021~~722		69,~~692~~210		145,743		138,902
Expenses:
Rental property operating and maintenance	2425,~~154~~744		2123,~~775~~224		49,898		44,999
Real estate taxes	9,~~855~~859		10,040		19,714		20,080
Parking	2,~~373~~558		1,~~587~~879		4,931		3,466
Other expenses	21,~~459~~345		32,~~420~~549		3,804		5,969
Depreciation and amortization	25,~~347~~801		2726,~~022~~638		51,148		53,660
Interest	1821,~~443~~304		2318,~~781~~595		39,747		42,376
Total expenses	8286,~~631~~611		8782,~~625~~925		169,242		170,550
Other Income:
Equity in earning of unconsolidated real estate joint venture	~~213~~378		~~199~~97		591		296
Total other income	~~213~~378		~~199~~97		591		296
Net loss	(1012,~~397~~511)		(1713,~~734~~618)		(22,908)		(31,352)
Net loss (income) attributable to noncontrolling interests:
Series A-1 preferred interest returns	4,303		4,~~303~~302		8,606		8,605
Senior participating preferred interest redemption measurement adjustment	~~(201)~~142		~~601~~299		(59)		900
Series B preferred interest returns	3,~~750~~562		4,~~282~~146		7,312		8,428
Series B common interest – allocation of net (loss) income	(312,~~064~~196)		15(6,~~204~~669)		(15,260)		8,535
Net loss attributable to Brookfield DTLA	(158,~~185~~322)		(4215,~~124~~696)		(23,507)		(57,820)
Series A preferred stock dividends	4,637		4,~~637~~638		9,274		9,275
Net loss attributable to common interest holders of Brookfield DTLA	$	(1912,~~822~~959)	$	(4620,~~761~~334)	$	(32,781)	$	(67,095)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited; in thousands, except share amounts)

	Number ofShares	CommonStock		AdditionalPaid-inCapital		AccumulatedDeficit		Non-controllingInterests		TotalStockholders’Deficit
	CommonStock
Balance, December 31, 2021	1,000	$	—	$	203,369	$	(865,927)	$	(71,246)	$	(733,804)
Net (loss) income						(15,185)		4,788		(10,397)
Contributions				500						500
Dividends, preferred returns and redemption measurement adjustments on mezzanine equity						(4,637)		(7,852)		(12,489)
Balance, March 31, 2022	1,000	$—	—	$203,869	~~203,869~~	$(885,749)	~~(885,749)~~	$(74,310)	~~(74,310)~~	$(756,190)	~~(756,190)~~
Net loss						(8,322)		(4,189)		(12,511)
Contributions				—						—
Dividends, preferred returns and redemption measurement adjustments on mezzanine equity						(4,637)		(8,007)		(12,644)
Balance, June 30, 2022	1,000	$	—	$	203,869	$	(898,708)	$	(86,506)	$	(781,345)

	Number ofShares	CommonStock		AdditionalPaid-inCapital		AccumulatedDeficit		Non-controllingInterests		TotalStockholders’Deficit
	CommonStock
Balance, December 31, 2020	1,000	$	—	$	202,369	$	(726,369)	$	(104,440)	$	(628,440)
Net (loss) income						(42,124)		24,390		(17,734)
Contributions				—						—
Dividends, preferred returns and redemption measurement adjustments on mezzanine equity						(4,637)		(9,186)		(13,823)
Balance, March 31, 2021	1,000	$—	—	$202,369	~~202,369~~	$(773,130)	~~(773,130)~~	$(89,236)	~~(89,236)~~	$(659,997)	~~(659,997)~~
Net (loss) income						(15,696)		2,078		(13,618)
Contributions				500						500
Dividends, preferred returns and redemption measurement adjustments on mezzanine equity						(4,638)		(8,747)		(13,385)
Balance, June 30, 2021	1,000	$	—	$	202,869	$	(793,464)	$	(95,905)	$	(686,500)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

	For the Three Months Ended
	For the Six Months Ended
	March 31,
	June 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(1022,~~397~~908)	$	(1731,~~734~~352)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	2551,~~347~~148		2753,~~022~~660
Equity in earning of unconsolidated real estate joint venture	(~~213~~591)		(~~199~~296)
(Recovery) write-off of lease receivables previously deemed uncollectible	(~~154~~335)		~~665~~576
Amortization of acquired below-market leases, net of acquired above-market leases	(1573)		~~110~~158
Straight-line rent amortization	(~~129~~1,168)		(1,~~768~~027)
Amortization of tenant inducements	~~390~~1,175		~~813~~1,603
Amortization and write-off of debt financing costs	13,~~733~~496		13,~~973~~956
Unrealized gain on interest rate cap contracts	(211)		(12)
Loss on early extinguishment of debt	—		4,575
Unrealized gain on interest rate cap contracts	(372)		(15)
Changes in assets and liabilities:
Rents, deferred rents and other receivables, net	(~~1,340~~766)		34,~~369~~444
Deferred charges, net	(13,~~096~~663)		(~~862~~1,647)
Due from affiliates	~~1,032~~794		21,~~038~~261
Prepaid and other assets, net	~~(743)~~6,115		~~(631)~~6,410
Accounts payable and other liabilities	~~713~~(5,445)		~~9,702~~787
Due to affiliates	~~(141)~~309		~~(638)~~37
Net cash provided by operating activities	1427,~~776~~716		2343,~~848~~130
Cash flows from investing activities:
Expenditures for real estate improvements	(520,~~104~~508)		(1318,~~674~~401)
Net cash used in investing activities	(520,~~104~~508)		(1318,~~674~~401)
Cash flows from financing activities:
Proceeds from secured debt	—		465,000
Principal payments on secured debt	—		(450,000)
Proceeds from Series B preferred interest	10,330		26,~~600~~000
Proceeds from senior participating preferred interest	125		171
Distributions to Series B preferred interest	(56,~~005~~264)		(48,~~244~~527)
Repurchases of Series B preferred interest	(1531,~~795~~236)		(1627,~~156~~273)
Distributions to senior participating preferred interest	(~~379~~1,017)		(~~242~~546)
Contributions to additional paid-in capital	500		—500
Purchase of interest rate cap contracts	—		(62)
Payment for early extinguishment of debt	—		(4,575)
Debt financing costs paid	—		(6,544)
Net cash used in financing activities	(1027,~~224~~562)		(1425,~~052~~856)
Net change in cash, cash equivalents and restricted cash	(~~552~~20,354)		(31,~~878~~127)
Cash, cash equivalents and restricted cash at beginning of period	88,223		83,483
Cash, cash equivalents and restricted cash at end of period	$	8767,~~671~~869	$	7982,~~605~~356

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited; in thousands)

	For the Three Months Ended
	For the Six Months Ended
	March 31,
	June 30,
	2022		2021
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1635,~~532~~449	$	1733,~~899~~306
Cash paid for income taxes	$	34	$	1,851
Supplemental disclosure of non-cash investing and financing activities:
Accrual for current-period additions to real estate investments	$	315,~~588~~717	$	58,~~633~~699

The following is a reconciliation of Brookfield DTLA’s cash, cash equivalents and restricted cash at the beginning and end of the ~~three~~six months ended ~~March~~June 3130, 2022 and 2021:

	For the Three Months Ended
	For the Six Months Ended
	March 31,
	June 30,
	2022		2021
Cash and cash equivalents at beginning of period	$	38,901	$	37,394
Restricted cash at beginning of period	49,322		46,089
Cash, cash equivalents and restricted cash at beginning of period	$	88,223	$	83,483
Cash and cash equivalents at end of period	$	4926,~~162~~100	$	3134,~~783~~491
Restricted cash at end of period	3841,~~509~~769		47,~~822~~865
Cash, cash equivalents and restricted cash at end of period	$	8767,~~671~~869	$	7982,~~605~~356

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As used in these notes to consolidated financial statements, tabular amounts are presented in thousands, except share amounts, percentage data and dates.

Note 1—Organization and Description of Business

Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or the “Company”) is a Maryland corporation and was incorporated on April 19, 2013. Brookfield DTLA was formed for the purpose of consummating the transactions contemplated in the Agreement and Plan of Merger dated as of April 24, 2013, as amended, and the issuance of shares of 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series A preferred stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC, a Delaware limited liability company (“DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”). DTLA Holdings is an indirect partially‑owned subsidiary of Brookfield Property Partners L.P. (“BPY”), an exempted limited partnership under the Laws of Bermuda, which in turn is the flagship commercial property entity wholly-owned by Brookfield Asset Management Inc. (“BAM”), a corporation under the Laws of Canada, and the primary vehicle through which BAM invests in real estate on a global basis.

As of ~~March~~June 3130, 2022 and December 31, 2021, Brookfield DTLA owned Bank of America Plaza (“BOA Plaza”), EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, which are Class A office properties, and FIGat7th, a retail center nestled between EY Plaza and 777 Tower. Additionally, Brookfield DTLA Fund Properties II LLC (“Fund II”) has a noncontrolling interest in an unconsolidated real estate joint venture with Brookfield DTLA FP IV Holdings LLC (“DTLA FP IV Holdings”), a wholly‑owned subsidiary of DTLA Holdings, which owns 755 South Figueroa, a residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”) in Downtown Los Angeles, which has long been a major office district for law firms, accounting firms and government agencies.

Brookfield DTLA primarily receives its income from lease income, including tenant reimbursements, generated from the operations of its office and retail properties, and to a lesser extent, revenue from its parking garages.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 2—Basis of Presentation

As used in these consolidated financial statements and related notes, unless the context requires otherwise, the terms “Brookfield DTLA,” the “Company,” “us,” “we” and “our” refer to Brookfield DTLA Fund Office Trust Investor Inc. together with its direct and indirect subsidiaries.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10‑Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal and recurring nature, considered necessary for a fair presentation of the financial position and interim results of Brookfield DTLA as of and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of those that may be expected for a full fiscal year.

The consolidated balance sheets as of ~~March~~June 3130, 2022 and December 31, 2021 include the accounts of Brookfield DTLA and subsidiaries in which it has a controlling financial interest. All intercompany transactions have been eliminated in consolidation as of ~~March~~June 3130, 2022 and December 31, 2021, and for each of the three and six months ended ~~March~~June 3130, 2022 and 2021.

The accompanying notes to the unaudited consolidated financial statements do not include all disclosures required by GAAP. The unaudited consolidated financial information included herein should be read in conjunction with the audited consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 24, 2022.

Determination of Controlling Financial Interest

We consolidate entities in which Brookfield DTLA is considered to be the primary beneficiary of a variable interest entity (“VIE”) or has a majority of the voting interest in the entity. We are deemed to be the primary beneficiary of a VIE when we have (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. We do not consolidate entities in which the other parties have substantive kick-out rights to remove the Company’s power to direct the activities, and most significantly impacting the economic performance, of the VIE. In determining whether we are the primary beneficiary, we consider factors such as ownership interest, management representation, authority to control decisions, and contractual and substantive participating rights of each party.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Brookfield DTLA Fund Properties II LLC. The Company earns a return through an indirect investment in Fund II. DTLA Holdings, the parent of Brookfield DTLA, owns all of the common interest in Fund II. Brookfield DTLA has an indirect preferred stock interest in Fund II and its wholly-owned subsidiary is the managing member of Fund II. The Company determined that Fund II is a VIE. As a result of having the power to direct the significant activities of Fund II that impact Fund II’s economic performance, and the obligation to absorb losses of, or the right to receive benefits from, Fund II that could potentially be significant to the Fund II, Brookfield DTLA meets the two conditions for being the primary beneficiary of Fund II.

We consolidate entities through which we conduct substantially all of our business, and own, directly and through subsidiaries, substantially all of our assets. As of ~~March~~June 3130, 2022, these consolidated VIEs had in aggregate total consolidated assets of $2.76 billion (of which $2.43 billion is related to investments in real estate) and total consolidated liabilities of $2.3 billion (of which $2.3 billion is related to non-recourse debt secured by our office and retail properties). The Company is obligated to repay substantially all of the liabilities of our consolidated VIEs, except for the non-recourse secured debt.

Investment in Unconsolidated Real Estate Joint Venture. Fund II has a noncontrolling interest in a joint venture, Brookfield DTLA Fund Properties IV LLC (“Fund IV”), with DTLA FP IV Holdings. The Company determined that the joint venture is a VIE mainly because its equity investment at risk is insufficient to finance the joint venture’s activities without additional subordinated financial support. While the joint venture meets the definition of a VIE, Brookfield DTLA is not its primary beneficiary as the Company lacks the power through voting or similar rights to direct the activities that most significantly impact the joint venture’s economic performance. Therefore, the Company accounts for its ownership interest in the joint venture under the equity method. Under the equity method of accounting, we initially recognize our investment at cost and subsequently adjust the carrying amount of the investment for our share of the investee’s earnings or losses, distributions received (if any), and other-than-temporary impairments. As of ~~March~~June 3130, 2022, the Company’s ownership interest in the joint venture was 3027.6%, a decrease from 33.6% as of December 31, 2021 as a result of additional capital contributed by DTLA FP IV Holdings to the joint venture during the ~~three~~six months ended ~~March~~June 3130, 2022.

The liabilities of the joint venture may only be settled using the assets of 755 South Figueroa and are not recourse to the Company. Brookfield DTLA’s exposure to its investment in the joint venture is limited to its investment balance and the Company has no obligation to make future contributions to the joint venture. Pursuant to the operating agreement of the joint venture, DTLA FP IV Holdings may be required to fund additional amounts for the development of 755 South Figueroa, routine operating costs, and guaranties or commitments of the joint venture.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Impact of COVID-19 pandemic

While we have seen ~~continued~~slow improvement in our business during the first ~~quarter~~half of 2022 compared to the same period in 2021, ~~the~~leasing ~~winter~~activity ~~surge~~and ofphysical ~~COVID-19~~occupancy ~~infection~~in ~~fueled by~~ the ~~Omicron~~LACBD ~~variant~~has ~~during~~not ~~December~~caught ~~2021~~up ~~through~~to ~~January~~pre-pandemic ~~2022~~levels ~~continued~~as tobusinesses ~~bring~~consider ~~uncertainty~~how to ~~our~~best ~~tenants’~~implement return-to-office plans~~. Effective~~ ~~January~~and ~~2022,~~transition ~~well-fitting~~to ~~medical-grade~~hybrid ~~mask, surgical mask~~ or ~~higher-level~~remote ~~respirators~~work ~~must~~policies. Office betenants ~~worn~~are bystill ~~employees~~active in ~~Los Angeles County at all times while indoors at~~ the ~~worksite~~leasing ormarkets ~~facility. Although~~but ~~most~~being ~~masking~~more ~~requirements~~selective ~~were eased by early March 2022~~ in ~~Los~~making ~~Angeles~~real ~~County,~~estate ~~businesses once again reconsidered and delayed their return-to-office plans~~decisions. ~~Due~~Relocating toand ~~the~~renewing ~~uncertainties posed to our office property~~ tenants byare ~~the~~pursuing ~~COVID-19~~space ~~pandemic,~~efficiencies ~~during~~which ~~the~~are ~~three~~often ~~months~~accompanied ~~ended~~by ~~March 31,~~size ~~2022,~~reduction ~~adjustments~~and ofa ~~$0.1 million,~~focus ~~compared~~on tohighest ~~$0.2 million~~quality ~~for the same period in 2021, were recognized to lower our office lease income related to certain leases where we determined that the collection of future lease payments was not probable~~assets. Retail tenants ofhave ~~our properties~~ continued to benefit from higher visitor traffic since ~~the~~COVID ~~re-opening~~mandates ofthroughout California’s ~~economy~~were lifted in June 2021 (the “Reopening”)~~. As~~ ~~such,~~but ~~the~~short ~~Company~~of ~~recorded~~pre-pandemic ~~favorable~~levels. Overall, ~~lease~~there ~~income~~were ~~adjustments~~no ofmaterial ~~$0.3 million~~adjustments ~~during~~to ~~the~~our ~~three~~office ~~months~~and ~~ended~~retail ~~March 31,~~lease ~~2022,~~income ~~compared~~during toeach ~~adjustments~~ of ~~$0.5~~the three ~~million~~and tosix ~~lower~~months ~~our~~ended ~~lease~~June 30, ~~income~~2022 ~~during~~and ~~the same period in~~ 2021.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods presented. The Company bases its estimates on historical experience and on various other assumptions that it considers to be reasonable under the circumstances. For example, estimates and assumptions have been made with respect to the useful lives of assets, recoverable amounts of receivables, impairment of long-lived assets and the fair value of debt. Actual results could ultimately differ from such estimates.

Impairment Review

Investments in long-lived assets, including our investments in real estate, are individually reviewed for impairment quarterly or if events or changes in circumstances indicate that the carrying amount of the long-lived assets might not be recoverable, which is referred to as a “triggering event” or an “impairment indicator.” ~~The~~Indicators ~~carrying amount~~ of ~~long-lived~~potential ~~assets to be held and used is deemed not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. Triggering events or~~ impairment ~~indicators for long-lived assets to be held and used are assessed by property and~~ include ~~significant~~the fluctuations in estimated net operating income, changes in leasing activity, significant near-term lease expirations, current and historical operating and/or cash flow losses, rental rates, and other market factors. following:

•Change in strategy resulting in an increased or decreased holding period;

•Lower stabilized occupancy levels;

•Deterioration of the rental market as evidenced by rent decreases, record-high capital expense obligations, and/or elevated concessions such as tenant improvement, over numerous quarters;

•Properties with recent impairment issues that are adjacent to or located in the same submarket;

•Significant decrease in properties’ market price;

•Tenant financial problems; and/or

•Comparable market barriers of competitors in the same submarket.

The carrying amount of long-lived assets to be held and used is deemed not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. Triggering events or impairment indicators for long-lived assets to be held and used are assessed by property and include significant fluctuations in estimated net operating income, changes in leasing activity, significant near-term lease expirations, current and historical operating and/or cash flow losses, rental rates, and other market factors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

When conducting the impairment review of our investments in real estate, we assessed the expected undiscounted cash flows based upon numerous factors. These factors include, but are not limited to, the credit quality of our tenants, available market information, known trends, current market/economic conditions that may affect the asset, and historical and forecasted financial and operating information relating to the property, such as net operating income, leasing activity statistics, vacancy projections, renewal percentage, and rent collection rates. If the undiscounted cash flows expected to be generated by a property are less than its carrying amount, the Company determines the fair value of the property and an impairment loss would be recorded to write down the carrying amount of such property to its fair value. Based on its review, management concluded that none of Brookfield DTLA’s real estate properties were impaired asduring each of ~~March~~the three ~~31,~~and ~~2022~~six ~~and~~months ~~December~~ended June 3130, 2022 and 2021.

The Company’s investment in its unconsolidated real estate joint venture is also reviewed for impairment quarterly or when conditions exist that may indicate that the decrease in the carrying amount of the investment has occurred and is other than temporary. Triggering events or impairment indicators for the Company’s unconsolidated real estate joint venture include its recurring operating losses, and other events such as significant changes in construction costs, estimated completion dates, intended holding periods, and other factors related to 755 South Figueroa development. Upon determination that an other-than-temporary impairment has occurred, a write-down is recognized to reduce the carrying amount of the investment to its estimated fair value. Based on its review, management concluded that Brookfield DTLA’s investment in its unconsolidated real estate joint venture was not impaired as of ~~March~~June 3130, 2022 and December 31, 2021.

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(Unaudited)

Rents, Deferred Rents and Other Receivables

Under Accounting Standards Codification (“ASC”) Topic 842, Leases, Brookfield DTLA must assess on an individual lease basis whether it is probable that the Company will collect the future lease payments throughout the term of the lease. The Company considers the tenant’s payment history and current credit status when assessing collectibility. If the collectibility of the lease payments is probable at lease commencement, the Company recognizes lease income over the term of the lease on a straight-line basis. During the term of the lease, Brookfield DTLA monitors the credit quality and any related material changes of our tenants by (i) reviewing financial statements of the tenants that are publicly available or that are required to be delivered to us pursuant to the applicable lease, (ii) monitoring news reports regarding our tenants and their respective businesses, (iii) monitoring the tenant’s payment history and current credit status, and (iv) analyzing current economic trends, and reasonable and supportable forecasts of future economic conditions. When collectibility is not deemed probable at the lease commencement date, the Company’s lease income is constrained to the lesser of (i) the income that would have been recognized if collection were probable, or (ii) the lease payments that have been collected from the lessee. If the collectibility assessment changes to probable after the lease commencement date, any difference between the lease income that would have been recognized if collectibility had always been assessed as probable and the lease income recognized to date is recognized as a current-period adjustment to lease income. If the collectibility assessment changes to not probable after the lease commencement date, lease income is reversed to the extent that the lease payments that have been collected from the lessee are less than the lease income recognized to date. Changes to the collectibility of operating leases are recorded as adjustments to lease income in the consolidated statements of operations. As the result of our assessment of the collectibility of amounts due under leases with our tenants, the Company recognized a recovery of lease income totaling $0.2 million and $0.3 million, respectively, during the three and six months ended ~~March~~June 3130, 2022, compared to a reduction totaling $0.76 million during the ~~same~~six ~~period~~months inended June 30, 2021. No material collectibility adjustments were made to our lease income during the three months ended June 30, 2021.

Income Taxes

Brookfield DTLA has elected to be taxed as a real estate investment trust (“REIT”) pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with its tax period ended December 31, 2013. Brookfield DTLA conducts its operations with the intent to continue to qualify as a REIT. Accordingly, Brookfield DTLA is not subject to U.S. federal income tax, provided that it continues to qualify as a REIT and makes distributions to its stockholders, if any, that generally equal or exceed its taxable income.

Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). A TRS is permitted to engage in activities that a REIT cannot engage in directly, such as performing non‑customary services for the Company’s tenants, holding assets that the Company cannot hold directly and conducting certain affiliate transactions. A TRS is subject to both federal and state income taxes. During the three and six months ended ~~March~~June 3130, 2022 ~~and 2021~~, the Company’s various TRS ~~incurred~~reversed income tax expenses of $~~0.2~~286 ~~million~~thousand and $049 thousand, respectively, compared to accrual of income tax expenses of $629 thousand and $1.96 million, respectively, during the three and six months ended June 30, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 3—Recently Issued Accounting Literature

New Accounting Pronouncements Adopted

~~There~~In ~~have~~March ~~been~~2020, nothe ~~new~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides accounting ~~pronouncements~~relief ~~adopted~~from ~~during~~the future impact of the ~~three months~~cessation ~~ended~~of LIBOR by, among other things, providing optional expedients to treat contract modifications resulting from such reference rate reform as a continuation of the existing contract and for hedging relationships to not be de-designated resulting from such changes provided certain criteria are met. The guidance is effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which amends the scope of ASU 2020-04 to include derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company adopted ASU 2020-04 and ASU 2021-01 on a prospective basis on January 1, 2022. At the time of adoption, the guidance did not have a material impact on the Company’s consolidated financial statements. The Company will continue to track the exposure as of each reporting period and to assess the impact as the reference rate transition occurs through the cessation of LIBOR.

Accounting Pronouncements Issued But Not Yet Adopted

The Company does not anticipate any recently issued accounting standards pronouncements to have a significant impact on the consolidated financial position or results of operations in these or future consolidated financial statements.

Note 4—Rents, Deferred Rents and Other Receivables, Net

Brookfield DTLA’s rents, deferred rents and other receivables are comprised of the following:

	March 31, 2022		December 31, 2021
	June 30, 2022		December 31, 2021
Straight-line and other deferred rents	$	~~110~~111,~~551~~633	$	108,913
Tenant inducements receivable	28,~~386~~908		28,445
Tenant receivables	43,~~747~~456		3,316
Other receivables	~~488~~867		362
Rents, deferred rents and other receivables, gross	144,~~172~~864		141,036
Less: accumulated amortization of tenant inducements	1516,~~802~~586		15,411
Rents, deferred rents and other receivables, net	$	128,~~370~~278	$	125,625

See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of assessments regarding the collectibility of rents and deferred rent receivables and related adjustments made during the three and six months ended ~~March~~June 3130, 2022 and 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 5—Intangible Assets and Liabilities

Brookfield DTLA’s intangible assets and liabilities are summarized as follows:

	March 31, 2022		December 31, 2021
	June 30, 2022		December 31, 2021
Intangible Assets
In-place leases	$	41,422	$	41,422
Tenant relationships	6,432		6,432
Above-market leases	16,734		16,734
Intangible assets, gross	64,588		64,588
Less: accumulated amortization	4951,~~844~~126		48,565
Intangible assets, net	$	1413,~~744~~462	$	16,023
Intangible Liabilities
Below-market leases	$	33,416	$	33,416
Less: accumulated amortization	29,~~339~~763		28,961
Intangible liabilities, net	$	43,~~077~~653	$	4,455

A summary of the effect of amortization/accretion of intangible assets and liabilities reported in the consolidated financial statements is as follows:

	For the Three Months Ended				For the Six Months Ended
	March 31,
	June 30,				June 30,
	2022		2021		2022		2021
Lease income	$	1558	$	(~~110~~48)	$	73	$	(158)
Depreciation and amortization expense	$	916	$	1,~~101~~066	$	1,832	$	2,167

As of ~~March~~June 3130, 2022, the estimated amortization/accretion of intangible assets and liabilities in future periods is as follows:

	In-PlaceLeases		OtherIntangible Assets		Intangible Liabilities
Remainder of 2022	$	21,~~062~~368	$	1,~~676~~090	$	~~1,115~~720
2023	1,947		1,~~934~~933		~~794~~776
2024	1,091		1,849		~~278~~277
2025	951		1,~~177~~180		~~263~~262
2026	580		~~444~~440		~~245~~244
2027	115		—		~~154~~153
Thereafter	918		—		1,~~228~~221
Total future amortization/accretion of intangibles	$	76,~~664~~970	$	76,~~080~~492	$	43,~~077~~653

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 6—Secured Debt, Net

Brookfield DTLA’s secured debt is as follows:

	Maturity Date (1)	Contractual Interest Rates		Principal Amount as of
				March 31, 2022		December 31, 2021
				June 30, 2022		December 31, 2021
Variable-Rate Loans:
Wells Fargo Center–North Tower (2)	10/9/2023	LIBOR + 1.65%		$	400,000	$	400,000
Wells Fargo Center–North Tower (2)	10/9/2023	LIBOR + 4.00%		65,000		65,000
Wells Fargo Center–North Tower (2)(3)	10/9/2023	LIBOR + 5.00%		35,000		35,000
Wells Fargo Center–South Tower (4)	11/4/2023	LIBOR + 1.80%		260,796		260,796
777 Tower (5)	10/31/2024	LIBOR + 1.60%		231,842		231,842
777 Tower (6)	10/31/2024	LIBOR + 4.15%		43,158		43,158
EY Plaza (7)	10/9/2025	LIBOR + 2.86%		275,000		275,000
EY Plaza (7)	10/9/2025	LIBOR + 6.85%		30,000		30,000
Gas Company Tower (7)	2/9/2026	LIBOR + 1.89%		350,000		350,000
Gas Company Tower (7)	2/9/2026	LIBOR + 5.00%		65,000		65,000
Gas Company Tower (7)	2/9/2026	LIBOR + 7.75%		50,000		50,000
Total variable-rate loans				1,805,796		1,805,796
Fixed-Rate Debt:
BOA Plaza	9/1/2024	4.05	%	400,000		400,000
FIGat7th	3/1/2023	3.88	%	58,500		58,500
Total fixed-rate debt				458,500		458,500
Total secured debt				2,264,296		2,264,296
Less: unamortized debt financing costs				64,~~642~~879		8,375
Total secured debt, net				$	2,~~257~~259,~~654~~417	$	2,255,921

(1)Maturity dates include the effect of extension options that the Company controls, if applicable. As of ~~March~~June 3130, 2022 and December 31, 2021, we meet the criteria specified in the loan agreements to extend the loan maturity dates.

(2)As required by the loan agreements, we have entered into interest rate cap contracts that limit the LIBOR portion of the interest rate to 2.57%.

(3)BAM owns a significant interest in a company whose subsidiary is the lender of this loan. See Note 12—“Related Party Transactions.”

(4)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 3.63%. As of ~~March~~June 3130, 2022, a future advance amount of $29.2 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, leasing commissions, and common area improvements.

(5)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.00%. As of ~~March~~June 3130, 2022, a future advance amount of $36.8 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mezzanine loan future advance amount.

(6)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.00%. As of ~~March~~June 3130, 2022, a future advance amount of $6.8 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mortgage loan future advance amount.

(7)As required by the loan agreements, we have entered into interest rate cap contracts that limit the LIBOR portion of the interest rate to 4.00%.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The weighted average interest rate of the Company’s secured debt was 3.1081% and 2.91% as of ~~March~~June 3130, 2022 and December 31, 2021, respectively. As of ~~March~~June 3130, 2022, the weighted average term to maturity of our debt (after the impact of extension options that the Company controls, if applicable) was approximately ~~three~~two years.

Debt Maturities

The following table provides information regarding the Company’s minimum future principal payments due on the Company’s secured debt (after the impact of extension options that the Company controls, if applicable) as of ~~March~~June 3130, 2022:



2023	$	819,296
2024	675,000
2025	305,000
2026	465,000
Total secured debt	$	2,264,296

As of ~~March~~June 3130, 2022, $1,805.8 million of the Company’s secured debt may be prepaid without penalty, $400.0 million may be defeased (as defined in the underlying loan agreements) and $58.5 million may be prepaid with prepayment penalties.

Non-Recourse Carve Out Guarantees

All of our secured debt is subject to “non-recourse carve out” guarantees that expire upon elimination of the underlying loan obligations. In connection with all of these loans, Brookfield DTLA entered into “non-recourse carve out” guarantees, which provide for these otherwise non-recourse loans to become partially or fully recourse against DTLA Holdings, if certain triggering events (as defined in the loan agreements) occur.

Debt Compliance

As of ~~March~~June 3130, 2022 and December 31, 2021, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements.

Certain loan agreements held by Brookfield DTLA contain debt yield and debt service coverage ratios. As of ~~March~~June 3130, 2022, Brookfield DTLA was meeting or exceeding these financial ratios, with the exception of the loans secured by Wells Fargo Center—South Tower and Wells Fargo Center—North Tower that did not meet their respective minimum debt yield ratio.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Wells Fargo Center–South Tower —

Pursuant to the terms of the Wells Fargo Center–South Tower mortgage loan agreement, effective September 2020, a cash sweep event commenced as the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, any excess operating cash flows are currently swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses, capital expenditures and leasing costs; property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; and fees and expenses due to the loan administrative agent.

Wells Fargo Center–North Tower —

As of ~~March~~June 3130, 2022, the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, following the occurrence of such debt yield event, any excess operating cash flows are to be swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses; tenant improvement costs and leasing commissions (capped at the leasing reserve deposit amount as specified in the loan agreements); property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; reserve accounts; and fees and expenses due to the loan administrative agent. The cash sweep started in January 2022.

London Interbank Offered Rate (“LIBOR”) Transition

The chief executive of the United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, previously announced that the FCA intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In response, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (“ARRC”) which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. In November 2020, the Intercontinental Exchange (“ICE”) Benchmark Administration Limited, the benchmark administrator for USD-LIBOR rates, proposed extending the publication of certain commonly-used USD-LIBOR settings until June 30, 2023 and the FCA issued a statement supporting such proposal. In connection with this proposal, certain U.S. banking regulators issued guidance strongly encouraging banks to generally cease entering into new contracts referencing USD-LIBOR as soon as practicable and in any event by December 31, 2021. It is not possible to predict the effect of these changes, including when there will be sufficient liquidity in the SOFR markets.

We have outstanding variable debt and interest rate cap contracts that are indexed to LIBOR. The Company is currently in the process of identifying its LIBOR-based contracts that will be impacted by the cessation of LIBOR and incorporating non-LIBOR reference rate and/or fallback language in new contracts to prepare for these changes. As of ~~March~~June 3130, 2022, all of the Company’s variable debt contracts contain fallback languages that lay out the process through which a replacement rate can be identified or used when LIBOR is not available.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or interest rate caps, but if our contracts indexed to LIBOR are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available.

Note 7—Accounts Payable and Other Liabilities

Brookfield DTLA’s accounts payable and other liabilities are comprised of the following:

	March 31, 2022		December 31, 2021
	June 30, 2022		December 31, 2021
Tenant improvements and inducements payable	$	3026,~~498~~958	$	32,973
Unearned rent and tenant payables	27,~~685~~924		31,249
Accrued capital expenditures and leasing commissions	9,~~157~~070		7,422
Accrued expenses and other liabilities	104,~~566~~244		5,968
Accounts payable and other liabilities	$	7768,~~906~~196	$	77,612

Note 8—Noncontrolling Interests

Mezzanine Equity Component

Mezzanine equity in the consolidated balance sheets is comprised of the following:

Series A Preferred Stock. As of ~~March~~June 3130, 2022 and December 31, 2021, 9,730,370 shares of Series A preferred stock were outstanding, of which 9,357,469 shares were issued to third parties and 372,901 shares were issued to DTLA Fund Holding Co., a subsidiary of DTLA Holdings.

Series A Preferred Interest. The Series A preferred interest in Fund II is indirectly held by the Company through wholly owned subsidiaries (subject to certain REIT accommodation preferred interests).

Series A-1 Preferred Interest. The Series A-1 preferred interest is held by DTLA Holdings or wholly-owned subsidiaries of DTLA Holdings.

Senior Participating Preferred Interest. Brookfield DTLA Fund Properties III LLC (“Fund III”), a wholly-owned subsidiary of DTLA Holdings, issued a senior participating preferred interest to DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Series B Preferred Interest. Pursuant to the Limited Liability Company Agreement ~~(“LLCA”)~~ of Fund II and the ~~subsequent~~First ~~amendment~~Amendment to the ~~LLCA~~Limited Liability Company Agreement of Fund II, DTLA Holdings made a commitment to contribute up to $310.0 million in cash or property to Fund II, which directly or indirectly owns the Brookfield DTLA properties. Effective May 2022, pursuant to the Second Amendment to the Limited Liability Company Agreement of Fund II, such contribution commitment by DTLA Holdings increased by $40.0 million to $350.0 million. As of ~~March~~June 3130, 2022, $1050.8 million is available to the Company under this commitment for future funding. The Series B preferred interest in Fund II held by DTLA Holdings is effectively senior to the interest in Fund II indirectly held by the Company and has a priority on distributions senior to the equity securities of such subsidiaries held indirectly by the Company and, as a result, effectively rank senior to the Series A preferred stock. The Series B preferred interest in Fund II may limit the amount of funds available to the Company for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock.

The Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest are held by a noncontrolling interest holder. Series A preferred stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest (collectively, the “Preferred Interests”) are classified as mezzanine equity because they are callable, and the holder of the Series A-1 preferred interest, senior participating preferred interest, Series B preferred interest, and some of the Series A preferred stock indirectly controls the ability to elect to redeem such instruments, through its controlling interest in the Company and its subsidiaries. See Note 9—“Mezzanine Equity.”

Stockholders’ Deficit Component

Common interests held by DTLA Holdings are presented as “noncontrolling interests” as part of Stockholders’ Deficit in the consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 9—Mezzanine Equity

A summary of the change in mezzanine equity is as follows:

	Number ofShares ofSeries APreferredStock	Series APreferredStock		Noncontrolling Interests						TotalMezzanineEquity
				Series A-1PreferredInterest		SeniorParticipatingPreferredInterest		Series BPreferredInterest
Balance, December 31, 2021	9,730,370	$	465,577	$	452,454	$	21,191	$	177,290	$	1,116,512
Issuance of Series B preferred interest								10,330		10,330
Dividends		4,637								4,637
Preferred returns				4,303				3,750		8,053
Redemption measurement adjustments						(201)				(201)
Contributions from noncontrolling interests						125				125
Repurchases of noncontrolling interests								(15,795)		(15,795)
Distributions to noncontrolling interests						(379)		(5,005)		(5,384)
Balance, March 31, 2022	9,730,370	$470,214	~~470,214~~	$456,757	~~456,757~~	$20,736	~~20,736~~	$170,570	~~170,570~~	$1,118,277	~~1,118,277~~
Issuance of Series B preferred interest								—		—
Dividends		4,637								4,637
Preferred returns				4,303				3,562		7,865
Redemption measurement adjustments						142				142
Contributions from noncontrolling interests						—				—
Repurchases of noncontrolling interests								(15,441)		(15,441)
Distributions to noncontrolling interests						(638)		(1,259)		(1,897)
Balance, June 30, 2022	9,730,370	$	474,851	$	461,060	$	20,240	$	157,432	$	1,113,583

	Number ofShares ofSeries APreferredStock	Series APreferredStock		Noncontrolling Interests						TotalMezzanineEquity
				Series A-1PreferredInterest		SeniorParticipatingPreferredInterest		Series BPreferredInterest
Balance, December 31, 2020	9,730,370	$	447,028	$	435,242	$	20,413	$	198,827	$	1,101,510
Issuance of Series B preferred interest								2,600		2,600
Dividends		4,637								4,637
Preferred returns				4,303				4,282		8,585
Redemption measurement adjustments						601				601
Contributions from noncontrolling interests						171				171
Repurchases of noncontrolling interests								(16,156)		(16,156)
Distributions to noncontrolling interests						(242)		(4,244)		(4,486)
Balance, March 31, 2021	9,730,370	$	451,665	$	439,545	$	20,943	$	185,309	$	1,097,462

During the three months ended March 31, 2022 and 2021, net repurchases of and distributions to noncontrolling interests were made using the excess operating cash flows generated from properties.

Series A Preferred Stock

As of March 31, 2022, the Series A preferred stock is reported at its redemption value of $470.2 million calculated using the redemption price of $243.3 million plus $227.0 million of accumulated and unpaid dividends on such Series A preferred stock through March 31, 2022.

No dividends were declared on the Series A preferred stock during the three months ended March 31, 2022 and 2021. Dividends on the Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.90625 per share.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)


	Number of Shares of Series A Preferred Stock	Series A Preferred Stock		Noncontrolling Interests						Total Mezzanine Equity
				Series A-1 Preferred Interest		Senior Participating Preferred Interest		Series B Preferred Interest

Balance, December 31, 2020	9,730,370	$	447,028	$	435,242	$	20,413	$	198,827	$	1,101,510
Issuance of Series B preferred interest								2,600		2,600
Dividends		4,637								4,637
Preferred returns				4,303				4,282		8,585
Redemption measurement adjustments						601				601
Contributions from noncontrolling interests						171				171
Repurchases of noncontrolling interests								(16,156)		(16,156)
Distributions to noncontrolling interests						(242)		(4,244)		(4,486)
Balance, March 31, 2021	9,730,370	451,665		439,545		20,943		185,309		1,097,462
Issuance of Series B preferred interest								3,400		3,400
Dividends		4,638								4,638
Preferred returns				4,302				4,146		8,448
Redemption measurement adjustments						299				299
Contributions from noncontrolling interests						—				—
Repurchases of noncontrolling interests								(11,117)		(11,117)
Distributions to noncontrolling interests						(304)		(4,283)		(4,587)
Balance, June 30, 2021	9,730,370	$	456,303	$	443,847	$	20,938	$	177,455	$	1,098,543

During the three and six months ended June 30, 2022 and 2021, net repurchases of and distributions to noncontrolling interests were made using the excess operating cash flows generated from properties.

Series A Preferred Stock

As of June 30, 2022, the Series A preferred stock is reported at its redemption value of $474.9 million calculated using the redemption price of $243.3 million plus $231.6 million of accumulated and unpaid dividends on such Series A preferred stock through June 30, 2022.

No dividends were declared on the Series A preferred stock during the three and six months ended June 30, 2022 and 2021. Dividends on the Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.90625 per share.

The Series A preferred stock does not have a stated maturity and is not subject to any sinking fund or mandatory redemption provisions. We may, at our option, redeem the Series A preferred stock, in whole or in part, for $25.00 per share, plus all accumulated and unpaid dividends on such Series A preferred stock up to and including the redemption date. There is no commitment or obligation on the part of Brookfield DTLA or DTLA Holdings to redeem the Series A preferred stock. The Series A preferred stock is not convertible into or exchangeable for any other property or securities of Brookfield DTLA.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Noncontrolling Interests

There is no commitment or obligation on the part of Brookfield DTLA or DTLA Holdings to redeem the Preferred Interests.

Series A-1 Preferred Interest

As of ~~March~~June 3130, 2022, the Series A-1 preferred interest is reported at its redemption value of $~~456~~461.81 million calculated using its liquidation value of $225.7 million plus $~~231~~235.03 million of unpaid interest through ~~March~~June 3130, 2022. Interest earned on the Series A-1 preferred interest is cumulative and accrues at an annual rate of 7.625%.

Senior Participating Preferred Interest

As of ~~March~~June 3130, 2022, the senior participating preferred interest is reported at its redemption value of $20.72 million using the 4.0% participating interest in the residual value of BOA Plaza, EY Plaza and FIGat7th upon disposition or liquidation.

Series B Preferred Interest

As of ~~March~~June 3130, 2022, the Series B preferred interest is reported at its redemption value of $~~170~~157.64 million calculated using its liquidation value of $~~169~~153.39 million plus $1.3.6 million of unpaid preferred returns on such Series B preferred interest through ~~March~~June 3130, 2022. Brookfield DTLA is entitled to receive a market rate of return on its contributions, currently 9.0% as of ~~March~~June 3130, 2022.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Distribution Waterfall

Brookfield DTLA may, at its discretion, distribute all or a portion of its available cash (as defined in the limited liability company agreement of Fund II) in the following priority: (1)

First to:

Series B preferred interest unpaid preferred return

Second to:

Series B preferred interest unreturned preferred capital

Third, proportionally in respect of
unpaid preferred return to:

Series A preferred interest unpaid preferred return (2)

Series A-1 preferred interest unpaid preferred return (3)

Fourth, proportionally in respect
of unreturned capital to: (2) (4)

Series A preferred interest unreturned capital

Series A-1 preferred interest unreturned capital (3)

And fifth to:

Common interests to Brookfield DTLA and DTLA Holdings (5)

__________

(1)Cash available to Fund II arises from its interests in its investments. Fund II owns indirectly all of the interests in Gas Company Tower, Wells Fargo Center–South Tower, Wells Fargo Center–North Tower, 777 Tower and an interest in the 755 South Figueroa development site which will decrease as capital is called to fund the development. See Note 1 “Organization and Description of Business”. In addition, Fund II owns 96% indirectly of the interests in EY Plaza, FIGat7th and BOA Plaza (the “Fund III Assets”). DTLA Holdings owns the remaining 4% interest in the Fund III Assets. The amounts due to DTLA Holdings on the senior participating preferred interest for its preferred return and unreturned capital in Fund III were fully paid as of December 31, 2015. All of Fund II’s interests in these assets are subject to certain REIT accommodation preferred interests. This waterfall may be effected by future equity issuances in respect of Fund II, Fund III, Fund IV, or their subsidiaries, and are subject to all of the indebtedness of the entities.

(2)The Fund II Series A preferred interest is comprised of two parts, one is a preferred component with the analogous economic terms as the Company’s Series A Preferred Stock and a common component, which is junior to the preferred component of the Series A interest on analogous terms to the relationship between the Company’s Series A Preferred Stock and Common Stock. The Series A preferred interest is junior to the Fund II Series B preferred interest. See Note 8 “Noncontrolling Interests — Series B Preferred Interest”. Amounts paid in respect of the Fund II’s Series A preferred interest are generally available upon distribution to the Company for further distribution in respect of the Company’s Series A Preferred Stock, and, when and if distributed in respect of the Series A Preferred Stock, will be distributed first to accumulated and unpaid dividends and to reduce its unreturned liquidation capital.

(3)DTLA Holdings in its capacity as the holder of the Series A-1 preferred interest can waive receipt of distributions that would otherwise be made to it in respect of the Series A-1 preferred interest and such amounts shall be paid instead to the Series A preferred interest or as otherwise provided by the subsequent provisions of the waterfall. Any amounts waived by DTLA Holdings shall not reduce the Series A-1 unpaid preferred return or unreturned capital.

(4)Applicable if distribution is (a) in connection with a liquidating event or redemption or (b) at the election of Brookfield DTLA.

(5)Based on the interests of the Series A and Series B interests of the Fund after repayment of the preferred capital portion of each of them, until the Senior A junior unreturned liquidation capital is reduced to zero.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 10—Financial Instruments

Derivative Financial Instruments

The following table presents the interest rate cap contracts pursuant to the terms of certain of its loan agreements as of ~~March~~June 3130, 2022:


	Notional Amount		Strike Rate (1)	Expiration Date

Interest Rate Caps:
Wells Fargo Center–North Tower	$	400,000	2.57%	10/15/2022
Wells Fargo Center–North Tower	65,000		2.57%	10/15/2022
Wells Fargo Center–North Tower	35,000		2.57%	10/15/2022
Wells Fargo Center–South Tower	290,000		3.63%	11/4/2022
777 Tower	268,600		4.00%	11/10/2022
777 Tower	50,000		4.00%	11/10/2022
EY Plaza	275,000		4.00%	10/15/2022
EY Plaza	30,000		4.00%	10/15/2022
Gas Company Tower	350,000		4.00%	2/15/2023
Gas Company Tower	65,000		4.00%	2/15/2023
Gas Company Tower	50,000		4.00%	2/15/2023
Total derivatives not designated as cash flow hedging instruments	$	1,878,600

__________

(1)The index used for all derivative financial instruments shown above is 1-Month LIBOR.

A summary of the fair value of Brookfield DTLA’s derivative financial instruments is as follows:

Fair Value as of

Balance Sheet Location

~~March~~June 3130, 2022

December 31, 2021

Derivatives not designated as hedging instruments: Interest rate caps

Prepaid and other assets, net

~~257~~418

Changes in fair value of interest rate cap contracts recognized in the consolidated statements of operations during the three and six months ended ~~March~~June 3130, 2022 and 2021 were de minimis.

Other Financial Instruments

Brookfield DTLA’s other financial instruments that are exposed to concentrations of credit risk consist primarily of bank deposits and rents receivable. Brookfield DTLA places its bank deposits with major commercial banks. Cash balances with any one institution may at times be in excess of the Federal Deposit Insurance Corporation-insured limit of $250,000.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of assessments regarding the collectibility of rents and deferred rents receivable and related adjustments made during the three and six months ended ~~March~~June 3130, 2022 and 2021.

Note 11—Fair Value Measurements and Disclosures

ASC Topic 820, Fair Value Measurement, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the “exit price”).

ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three categories:


•	Level 1—	Quoted prices (unadjusted) in active markets that are accessible at the measurement date.
•	Level 2—	Observable prices that are based on inputs not quoted in active markets but corroborated by market data.
•	Level 3—	Unobservable prices that are used when little or no market data is available.

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Brookfield DTLA utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible, as well as consider counterparty credit risk in its assessment of fair value.

~~Recurring Measurements—~~25

The fair value of Brookfield DTLA’s interest rate swap contracts was determined using widely accepted valuation techniques, including discounted cash flow analyses on the expected cash flows of the derivatives. These analyses reflect the contractual terms of the derivatives, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The Company has incorporated credit valuation adjustments to appropriately reflect both our and the respective counterparty’s non‑performance risk in the fair value measurements. The interest rate swap contracts were terminated in September 2020. See Note 10 “Financial Instruments.”

The fair value of interest rate cap contracts was $257 thousand and $46 thousand as of March 31, 2022 and December 31, 2021, respectively. The Company classified them as Level 2 in the fair value hierarchy.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Recurring Measurements—

The fair value of interest rate cap contracts was $418 thousand and $46 thousand as of June 30, 2022 and December 31, 2021, respectively. The Company classified them as Level 2 in the fair value hierarchy.

Nonrecurring Measurements—

As of ~~March~~June 3130, 2022 and December 31, 2021, the Company did not have any assets or liabilities that are measured at fair value on a nonrecurring basis. Refer to Note 2—“Basis of Presentation —Impairment Review” for further discussion.

Disclosures about Fair Value of Financial Instruments—

Secured debt — The Company estimates the fair value of its debt by calculating the credit-adjusted present value of principal and interest payments for each loan. The calculation incorporates observable market interest rates (Level 2 inputs), assumes that each loan will be outstanding until maturity, and excludes any options to extend the maturity date of the loan available per the terms of the loan agreement, if any. The table below presents the estimated fair value and carrying value of the Company’s secured debt included in liabilities:

	March 31, 2022		December 31, 2021
	June 30, 2022		December 31, 2021
Fair Value	$	2,~~258~~253,~~765~~544	$	2,263,160
Carrying value	$	2,~~257~~259,~~654~~417	$	2,255,921

Other financial instruments — As of ~~March~~June 3130, 2022 and December 31, 2021, the carrying values of cash and cash equivalents, restricted cash, tenant and other receivables, other assets, accounts payable and other liabilities, and balances with affiliates approximate fair value because of the short-term nature of these instruments.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 12—Related Party Transactions

Management Agreements

Certain subsidiaries of Brookfield DTLA have entered into arrangements with the Manager, pursuant to which the Manager provides property management and various other services. The following table presents the basis of fees incurred to the Manager and Brookfield affiliates during the three and six months ended ~~March~~June 3130, 2022 and 2021:

Fee Type

Affiliate

Fee Description

Property management

The Manager

2.75% of rents collected (as defined in the management agreements)

Asset management

BPY and BAM

0.75% of DTLA Holdings’ invested equity in Brookfield DTLA’s properties

Leasing

The Manager and Brookfield affiliates

1.00% to 4.00% of expected rents, depending on the terms of the lease and whether a third-party broker was paid a commission for the transaction

Construction management

The Manager

3.00% of hard and soft construction costs

Development management

Other

3.00% of hard and soft construction costs

Entitlement

Other

20.00% of the entitlement costs incurred by BOA Plaza, if the entitlement budget is less than $3,000,000

A summary of fees and costs incurred by the applicable Brookfield DTLA subsidiaries under these arrangements is as follows:

	For the Three Months Ended				For the Six Months Ended
	March 31,
	June 30,				June 30,
	2022		2021		2022		2021
Property management	$	12,~~968~~007	$	21,~~036~~946	$	3,975	$	3,982
Asset management	$	1,~~559~~571	$	1,~~547~~533	$	3,130	$	3,080
Leasing	$	81584	$	~~280~~223	$	665	$	503
Construction management	$	5781	$	~~279~~(146)	$	138	$	133
Development management (1)	$	~~566~~401	$	~~349~~357	$	967	$	706
Entitlement	$	5516	$	67142	$	71	$	209
General, administrative and reimbursable expenses	$	~~739~~1,002	$	~~585~~635	$	1,740	$	1,220

__________

(1)Amounts presented are calculated by applying the Company’s ownership interest percentage in the unconsolidated real estate joint venture as of period end to the costs incurred during the period.

Expenses incurred under these arrangements are included in rental property operating and maintenance expense in the consolidated statements of operations, with the exception of asset management fee which is included in other expenses. Leasing fees are capitalized as deferred charges, construction management and entitlement fees are capitalized as part of investments in real estate, and development management fees are capitalized and included in the investment in unconsolidated real estate joint venture in the consolidated balance sheets.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Insurance Agreements

Properties held by certain Brookfield DTLA subsidiaries and affiliates are covered under insurance policies entered into by the Manager. Insurance premiums for Brookfield DTLA’s properties are paid by the Manager. Brookfield DTLA reimburses the Manager for the amount of fees and expenses related to such policies that have been allocated to the Company’s properties as determined by the Manager in its reasonable discretion taking into consideration certain facts and circumstances, including the value of the Company’s properties.

A summary of costs incurred by the applicable Brookfield DTLA subsidiaries and affiliates under this arrangement, which are included in rental property operating and maintenance expense in the consolidated statements of operations, is as follows:

	For the Three Months Ended				For the Six Months Ended
	March 31,
	June 30,				June 30,
	2022		2021		2022		2021
Insurance expense (1)	$	3,~~083~~082	$	3,~~192~~199	$	6,165	$	6,391

__________

(1)An affiliate of BAM secures insurance policies for the Company through third-party brokers and insurance companies and charges the Company a fee for the services it provides. Fees charged vary but will not exceed 2.50% of the total net insurance premiums of the Company and its covered properties. Effective November 1, 2021, this affiliate of BAM ceased charging such fee. During the three and six months ended ~~March~~June 3130, 2021, fees incurred for these services totaled $7876 thousand and $154 thousand, respectively. Additionally, the Company’s terrorism insurance coverage is purchased through a captive facility that is an affiliate of BPY. Insurance premiums incurred totaled $32 thousand and $64 thousand, respectively, during each of the three and six months ended ~~March~~June 3130, 2022 and 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Other Related Party Transactions with BAM Affiliates

A summary of the impact of other related party transactions with BAM affiliates on the Company’s consolidated statements of operations is as follows:

	For the Three Months Ended				For the Six Months Ended
	March 31,
	June 30,				June 30,
	2022		2021		2022		2021
Lease income (1)	$	3,~~610~~475	$	4,~~776~~189	$	7,085	$	8,965
Parking revenue (1)	$	247	$	~~250~~246	$	494	$	496
Rental property operating and maintenance expense (2)	$	—	$	~~111~~149	$	—	$	260
Interest expense (3)(4)	$	~~568~~626	$	~~496~~565	$	1,194	$	1,060

__________

(1)In September 2019, BAM acquired a significant interest in Oaktree Capital Group, LLC (“Oaktree”), an existing tenant at Wells Fargo Center–North Tower. Lease income and parking revenue from Oaktree and its subsidiaries have been reported as related party transactions since the date of acquisition by BAM.

(2)Amounts presented are for purchases of chilled water for air conditioning at one of the Company’s properties supplied by an affiliate of BAM. In July 2021, such supplier was acquired by third parties.

(3)A subsidiary of Oaktree is the lender of the $35.0 million mezzanine loan secured by Wells Fargo Center–North Tower. Interest payable to the lender totaled $89105 thousand as of ~~March~~June 3130, 2022 and is reported as part of accounts payable and other liabilities in the consolidated balance sheets. See Note 6—“Secured Debt, Net.” Interest expense on this loan has been reported as a related party transaction since the date of acquisition by BAM.

(4)In February 2021, BAM purchased $18.2 million of commercial mortgage-backed securities (“CMBS”) secured by the Gas Company Tower loans in the open market. The CMBS are payable in monthly installments over a two-year period at a fixed interest rate of 2.50%. The transaction was conducted on an arm’s length basis at fair market value. In September 2021, this CMBS was sold to Brookfield Asset Management Reinsurance Partners Ltd., an affiliate of BAM. During the three and six months ended ~~March~~June 3130, 2022 ~~and 2021~~, the Company incurred interest expense of $~~114~~115 thousand and $47229 thousand, respectively, on this CMBS, compared to $114 thousand and $162 thousand, respectively, during the three and six months ended June 30, 2021.

The Manager or its affiliates may incur certain out-of-pocket expenses on behalf of the Company and pass through such expenses at cost to the Company.

~~Note 13—Future Minimum Base Rents~~29

Brookfield DTLA leases space to tenants primarily under non-cancelable operating leases that generally contain provisions for payment of base rent plus reimbursement of certain operating expenses. The table below presents the undiscounted cash flows for future minimum base rents to be received from tenants under executed non-cancelable office and retail leases as of March 31, 2022:

Remainder of 2022	$	116,385
2023	147,104
2024	133,152
2025	120,612
2026	108,712
2027	83,460
Thereafter	436,009
Total future minimum base rents	$	1,145,434

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 13—Future Minimum Base Rents


Remainder of 2022	$	77,652
2023	150,493
2024	142,623
2025	128,996
2026	114,447
2027	87,043
Thereafter	457,841
Total future minimum base rents	$	1,159,095

Note 14—Commitments and Contingencies

Litigation

Brookfield DTLA and its subsidiaries may be subject to pending legal proceedings and litigation incidental to its business. After consultation with legal counsel, management believes that any liability that may potentially result upon resolution of such matters is not expected to have a material adverse effect on the Company’s business, financial condition or consolidated financial statements as a whole.

Concentration of Tenant Credit Risk

Credit risk arises from the possibility that tenants may be unable to fulfill their lease commitments. Brookfield DTLA’s properties are typically leased to high credit-rated tenants for lease terms ranging from five to ten years, although we also enter into some shorter or longer-term leases. As our entire portfolio is located in the LACBD, any specific economic changes within that location could affect our tenant base, and by extension, our profitability.

Brookfield DTLA generally does not require collateral or other security from its tenants, other than security deposits or letters of credit. Our credit risk is mitigated by the high quality of our existing tenant base, review of prospective tenants’ risk profiles prior to lease execution, and frequent monitoring of our tenant portfolio to identify problem tenants. However, since we may have a concentration of lease income from certain tenants, the inability of those tenants to make payments under their leases could have a material adverse effect on our results of operations, cash flows or financial condition.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Capital Commitments

As of ~~March~~June 3130, 2022, the Company had $3432.64 million in tenant-related commitments, including tenant improvements, tenant inducements and leasing commissions, which are based on executed leases. As of ~~March~~June 3130, 2022, $2926.19 million of our tenant-related commitments were expected to be paid during the remainder of 2022. Additionally, we had $0.2 million in construction-related commitments, mainly related to retention payable to contractors for the atrium redevelopment project at Wells Fargo Center as of March 31, 2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition

and Results of Operations.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Forward-Looking Statements disclaimer, and the consolidated financial statements and related notes thereto that appear in Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q.

As used in this section unless otherwise indicated, tabular amounts are presented in thousands, except leasing information, percentage data and years.

Overview and Background

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Brookfield DTLA owns and manages six Class A office properties and a retail center, consisting of 7,580,113 rentable square feet in total. Additionally, Brookfield DTLA also has an indirect noncontrolling interest in an unconsolidated real estate joint venture that owns a multifamily residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”) in Downtown Los Angeles, which has long been a major office district for law firms, accounting firms and government agencies. The following table sets forth information regarding these eight properties as of ~~March~~June 3130, 2022:

Name	Property Type	Rentable Square Feet	Ownership Percentage	Percentage Leased (1)	Weighted-Average Remaining Lease Term (Years) (2)
Bank of America Plaza (“BOA Plaza”)	Office (4)	1,405,428	100%	85.10%	6.42
Wells Fargo Center–North Tower	Office (4)	1,399,795	100%	8384.57%	67.94
Gas Company Tower	Office (4)	1,345,163	100%	72.9%	5.53
EY Plaza	Office (4)	963,682	100%	7877.80%	6.68
Wells Fargo Center–South Tower	Office (4)	1,124,960	100%	6164.98%	5.1
777 Tower	Office (4)	1,024,835	100%	7880.85%	43.09
FIGat7th	Retail	316,250	100%	88.9%	6.96
755 South Figueroa	Multifamily (3)	N/A	3027.6%	N/A	N/A
Total		7,580,113		7778.73%	5.9

(1)Represents properties’ leased square feet over total rentable square feet for executed leases as of ~~March~~June 3130, 2022.

(2)Represents weighted-average of the period remaining (denominated in years) for executed lease as of ~~March~~June 3130, 2022, excluding tenant lease extension options.

(3)Under development as of ~~March~~June 3130, 2022.

(4)Classified as Class A office properties as they are centrally-located buildings that are professionally managed and maintained, attract high-quality tenants and command upper-tier rental rates, and that are modern structures or have been modernized to compete with newer buildings.

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Current Period Highlights

Leasing Market and COVID-19 Pandemic Update

While we cannot be certain as to the duration of the impact of COVID-19, we expect impacts of COVID-19 to continue affecting our financial results atand ~~least~~the ~~through~~LACBD ~~the~~Class ~~remaining~~A ofoffice ~~2022,~~leasing ~~albeit~~market ~~modestly~~in general. The future impact of the pandemic on the demand for office space is ~~unclear~~unknown, as companies consider the ~~repercussion~~evolving ofbusiness ~~the~~environment ~~pandemic~~and onlabor requirements to evaluate their ~~business~~future ~~and~~space demands in light of their ~~demand~~current and projected headcount and the increased desire for ~~labor~~more ~~while~~work-location flexibility. In addition, atduring the ~~same~~second ~~time~~quarter of 2022, ~~evaluate~~uncertainty ~~their~~in ~~space~~the ~~requirements~~overall economy has returned due to the Federal Reserve raising interest rates to fight inflation. With the Los Angeles regional economy operating in ~~light~~a ofpost-pandemic ~~their~~environment, ~~current~~the labor market remains historically tight and ~~projected~~regional ~~headcount~~unemployment is back to pre-pandemic levels. While these strong underlying fundamentals would normally result in higher leasing activity and decreased availability, the continued ~~focus~~widespread onadoption ~~social~~of ~~distancing~~hybrid workspace strategies and ~~employees’~~uncertainty ~~desire~~in the overall economy may suppress the Los Angeles office demand and remain a tenant-favorable market for ~~more~~the ~~work~~foreseeable future. As interest rates continue to increase, a slowdown in economic growth could be seen in the near-~~location~~term ~~flexibility~~which could adversely affect leasing activity and result in rising availability levels again. See “Risk Factors—The Company’s business, results of operations and financial condition have been adversely affected and could in the future be materially adversely affected by the ongoing global pandemic of novel strain of the coronavirus.” and “Risk Factors—We may be adversely affected by trends in the office real estate industry.” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022 for additional information.

Leasing Activity

Following the Reopening, leasing activity improved with new and renewal leases totaling ~~104~~419,~~879~~345 square feet within our portfolio in the ~~three~~six months ended ~~March~~June 3130, 2022, compared to 35107,~~317~~277 square feet for the same period in 2021, an increase of ~~197~~291% year over year. Contractual expirations and early terminations of leases totaled 71337,~~463~~181 square feet during the ~~three~~six months ended ~~March~~June 3130, 2022, compared to ~~149~~185,~~207~~731 square feet for the same period in 2021, aan ~~decrease~~increase of 5282% year over year. As a result of the positive net absorption, leased space increased slightly from 7778.61% during the ~~three~~six months ended ~~March~~June 3130, 2021 to 7778.73% for the same period in 2022. See “Leasing Activity” for details.

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Capital Improvements

The atrium development project at Wells Fargo Center was completed in 2020 and the construction of the various food vendor spaces is in progress with openings starting in the second quarter of 2021 and expected to be completed in ~~the second quarter of 2022~~2023.

Expenditures for real estate improvements ~~decreased~~increased from $58.67 million in the ~~three~~six months ended ~~March~~June 3130, 2021 to $316.71 million for the same period in 2022, aan ~~decrease~~increase of $17.94 million or 3485% year over year~~. This~~, is mainly ~~attributable to capital expenditures for a tenant improvement project of $4.3 million~~ in ~~EY Plaza that was completed in 2021. Such decrease was partially offset by increases in capital expenditures in 777 Tower,~~ Wells Fargo Center and ~~BOA~~777 ~~Plaza~~Tower as the economy continues to recover since the Reopening.

755 South Figueroa Development

The 755 South Figueroa multifamily site is held by an unconsolidated real estate joint venture in which the Company had an ownership interest of 3027.6% as of ~~March~~June 3130, 2022. AsIn ofApril ~~the~~2022, ~~end~~vertical ofconcrete construction for the ~~first~~development ~~quarter~~site ofwas ~~2022, core~~completed ~~concrete~~and ~~walls~~a ceremony for the ~~development~~topping ~~site~~out ~~are~~of ~~complete,~~the project was held with the ~~final~~residential ~~pour~~building ~~completed~~officially innamed ~~April 2022~~“Beaudry”. Interior work ~~started~~continued from level 4 through 39. Substantial completion is expected in the ~~fourth~~first quarter of ~~2022~~2023 and will accommodate 785 residential rental units, approximately 5,300 square feet of retail space and 800 parking spaces. As the development progresses towards the targeted completion inby ~~2022~~the first quarter of 2023, $6457.19 million and $122.0 million was capitalized as development cost during the three and six months ended ~~March~~June 3130, 2022, respectively, compared to $2729.67 million and $57.3 million during the ~~same~~three ~~period~~and insix months ended June 30, 2021, respectively. As such, during the three and six months ended ~~March~~June 3130, 2022, additional capital contributions of $1316.0 million and $29.2 million, respectively, compared to $85.0 million and $13.8 million during the ~~same~~three ~~period~~and insix months ended June 30, 2021, respectively, were made by DTLA FP IV Holdings to fund development costs.

33Liquidity and Capital Resources

General

Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover its investing and financing activities without issuing additional debt or equity, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease, or that it will not increase, in the future. If Brookfield DTLA’s operating cash flows and capital are not sufficient to cover its operating costs or to repay its indebtedness as it comes due, we may issue additional debt and/or equity, including to affiliates of Brookfield DTLA, which issuances could further adversely impact the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock. In many cases, such securities may be issued if authorized by the board of directors of Brookfield DTLA without the approval of holders of the Series A preferred stock. Given the uncertainty in the economy and financial markets created by the continued rise in interest rates in the near future, management believes that access to liquidity may be challenging and is planning accordingly. We are also working to proactively address challenges to our long-term liquidity position, including assessing early renewals to debt maturities and re-assessing future leasing costs.

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~~Liquidity~~The following are our expected actual and ~~Capital~~potential ~~Resources~~sources of liquidity, which we currently believe will be sufficient to meet our near-term liquidity needs:

~~General~~•Unrestricted and restricted cash; see “Unrestricted and Restricted Cash”;

~~The~~•Cash ~~following~~generated ~~table~~from ~~presents~~operating ~~the~~activities, ~~major~~see ~~sources~~“Discussion of ~~Brookfield DTLA’s~~Consolidated ~~liquidity~~Cash asFlows of— ~~March 31,~~Operating ~~2022~~Activities” ~~and~~; ~~December 31, 2021:~~

	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	49,162	$	38,901
Unused capital contribution commitments available on Series B preferred interest	10,848		21,178
Availability under secured debt to fund approved leasing costs	72,804		72,804
Total Liquidity	$	132,814	$	132,883

•Potential asset dispositions;

Brookfield DTLA’s primary liquidity sources and uses during the three months ended March 31, 2022 and 2021 are as follows:

Sources:

•Cash provided by operating activities, see “Discussion of Consolidated Cash Flows — Operating Activities” ;

•Proceeds from additional secured debt financings, see “Indebtedness”; and

•Contributions from noncontrolling interests, see “Discussion of Consolidated Cash Flows — Financing Activities”.

~~Uses:~~These sources are essential to our liquidity and financial position, and we cannot assure you that we will be able to successfully access them (particularly in the current rising interest rate environment). While we believe that we will have adequate cash for our near-term uses, if we are unable to generate adequate cash from these sources, we will have liquidity-related shortfalls and will be exposed to significant risks.

The following are our uses of liquidity, which represents our near- and long- term liquidity needs:

•Cash used in operating activities, see “Discussion of Consolidated Cash Flows — Operating Activities”;

•Capital expenditures and leasing costs, see “Capital Expenditures and Leasing Costs”;

•Payments in connection with secured debt, see “Indebtedness”; and

•Distributions to noncontrolling interests, see “Discussion of Consolidated Cash Flows — Financing Activities”.

34As of June 30, 2022, the Company had $2.3 billion of total consolidated debt. Our substantial indebtedness requires us to use a material portion of our cash flow to service interest on our debt. As our debt matures between 2023 and 2026, with $819.3 million due by the end of 2023, our principal payment obligations also present significant future cash requirements. We may not be able to successfully extend, refinance or repay our debt due to a number of factors, including decreased property valuations, limited availability of credit, tightened lending standards and deteriorating economic conditions. Because of our limited unrestricted cash when compared with the significant debt balances, upcoming debt maturities present cash obligations that the property-owning subsidiary obligor may not be able to satisfy. For assets that we do not or cannot dispose of and for which the relevant property-owning subsidiary is unable or unwilling to fund the resulting obligations, we may seek to extend or refinance the applicable loans or engage in negotiations with loan servicers to modify loans or may default upon such loans. Historically, extending or refinancing loans has required the payment of certain fees to, and expenses of, the applicable lenders. Any future extensions or refinancings will likely require increased fees. These fees and cash flow restrictions will affect our ability to fund our other liquidity uses. In addition, the terms of the extensions or refinancings may include operational and financial covenants significantly more restrictive than our current debt covenants.

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Unrestricted and Restricted Cash

A summary of our cash position is as follows:


	June 30, 2022		December 31, 2021
Restricted cash:
Leasing costs, tenant improvements and capital expenditure reserves	$	9,066	$	23,511
Tax and insurance reserves	11,215		7,881
Other working capital reserves	8,955		10,117
Cash sweep reserves	12,533		7,813
Total restricted cash	$	41,769	$	49,322
Unrestricted cash and cash equivalents	$	26,100	$	38,901
Total restricted cash and unrestricted cash and cash equivalents	$	67,869	$	88,223

The leasing costs, tenant improvements and capital expenditure, tax, insurance and other working capital reserves are held in restricted accounts by our lenders in accordance with the terms of our mortgage loan agreements. The other working capital reserves mainly include reserves for free rent and discounted parking. The cash sweep reserves represent cash accounts controlled by loan administrative agents or lenders pursuant to cash sweep events associated with the loans secured by the Wells Fargo Center–North Tower and South Tower. See Indebtedness” below for more information regarding the cash sweep events.

Capital Expenditures and Leasing Costs

Capital expenditures fluctuate in any given period, subject to the nature, extent and timing of improvements required to maintain Brookfield DTLA’s properties. Leasing costs also fluctuate in any given period, depending upon such factors as the type of property, the length and type of lease, the involvement of external leasing agents and overall market conditions.

As of ~~March~~June 3130, 2022, the Company had $3432.64 million in tenant-related commitments, including tenant improvements, tenant inducements and leasing commissions, which are based on executed leases. As of ~~March~~June 3130, 2022, $2926.19 million of our tenant-related commitments were expected to be paid during the remainder of 2022, relating mainly to tenant improvement works performed for a major tenant in the Wells Fargo Center–North Tower of $20.4 million.

Brookfield DTLA expects that capital improvements and leasing activities at its properties will require material amounts of cash for at least several years. According to our 2022 business plan, Brookfield DTLA projects spending approximately $~~448~~433.49 million over the next five years consisting of $~~336~~324.89 million for tenant improvements and landlord works, $9694.2 million for leasing costs and $1514.49 million for capital expenditures. The expected capital improvements include, but are not limited to, renovations and physical capital upgrades to Brookfield DTLA’s properties, elevator modernization, replacement of transformers and boilers, and upgrades to emergency generators. These projections are estimates and may be subject to changes per future revisions of speculative leasing plans.

See “Indebtedness” below for more information regarding future advance amounts available as of March 31, 2022 under the loans secured by the Wells Fargo Center–South Tower and 777 Tower office properties that can be drawn to fund approved leasing costs, including tenant improvements and inducements and leasing commissions, and, in the case of Wells Fargo Center–South Tower, common area improvements. 37

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See “Indebtedness” below for more information regarding future advance amounts available as of June 30, 2022 under the loans secured by the Wells Fargo Center–South Tower and 777 Tower office properties that can be drawn to fund approved leasing costs, including tenant improvements and inducements and leasing commissions, and, in the case of Wells Fargo Center–South Tower, common area improvements.

Indebtedness

As of ~~March~~June 3130, 2022, Brookfield DTLA’s debt was comprised of mortgage and mezzanine loans secured by seven properties. A summary of our debt as of ~~March~~June 3130, 2022 is as follows:

	PrincipalAmount		Percent ofTotal Debt		EffectiveInterestRate		Weighted Average Term toMaturity (3)
Fixed-rate	$	458,500	20	%	4.03	%	2 years
Variable-rate (1) (2)	1,805,796		80	%	23.8775	%	32 years
Total secured debt	$	2,264,296	100	%	3.1081	%	32 years

__________

(1)As of ~~March~~June 3130, 2022 and through the date of this Report, a future advance amount of $29.2 million is available under the Wells Fargo Center–South Tower mortgage loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, leasing commissions, and common area improvements.

(2)As of ~~March~~June 3130, 2022 and through the date of this Report, a future advance amount of $43.6 million is available under the 777 Tower mortgage and mezzanine loans that can be drawn to fund approved leasing costs (as defined in the underlying loan agreements), including tenant improvements and inducements, and leasing commissions.

(3)Includes the effect of extension options that the Company controls, if applicable. As of ~~March~~June 3130, 2022, we meet the criteria specified in the loan agreements to extend the loan maturity dates.

~~The following table provides information with respect to Brookfield DTLA’s commitments as of March 31, 2022, including any guaranteed or minimum commitments under contractual obligations:~~38

	Remainderof 2022		2023		2024		2025		2026		Thereafter		Total
Principal payments on secured debt (1)(2)	$	—	$	819,296	$	675,000	$	305,000	$	465,000	$	—	$	2,264,296
Interest payments –
Fixed-rate debt (3)	14,109		16,803		11,025		—		—		—		41,937
Variable-rate debt (4)	39,590		48,725		32,912		24,509		1,732		—		147,468
	$	53,699	$	884,824	$	718,937	$	329,509	$	466,732	$	—	$	2,453,701

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The following table provides information with respect to Brookfield DTLA’s commitments as of June 30, 2022, including any guaranteed or minimum commitments under contractual obligations:


	Remainder of 2022		2023		2024		2025		2026		Thereafter		Total

Principal payments on secured debt (1)(2)	$	—	$	819,296	$	675,000	$	305,000	$	465,000	$	—	$	2,264,296
Interest payments –
Fixed-rate debt (3)	9,440		16,803		11,025		—		—		—		37,268
Variable-rate debt (4)	34,655		63,513		41,876		31,095		2,210		—		173,349
	$	44,095	$	899,612	$	727,901	$	336,095	$	467,210	$	—	$	2,474,913

__________

(1)BAM owns a significant interest in a company whose subsidiary is the lender of the $35.0 million mezzanine loan secured by Wells Fargo Center–North Tower, which matures in October 2023. See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 12—Related Party Transactions.”

(2)Based on the maturity dates after the impact of extension options that the Company controls, if applicable.

(3)Interest payments on fixed-rate debt are calculated based on the maturity dates (after the impact of extension options that the Company controls, if applicable) and contractual interest rates.

(4)Interest payments on variable-rate debt are calculated based on the maturity dates (after the impact of extension options that the Company controls, if applicable) and the one-month LIBOR rate (or, from 2023 onwards, its successor rate) in place on the debt as of ~~March~~June 3130, 2022 plus the contractual spread per the loan agreements. Interest payments due to the related party lender of the loan described in (1) above total $1.41 million for the remainder of 2022 and $1.57 million for 2023.

The Company may use operating cash flows and contributions from noncontrolling interests to satisfy the secured debt-related commitment disclosed in the table above before or as they come due.

36Non-Recourse Carve Out Guarantees

Debt Compliance

As of June 30, 2022 and December 31, 2021, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements.

Certain loan agreements held by Brookfield DTLA contain debt yield and debt service coverage ratios. As of June 30, 2022, Brookfield DTLA was meeting or exceeding these financial ratios, with the exception of the loans secured by Wells Fargo Center—South Tower and Wells Fargo Center—North Tower that did not meet their respective minimum debt yield ratio.

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Non-Recourse Carve Out Guarantees

Debt Compliance

As of March 31, 2022 and December 31, 2021, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements.

Certain loan agreements held by Brookfield DTLA contain debt yield and debt service coverage ratios. As of March 31, 2022, Brookfield DTLA was meeting or exceeding these financial ratios, with the exception of the loans secured by Wells Fargo Center—South Tower and Wells Fargo Center—North Tower that did not meet their respective minimum debt yield ratio.

Wells Fargo Center–South Tower —

Wells Fargo Center–North Tower —

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Leasing Activity

The following table summarizes leasing activity at Brookfield DTLA’s properties for the ~~three~~six months ended ~~March~~June 3130, 2022:

	Leasing Activity	Percentage Leased
Leased square feet as of December 31, 2021	5,855,604	77.2	%
Contractual expirations and early terminations	(71337,~~463~~181)	(04.95)	%
New leases	~~101~~218,~~317~~068	12.49	%
Renewals	3201,~~562~~277	—2.7	%
Remeasurement adjustments	(77)	—	%
Leased square feet as of March 31, 2022	5,888,943	77.7	%
Leased square feet as of June 30, 2022	5,937,691	78.3	%

Lease contractual expirations and early terminations. The following table summarizes the large contractual expiries and early terminations at Brookfield DTLA’s properties during the ~~three~~six months ended ~~March~~June 3130, 2022:

Tenant

Property

LeasedSquare Feet

Wells Fargo Bank National Association (1)

Wells Fargo Center–North Tower

134,814

City Storage Systems (2)

777 Tower

44,958

The Capital Group Companies

Wells Fargo Center–South Tower

26,658

HSBC Bank USA National Association

EY Plaza

20,523

DBS Bank

EY Plaza

16,955

HyreCar Inc.

Wells Fargo Center–South Tower

11,839

Mindshow, Inc.

Wells Fargo Center–North Tower

5,829

Progressive Affordable Development, LLC

Gas Company Tower

5,673

Wilson Associates

Wells Fargo Center–South Tower

4,817

Aspen Insurance U.S. Services, Inc.

777 Tower

4,606

Charles Schwab & Co., Inc. (1)

Wells Fargo Center–South Tower

3,562

Total

62280,~~984~~234

(1) All expired leased square feet were renewed during the ~~three~~six months ended ~~March~~June 3130, 2022.

~~Improvement~~(2) Out ~~during~~of the ~~three months~~expired ~~ended March 31~~44,958 ~~2022~~square was mainly attributable to new leases as LACBD continued to recover from the COVID-19 pandemic. Many companies continued to consider the repercussion of the pandemic on their business and their demand for labor whilefeet, ~~at the same time~~39,291 ~~evaluate~~square ~~their~~feet ~~space~~were ~~requirements~~renewed induring ~~light of their current and projected headcount and~~ the ~~continued~~six months ~~focus~~ended onJune 30, ~~social distancing and employees’ desire for more work-location flexibility~~2022. ~~We have ongoing interest and lease negotiations with existing tenants on lease renewals/extensions and expansion of space and continued negotiations with prospective tenants on leasing of space.~~

38Improvement during the six months ended June 30, 2022 was mainly attributable to new and renewed leases as LACBD continued to recover from the COVID-19 pandemic. Many companies consider the evolving business environment and labor requirements to evaluate their future space demands in light of their current and projected headcount and the increased desire for more work-location flexibility. Tenants are seeking higher quality spaces modernized with new amenities that are more inviting and collaborative. Landlords are curating premier tenant experiences to better align with an active work environment, leveraging diverse food and beverage options with hospitality-focused tenant engagement services. Lease concessions, particularly tenant improvement allowances, continue to remain high as landlords continued to market increased vacant space in the slow-recovering LACBD leasing market.

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Rental rates. The following table presents leasing information for executed leases at Brookfield DTLA’s properties as of ~~March~~June 3130, 2022:

	Square Feet
Property	NetBuildingRentable	% of NetRentable		%Leased		AnnualizedRent (1)		AnnualizedRent$/RSF (2)
BOA Plaza	1,405,428	18.5	%	85.10	%	$	35,~~575~~545,~~753~~812	$	29.7475
Wells Fargo Center–North Tower	1,399,795	18.5	%	8384.57	%	35,~~634~~783,~~666~~667		30.5018
Gas Company Tower	1,345,163	17.8	%	72.9	%	27,~~253~~162,~~657~~892		27.8071
EY Plaza	963,682	12.7	%	7877.80	%	2221,~~176~~590,~~911~~068		29.1910
FIGat7th	316,250	4.2	%	88.9	%	6,~~731~~740,~~309~~743		23.9396
Wells Fargo Center–South Tower	1,124,960	14.8	%	6164.98	%	2021,~~687~~227,~~199~~303		29.7313
777 Tower	1,024,835	13.5	%	7880.85	%	22,~~820~~620,~~869~~502		2827.2643
	7,580,113	100.0	%	7778.73	%	$	170,~~880~~670,~~364~~987	$	2928.0274

__________

(1)Annualized rent represents the annualized monthly contractual rent under executed leases as of ~~March~~June 3130, 2022. This amount reflects total base rent before any rent abatements as of ~~March~~June 3130, 2022. Total abatements for executed leases as of ~~March~~June 3130, 2022 for the twelve months ending ~~March~~June 3130, 2023 are approximately $15.38 million, or $2.5966 per leased square foot.

(2)Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of ~~March~~June 3130, 2022.

Average asking net effective rents in the LACBD were essentially flat during the ~~three~~six months ended ~~March~~June 3130, 2022. Management believes that on average our current rents approximate market in the LACBD.

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The following table presents a summary of lease expirations at Brookfield DTLA’s properties for executed leases as of ~~March~~June 3130, 2022, plus currently available space, for future periods. This table assumes that none of our tenants will exercise renewal options or early termination rights, if any, at or prior to their scheduled expirations.

Year	Total Area inSquare Feet Covered by ExpiringLeases	Percentage of Leased Square Feet		Annualized Rent (1)		Percentage of Annualized Rent		CurrentRent perLeasedSquareFoot (2)		Rent per Leased Square Foot at Expiration (3)
Remainder of 2022	~~242~~215,~~512~~538	43.16	%	$	75,~~163~~795,~~804~~817	43.24	%	$	2926.5489	$	2927.5409
2023	~~927~~702,~~521~~467	1511.8	%	2418,~~310~~762,~~325~~894		1411.20	%	26.2171		27.1968
2024	~~542~~620,~~525~~602	910.25	%	16,~~536~~719,~~162~~018		9.78	%	3026.4894		3228.3071
2025	~~737~~743,~~090~~374	12.5	%	22,~~245~~420,~~376~~160		13.01	%	30.1816		32.35
2026	~~571~~715,~~174~~466	912.70	%	1418,~~901~~938,~~930~~385		811.71	%	26.0947		29.5367
2027	~~299~~326,~~991~~238	5.15	%	9,~~161~~946,~~725~~997		5.48	%	30.5449		35.8669
2028	~~114~~125,~~648~~095	12.91	%	34,~~677~~010,~~908~~546		2.23	%	32.0806		4039.1489
2029	~~303~~302,~~025~~989	5.1	%	9,~~866~~865,~~494~~322		5.8	%	32.56		42.05
2030	~~329~~331,~~006~~112	5.6	%	10,~~133~~373,~~385~~739		56.91	%	3031.8033		39.86
2031	~~308~~306,~~309~~040	5.2	%	9,~~166~~055,~~027~~724		5.43	%	29.7359		39.7358
Thereafter	1,~~513~~548,~~142~~770	2526.81	%	4344,~~717~~782,~~228~~385		2526.53	%	28.8991		42.4044
Total expiring leases	5,~~888~~937,~~943~~691	100.0	%	$	170,~~880~~670,~~364~~987	100.0	%	$	2928.0274	$	35.3616
Currently available	1,~~691~~642,~~170~~422
Total rentable square feet	7,580,113

__________

(2)Current rent per leased square foot represents base rent for executed leases, divided by total leased square feet as of ~~March~~June 3130, 2022.

(3)Rent per leased square foot at expiration represents base rent, including any future rent steps, and thus represents the base rent that will be in place at lease expiration.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Discussion of Consolidated Cash Flows

The following discussion of Brookfield DTLA’s cash flows is based on the consolidated statements of cash flows in Item 1. “Financial Statements” and is not meant to be an all‑inclusive discussion of the changes in its cash flows for the periods presented below.

A summary of changes in Brookfield DTLA’s cash flows is as follows:

For the Three Months Ended

DollarChange

For the Six Months Ended

DollarChange

March 31,

June 30,

2022

2021

Net cash provided by operating activities

1427,~~776~~716

2343,~~848~~130

(915,~~072~~414)

Net cash used in investing activities

(520,~~104~~508)

(1318,~~674~~401)

8(2,~~570~~107)

Net cash used in financing activities

(1027,~~224~~562)

(1425,~~052~~856)

3(1,~~828~~706)

Operating Activities

Brookfield DTLA’s cash flows from operating activities are primarily dependent upon (1) the leasing activity of its portfolio, (2) the rental rates achieved on its leases, (3) the collectibility of rent and other amounts billed to tenants, (4) changes in working capital, and (5) interest payments. The decrease in cash provided by operating activities is primarily attributable to cash outflows from working capital changes by $1013.09 million and increase in rental property operating and maintenance expense by $2.4.9 million, reflecting the increase in physical occupancy. Working capital changes are subject to variability period over period as a result of timing differences, including with respect to the collection of tenant receivables and payments of accounts and tenant payables. ~~The~~In ~~cash~~addition, ~~outflows~~interest ~~were~~payments ~~partially~~on ~~offset~~secured debt increased by ~~decreases~~$2.1 million due to the rising interest rate environment in 2022. We anticipate interest ~~payments~~expense onto ~~secured~~continue ~~debt~~to byincrease $1for variable-rate loans during the second half of 2022.4 The ~~million~~cash ~~and~~outflows ~~increase~~were partially offset by increases in cash lease and parking revenue by $15.20 million.

Investing Activities

Brookfield DTLA’s cash flows from investing activities are generally impacted by the amount of capital expenditures and tenant improvement activities for its properties. The ~~decrease~~increase in net cash used in investing activities was mainly due to ~~decreases~~increases in tenant improvement expenditures ~~by $5.4 million, following the substantial completion of tenant improvement projects for a major tenant~~ at ~~the EY Plaza during the three months ended March 31, 2021, as well as decreases in capital expenditures by $3.5 million, as the majority of food vendor space construction at~~ Wells Fargo Center’s ~~atrium~~and ~~was~~777 ~~completed in 2021~~Tower.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Financing Activities

Brookfield DTLA’s cash flows from financing activities are generally impacted by its loan activity, and contributions from and distributions to its equity holders, if any. During the ~~three~~six months ended ~~March~~June 3130, 2022, net proceeds from the issuance of Series B preferred interest of $10.3 million was the main source of cash provided by financing activities. Cash outflows were mainly driven by repurchases of and distributions to Series B preferred interest of $31.2 million and $6.3 million, respectively, using the excess operating cash flows generated from properties. In comparison, during the same period in 2021, net proceeds from the refinancing of the loans secured by the Gas Company Tower were the main source of cash provided by financing activities. All proceeds from the new secured loans were used to pay off the original $450.0 million encumbrance and to satisfy the new loans’ required reserves. As Brookfield DTLA had excess cash from operating activities generated from properties, it repurchased $1627.23 million of the Series B preferred interest and made distribution of $48.25 million to the Series B preferred interest.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Discussion of Results of Operations

Comparison of the Three Months Ended ~~March~~June 3130, 2022 to ~~March~~June 3130, 2021

Consolidated Statements of Operations Information

(In millions, except percentage amounts)

	For the Three Months Ended				Increase/(Decrease)		%Change
	March 31,
	June 30,
	2022		2021
Revenue:
Lease income	$	65.14	$	6462.27	$	02.97	14	%
Parking	68.50		56.2		1.38		2529	%
Interest and other	0.3		0.3		—		—	%
Total revenue	7173.97		69.72		24.25		37	%
Expenses:
Rental property operating and maintenance	2425.27		2123.82		2.45		11	%
Real estate taxes	9.9		10.0		(0.1)		(1)	%
Parking	2.46		1.69		0.87		5037	%
Other expenses	21.53		32.45		(01.92)		(2648)	%
Depreciation and amortization	25.38		2726.06		(10.78)		(63)	%
Interest	1821.43		2318.86		(52.4)7		~~(23)~~15	%
Total expenses	8286.76		8782.68		(43.9)8		~~(6)~~5	%
Other Income:
Equity in earning of unconsolidated real estate joint venture	0.24		0.21		—0.3		—300	%
Total other income	0.24		0.21		—0.3		—300	%
Net loss	$	(1012.65)	$	(1713.75)	$	7.1.0	(407)	%

~~Parking~~Lease income, parking revenue and expense

~~Parking~~Increase ~~revenue~~in ~~includes~~lease ~~monthly~~revenue, and ~~transient~~ parking ~~income. Increase in parking~~ revenue and expense during the three months ended ~~March~~June 3130, 2022 was mainly due to higher physical occupancy resulting from the ongoing recovery from the COVID-19 pandemic as discussed above.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Rental Property Operating and Maintenance Expense

Rental property operating and maintenance expense mainly includes janitorial, repairs and maintenance, utilities, insurance, and various other recurring expenses. With the higher physical occupancy since the Reopening in June 2021, rental property operating and maintenance expense increased.

Other Expenses

Other expenses mainly represent asset management fee, audit and professional fees, and miscellaneous expenses. Decrease was mainly due to income tax expense incurred by the Company’s TRS on taxable early lease termination income during the three months ended June 30, 2021, which is nonrecurring in nature.

Interest Expense

~~Interest~~Increase ~~expense mainly represents interest expense on secured debt and loss on early extinguishment of debt. Decrease~~ in interest expense during the three months ended ~~March~~June 3130, 2022 was mainly due to the ~~nonrecurring~~rise ~~loss~~in oninterest ~~early~~rates ~~extinguishment~~during ~~of debt of $4~~2022.~~6 million~~ We ~~recorded~~anticipate ~~during~~interest ~~the~~expense ~~three months~~to ~~ended~~continue ~~March 31,~~to ~~2021~~increase for ~~prepayment~~variable-rate ~~premium~~loans ~~and~~during ~~debt~~the ~~yield~~second ~~maintenance~~half ~~fee charged on refinancing~~ of ~~loans secured by Gas Company Tower in February 2021~~2022.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Comparison of the Six Months Ended June 30, 2022 to June 30, 2021

Consolidated Statements of Operations Information

(In millions, except percentage amounts)


	For the Six Months Ended				Increase/ (Decrease)		% Change
	June 30,
	2022		2021
Revenue:
Lease income	$	130.5	$	127.0	$	3.5	3	%
Parking	14.5		11.4		3.1		27	%
Interest and other	0.7		0.6		0.1		18	%
Total revenue	145.7		139.0		6.7		5	%

Expenses:
Rental property operating and maintenance	49.9		45.0		4.9		11	%
Real estate taxes	19.7		20.1		(0.4)		(2)	%
Parking	4.9		3.5		1.4		40	%
Other expenses	3.8		6.0		(2.2)		(37)	%
Depreciation and amortization	51.1		53.7		(2.6)		(5)	%
Interest	39.7		42.4		(2.7)		(6)	%

Total expenses	169.1		170.7		(1.6)		(1)	%

Other Income:

Equity in earning of unconsolidated real estate joint venture	0.6		0.3		0.3		100	%
Total other income	0.6		0.3		0.3		100	%

Net loss	$	(22.8)	$	(31.4)	$	8.6	(27)	%

Lease income, parking revenue and expense

Increase in lease revenue, and parking revenue and expense during the six months ended June 30, 2022 was mainly due to higher physical occupancy resulting from the ongoing recovery from the COVID-19 pandemic as discussed above.

Table of Contents

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Rental Property Operating and Maintenance Expense

Other Expenses

Other expenses mainly represent asset management fee, audit and professional fees, and miscellaneous expenses. Decrease was mainly due to income tax expense incurred by the Company’s TRS on taxable early lease termination income during the six months ended June 30, 2021, which is nonrecurring in nature.

Interest Expense

Interest expense mainly represents interest expense on secured debt and loss on early extinguishment of debt. Decrease was mainly attributable to the $4.6 million nonrecurring loss on early extinguishment of the debt secured by Gas Company Tower in February 2021. Such decrease was partially offset by an increase in interest expense on secured debt primarily due to the rise in interest rates during 2022. We anticipate interest expense to continue to increase for variable-rate loans during the second half of 2022.

Table of Contents

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Related Party Transactions

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 12—Related Party Transactions” of this Quarterly Report on Form 10-Q.

Litigation

See Part II, Item 1. “Legal Proceedings” of this Quarterly Report on Form 10-Q.

Critical Accounting Policies

Please refer to Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022 for a discussion of our critical accounting policies for the year ended December 31, 2021.

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 2—Basis of Presentation” of this Quarterly Report on Form 10-Q for a discussion of use of estimates, impairment review of investments in real estate and unconsolidated real estate joint venture, and collectibility assessment on rents, deferred rents and other receivables during the three and six months ended ~~March~~June 3130, 2022.

Recently Issued Accounting Literature

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 3—Recently Issued Accounting Literature” of this Quarterly Report on Form 10-Q for information regarding the impact of the adoption of new accounting pronouncements during the ~~three~~ six months ended ~~March~~June 3130, 2022.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

See Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022 for a discussion regarding our exposure to market risk. Our exposure to market risk has not changed materially since year end 2021.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Brookfield DTLA maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), Brookfield DTLA carried out an evaluation, under the supervision and with the participation of its management, including its principal executive officer and its principal financial officer, of the effectiveness of the design and operation of Brookfield DTLA’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, G. Mark Brown, our principal executive officer, and Bryan D. Smith, our principal financial officer, concluded that these disclosure controls and procedures were effective at the reasonable assurance level as of ~~March~~June 3130, 2022.

Changes in Internal Control over Financial Reporting

There have been no changes in Brookfield DTLA’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended ~~March~~June 3130, 2022 that have materially affected, or that are reasonable likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting due to the ~~Shutdown~~measures taken in response to the COVID-19 pandemic. We are continually monitoring and assessing the impact of ~~the~~these ~~Shutdown~~measures on our internal controls to minimize the impact on their design and operating effectiveness.

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Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

There have been no material changes to the risk factors included in Part I, “Item IA. Risk Factors” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

Dividends on the Series A preferred stock are cumulative and therefore will continue to accrue at an annual rate of $1.90625 per share. As of ~~April~~July 3031, 2022, the cumulative amount of unpaid dividends totaled $~~228~~233.51 million.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit No.						Exhibit Description
31.1						Certification of Principal Executive Officer dated ~~May~~August 1211, 2022 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Principal Financial Officer dated ~~May~~August 1211, ~~2022pursuant~~2022 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Principal Executive Officer and Principal Financial Officer dated ~~May~~August 1211, 2022 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS						Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

__________


*			Furnished herewith.

(1) This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

SIGNATURES

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

Date: As of ~~May~~August 1211, 2022


			BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.
			Registrant

			By:			/s/ G. MARK BROWN
						G. Mark Brown
						Chairman of the Board
						(Principal executive officer)

			By:			/s/ BRYAN D. SMITH
						Bryan D. Smith
						Chief Financial Officer
						(Principal financial officer)

4853

Filing Compare · Brookfield DTLA Fund Office Trust Investor Inc.