** See Table of Additional Registrants below.

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

Indicate by check mark whether the registrants are emerging growth companies as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company ☐​

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP (as defined below), indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

(continued from cover)

There is currently no market for the New LP Preferred Units. New LP intends to apply to list the New LP Preferred Units on Nasdaq and the TSX. Listing is subject to the approval of the TSX in accordance with its applicable listing requirements.

The Transaction was unanimously recommended by a special committee of the BPY Board of Directors composed entirely of independent directors (the “Special Committee”). The BPY Board of Directors (with Mr. Jeffrey Blidner abstaining because of his executive position at BAM) (the “Directors”), following receipt of the unanimous recommendation of a Special Committee, has unanimously determined that the Arrangement is fair to the Unaffiliated BPY Unitholders, that the Transaction is in the best interest of BPY and recommends that BPY Unitholders other than BAM and its affiliates vote FOR the Transaction Resolutions. The attached Document describes the background to the determinations and recommendations of the Directors, including the process and recommendations of the Special Committee.

This Document contains a detailed description of the Transaction and includes other information to assist you in considering the matters to be voted upon and which we encourage you to carefully consider. Please read carefully this entire Document, including “Risk Factors” beginning on page 45, for a discussion of the risks relating to the Transaction. If you require assistance, you should consult your own financial, legal or other professional advisors.

Voting and Elections

Your vote is important regardless of the number of BPY Units you own. Whether or not you plan to attend the Meeting, please take the time to vote by using the internet or by telephone as described in this Document or by completing the enclosed proxy card and mailing it in the enclosed envelope. Information about the Meeting, the Transaction and the other business to be considered at the Meeting is contained in this Document. You are urged to read this Document carefully.

If you are not registered as the holder of your BPY Units but hold your BPY Units through a broker or other intermediary, you should follow the instructions provided by your broker or other intermediary to vote your BPY Units. See the section in the Document entitled “Meeting and Voting Information” for further information on how to vote your BPY Units. If you hold your Units through a broker or other intermediary, please contact that broker or other intermediary for instructions and assistance in receiving the Transaction Consideration (as defined in the Document) in respect of your Units.

Registered BPY Unitholders have been sent a Letter of Transmittal and Election (printed on YELLOW paper) along with the Document and registered Exchange LP Unitholders have been sent a Letter of Transmittal and Election (printed on BLUE paper) along with the Document. The Letter of Transmittal and Election or a manually executed facsimile thereof, properly completed and duly executed in accordance with the instructions set out therein, together with all other required documents, must be received by AST Trust Company (Canada) at the office specified on the back page of the Letter of Transmittal and Election, no later than 5:00 p.m. (Toronto time) on the election deadline or your election will not be processed. Further information with respect to the election deadline is set forth under the heading “Description of the Transaction — Elections by Unitholders and Pro-ration” of the Document.

*   *   *   *   *

If the Transaction Resolutions are passed by the requisite BPY Unitholder approval thresholds at the Meeting, it currently is anticipated that the Transaction will be completed in the third quarter of 2021.

(continued on next page)​

(continued from cover)

Neither the U.S. Securities and Exchange Commission nor any state or Canadian securities regulatory authority has approved or disapproved the Transaction, approved or disapproved the securities to be issued under the Document, passed upon the merits or fairness of the Transaction or determined if the Document is truthful or complete. Any representation to the contrary is a criminal offense.

The Document is dated    •   , 2021 and is first being mailed to BPY Unitholders on or about    •   , 2021.

 

 

BROOKFIELD PROPERTY PARTNERS L.P.

NOTICE OF SPECIAL MEETING OF UNITHOLDERS

NOTICE IS HEREBY GIVEN that a special meeting (the “Meeting”) of the holders (“BPY Unitholders”) of limited partnership units (“BPY Units”) of Brookfield Property Partners L.P. (the “Partnership”) will be held on    •   , 2021 at    •    [a.m.]/[p.m.] (Toronto Time). The Meeting will be a virtual meeting conducted via live audio webcast. BPY Unitholders can access the Meeting by visiting www.virtualshareholdermeeting.com/BPY2021. The Meeting is being held for the following purposes:

1.

to consider, pursuant to an interim order of the Ontario Superior Court of Justice (Commercial List) dated    •   , 2021, as the same may be varied (the “Interim Order”), and, if deemed advisable, approve, with or without variation, a resolution of BPY Unitholders (the “Arrangement Resolution”), the full text of which is attached as Appendix C to the accompanying circular/prospectus (the “Document”), to approve an arrangement (the “Arrangement”) pursuant to section 182 of the Business Corporations Act (Ontario) as amended, (the “OBCA”) being made pursuant to an Arrangement Agreement dated March 31, 2021, the full text of which is attached as Appendix B to this Document, by and among Brookfield Asset Management Inc. (“BAM”), BPY Arrangement Corporation (“Purchaser Sub” and together with BAM, the “Purchaser Parties”) and the Partnership whereby the Purchaser Parties have agreed to acquire, directly and indirectly, all of the issued and outstanding BPY Units and exchangeable limited partnership units (“Exchange LP Units”) of Brookfield Office Properties Exchange LP (“Exchange LP”), all as more particularly described and set forth in this Document; and

​

2.

to consider and, if deemed advisable, approve, with or without variation, a resolution of BPY Unitholders to amend (the “BPY LPA Amendment” and together with the Arrangement and the transactions contemplated by the BPY LPA Amendment and the Arrangement, the “Transaction”) the second amended and restated limited partnership agreement dated August 8, 2013, as amended, of the Partnership to provide for the Arrangement and the grant of dissent rights to registered BPY Unitholders in connection with the Transaction (together with the Arrangement Resolution, the “Transaction Resolutions”), the full text of which is attached as Appendix C to this Document.

​

Any other business that may properly come before the Meeting or any adjournment thereof will also be considered.

Pursuant to the BPY LPA Amendment, registered BPY Unitholders (“Registered BPY Unitholders”) will be granted the right to dissent in respect of the Transaction and be paid the fair value of their BPY Units. These dissent rights and the procedures for their exercise are described in this Document under the heading “Rights of Dissenting BPY Unitholders”. Only Registered BPY Unitholders are entitled to exercise rights of dissent. Non-registered BPY Unitholders and holders of Exchange LP Units and BPYU Shares are not entitled to exercise rights of dissent. Failure to follow exactly the procedures set forth in the BPY LPA Amendment will result in the loss or unavailability of any right of dissent. Registered BPY Unitholders considering exercising their rights of dissent should consult their legal counsel and tax and investment advisors.

The Document accompanying this notice provides additional information relating to the matters to be dealt with at the Meeting and includes the full text of the Transaction Resolutions, the BPY LPA Amendment and the Interim Order, attached as Appendix C, Appendix D and Appendix F, respectively, which are incorporated by reference into and form part of this notice.

You have the right to vote at the Meeting if you are a holder of BPY Units as at the close of business on    •   , 2021. The Document tells you how to exercise your right to vote your BPY Units.

Registered BPY Unitholders have been sent a Letter of Transmittal and Election (printed on YELLOW paper) along with the Document and registered holders of Exchange LP Units have been sent a Letter of Transmittal and Election (printed on BLUE paper) along with the Document. The Letter of Transmittal and Election or a manually executed facsimile thereof, properly completed and duly executed in accordance with the instructions set out therein, together with all other required documents, must be received by AST Trust Company (Canada) at the office specified on the back page of the Letter of Transmittal and Election, no later than 5:00 p.m. (Toronto time) on    •   , 2021 or your election will not be processed. Further information with

ii

 

respect to the election deadline is set forth under the heading “Description of the Transaction — Elections by Unitholders and Pro-ration” of the Document.

By Order of the Board of Directors of Brookfield Property Partners Limited, as general partner and on behalf of Brookfield Property Partners L.P.

/s/    •   
Jane Sheere
Secretary
Hamilton, Bermuda

   •   , 2021

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This Document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities or the solicitation of a proxy in any jurisdiction in which, or from any person with respect to whom, it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this Document regarding BAM has been provided by BAM, information contained in this Document regarding BPY, New LP and the other Guarantors has been provided by BPY and information contained in this Document regarding BPYU has been provided by BPYU.

In this Document, “BPY”, “Partnership”, or “Brookfield Property Partners”, refers to Brookfield Property Partners L.P. and its consolidated subsidiaries, unless otherwise noted or the context requires otherwise.

This Document explains the business to be considered at the Meeting referred to in the accompanying notice of meeting (the “Notice”) to be held virtually on    •   , 2021 at    •    [a.m.]/[p.m.]. (Toronto time). The Meeting will be a virtual meeting conducted via live audio webcast. Holders of BPY Units (“BPY Unitholders”) can access the Meeting by visiting www.virtualshareholdermeeting.com/BPY2021. The Meeting is being held to consider and, if deemed advisable, approve, with or without variation, the Transaction Resolutions.

You have the right to vote at the Meeting if you are a holder of BPY Units as at the close of business on    •   , 2021 (the “Record Date”). The Document tells you how to exercise your right to vote your BPY Units.

Only BPY Unitholders will be entitled to vote on the Transaction Resolutions. For greater certainty, holders of Exchange LP Units (“Exchange LP Unitholders”and together with the BPY Unitholders, “Unitholders”) and holders of BPYU Shares (“BPYU Stockholders”) will not be entitled to vote on the Transaction Resolutions or exercise rights of dissent. Exchange LP Unitholders will be entitled to elect their preferred form of consideration. BPYU Stockholders who wish to elect their preferred form of consideration are encouraged to convert their BPYU Shares into BPY Units as soon as possible. Instructions on how BPYU Stockholders can convert BPYU Shares can be found at https://bpy.brookfield.com/bpyu/stock-and-dividends/exchange-bpyu-for-bpy. The information contained on, or available through, this website is not incorporated by reference into the Document. Exchange LP Unitholders and BPYU Stockholders may attend the Meeting as guests by visiting www.virtualshareholdermeeting.com/BPY2021.

The solicitation of proxies by this Document is being made by or on behalf of the management of Brookfield Property Group LLC (“Brookfield Property Group”), one of the service providers of BPY and the total cost of solicitation will be borne by the Partnership. The solicitation will be made primarily by mail, but proxies may also be solicited personally or by telephone by regular employees of the Partnership at nominal cost.

The information in this Document is given as at    •   , 2021, unless otherwise indicated.

No person has been authorized to give information or to make any representations in connection with the Arrangement pursuant to section 182 of the OBCA involving the Purchaser Parties and BPY or any other matters described herein other than those contained or incorporated by reference in this Document and, if given or made, any such information or representations should not be relied upon in making a decision as to how to vote on the Transaction Resolutions, or be considered to have been authorized by the Purchaser Parties or BPY.

Pursuant to National Instrument 54-101 — Communication with Beneficial Owners of Securities of a Reporting Issuer, BPY is indirectly sending proxy-related materials to all objecting and non-objecting beneficial owners

This Document does not constitute an offer to buy or sell, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized, or in which the person making such an offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such an offer or solicitation.

You should not construe the contents of this Document as legal, tax, investment or financial advice and should consult with your own professional advisors as to the relevant legal, tax, investment, financial or other matters in connection herewith.

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proceedings that may be instituted against BAM, BPY or their respective unitholders, shareholders or directors; the ability to meet closing conditions to the Transaction; a delay in closing the Transaction; the ability to obtain approval by Unaffiliated BPY Unitholders on the expected terms and schedule; and general political, economic and market conditions. For a more detailed discussion of these factors, also see the information under “Business Environment and Risks” in the BAM Annual Report and under Item 3.D. “Risk Factors” in the BPY Annual Report, and in each case any material updates to these factors contained in any of BAM’s or BPY’s future filings.

BAM and BPY caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on BAM’s and BPY’s forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Please keep this cautionary note in mind as you read this Document.

Except as required by law, BAM and BPY undertake no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

Where You Can Find More Information; Incorporation by Reference

This Document is being made available in respect of the Transaction. In connection with the Transaction, BAM, New LP and the Guarantors have filed a registration statement on Form F-4 to register with the SEC the BAM Shares and the New LP Preferred Units (and related Guarantees) to be issued to BPY Unitholders, Exchange LP Unitholders and BPYU Stockholders. This Document is a part of that registration statement and constitutes a prospectus of BAM, New LP and the Guarantors in addition to being a management information circular for BPY. The registration statement, including the attached annexes and exhibits, contains additional relevant information about BAM, New LP and the Guarantors, and the BAM Shares and the New LP Preferred Units (and related Guarantees). The rules and regulations of the SEC allow BAM and BPY to omit certain information included in the registration statement from this Document. Certain information regarding BPYU is also incorporated by reference in this Document.

BAM, BPY and BPYU file or furnish reports and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, available at www.sec.gov. A free copy of this Document, as well as other filings containing information about BAM, BPY and BPYU, and their subsidiaries, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from BPY by accessing BPY’s website at http://bpy.brookfield.com, from BAM by accessing BAM’s website at http://bam.brookfield.com and from BPYU’s website at http://bpy.brookfield.com/bpyu. Copies of the Document can also be obtained, free of charge, by directing a request to Investor Relations, Brookfield Property Partners L.P., 73 Front Street, 5th Floor, Hamilton, Bermuda HM 12, by calling (855) 212-8243 or by sending an e-mail to bpy.enquiries@brookfield.com or to Brookfield Investor Relations by calling (416) 359-8647 or by sending an e-mail to enquiries@brookfield.com.

Because the Transaction is a “going private” transaction, BPY and the Purchaser Parties have filed with the SEC a Transaction Statement on Schedule 13E-3 with respect to the Transaction. The Schedule 13E-3, including any amendments and exhibits filed or incorporated by reference as a part of it, is available for inspection as set forth above. The reports, opinions or appraisals filed as exhibits to the Schedule 13E-3 will also be made available for inspection and copying at the principal executive offices of BPY during regular business hours by any interested holder of BPY Units or any representative who has been so designated in writing. The Schedule 13E-3 will be amended to report promptly any material change in the information set forth in the most recent Schedule 13E-3 filed with the SEC. You are urged to read the entire Schedule 13E-3 carefully, including the exhibits, in connection with your consideration of the Transaction.

The SEC allows BPY, BAM and BPYU to “incorporate by reference” into this Document information that BPY, BAM and BPYU file with the SEC, which means that important information can be disclosed to you by referring you to those documents and those documents will be considered part of this Document. The information incorporated by reference is an important part of this Document. Certain information that is subsequently filed with the SEC will automatically update and supersede information in this Document and in earlier filings with the SEC. Any statement so modified or superseded will not be deemed, except as so

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updated or superseded, to constitute a part of this Document. Some documents or information, such as information furnished by BPY or BAM on Form 6-K, unless expressly stated otherwise therein, or certain information furnished by BPYU on Form 8-K, are deemed furnished and not filed in accordance with SEC rules. None of those documents and none of that information is incorporated by reference into this Document. This Document also contains summaries of certain provisions contained in some of the BPY, BAM or BPYU documents described in this Document, but reference is made to the actual documents for complete information. All of these summaries are qualified in their entirety by reference to the actual documents.

The following documents, which have been filed with the securities regulatory authorities in Canada and/or filed with, or furnished to, the SEC, as applicable, are specifically incorporated by reference in this Document:

1.

BPY’s Annual Report on Form 20-F for the fiscal year ended December 31, 2020 filed on SEDAR and EDGAR on February 26, 2021 (the “BPY Annual Report”), which includes BPY’s audited consolidated financial statements as at December 31, 2020 and 2019 and for each of the years in three-year period ended December 31, 2020, together with the auditor’s reports thereon and management’s discussion and analysis of BPY’s financial position as of December 31, 2020 and 2019 and results of operations for the years ended December 31, 2020, 2019 and 2018;

​

2.

BAM’s Annual Report on Form 40-F dated March 23, 2021, as amended by Amendment No.1 on Form 40-F/A dated March 26, 2021, for the year ended December 31, 2020 (the “BAM Annual Report”), which includes (i) BAM’s annual information form for the financial year ended December 31, 2020, filed on SEDAR on March 23, 2021 (the “BAM AIF”); (ii) BAM’s audited comparative consolidated financial statements and the notes thereto for the fiscal years ended December 31, 2020 and 2019, together with the accompanying auditor’s reports thereon; (iii) the management’s discussion and analysis for the audited comparative consolidated financial statements and (iv) a description of the BAM Shares;

​

3.

BPYU’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 26, 2021, which includes the description of BPYU Shares in Exhibit 4.7;

​

4.

Item 5.02 of BPYU’s Form 8-K filed with the SEC on February 2, 2021; and

​

5.

The Sixth Amendment, dated March 31, 2021, to the Second Amended and Restated Limited Partnership Agreement of BPY, dated August 8, 2013, as amended, filed as Exhibit 99.1 to the Form 6-K filed by BPY with the SEC on April 5, 2021.

​

In addition, all documents filed by BPY, BAM and BPYU with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the U.S. Exchange Act after the date of filing of the registration statement on Form F-4 of which this Document forms a part and before the date of the Meeting will be deemed to be incorporated by reference into this Document and made a part of this Document from the date of filing; provided, however, that BPY and BAM are not incorporating any information furnished by BPY or BAM on Form 6-K, unless specifically stated otherwise.

BAM has supplied all information contained in or incorporated by reference into this Document relating to BAM, and BPY has supplied all such information contained in or incorporated by reference into this Document relating to BPY.

You should not rely on information that purports to be made by or on behalf of BPY, BAM or BPYU other than the information contained in or incorporated by reference into this Document. None of BPY, BAM or BPYU has authorized anyone to provide you with information on behalf of BPY, BAM or BPYU, respectively, that is different from what is contained in this Document. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this Document or solicitations of proxies are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this Document does not extend to you.

This Document is dated    •   , 2021. You should not assume that the information contained in this Document is accurate as of any date other than that date, or that the information incorporated by reference into this Document is accurate as of any date other than the date of such information, and neither its mailing to BPY Unitholders, Exchange LP Unitholders or BPYU Stockholders nor the issuance of BAM Shares or New LP Preferred Units (and related Guarantees) in the Transaction will create any implication to the contrary.

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SPECIAL FACTORS

Background to the Transaction

As part of BAM’s ongoing focus on building long term value, the BAM Board of Directors regularly reviews and assesses BPY’s long-term goals and opportunities, industry trends, competitive environment and short- and long-term performance, with the goal of maximizing unitholder value. The BAM Board of Directors also discusses on an ongoing basis the price of BPY Units and BPY Unitholder total returns, both on an absolute basis and relative to BPY’s peers. The BAM Board of Directors also considers potential risks that BPY faces in execution, including challenging global economic conditions, potentially unfavorable investment environments in the real estate market, general market conditions and trends, the highly competitive environment, and other factors.

Beginning in December 2020, members of management of BAM began assessing the feasibility of acquiring the BPY Units not already owned by BAM, including the related structuring, financing and tax considerations for a potential transaction.

On January 1, 2021, a special meeting of the BAM Board of Directors was called for January 3, 2021 to consider whether to authorize the management of BAM to pursue such a transaction.

On January 3, 2021, the BAM Board of Directors authorized management of BAM to pursue a transaction to acquire all of the BPY Units that BAM did not already own.

On January 3, 2021, the BPY Board of Directors received an unsolicited non-binding proposal from BAM to acquire all of the issued and outstanding BPY Units not owned by BAM and its affiliates for a price of $16.50 per BPY Unit, with each Unitholder being entitled to elect to receive any of $16.50 in cash, 0.40 BAM Shares or 0.66 New LP Preferred Units per BPY Unit (subject to pro-ration) (the “Proposed Transaction”). The Proposed Transaction contemplated that pro-ration of elected consideration would be based on maximum cash consideration of $2.95 billion (50% of the total value), a maximum of 59.5 million BAM Shares, and a maximum value of $500 million of New LP Preferred Units (which could be increased, based on elections received, to $1 billion, offset against the BAM Shares). BAM’s proposal also stated that it was not prepared to pursue any alternative transaction that would result in BAM selling its BPY Units or an acquisition by a third party of the BPY Units not owned by BAM and its affiliates.

At a BPY Board of Directors meeting held later that day, the BPY Board of Directors formed the Special Committee, consisting of Omar Carneiro da Cunha, Stephen DeNardo, Louis Joseph Maroun and Lars Rodert, with a mandate to, among other things, review and consider the Proposed Transaction. Once the Special Committee’s legal counsel was appointed, the mandate was reviewed with them and it was determined that it should be broadened. As a result, the BPY Board of Directors subsequently approved a mandate granting exclusive authority to the Special Committee to examine, review and evaluate the Proposed Transaction, and its implications for BPY and its stakeholders, including the Unaffiliated BPY Unitholders, and consider the financial implications of alternatives to the Proposed Transaction and pursue them to the extent feasible in light of BAM’s statement that it was not interested in selling its equity position in BPY, and to conduct or supervise the conduct of negotiations of the structure and terms of the Proposed Transaction, to make recommendations to the BPY Board of Directors with respect thereto and to ensure that the interests of Unaffiliated BPY Unitholders be taken into account in the context of that process.

On January 4, 2021, Mr. Maroun contacted representatives of Goodmans LLP (“Goodmans”) about the possibility of advising a committee of independent directors of BPY in respect of the Proposed Transaction.

In connection with the adoption of a broader mandate, the Special Committee directed its legal counsel to conduct a review of the independence of each of the members of the Special Committee. Legal counsel conducted interviews with each of the members of the Special Committee to verify their independence and the findings of those interviews were shared with the Special Committee, and subsequently the other independent directors of the BPY Board of Directors. Following review and consideration, the determination was made that no member of the Special Committee had a material relationship with BPY, BAM or their respective affiliates or a material interest in the Proposed Transaction that would be reasonably expected to interfere with the exercise of his independent judgement or to compromise his ability to discharge his duties as a member of the Special Committee. In connection with the ratification of the composition of the Special

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Committee, the findings of the independence review also were shared with the BPY Board of Directors and the BPY Board of Directors determined that, notwithstanding Mr. Maroun’s directorship with an affiliate of BAM, Mr. Maroun was free from interference and undue influence by persons with a conflict of interest in respect of the Proposed Transaction and noted that Mr. Maroun possessed experience and expertise that was expected to be beneficial to the Special Committee’s role in the Proposed Transaction, there were additional mechanisms to ensure that the interests of Unaffiliated BPY Unitholders would be appropriately taken into account and that a special committee of entirely “independent directors” ​(for purposes of Part 7 of MI 61-101) is advisable, but not required, in connection with the Proposed Transaction.

Prior to the first formal meeting of the Special Committee on January 6, 2021, the members of the Special Committee had a number of informal meetings to discuss the engagement of legal and financial advisors and the process for considering the Proposed Transaction.

On January 6, 2021, the Special Committee held its first formal meeting. At the meeting, the Special Committee unanimously resolved to engage Goodmans as its legal advisor, after confirming with Goodmans that it had no legal conflict that would prevent it from acting as counsel to the Special Committee in respect of the Proposed Transaction, following disclosure of the nature and extent of Goodmans’ involvement with BPY and BAM and its other affiliates. Having understood the nature of Goodmans’ relationships with BPY and BAM and its other affiliates, the Special Committee concluded that such relationships would not prevent Goodmans from providing full, open and competent advice as independent counsel to the Special Committee. At a meeting of the Special Committee on January 7, 2021, the Special Committee engaged Latham & Watkins LLP (“Latham”) as U.S. counsel following a discussion regarding the independence and qualifications of Latham, including disclosure of the nature and extent of Latham’s involvement with BPY and BAM and its other affiliates, and on February 3, 2021, the Special Committee engaged MJM Limited as special Bermuda counsel. The Special Committee also received advice from Richards, Layton & Finger, PA on matters of Delaware law during the course of the Special Committee’s review, consideration and negotiation of the Proposed Transaction.

During the January 6 and January 8, 2021 meetings, the Special Committee received legal advice from Goodmans regarding its duties and responsibilities and the legal requirements of the Proposed Transaction, including the application of MI 61-101, and the requirement under MI 61-101 for a formal valuation prepared by an independent financial advisor. During the meetings, Goodmans reviewed the criteria for determining the independence of an independent valuator under MI 61-101.

Shortly after the establishment of the Special Committee, members of the Special Committee identified an extensive list of potential financial advisors and selected five to provide proposals in respect of the Proposed Transaction based on their experience, qualifications, reputations and independence from BPY and BAM, and the Special Committee’s decision to exclude from the selection process U.S. and Canadian bank-owned dealers with a significant involvement or relationships with BAM. Each of the five financial advisors confirmed their independence with reference to relevant regulatory requirements, including MI 61-101, and demonstrated that they had the requisite expertise, qualifications and capacity for this engagement.

Between January 6 and January 11, 2021, members of the Special Committee met with and received and evaluated the proposals from each of the five potential financial advisors. Each of the potential financial advisors outlined their qualifications and experience for the mandate and each provided disclosure outlining every interaction such advisor had with BAM and/or any of its affiliates in the prior five years, including mandates acting for and opposite such entities. Goodmans and Latham conducted interviews with each of the proposed financial advisors regarding their independence based on their disclosure and, on January 11, 2021, reviewed the findings with the Special Committee. After numerous discussions with each of the potential financial advisors and deliberation among the members of the Special Committee, including with counsel, at a meeting of the Special Committee held on January 13, 2021, the Special Committee resolved to retain Lazard as independent financial advisor to provide the formal valuation required by MI 61-101 and strategic advice in respect of the Proposed Transaction.

On January 11, 2021, Torys LLP (“Torys”), counsel to BAM, provided an initial draft of a term sheet in respect of the Proposed Transaction, which provided an initial outline of, among other things, the contemplated objectives, approvals and structure of the Proposed Transaction. Thereafter, in parallel with the Special Committee’s consideration of the Proposed Transaction, the Special Committee’s legal advisors

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conducted due diligence regarding various aspects of the Proposed Transaction and commenced discussions and negotiations with Torys regarding the structure, terms, documentation and implementation of the Proposed Transaction, which continued throughout the process and included revisions and refinements to the proposed transaction structure. On March 5, 2021, Torys provided an initial draft of the Arrangement Agreement to Goodmans and Latham and thereafter held discussions and negotiations and exchanged drafts of the Arrangement Agreement and the other key documents necessary to give effect to the Proposed Transaction.

Throughout the process, Lazard reviewed extensive information regarding BPY and its business, operations, properties, assets, financial performance and condition, operating results and prospects, including BPY’s five-year business plan, and analyzed the financial terms of the Proposed Transaction and the value range of the BPY Units and the potential value of the New LP Preferred Units. Lazard was provided with access to all requested information and met with BPY management to review the information, including BPY’s five-year business plan.

Throughout the process, the Special Committee met on at least a weekly basis and held 22 formal meetings, during which meetings the Special Committee:

•

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

​

•

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

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•

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

​

•

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

​

•

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

​

•

made recommendations to the BPY Board of Directors with respect to the foregoing.

​

In addition to the Special Committee meetings, on February 2, 2021, the full BPY Board of Directors met to receive an update from management regarding BPY’s annual financial results and a five-year business plan of BPY’s anticipated financial performance under the status quo.

In addition to its formal meetings, the Special Committee members had additional informal discussions among themselves, as well as with their independent legal and financial advisors. None of the representatives of BAM were present during any of the Special Committee’s meetings or participated in the Special Committee’s decision-making process.

On March 5, 2021, Lazard reviewed its preliminary analysis of the value range for the BPY Units and the potential value of the New LP Preferred Units.

On March 19, 2021, the Special Committee provided an update to the other independent directors of the BPY Board of Directors and, following this update and the other directors having left the meeting, the Special Committee reviewed with Lazard and its legal advisors alternative strategies and tactics in respect of negotiations with BAM in light of the preliminary valuation analysis provided by Lazard and the Special Committee’s assessment of the on-going prospects for any risks attendant to BPY’s business plan. Following discussion, the Special Committee determined that representatives of Lazard should contact the designated

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representative of BAM to negotiate consideration mix and price. The Special Committee also determined, in order to maintain a consistent approach, that any communication that might occur between BAM and the Special Committee directly should be facilitated through Mr. Maroun.

Also on March 19, 2021, Matthew Lustig, Chairman of Investment Banking, North America, Head of Real Estate & Lodging for Lazard, contacted Justin Beber, Managing Partner, Head of Corporate Strategy & Chief Legal Officer of BAM, to review the Special Committee’s views on the Proposed Transaction from a financial perspective. As an initial negotiating position, Mr. Lustig expressed the view that simply based, in part, on the current trading prices of the BPY Units and BAM Shares relative to the date of the announcement of the Proposed Transaction, a transaction price at or above $20.00 per BPY Unit could be supported. Mr. Lustig also indicated that the Special Committee would be prepared to consider a different mix of consideration if BAM could increase its price to that level. Mr. Beber, who was joined on the call by Nicholas Goodman, Chief Financial Officer of BAM, shared BAM’s perspective that the price of $16.50 per BPY Unit properly valued the BPY Units, including with reference to, among other factors, current implied capitalization rates among BPY’s peers. Over the course of discussions held between BAM and Lazard on March 19, 2021, March 20, 2021 and March 21, 2021, each of BAM and Lazard shared their perspectives for their outlooks on an appropriate price for the Proposed Transaction.

On March 23, 2021, Mr. Beber and Mr. Goodman contacted Mr. Lustig to arrange a time to further discuss the financial terms of the Proposed Transaction. During a telephone conversation on March 25, 2021 among Mr. Lustig, Alex Russo, a colleague of Mr. Lustig, Mr. Beber and Mr. Goodman, Mr. Beber presented an updated price proposal from BAM in respect of the Proposed Transaction of $17.50 per BPY Unit that would add $135 million in cash, in the aggregate, to the offer price (or $0.38 per BPY Unit), and holding all other parameters of the Proposed Transaction constant (including the fixed exchange ratio of 0.40 BAM Shares), resulting in a $1.00 increase to the total offer price when factoring in the increased current trading price of BAM Shares since January 3, 2021. BAM noted that $17.50 per BPY Unit accorded with the current trading price of the BPY Units, based on its 30-day volume-weighted average price. Mr. Lustig indicated that the Special Committee had a meeting scheduled for March 26, 2021, at which the Special Committee would consider BAM’s revised proposal.

At the Special Committee meeting held on March 26, 2021, after consulting with Lazard and its legal advisors, the Special Committee directed Mr. Lustig to advise BAM that the Special Committee was not prepared to recommend the Proposed Transaction at the $17.50 per BPY Unit revised purchase price.

Mr. Lustig, Mr. Beber and Mr. Goodman had a discussion in the afternoon of March 26, 2021 in which Mr. Lustig communicated to BAM the Special Committee’s position. He further noted that, although not able to support BAM’s revised offer, the Special Committee was desirous of reaching a successful transaction.

On the morning of March 27, 2021, Mr. Beber contacted Mr. Lustig by email to schedule a follow-up discussion from the March 26, 2021 call. Mr. Beber noted that Brian Kingston, Chief Executive Officer of Brookfield Property Group, would be contacting Mr. Maroun as well. Messrs. Beber, Goodman, Lustig and Russo convened a telephone call in the afternoon of March 27, 2021, in which Messrs. Beber and Goodman presented a further updated price proposal of $18.00 per BPY Unit that contemplated an additional aggregate increase of $150 million in cash (or an aggregate increase of $285 million in cash from the initial proposal), and a decreased exchange ratio from 0.4 BAM Shares to 0.3941 BAM Shares, thereby fixing the value per BAM Share at $45.67, being its closing price on March 26, 2021. BAM indicated that this revised proposal left no ability for BAM to do more to increase the price of the Proposed Transaction. In addition, BAM noted that its original proposal had contemplated closing the Proposed Transaction sooner in the second quarter than was now expected and, as such, BAM’s further updated proposal also included the cessation of all distributions following the distribution to be paid on March 31, 2021. Finally, Mr. Beber indicated that, should this revised proposal be acceptable, it was BAM’s intention to formalize and announce the transaction prior to the opening of markets on March 29, 2021.

Also on March 27, 2021, Mr. Kingston contacted Mr. Maroun, at the direction of BAM, to ensure that the messages communicated by Mr. Beber to Mr. Lustig on that day were properly understood by the Special Committee, both in terms of firmness of pricing and urgency of timing. Later that day, Mr. Maroun called Mr. Kingston to describe the process that the Special Committee and BPY Board of Directors would need to undertake before any transaction could be agreed, which made it difficult to achieve a targeted announcement

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prior to market open on March 29, 2021 given that the significant financial terms had not yet been agreed at that point. While Mr. Kingston confirmed that timing was an important factor for BAM, the March 29, 2021 timeline was not intended to be regarded as a deadline provided that the parties were able to reach agreement in principle by then. No negotiations regarding the financial or other terms of the Proposed Transaction took place between Mr. Maroun and Mr. Kingston on those calls.

At a meeting held in the morning on March 28, 2021, the Special Committee met with its independent legal and financial advisors to evaluate BAM’s revised proposed purchase price of $18.00 per BPY Unit, including the cessation of distributions after March 31, 2021. The Special Committee, with the assistance of its advisors, determined that it was not prepared to recommend the Proposed Transaction at that price and on those terms and that all matters necessary to announce a transaction could not properly be completed prior to market open on March 29, 2021. The Special Committee also noted that the market likely had an expectation that, if a transaction was to be completed, BPY Unitholders would receive regular distributions until closing. On that basis, the Special Committee directed Lazard to communicate to BAM that it would be prepared to recommend the Proposed Transaction at a price of $18.44 per BPY Unit (with no distributions after the March 2021 distribution), which amount reflected an increase, in part, to account for a potential June 2021 distribution in the amount of $0.33 per BPY Unit not being made.

In the afternoon of March 28, 2021, Mr. Lustig communicated the Special Committee’s views to Mr. Beber and Mr. Goodman and the Special Committee’s counter proposal of $18.44 per BPY Unit. Mr. Lustig further noted that, while the Special Committee was desirous of moving expeditiously, any announcement would require more time in order to finalize all transaction documentation and convene a meeting of all independent members of the BPY Board of Directors.

Mr. Beber and Mr. Goodman contacted Mr. Lustig later on March 28, 2021 and advised that, subject to the Special Committee’s concurrence that there would be no further distributions paid beyond March 31, 2021, BAM would be prepared to agree to a price of $18.17 per BPY Unit (based on a value of the BAM Shares as of market close on March 26, 2021), which contemplated an additional aggregate increase of $60 million of cash. Pursuant to such revised proposal, each BPY Unitholder would be entitled to elect to receive any of $18.17 in cash, 0.3979 BAM Shares or 0.7268 of New LP Preferred Units per BPY Unit, subject to pro-ration of elected consideration based on maximum cash consideration of $3.27 billion (50% of the total value), a maximum of 59.3 million BAM Shares (approximately 42% of the total value, based on a price per BAM Share of $45.67 (the closing price per BAM Share on March 26, 2021)), and a maximum value of $500 million in liquidation preference of New LP Preferred Units. Mr. Beber made it clear that BAM was not prepared to agree to a higher price, indicating that this represented BAM’s best and final offer and that BAM was prepared to maintain the status quo and pursue the continued execution of BPY’s business plan as a public entity if the Special Committee determined not to proceed with the Proposed Transaction on these terms.

Later that day, the Special Committee again met with its legal and financial advisors to evaluate BAM’s proposed revised purchase price of $18.17 per BPY Unit. After discussion, the Special Committee directed Lazard to advise BAM that it would consider the revised proposal and intended to provide its response on the following day.

At a meeting held on March 29, 2021, the Special Committee met with its independent legal and financial advisors to further evaluate BAM’s proposed revised purchase price of $18.17 per BPY Unit. The Special Committee, with the assistance of its advisors, reviewed the relative benefits and risks associated with the Proposed Transaction as compared to the status quo, including the factors set out below. During the meeting, the Special Committee also received an update regarding the status of the legal documentation for the Proposed Transaction. Following discussion, the Special Committee determined that it would be prepared to proceed with the Proposed Transaction on the final terms presented by BAM, subject to receiving Lazard’s formal valuation and fairness opinion, satisfactory negotiation of definitive documentation in respect of the Proposed Transaction and approval of the Proposed Transaction by the BPY Board of Directors. The Special Committee directed Lazard to communicate the Special Committee’s position to BAM.

At a meeting of the Special Committee held on March 30, 2021, the Special Committee, with assistance from its legal and financial advisors, provided the other independent directors with a further update of the BPY Board of Directors with respect to the Proposed Transaction and responded to various questions.

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Following departure of the other independent directors of the BPY Board of Directors, the Special Committee considered the matters raised by the other directors.

On March 31, 2021, the Special Committee met in the morning and again invited the other independent directors of the BPY Board of Directors. At that meeting, Lazard reviewed its updated preliminary analysis of the value range for the BPY Units and the potential value of the New LP Preferred Units for the benefit of the other independent directors and to further provide them with the benefit of more detailed analysis.

Between March 29, 2021 and March 31, 2021, the Special Committee and its legal and financial advisors, with the assistance of BAM’s legal advisors, finalized the terms of the definitive documentation for the Proposed Transaction.

In the afternoon of March 31, 2021, the Special Committee met again to consider the Proposed Transaction, including the proposed purchase price of $18.17 per BPY Unit. During the meeting, the Special Committee received advice from its legal advisors with respect to the duties and responsibilities of the Special Committee in making its determinations and recommendations to the BPY Board of Directors, as well as the terms of the transaction documents. Lazard orally delivered its formal valuation of the BPY Units, being a range of $14.00 to $18.50 per BPY Unit (implying a total enterprise value of $67.6 to $72.1 billion), and the New LP Preferred Units and delivered its verbal fairness opinion to the effect that, subject to the various assumptions, qualifications and limitations to be set forth in its written fairness opinion, as of March 31, 2021, the consideration being offered to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to the Unaffiliated BPY Unitholders. The Special Committee once again reviewed the relative benefits and risks associated with the Proposed Transaction as compared to the status quo, including the factors set out below, and, after receiving advice from its independent legal and financial advisors, unanimously resolved to make the recommendations set forth below.

The Arrangement Agreement was finalized and executed by BAM, BPY and Purchaser Sub on March 31, 2021, and the Arrangement was publicly announced on April 1, 2021.

The Transaction is the result of arm’s-length negotiations conducted between members of the Special Committee and its financial and legal advisors with representatives of BAM and its legal advisors.

The Purchaser Parties’ Purpose and Structure of the Transaction; Reasons for the Transaction

Under the SEC rules governing “going private” transactions, the Purchaser Parties may be deemed to be affiliates of BPY and are required to express their reasons for entering into the Arrangement Agreement and the Transaction to BPY Unitholders. The Purchaser Parties are making the statements included in this section solely for purposes of complying with the requirements of these rules.

The Transaction is being implemented pursuant to the Plan of Arrangement. Pursuant to the Transaction, the Purchaser Parties will, subject to Court approval and compliance with applicable Laws, acquire all of the Units. If the Transaction is approved and completed, Unitholders and BPYU Stockholders will be entitled to receive the Transaction Consideration.

The purpose of the Transaction is to enable the Purchaser Parties to acquire all of the outstanding BPY Units. Brookfield holds approximately 33.6% of the outstanding BPY Units, representing 33.6% of the votes that may be cast towards achieving the Standard Approval Threshold (but not towards achieving the Majority of the Minority Threshold).

In order for the Transaction to be completed, (i) the Transaction Resolutions must be duly approved (see “Description of the Transaction — Required BPY Unitholder Approval for the Transaction”), (ii) the Arrangement must be approved by the Court pursuant to the Final Order, (iii) all conditions precedent to the Arrangement set forth in the Arrangement Agreement must be satisfied or waived by the appropriate party (see “Description of the Transaction — Summary of Arrangement Agreement”); and (iv) the Final Order and related documents, in the form prescribed by the OBCA, must be filed with the OBCA Director.

The Purchaser Parties spent considerable time and resources considering a variety of alternative transaction structures. The Purchaser Parties ultimately determined that the structure of the Transaction is preferable to other transaction structures because it gives Unaffiliated BPY Unitholders the option to

21

 

(i) immediately realize value and liquidity in respect of a portion of their investment, (ii) participate in the future success of BAM through ownership of BAM Shares or (iii) maintain a dividend that more closely reflects the existing BPY distribution (as compared to the current dividend payable on the BAM Shares) through ownership of a New LP Preferred Unit.

If the Purchaser Parties are unable to effectuate the Transaction, the Purchaser Parties may evaluate other available alternatives. These alternatives could include, to the extent permitted by applicable Laws, purchasing additional BPY Units: (i) in the open market; (ii) in privately negotiated transactions; or (iii) in a take-over bid or exchange offer or otherwise. Any additional purchases of BPY Units could be at a price greater than, equal to or less than the price to be paid for BPY Units under the Transaction and could be for cash or securities or other consideration.

In determining the structure of the Transaction, the Purchaser Parties, individually and collectively, particularly considered the following material factors:

•

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

​

•

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

​

•

The Transaction would provide BPY Unitholders with an opportunity to exchange their BPY Units for New LP Preferred Units with a distribution rate that more closely reflects the existing BPY distribution (as compared to the current dividend payable on the BAM Shares), with amounts of New LP Preferred Units dependent on the elections of BPY Unitholders and subject to pro-ration.

​

A number of beliefs and factors were considered in the decision by the Purchaser Parties to undertake the Transaction, including the following material factors:

•

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

​

•

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

​

•

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

​

•

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

​

•

A plan of arrangement is a transaction structure commonly used for privatizations.

​

The Purchaser Parties’ Plans for BPY After the Transaction; Certain Effects of the Transaction

Plans for BPY After the Transaction

The Purchaser Parties are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules under the U.S. Exchange Act.

If all of the BPY Units are acquired pursuant to the Transaction, the Purchaser Parties would plan to review BPY and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel to determine what changes, if any, would be desirable, to best organize the activities of BPY. The Purchaser Parties expressly reserve the right to make any such changes that they deem necessary or appropriate in light of their review or in light of future developments.

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Subsequent to the completion of the Transaction, the Purchaser Parties intend to apply to Nasdaq and the TSX to de-list the BPY Units from trading. In addition, the Purchaser Parties intend to apply to Nasdaq to de-list the BPYU Shares from trading in connection with the completion of the BPYU Mandatory Exchange.

After the BPY Units are de-listed from trading on Nasdaq and the TSX, BPY is expected to remain a reporting issuer under Canadian Securities Laws and continue to be subject to the reporting obligations under the U.S. Exchange Act following completion of the Transaction.

Certain Effects of the Transaction

Following the consummation of the Transaction, BAM’s interest in BPY’s net book value and net earnings will increase due to the number of BPY Units acquired under the Transaction, and BAM will be entitled to benefits resulting from that interest, including cash flow generated by BPY’s operations and any future increase in BPY’s value. Similarly, BAM will also bear the risk of losses generated by BPY’s operations and any decrease in the value of BPY after acquiring all outstanding BPY Units.

If the Transaction is consummated, Brookfield’s ownership interest in BPY would increase from 62.27%, on a fully exchanged basis prior to the date of the Arrangement Agreement, to 100%. Based on BPY’s consolidated financial statements as of December 31, 2020, the completion of the Transaction would result in (1) an increase of approximately $9.6 billion, or 62%, from BAM’s existing interest in BPY’s net book value of approximately $25.1 billion as of December 31, 2020, and (2) on a pro forma basis an increase of approximately $1,015 million, or 73%, to BAM’s existing interest in BPY’s net loss of approximately $2,058 million for the year ended December 31, 2020.

Describing the BPY Units on a “fully exchanged” basis throughout this Document assumes the exchange of all of the issued and outstanding securities that are exchangeable into BPY Units, including the exchange of the issued and outstanding redemption-exchange units (the “REUs”) of Brookfield Property L.P. (the “Property Partnership”), the exchange of the issued and outstanding class A preferred limited partnership units of the Property Partnership (the “Property Partnership Units”), Series 1, 2 and 3 that are exchangeable into BPY Units in accordance with the terms of the limited partnership agreement of the Property Partnership and the Exchange LP Units.

Recommendation of the BPY Board of Directors

As described above under the section entitled “Special Factors — Background to the Transaction”, the BPY Board of Directors established the Special Committee and approved a mandate granting exclusive authority to the Special Committee to examine, review and evaluate the Proposed Transaction, and its implications for BPY and its stakeholders, including the Unaffiliated BPY Unitholders, and consider the financial implications of alternatives to the Proposed Transaction and pursue them to the extent feasible in light of BAM’s statement that it was not interested in selling its equity position in BPY, and to conduct or supervise the conduct of negotiations of the structure and terms of the Proposed Transaction, to make recommendations to the BPY Board of Directors with respect thereto and to ensure that the interests of Unaffiliated BPY Unitholders be taken into account in the context of that process.

With the assistance of its legal and financial advisors, the Special Committee evaluated the Arrangement Agreement and, on March 31, 2021, the Special Committee unanimously (i) determined that the Transaction is in the best interests of BPY and fair to the Unaffiliated BPY Unitholders; (ii) recommended that the BPY Board of Directors determine the Transaction is in the best interests of BPY and fair to the Unaffiliated BPY Unitholders; and (iii) recommended that the BPY Board of Directors approve the Transaction and recommend that the Unaffiliated BPY Unitholders vote in favor of the Transaction Resolutions.

The Special Committee engaged its own legal and financial advisors and received advice throughout the negotiations from such advisors. Since the members of the Special Committee are independent and free from interference and undue influence by persons with a conflict of interest in respect of the Transaction, the Special Committee believed that it could effectively represent the interests of the Unaffiliated BPY Unitholders in negotiating the terms of the Transaction.

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The BPY Board of Directors (with Jeffrey Blidner, a director who has interests that present actual or potential conflicts of interest in connection with the Transaction, abstaining from voting on any resolution, approval or recommendation in connection with the Transaction) adopted the Special Committee’s analyses and discussions as to the fairness of the Transaction to Unaffiliated BPY Unitholders as described above as its own and, following the unanimous recommendation of the Special Committee, has (i) determined that the Arrangement is fair to Unaffiliated BPY Unitholders and that the transactions contemplated in the Arrangement are in the best interests of BPY, (ii) approved the Arrangement and the execution and performance of the Arrangement Agreement and (iii) recommended to the Unaffiliated BPY Unitholders that they vote their BPY Units in favor of the Arrangement.

Accordingly, the BPY Board of Directors (with Jeffrey Blidner, a director who has interests that present actual or potential conflicts of interest in connection with the Transaction, abstaining from voting on any resolution, approval or recommendation in connection with the Transaction) has unanimously determined that, based on the recommendation of the Special Committee and the considerations described above, the Arrangement is fair to Unaffiliated BPY Unitholders and the Transaction is in the best interests of BPY and therefore unanimously recommends that Unaffiliated BPY Unitholders vote in favor of the Transaction Resolutions.

Mr. Blidner declared his interest in and did not participate in deliberations on, and abstained from voting in respect of resolutions relating to, the Transaction. See the Special Factors section of this Document entitled “Interests of Certain Persons in the Transaction”.

In adopting the Special Committee’s recommendation and concluding that the Consideration is fair to the Unaffiliated BPY Unitholders, the BPY Board of Directors considered and relied upon the same factors and considerations that the Special Committee relied upon as described in “Recommendation of the Special Committee of the BPY Board of Directors — Reasons for Recommendation”, and adopted the Special Committee’s analyses in their entirety.

After being advised of Brookfield’s intent to undertake the Canadian Purchase Transactions (as defined and described in the section entitled “Arrangements, Agreements or Understandings; Other Benefits to Insiders, Affiliates and Associates — Canadian Purchase Transactions”), on April 21, 2021, the Special Committee met to review such transactions. The Special Committee concluded, based upon, among other things, advice and input from its legal and financial advisors, that its determination as to fairness of the Transaction to the Unaffiliated BPY Unitholders would not change if the Canadian Purchase Transactions, which are separate and distinct from the Transaction, are consummated. The Special Committee makes no recommendation as to the distinct Canadian Purchase Transactions, and Lazard expressed no opinion as to the consideration to be received by any Canadian Taxable Holders in the Canadian Purchase Transactions, if any.

The recommendation of the BPY Board of Directors is not, and is not intended to be, investment advice to any particular BPY Unitholder. Each BPY Unitholder’s circumstances are different. Each BPY Unitholder should consider the Transaction carefully and come to its own conclusions as to whether to vote in favor of or against the Transaction Resolutions. A BPY Unitholder who is in doubt as to how to respond should consult with its own investment advisor, stockbroker, bank manager, trust company manager, accountant, lawyer or other professional advisor as to how to respond to the Transaction having regard to its own particular circumstances. Further, BPY Unitholders are advised that the exchange of their BPY Units as result of the consummation of the Transaction may have tax consequences and they should consult their own professional tax advisors. The recommendation of the BPY Board of Directors set forth above is not, and is not intended to be, a recommendation to the holders of any other class of securities of BPY other than the BPY Units.

Position of the Purchaser Parties Regarding the Fairness of the Transaction

The Purchaser Parties are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules under the U.S. Exchange Act. Their views as to the fairness of the Transaction should not be construed as a recommendation to any Unaffiliated BPY Unitholder as to how such Unaffiliated BPY Unitholder should vote on the proposal to approve the Transaction. The Purchaser Parties attempted to negotiate the terms of the Transaction that would be most favorable to them, and not Unaffiliated BPY Unitholders.

The Purchaser Parties believe that the Transaction is substantively and procedurally fair to the Unaffiliated BPY Unitholders. In reaching this conclusion, the Purchaser Parties noted that the Special

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Committee consists of independent directors, that the Plan of Arrangement must be approved by a majority of the votes cast by Unaffiliated BPY Unitholders present or represented by proxy at the Meeting and that the Plan of Arrangement is subject to the approval of the Court. The Purchaser Parties further note the conclusions in the Valuation and the Fairness Opinion delivered to the Special Committee, the recommendations of the Special Committee and the BPY Board of Directors and the factors considered by, and the analyses and conclusions made by, the Special Committee and the BPY Board of Directors and expressly adopted these factors, analyses and conclusions.

Recommendation of the Special Committee of the BPY Board of Directors

Information Considered

In reaching its determination and in making its recommendations, the Special Committee considered and relied upon extensive information, advice and analysis obtained by it in the course of its process, including:

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

the views of the other independent directors of BPY regarding the impact of the Transaction on BPY.

​

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Benefits of the Transaction

In reaching its determination and making its recommendations, the Special Committee considered a number of substantive benefits associated with the Transaction, including the following material benefits:

1.

The proposed purchase price of $18.17 per BPY Unit is at the high end of the fair market value range for the BPY Units as determined by Lazard in the Valuation.

​

2.

The proposed purchase price of $18.17 per BPY Unit represents a 25.6% premium to the unaffected closing price per BPY Unit on Nasdaq on December 31, 2020, a 10.1% premium to the price per BPY Unit offered in Brookfield’s initial proposal and a 6% premium to the volume-weighted average trading price for the BPY Units on Nasdaq since the announcement made on January 4, 2021.

​

3.

The Transaction provides BPY Unitholders with the option to elect to receive per BPY Unit $18.17 in cash, 0.3979 BAM Shares or 0.7268 New LP Preferred Units, subject to pro-ration. BPY Unitholders who receive cash for their BPY Units will immediately realize a fair value for their investment and the payment in cash provides certainty of value for their BPY Units. BPY Unitholders who receive BAM Shares will have the opportunity to participate in any increase in value of BPY’s assets and the increase in value of the current assets of Brookfield. BPY Unitholders who receive New LP Preferred Units will maintain a distribution that more closely reflects the existing BPY distribution (as compared to the current dividend payable on the BAM Shares).

​

4.

Because the exchange ratio of 0.3979 BAM Shares (the “Exchange Ratio”) is fixed in connection with the Transaction and will not fluctuate as a result of changes in the value of BPY or Brookfield, an increase in the value of the BAM Shares would increase the value to be realized in respect of the BAM Share consideration to be paid in connection with the Transaction (recognizing that the inverse is also true as indicated below).

​

5.

The Transaction represents the best prospect for maximizing BPY Unitholder value over the short to medium term given current and expected macroeconomic conditions in North America (including economic uncertainty resulting from the ongoing COVID-19 pandemic and shifts to online shopping) and their potential impact on BPY.

​

6.

Canadian BPY Unitholders who make an election in respect of the receipt of BAM Shares should be able to obtain a full or partial deferral of capital gains for Canadian federal income tax purposes.

​

7.

The Fairness Opinion delivered by Lazard to the Special Committee to the effect that, as of March 31, 2021 and based upon and subject to the assumptions made, procedures followed, matters considered and other qualifications and limitations set forth therein, the Transaction Consideration to be paid to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to such Unaffiliated BPY Unitholders.

​

8.

The terms and conditions of the Transaction do not prohibit the BPY Board of Directors from taking any action that would be consistent with its obligation to properly discharge its fiduciary duties, including changing its recommendation to Unaffiliated BPY Unitholders regarding the Transaction without any obligation to pay a break fee.

​

9.

Given BAM’s confirmation that it is not prepared to pursue any alternative transactions that would result in the selling of its interest in BPY or the acquisition by a third party of the BPY Units that Brookfield does not already own, it is highly unlikely that a competing offer for equal or greater consideration could emerge.

​

10.

The likelihood (subject to BPY Unitholder approval, including Unaffiliated BPY Unitholder approval) that the Transaction will be completed, given the limited number of conditions, including the absence of any financing condition.

​

11.

If the required vote is not obtained at the meeting of BPY Unitholders, Brookfield will reimburse BPY for all of its reasonable fees, costs and expenses incurred in connection with the Transaction.

​

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Procedural Safeguards

The Special Committee also believes that adequate procedural safeguards were and are present to ensure the fairness of the Transaction to BPY and the Unaffiliated BPY Unitholders, including:

1.

In accordance with MI 61-101 (i) the Special Committee was required to, and did, select and retain Lazard and supervise the preparation of the formal valuation of the BPY Units and the New LP Preferred Units and (ii) the Transaction must be approved by (A) not less than a majority of the votes cast by BPY Unitholders present in person or represented by proxy at a special meeting and (B) at least a majority of the votes cast by the Unaffiliated BPY Unitholders at a special meeting.

​

2.

The fact that the process was conducted by, and under the oversight of, the Special Committee, which was comprised solely of independent directors, and advised by experienced, qualified and independent financial and legal advisors.

​

3.

The Special Committee and its independent legal and financial advisors engaged in extensive analysis and robust negotiations in order to obtain the best available terms for BPY, including the Unaffiliated BPY Unitholders.

​

4.

The Special Committee was able to negotiate a significantly higher purchase price (including three increases in the purchase price) relative to the original purchase price proposed in Brookfield’s initial proposal.

​

5.

Completion of the Transaction is subject to the court’s approval as to its fairness to all stakeholders (including Unaffiliated BPY Unitholders) at a hearing at which stakeholders (including Unaffiliated BPY Unitholders) are entitled to be heard by the court.

​

6.

BPY Unitholders have been provided with the right to exercise dissent rights and to be paid fair value for their BPY Units.

​

Risks and Potentially Negative Factors

The Special Committee also considered a number of risks and other potentially negative factors concerning the Transaction, including the following:

1.

BPY Unitholders will not be entitled to receive any distributions in respect of their BPY Units after the payment of the March 2021 distribution.

​

2.

The fact that no alternative transaction can be completed without the consent of BAM, and that BAM has indicated that is it not willing to support any alternative transaction. As a result, BPY did not solicit offers from other parties, as the Transaction is the only viable transaction that will provide Unaffiliated BPY Unitholders with a substantial premium for their BPY Units.

​

3.

There can be no certainty that all conditions to the Transaction will be satisfied. BAM has the right to terminate the Transaction under certain limited circumstances. The failure to complete the Transaction could negatively impact the price of BPY Units or otherwise adversely affect the business of BPY.

​

4.

The Transaction will be a partially taxable transaction for Canadian and fully taxable for U.S. federal income tax purposes and, as a result, BPY Unitholders will generally be required to pay taxes on any gain that results from the receipt of some or all of the consideration.

​

5.

Because the Exchange Ratio is fixed in connection with the Transaction and will not fluctuate as a result of changes in the value of BPY or BAM, a decline in the value of the BAM Shares would decrease the value to be realized in respect of the BAM Share consideration to be paid in connection with the Transaction.

​

27

 

6.

In light of the total amount of cash, BAM Shares and New LP Preferred Units available and the value of the cash consideration compared to the value of the BAM Shares and New LP Preferred Units, a BPY Unitholder may receive consideration with a different aggregate value and a different combination of cash, BAM Shares and New LP Preferred Units than the BPY Unitholder elects to receive.

​

The Special Committee did not retain an unaffiliated representative to act solely on behalf of the Unaffiliated BPY Unitholders for purposes of negotiating the terms of the Transaction. However, the Special Committee retained Lazard as independent financial advisor to prepare the Valuation and Fairness Opinion.

The foregoing factors are not intended to be exhaustive, but include the material factors considered by the Special Committee in making its determinations and recommendations. The Special Committee did not consider it practicable to, and did not, assign specific weights to any of the factors considered in reaching their determinations and recommendations, and individual members of the Special Committee may have given different weights to different factors. The above factors are not presented in any order of priority.

Recommendations of the Special Committee

As a result of the foregoing process and after having carefully considered and weighed all relevant benefits, risks and other factors (including those set forth above), the Special Committee unanimously

•

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

​

•

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

​

•

recommended that the BPY Board of Directors approve the Transaction and recommend that the Unaffiliated BPY Unitholders vote in favor of the Transaction Resolutions.

​

Remuneration

For their services in reviewing and considering the Transaction on behalf of BPY, the independent directors of the BPY Board of Directors, other than the members of the Special Committee, determined that BPY will pay $100,000 to each of the members of the Special Committee. Such payments are not contingent upon the completion of the Transaction.

Interests of Certain Persons in the Transaction

Interlocking Directors and Officers. In considering the Transaction and any position taken by BPY with respect to the Transaction, BPY Unitholders should be aware that certain directors of the BPY Board of Directors have interests in connection with the Transaction, which may present them with certain actual or potential conflicts of interest. Jeffrey M. Blidner has served as a director of BAM since May 2013. Mr. Blidner is a Vice Chairman of BAM. Mr. Blidner is also Chairman of the general partner of Brookfield Renewable Partners L.P. and the general partner of Brookfield Business Partners L.P. and a director of BPY and the general partner of Brookfield Infrastructure Partners L.P. Accordingly, Jeffrey M. Blidner declared his interest in and did not participate in deliberations on, and abstained from voting in respect of resolutions relating to, the Transaction. Louis J. Maroun has served as a director of the general partner of Brookfield Renewable Partners L.P., which is another subsidiary of BAM, since August 2011. The BPY Board of Directors considered Mr. Maroun’s inclusion on the Special Committee in light of MI 61-101, the Companion Policy to MI 61-101 and Multilateral CSA Staff Notice 61-302 — Staff Review and Commentary on MI 61-101, noting that a special committee of entirely “independent directors” ​(for purposes of Part 7 of MI 61-101) is advisable, but not required, in connection with the Transaction, and determined that (i) Mr. Maroun possessed experience and expertise that was expected to be beneficial to the Special Committee’s role in the Transaction, (ii) notwithstanding his directorship with an affiliate of Brookfield, Mr. Maroun is free from interference and undue influence by persons with a conflict of interest in respect of the Transaction and (iii) there were additional mechanisms to ensure that the interests of Unaffiliated BPY Unitholders would be appropriately taken into account. See also “Beneficial Ownership of and Trading in Securities” for the ownership of BPY Units by the directors and officers of BPY and the Purchaser Parties.

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Certain Interests of the Purchaser Parties.   The Purchaser Parties have certain interests that present actual or potential conflicts of interest in connection with the Transaction, including that their financial interests with regard to the Transaction Consideration are generally adverse to the financial interests of the Unaffiliated BPY Unitholders being asked to vote in favor of the Transaction Resolutions. Due to the nature of the Transaction, it was determined at the outset of the transaction that it would be appropriate for members of the BPY Board of Directors who are also members of the BAM Board of Directors or officers of Brookfield, or otherwise have interests that present actual or potential conflicts of interest in connection with the transaction to have no role in reviewing and considering the transaction on behalf of BPY. Accordingly, Jeffrey M. Blidner declared his interest in and did not participate in deliberations on, and abstained from voting in respect of resolutions relating to, the Transaction.

Financial Interests.   The interests of the Purchaser Parties in respect of the Transaction are different from the interests of Unaffiliated BPY Unitholders because such entities have an interest in acquiring the Units for as low a price as possible and Unitholders have an interest in selling their Units for as high a price as possible. The interests of the directors, officers and other affiliates of the Purchaser Parties in the Transaction may be the same as or different from the interests of Unitholders. For example, while in general the interests of the Purchaser Parties’ respective directors and officers in respect of the Transaction will be aligned with such entities’ respective interests, some of such persons own Units or hold BPY Options or Tracking Share Options exercisable for Units, which Units, including Units acquired following an exercise of BPY Options or Tracking Share Options, they are entitled to deposit to the Transaction for the same price per Unit that is available to Unitholders, and/or hold Restricted BPY Units or DSUs with a value derived from the value of the Units.

BPY Options, Tracking Share Options, DSUs and Restricted BPY Units.   Certain officers of BPY hold BPY Options, Tracking Share Options, DSUs and Restricted BPY Units. All vested BPY Options and Tracking Share Options may be exercised in accordance with their terms, and holders of BPY Units acquired thereby may vote at the Meeting or exercise Dissent Rights pursuant to the Plan of Arrangement. Pursuant to the Plan of Arrangement, options and other share based compensation awards outstanding at BPY will be exchanged for cash and/or converted into the following interests in BAM:

•

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

​

•

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

​

•

Unvested Restricted BPY Units and Restricted Canadian BPY Units will be transferred to BAM in exchange for the BAM Share Consideration, and such BAM Shares will be subject to the same transfer restrictions, vesting, forfeiture and other terms and conditions as were applicable to the Restricted BPY Units prior to such exchange.

​

Restricted BPYU Shares.   Certain officers of BPY and BPYU hold restricted BPYU Shares granted under and subject to the terms of the Brookfield Property Group Restricted BPR Class A Stock Plan, as amended. Each holder of such restricted BPYU Shares will be able to elect to receive the Default Consideration or a number of BAM Shares having an equal value. The pro-rated Default Consideration or BAM Shares received in exchange for such holders’ unvested restricted BPYU Shares at the closing of the Transaction will be restricted and subject to the same transfer restrictions, vesting, forfeiture and other terms and conditions of the Brookfield Property Group Restricted BPR Class A Stock Plan that were applicable to the unvested restricted BPYU Shares prior to the closing of the Transaction.

Indemnification.   BPY expects that all rights to indemnification, advancement of expenses and exculpation currently in effect in favor of the present and former BPY Board of Directors and officers of the BPY General Partner, including on the terms provided in the BPY LPA, with respect to matters occurring prior to the consummation of the Transaction will survive the consummation of the Transaction and continue in full force and effect thereafter.

Insofar as indemnification for liabilities arising under the U.S. Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrants

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have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the U.S. Securities Act and is therefore unenforceable.

Summary of the Valuation and the Fairness Opinion

The following constitutes only a summary of the Valuation and the Fairness Opinion which were prepared by Lazard for the use of the Special Committee in connection with the Transaction. The Valuation has been prepared as of March 31, 2021 for the use of the Special Committee and for inclusion in this Document. The Fairness Opinion has been prepared as of March 31, 2021 for the use of the Special Committee and for inclusion in this Document. The following summaries are qualified in their entirety by the full text of the Valuation and the Fairness Opinion. A copy of the Valuation is attached hereto as Appendix H and a copy of the Fairness Opinion is attached hereto as Appendix I to this Document. The Valuation and the Fairness Opinion are incorporated by reference herein. BPY Unitholders are urged to read the full text of the Valuation and the Fairness Opinion and should consider the same in their entirety. Neither the Valuation nor the Fairness Opinion constitutes a recommendation to any BPY Unitholder as to how such BPY Unitholder should vote with respect to the Transaction Resolutions or any other matter.

Lazard was formally engaged by the Special Committee through an engagement agreement between the Special Committee and Lazard effective as of January 18, 2021. Pursuant to the engagement agreement, Lazard was paid certain fees by BPY for its services as advisor and independent valuator, including a fee upon delivery of the Valuation and the Fairness Opinion, no part of which was contingent upon the conclusions reached in the Valuation or the Fairness Opinion, or upon the completion of the Transaction. In addition, BPY agreed to reimburse Lazard for its reasonable expenses and to indemnify Lazard in respect of certain liabilities that might arise in connection with its engagement.

Lazard has been involved in a significant number of transactions involving private and publicly traded companies and has extensive experience in preparing valuations and fairness opinions. Lazard is independent of all “interested parties” ​(as defined in MI 61-101) to the Transaction, in accordance with the requirements of MI 61-101. Neither Lazard nor any of its “affiliated entities” ​(as defined in MI 61-101): (a) is an “associated entity” or “affiliated entity” or “issuer insider” of any “interested party” ​(as such terms are defined for the purposes of MI 61-101); (b) is an advisor to any “interested party” in connection with the Transaction; (c) will receive compensation that will depend in whole or in part on the conclusions reached in the Valuation or the Fairness Opinion or on the completion of the Transaction; (d) is a manager or co-manager of a soliciting dealer group for the Transaction (or a member of a soliciting dealer group for the Transaction providing services beyond the customary soliciting dealer’s functions or receiving more than the per security or per security holder fees payable to the other members of the group); (e) is the external auditor of the Company or any “interested party”; or (f) has any other material financial interest in the completion of the Transaction.

The Special Committee considered the nature and extent of Lazard’s previous financial advisory mandates for Brookfield, BPY and its subsidiaries in the last three years and certain other relationship disclosure provided by Lazard. Lazard advised the Special Committee that it and its affiliates have in the past provided and in the future may provide certain investment banking services to Brookfield, for which it has received and may receive compensation, including, during the past two years, having providing advisory services to an affiliate of BAM in connection with an acquisition and certain restructuring matters in which an affiliate of BAM was a lender. The Special Committee assessed all such mandates and determined that they were not material and would not reasonably interfere with the exercise of Lazard’s independent judgment in respect of the Transaction. Lazard also orally confirmed its qualifications to act as the independent valuator pursuant to MI 61-101, which was subsequently confirmed in its engagement agreement. Based on the foregoing, Lazard has been determined to be qualified and independent for the purposes of MI 61-101 in providing the Valuation and the Fairness Opinion.

At the meeting of the Special Committee on March 31, 2021, Lazard delivered an oral opinion, which was subsequently confirmed in writing, to the effect that, as of March 31, 2021 and based upon and subject to the assumptions made, procedures followed, matters considered and other qualifications and limitations set forth therein, the Transaction Consideration to be paid to the Unaffiliated BPY Unitholders pursuant to the Arrangement was fair, from a financial point of view, to such Unaffiliated BPY Unitholders.

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At the meeting of the Special Committee on March 31, 2021, Lazard also delivered an oral formal valuation of each of the BPY Units and the New LP Preferred Units, which was subsequently confirmed in writing. Lazard concluded that, as of March 31, 2021, and based upon and subject to the assumptions made, procedures followed, matters considered and other qualifications and limitations set forth therein, (i) the fair market value of the BPY Units was in the range of $14.00 to $18.50 per BPY Unit and (ii) the fair market value of the New LP Preferred Units was expected to be approximately $25.00 per New LP Preferred Unit.

Scope of Review

In connection with the Valuation, Lazard:

(i)

reviewed the financial terms and conditions of a draft, dated March 31, 2021, of the Arrangement Agreement;

​

(ii)

reviewed certain publicly available historical business and financial information relating to BPY and BAM;

​

(iii)

reviewed various financial forecasts and other data provided to Lazard by management of BPY relating to the business of BPY (the “Forecasts”);

​

(iv)

held discussions with members of the senior management of BPY with respect to the business and prospects of BPY;

​

(v)

reviewed public information with respect to certain other entities in lines of business Lazard believed to be generally relevant in evaluating the business of BPY;

​

(vi)

reviewed the financial terms and historical trading prices of preferred equity securities of certain other entities in lines of business Lazard believed to be generally relevant in evaluating the New LP Preferred Units;

​

(vii)

reviewed the financial terms of certain business combinations involving entities in lines of business Lazard believed to be generally relevant in evaluating the business of BPY;

​

(viii)

reviewed historical stock prices and trading volumes of BPY Units, BPY preferred equity securities and BAM Shares; and

​

(ix)

conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.

​

Lazard was not, to the best of its knowledge, denied access by BPY or its general partner to any material information it requested. Lazard requested certain asset-level information from BPY to confirm its understanding of the Forecasts, but was not provided such information. However, Lazard concluded, based on its experience and professional judgement, that having access to such information was not material to its analysis.

Valuation Assumptions and Limitations

The Valuation is subject to the assumptions and limitations set out below.

With the Special Committee’s acknowledgement and agreement as provided for in Lazard’s engagement agreement, Lazard assumed and relied upon, without independent verification, the accuracy and completeness of the information and data publicly available (including on SEDAR and/or EDGAR, supplied or otherwise made available to, or reviewed by or discussed with, Lazard by or on behalf of the Special Committee, BPY, BAM or any other participant in the Transaction or otherwise reviewed by Lazard, including the certificate identified below (collectively, the “Information”). The Valuation is conditional upon such accuracy and completeness. With respect to the Forecasts utilized in Lazard’s analyses, Lazard assumed, with the consent of the Special Committee, that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments as to the future financial performance of BPY. Lazard assumed no responsibility for and expressed no view as to any such forecasts or the assumptions on which they are based, including with respect to the potential effects of the COVID-19 pandemic on such forecasts or assumptions. Subject to the exercise of professional judgment and except as expressly described in the Valuation, Lazard has not attempted

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to verify independently the accuracy or completeness of any of the Information and has not made any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of BPY or BAM, nor has Lazard been furnished with any such evaluation or appraisal. Lazard has assumed the accuracy and fair presentation of, and relied upon, BPY’s audited financial statements and the reports of the auditors thereon and BPY’s unaudited interim financial statements.

Senior officers of BPY, in their capacities as officers of BPY and the general partner and not in their individual capacities, represented to Lazard in a certificate dated the date of the Valuation that:

(a)

BPY has no information or knowledge of any facts not specifically provided to Lazard relating to BPY, its subsidiaries (as defined in National Instrument 62-104 Take-Over Bids and Issuer Bids of the Canadian Securities Administrators) or its or their assets, liabilities, affairs, business, operations, prospects or condition (financial or otherwise) which would reasonably be expected to affect the Valuation in any material respect;

​

(b)

subject to (d) below regarding budgets, forecasts, projections and estimates, the information and data and other material as filed under BPY’s profile on SEDAR or EDGAR and/or supplied or otherwise made available to Lazard by or on behalf of BPY (the “BPY Information”) provided orally by, or in the presence of, an officer of BPY or its general partner or in writing by BPY, its general partner or any of their respective subsidiaries or representatives to Lazard for the purpose of preparing the Valuation is, or in the case of historical BPY Information, was at the date of preparation, complete, true and accurate in all material respects, and does not and did not contain any untrue statement of a material fact in respect of BPY, its subsidiaries or the Transaction and does not and did not omit to state a material fact in respect of BPY, its subsidiaries or the Transaction necessary to make the BPY Information or any statement therein not misleading in light of the circumstances under which the BPY Information was provided or any such statement was made;

​

(c)

since the date on which such BPY Information was provided to Lazard, except as disclosed in writing to Lazard, there has been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of BPY and its subsidiaries, taken as a whole, and no change has occurred in the BPY Information or any part thereof which would have or which would reasonably be expected to have a material effect on the Valuation and there is no plan or proposal by BPY for any material change in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of BPY or any of its subsidiaries which has not been disclosed to Lazard;

​

(d)

with respect to any portion of the BPY Information that constitute budgets, forecasts, projections, and/or estimates, such budgets, forecasts, projections and/or estimates: (i) were prepared using the assumptions identified therein, which in the reasonable belief of management of BPY are (or were at the time of preparation and continue to be) reasonable in the circumstances; (ii) were prepared on a basis reflecting the best currently available estimates and judgements of management of BPY as to matters covered thereby at the time thereof; (iii) reasonably present the views of management of BPY of the financial prospects and forecasted performance of BPY and its subsidiaries and are consistent, in all material respects, with the historical operating experience of BPY and its subsidiaries; and (iv) are not, in the reasonable belief of management of BPY, misleading in any material respect in light of the assumptions used or in light of any developments since the time of their preparation;

​

(e)

all financial material, documentation and other data concerning the Transaction, BPY or its subsidiaries, including any projections or forecasts provided to Lazard by or on behalf of BPY, were prepared on a basis consistent in all material respects with the accounting policies applied in the most recent audited consolidated financial statements of BPY;

​

(f)

the contents of any and all documents prepared in connection with the Transaction for filing with regulatory authorities or delivery or communication to securityholders of BPY have been, are and will be true, complete and correct in all material respects and have not and will not contain any misrepresentation (as defined in the Securities Act (Ontario)) and such documents have complied, comply and will comply with all requirements under applicable laws;

​

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(g)

to the best of their knowledge, after reasonable inquiry, there are no “prior valuations” ​(as defined in MI 61-101) of BPY, or of its securities or material assets, which have been prepared as of a date within two years preceding the date of the Valuation;

​

(h)

since the dates on which BPY Information was provided to Lazard (or filed on SEDAR and/or EDGAR), no material transaction has been entered into by BPY or any of its subsidiaries which has not been disclosed to Lazard;

​

(i)

to the best of their knowledge, after reasonable inquiry, there have been no written or verbal offers for, or proposed transactions involving, all or a material part of the properties and assets owned by, or the securities of, BPY or of any of its subsidiaries and no negotiations have occurred relating to any such offers or transactions within two years preceding the date on which the proposed acquisition of the BPY Units was first publicly announced which have not been disclosed to Lazard;

​

(j)

other than as disclosed in the BPY Information, neither BPY nor any of its subsidiaries has any material contingent liabilities and there are no actions, suits, claims, proceedings, investigations, or inquiries pending or, to the best of such officers’ knowledge, threatened against or affecting the Transaction, BPY or any of its subsidiaries at law or in equity or before or by any federal, national, provincial, state, municipal or other governmental department, commission, bureau, board, agency or instrumentality which would reasonably be expected to, in any way, materially adversely affect the Transaction or BPY and its subsidiaries, taken as a whole;

​

(k)

the representations and warranties made by BPY and, to the best of their knowledge, by the Purchaser Parties in the Agreement relating to the Transaction are true and correct in all material respects; and

​

(l)

to the best of their knowledge, after reasonable inquiry, there are no agreements, undertakings, commitments or understandings (whether written or oral, formal or informal) relating to the Transaction, except as have been disclosed to Lazard.

​

The Valuation has been provided solely for the use of the Special Committee (in its capacity as such) in connection with its evaluation of the Transaction. The Valuation is not intended to be, and does not constitute, a recommendation to the members of the Special Committee as to whether they should approve the Transaction or to any holder of a security of BPY or its affiliates as to whether or how such holder should vote in respect of the Transaction or otherwise, or whether to take any other action with respect to the Transaction. In advising the Special Committee and preparing the Valuation, Lazard was not authorized to, and Lazard did not, solicit indications of interest from third parties regarding a potential transaction with BPY. The Valuation does not address the relative merits of the Transaction as compared to other transactions or business strategies that might be available to BPY or the merits of the underlying decision by BPY to engage in the Transaction. Lazard expressed no opinion with respect to the future trading prices of securities of BPY, BAM or any of their affiliates.

The Valuation is rendered as of March 31, 2021 on the basis of securities markets, economic and general business and financial conditions prevailing on that date and the condition and prospects, financial and otherwise, of BPY and its affiliates as they were reflected in the Information provided to Lazard. Any changes therein may affect the Valuation and, although Lazard reserves the right to change or withdraw the Valuation in such event, Lazard disclaims any undertaking or obligation to advise any person of any such change that may come to its attention after such date or to change or withdraw the Valuation. Lazard further notes that the current volatility and disruption in the credit and financial markets relating to, among other things, the COVID-19 pandemic, may or may not have an effect on BPY or the Purchaser Parties and Lazard expressed no opinion as to the effects of such volatility or such disruption on BPY or the Purchaser Parties. In its analysis in connection with the preparation of the Valuation, Lazard made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which are beyond the control of Lazard, BPY or BAM.

Lazard assumed, with the consent of the Special Committee, that the Transaction will be consummated on the terms described in the Arrangement Agreement, without any waiver or modification of any material terms or conditions. Representatives of the Special Committee advised Lazard, and Lazard assumed, that the

33

 

Arrangement Agreement, when executed, would conform to the draft reviewed by Lazard in all material respects. Lazard also assumed, with the consent of the Special Committee, that obtaining the necessary governmental, regulatory or third party approvals and consents for the Transaction would not have an adverse effect on BPY, BAM or the Transaction. Lazard did not express any opinion as to any tax or other consequences that might result from the Transaction, nor did Lazard’s opinion address any legal, tax, regulatory or accounting matters, as to which Lazard understood that BPY obtained such advice as it deemed necessary from qualified professionals. Lazard relied upon, without independent verification, the assessment of the Special Committee and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Lazard expressed no view or opinion as to any terms or other aspects of the Transaction, including, without limitation, the form or structure of the Transaction, any agreements or arrangements entered into in connection with, or contemplated by, the Transaction or the election which holders of BPY Units (other than BAM and its affiliates) may make in respect of the Type of Consideration to receive. Lazard assumed, with the consent of the Special Committee, that adjustments (if any) to the Consideration will not be material in any respect to its analyses or opinion. In addition, Lazard expressed no view or opinion as to the fairness of the amount or nature of, or any other aspects relating to, the compensation to any officers, directors or employees of any parties to the Transaction, or class of such persons, relative to the consideration payable to holders of BPY Units or otherwise.

The preparation of a valuation is a complex process and is not necessarily amenable to partial analysis or summary description. Lazard believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by Lazard, without considering all factors and analyses together, could create an incomplete view of the process underlying the Valuation. Accordingly, the Valuation should be read in its entirety.

Overview of BPY

BPY was established on January 3, 2013 as a Bermuda exempted limited partnership registered under the Bermuda Limited Partnership Act and the Bermuda Exempted Partnerships Act. BPY is BAM’s primary vehicle to make investments across all strategies in real estate, with approximately $88 billion in total assets as of the date of the Valuation.

As of the date of the Valuation, BPY’s core office portfolio (“Core Office”) consisted of interests in 135 high-quality office properties totaling approximately 96 million square feet, located primarily in the world’s leading commercial markets such as New York, London, Los Angeles, Washington, D.C., Sydney, Toronto, and Berlin, as well as approximately 8 million square feet of active office and multifamily developments and office redevelopments. As of the date of the Valuation, BPY’s core retail portfolio (“Core Retail”) consisted of 122 best-in-class retail properties containing over 120 million square feet in the United States. As of the date of the Valuation, BPY’s limited partnership investments portfolio (“LP Investments”) included its equity invested in real estate opportunity funds sponsored by BAM and/or one or more of its subsidiaries (other than BPY) which target high quality assets with operational upside across various real estate sectors, including office, retail, multifamily, logistics, hospitality, triple net lease, manufactured housing and student housing.

Certain wholly-owned subsidiaries of BAM provide management and administration services to BPY under long-term arrangements. The BPY Units trade on the TSX under the symbol “BPY.UN” and on the Nasdaq under the symbol “BPY”.

Definition and Approach to Fair Market Value

The Valuation is based upon techniques and assumptions that Lazard considered appropriate in the circumstances for the purposes of arriving at an opinion as to the fair market value of the BPY Units and New LP Preferred Units.

Lazard approached the Valuation in accordance with MI 61-101 which, in the case of a business combination such as the Transaction, requires the valuator to make a determination as to the “fair market value” of the affected securities (i.e., the BPY Units) and any non-cash consideration that does not meet the criteria in s. 6.3(2) of MI 61-101 for an exemption from valuation (i.e., the New LP Preferred Units). Lazard understood that it was determined by BPY that the BAM Shares are exempt from valuation due to being

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liquid securities of a Canadian reporting issuer, as well as meeting the other applicable criteria set out in s. 6.3(2) of MI 61-101 (including receiving an oral opinion from Lazard that the valuation of the BAM Shares is not required).

MI 61-101 defines “fair market value” as the monetary consideration that, in an open and unrestricted market, a prudent and informed buyer would pay a prudent and informed seller, each acting at arm’s length with the other and under no compulsion to act. In accordance with MI 61 101, Lazard made no downward adjustment to the fair market value to reflect the liquidity of the securities, the effect of the Transaction on the securities, or the fact that the BPY Units not held by BAM and its affiliates do not form part of a controlling interest. Consequently, in respect of the BPY Units, the Valuation provides a conclusion on a per security basis with respect to BPY’s “en bloc” value, being the price at which all of the BPY Units could be sold to one or more buyers at the same time.

Valuation of the BPY Units

Valuation Approach and Methodologies

In determining the fair market value of the BPY Units, Lazard primarily relied on a sum-of-the-parts valuation analysis based on discounted cash flow (“DCF”) and comparable entity public trading analysis approaches. Lazard also reviewed and considered valuation reference points such as the average discount to net asset value (“NAV”) calculated pursuant to IFRS (“IFRS NAV”), historical trading analysis, equity research analysts’ price targets of the BPY Units, comparable entity trading premium/discounts to consensus NAV and a premiums paid analysis.

The summary of the analyses and reviews provided below includes information presented in tabular format. To fully understand Lazard’s analyses and reviews, the tables must be read together with the full text of each summary. The tables alone do not constitute a complete description of Lazard’s analyses and reviews. Considering the data in the tables below without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Lazard’s analyses and reviews.

Application of Valuation Methodologies to the BPY Units

Lazard performed a sum-of-the-parts analysis of BPY. A sum-of-the-parts valuation analysis reviews an entity’s operating performance and outlook on a segment-by-segment basis to determine an implied market value for the enterprise as a whole.

BPY is made up of four segments:

•

Core Office;

​

•

Core Retail;

​

•

LP Investments; and

​

•

undeveloped land, condominium and other assets (“Land & Other”).

​

Lazard performed the sum-of-the-parts valuation analysis by (i) performing a DCF analysis for the Core Office and Core Retail segments, using the BPY-marked values for the LP Investment segment and using BPY’s book values of the Land & Other segment and (ii) applying comparable entity trading multiples to perform a valuation analysis of the Core Office and Core Retail segments, using the BPY-marked values for the LP Investment segment and using BPY’s book values of the Land & Other segment. For the LP Investments and Land & Other segments, such aggregate values were $12.5 billion and $1.0 billion, respectively, as of December 31, 2020 (being the last date for which such information was available), in each case as provided by BPY management.

Discounted Cash Flow Analysis

A discounted cash flow analysis is a valuation methodology used to derive an intrinsic valuation of an entity by calculating the present value of its estimated future cash flows. “Future cash flows” refers to projected unlevered free cash flows of an entity (calculated by beginning with earnings before interest, taxes, depreciation

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

•

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

​

•

the estimated value of each applicable segment at the end of fiscal year 2024, known as the “terminal value”.

​

The following is a summary of the unlevered free cash flow projections, excluding synergies, based on BPY management projections and used in the discounted cash flow analysis:

Lazard then selected and applied a range of capitalization rates of 5.25% to 6.25% (in the case of the Core Office segment) and 6.0% to 6.5% (in the case of the Core Retail segment) to the respective segment’s estimated share of recurring 2025 net operating income, as provided by BPY management, to calculate the terminal value of each segment as of December 31, 2024. Lazard selected the range of capitalization rates applied to the terminal year net operating income based on its analysis of the implied historical capitalization rates of the select comparable entities (as defined below), as adjusted based on its professional judgment and experience, and further informed by reported capitalization rates for select asset-level transactions.

For its discounted cash flow calculations, Lazard applied discount rates ranging from 5.0% to 6.0% (in the case of the Core Office segment) and 6.25% to 7.25% (in the case of the Core Retail segment) to the respective segment’s estimated share of future cash flows, as provided by BPY management. Such discount rates were based on its estimated range of the weighted average cost of capital for each of the Core Office and

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Core Retail segments, derived from a number of factors using the Capital Asset Pricing Model, taking into account certain metrics, including, among others, the applicable risk-free rate of return, unlevered risk profile, cost of long-term debt and leverage ratio of each of the Core Office and Core Retail segments and the respective select comparable entities for each segment.

Lazard then calculated an enterprise value range for a valuation date of December 31, 2020 for BPY by taking the sum of the estimated discounted cash flows (including the net present value of the implied terminal value) for the Core Office and Core Retail segments and adjusting for the value of the LP Investments and Land & Other segments and an amount in respect of net tangible other assets as of December 31, 2020 (being the last date for which such information was available), as provided by BPY management.

Lazard then calculated an equity value range for BPY by taking the implied enterprise value range and (i) subtracting the outstanding principal amount of BPY’s share of asset-level debt, (ii) subtracting the outstanding principal amount of BPY’s share of corporate debt, (iii) subtracting the outstanding principal amount due to the holders of BPY’s capital securities, as adjusted for mandatorily convertible securities, (iv) subtracting the outstanding principal amount due to the holders of preferred equity, (v) subtracting the outstanding amount due in respect of BPY’s first quarter dividend, and (vi) adding BPY’s cash and cash equivalents, in each case as provided by BPY management as of December 31, 2020. Lazard divided the resulting equity value range by 1,006,104,628, the fully diluted number of BPY Units outstanding as of December 31, 2020, as provided by BPY management, to estimate an implied price range per BPY Unit.

Comparable Entities Public Trading Analysis

Lazard also applied comparable entity multiples to perform a valuation analysis of the Core Office and Core Retail segments.

Lazard reviewed various financial multiples and ratios of selected publicly traded entities that Lazard believed, based on its experience with entities operating in the office and retail segments and its professional judgment, to be relevant for purposes of this analysis, considered such entities’ property portfolios, operations, lines of business, markets, sizes and geographies, and applied such multiples to the applicable estimated FFO for 2021 for the Core Office and Core Retail segments as set forth in the financial projections prepared by BPY management.

The selected group of entities Lazard reviewed (the “select comparable entities”), were:

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Lazard selected the entities reviewed in this analysis because, among other things, the select comparable entities operate businesses similar to the applicable segment of BPY. However, no selected entity is identical to the applicable segment of BPY and certain of these entities may have characteristics that are materially different from those of such segments. Accordingly, Lazard believes that purely quantitative analyses are not, in isolation, determinative in the context of the Transaction and that qualitative judgments concerning differences between the businesses, financial and operating characteristics and prospects of each segment of BPY and the select comparable entities are also relevant.

For each of the select comparable entities, Lazard calculated the ratio of such entity’s closing trading price, as of (i) March 26, 2021 (the last trading day before the announcement of the Transactions), (ii) December 31, 2020 (the last trading day prior to the announcement that BAM was pursuing the Transaction), and (iii) on an average basis as observed over historical one-year, three-year and five-year periods to each entity’s estimated FFO for the next 12-month period (the “NTM FFO”). The NTM FFO estimates for the select comparable entities used by Lazard in its analysis were based on publicly available equity research estimates.

Lazard then observed the average of these ratios across the select comparable entities. The following table summarizes the results of this review for the select comparable entities:

*

The last trading day before the announcement of the Transaction.

​

**

The last trading day prior to the announcement that BAM was pursuing the Transaction.

​

Lazard then selected and applied a range of FFO multiples of (i) 14.0x to 17.0x for the Core Office segment and 8.5x to 12.0x for the Core Retail segment, in each case to the applicable segment’s estimated 2021 FFO, as set forth in the Forecasts provided by BPY management, and (ii) 15.0x to 18.0x for the Core Office segment and 9.0x to 11.5x for the Core Retail segment for the 3-year average, to the applicable segment’s estimated 2021 FFO, as set forth in the Forecasts provided by BPY management. Lazard selected the range of FFO multiples applied to each of the Core Office and Core Retail segments based on its analysis of the FFO multiples of the select comparable entities as of March 26, 2021, the last trading day prior to the announcement of the Transaction, and based on its professional judgment and experience.

From this analysis, Lazard estimated an implied equity value ranges for BPY by taking the sum of implied equity value ranges for the Core Office and Core Retail segments and adjusting for the equity value of the LP Investments and Land & Other segments and an amount in respect of net tangible other assets as of December 31, 2020 (being the last date for which such information was available), as provided by BPY management. Lazard then subtracted (i) the outstanding principal amount of BPY’s share of corporate debt, (ii) the outstanding principal amount due to the holders of BPY’s capital securities, as adjusted for mandatorily convertible securities, (iii) the outstanding principal amount due to the holders of preferred equity and (iv) the outstanding amount due in respect of BPY’s first quarter dividend, and added BPY’s cash and cash equivalents, in each case as provided by BPY management as of December 31, 2020. Lazard divided the resulting equity value ranges by 1,006,104,628, the fully diluted number of BPY Units outstanding as of December 31, 2020, as provided by BPY management, to estimate implied price ranges per BPY Unit.

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Other Valuation Reference Points

Lazard also reviewed the following valuation reference points.

Average IFRS NAV Discount

BPY has historically traded at a consistent and significant discount to its IFRS NAV per BPY Unit. BPY’s average trading discount to IFRS NAV per BPY Unit from inception until the announcement by BAM on January 4, 2021 that it was pursuing the transaction was 29.7%. Its average trading discount to IFRS NAV per BPY Unit for the year ended December 31, 2020 was 52.3%. Based on these data points and BPY’s IFRS NAV per BPY Unit as of December 31, 2020 of $26.65, a range of value for a BPY Unit of $12.71 to $18.73 is implied.

Historical Trading Analysis

Lazard reviewed historical trading prices of the BPY Units on the TSX and Nasdaq for the 52 weeks ending December 31, 2020, the last trading day prior to BAM announcing its intention to pursue the Transaction. Over this twelve-month period, the BPY Units traded in a band achieving a low of $7.25 and a high of $19.99 per BPY Unit.

Equity Research Analysts’ Price Targets

Lazard reviewed five available public market trading price targets for BPY Units published by equity research analysts prior to and following BAM announcing its intention to pursue to the Transaction. Equity research analyst price targets reflect each analyst’s estimate of the future public market trading price of the BPY Units at the time the price target is published. Of the reviewed price targets issued prior to BAM announcing its intention to pursue the Transaction, the lowest price target was $12.00 and the highest was $18.00. Following BAM’s announcement, the lowest price target was $17.00 and the highest was $18.00.

Comparable Entity Trading Premium/Discounts to Consensus NAV

Lazard compared the closing price of the equity securities of the select comparable entities as of March 26, 2021 to their respective NAV estimates based on research analyst consensus estimates as of such date (“Consensus NAV”), where available, to determine whether such securities traded at a premium or discount to Consensus NAV. All such securities were found to be trading at a discount to Consensus NAV, with the minimum discount to Consensus NAV being 0.2% and the maximum discount being 43.9%. Based on these data points and BPY’s consensus NAV estimate per BPY Unit as of December 31, 2020 of $19.27, a range of value for a BPY Unit of $10.80 to $19.24 is implied.

Premiums Paid Analysis

Lazard reviewed the transaction premiums paid over the unaffected security price for 35 completed change of control transactions for North American real estate targets over the past ten years with a total transaction value greater than $1 billion and cash consideration greater than 50%. Lazard calculated the 25th percentile and 75th percentile premia by comparing, to the extent publicly available, the per share acquisition price to the relevant target entity’s closing share price on the date prior to the announcement of the transaction, or other relevant date as referenced in public filings for the respective transaction, referred to as the “undisturbed date”. Based on a premium range of 14.6% to 29.7% implied by the 25th and 75th percentiles of such transactions and the closing price per BPY Unit on December 31, 2020, the last trading day before BAM announced its intention to pursue the Transaction, of $14.47, a range of value for the BPY Units of $16.58 to $18.77 was implied.

Benefits to BAM of Acquiring BPY Units Held by Holders Other than the Purchaser Parties and Their Affiliates

In accordance with MI 61-101, in arriving at its opinion of the value of the BPY Units Lazard reviewed and considered whether any distinctive material value would accrue to the Purchaser Parties through the acquisition of all of the BPY Units not already held by them or their affiliates in the Transaction. Based on the

39

 

Information and discussions with BPY management, Lazard were not aware of any material specific operational or financial benefits that would accrue to the Purchaser Parties, such as the earlier use of available tax losses, lower income tax rates, increased revenues, higher asset utilization or any other operational or financial benefits, other than the elimination of public company costs and certain duplicative management expenses.

Fair Market Value of the BPY Units

In arriving at an opinion of fair market value of the BPY Units, Lazard did not attribute any particular weight to any specific factor but have made qualitative judgments based on its experience in rendering such opinions and on circumstances prevailing as to the significance and relevance of each factor. Lazard did, however, ascribe the greatest amount of importance to the sum-of-the-parts discounted cash flow analysis.

Based upon and subject to the foregoing, in addition to other factors considered relevant, Lazard was of the opinion that, as of March 31, 2021, the fair market value of the BPY Units, on an “en bloc” basis, was in the range of $14.00 to $18.50 per BPY Unit.

Valuation of the New LP Preferred Units

Valuation Approach and Methodologies

In determining the fair market value of the New LP Preferred Units, Lazard relied on a comparable securities public trading analysis.

Application of Valuation Methodologies to the New LP Preferred Units

Lazard reviewed the proposed terms of the New LP Preferred Units to identify their key features, including that they will be 60-year term preferred units with a liquidation preference/par value of $25.00 and a distribution rate intending to match the yield on the existing BPY perpetual preferred units (to be determined at the time the registration statement registering the New LP Preferred Units is declared effective).

Lazard reviewed the market price of the following existing BPY perpetual preferred units with a liquidation preference/par value of $25.00 relative to such par value.

Lazard also reviewed the available market prices of other existing BPY perpetual preferred units issued by BPY’s various subsidiaries, which varied due to their terms and available liquidity, among other factors.

Lazard further reviewed the market price of over 50 series of preferred securities of North American real estate entities with a total enterprise value greater than $5 billion. For each of these securities Lazard calculated the estimated first and last dollar leverage levels on a net debt to total enterprise value and net debt plus preferred to total enterprise value basis across all of each issuer’s outstanding securities as of March 26, 2021. Lazard then observed the average market prices as a percentage of par value and coupon rates for these securities stratified by net debt plus preferred to total enterprise value.

Fair Market Value of the New LP Preferred Units

Based upon and subject to the foregoing, in addition to other factors considered relevant, Lazard was of the opinion that, as of March 31, 2021, the fair market value of the New LP Preferred Units was approximately $25.00 per New LP Preferred Unit.

Prior Valuations

To the knowledge of the directors and senior officers of BPY General Partner, after reasonable enquiry, other than the Valuation, there have been no “prior valuations” ​(as defined in MI 61-101) prepared in respect

40

 

of BPY, the BPY Units, any material assets of BPY or the New LP Preferred Units during the 24 months prior to the date of this Circular.

Certain Unaudited Financial Projections

BPY does not as a matter of course make public projections as to future sales, earnings or other results. However, the management of Brookfield Property Group has prepared the financial projections of BPY set forth below and provided such projections to Lazard in connection with its preparation of the Valuation and the Fairness Opinion. Such financial projections were also provided to BAM. The accompanying financial projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of management of Brookfield Property Group, were prepared on a reasonable basis, reflect the best currently available estimates and judgments, and present, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of BPY. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this document are cautioned not to place undue reliance on the financial projections.

Neither BPY’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the financial projections.

In developing the financial projections, management of Brookfield Property Group made numerous assumptions with respect to BPY for the relevant forecast period (fiscal 2021 through fiscal 2025). The assumptions and estimates underlying the financial projections are inherently uncertain and, though considered reasonable by the management of Brookfield Property Group as of the date of their preparation, are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective financial information. See the risk factors in the BPY Annual Report, which is incorporated herein by reference. Accordingly, there can be no assurance that the prospective results are indicative of the future performance of BPY or that actual results will not differ materially from those presented in the financial projections. Inclusion of the financial projections in this Document should not be regarded as a representation by any person that the results contained in the financial projections will be achieved.

The financial projections do not take into account any circumstances or events occurring after the date they were prepared, and except as may be required in order to comply with applicable law, none of BPY or, to BPY’s knowledge, any of its representatives intends to update, or otherwise revise, the financial projections, or the specific portions presented herein, to reflect circumstances existing after the date when they were made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. Neither BPY nor any of its affiliates or representatives has made or makes any representation to any person regarding the ultimate performance of BPY compared to the information contained in the financial projections contained herein.

Measures in these financial projections include those considered as non-IFRS financial measures. Non-IFRS financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with IFRS, and non-IFRS financial measures as used by BPY may not be comparable to similarly titled amounts used by other companies.

This table should be read in conjunction with BPY’s Annual Report incorporated by reference into this Document, and other publicly available information. In developing the projections, management of Brookfield Property Group made numerous assumptions with respect to BPY for the periods presented below, including the following assumptions:

•

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

​

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•

the projections did not contemplate a privatization or other similar transaction;

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

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

​

•

with respect to distributions on BPY Units, annual distributions of $1.33 per BPY Unit are assumed

​

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(1)

BPY defines NOI, or net operating income, as revenues from BPY’s commercial properties operations less direct commercial property expenses and revenues from BPY’s hospitality operations less direct hospitality expenses. BPY defines FFO, or funds from operations, as net income, prior to fair value gains, net, depreciation and amortization of real estate assets, and income taxes less non-controlling interests of others in operating subsidiaries and properties therein. When determining FFO, BPY includes its proportionate share of the FFO of unconsolidated partnerships and joint ventures and associates, as well as gains (or losses) related to properties developed for sale. NOI and FFO do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. For a reconciliation of NOI and FFO to the comparable IFRS measures for the year ended December 31, 2020, see BPY’s Annual Report on Form 20-F incorporated by reference into this Document.

​

(2)

For a description of BPY’s business segments, see BPY’s Annual Report incorporated by reference into this Document.

​

Dissent Rights; Rule 13e-3

Dissent Rights

Under the BPY LPA Amendment, each Registered BPY Unitholder will have the right to exercise dissent rights for payment of fair value of their BPY Units.

The following summarizes provisions of the BPY LPA Amendment regarding dissent rights that would be applicable in connection with the Transaction.

The Transaction

Registered BPY Unitholders have the right to dissent in respect of the Transaction and demand payment of the fair value of their BPY Units. The exercise of such right of dissent, if certain procedures are complied with by the Registered BPY Unitholder, could lead to a judicial determination of fair value required to be paid to such Dissenting BPY Unitholder for its BPY Units. The fair value so determined could be more or less than the amount paid per BPY Unit pursuant to the Transaction. The exact terms and procedures of the rights of dissent available to Registered BPY Unitholders are more fully described in this Document. See “Rights of Dissenting BPY Unitholders”.

Rule 13e-3

Under the SEC rules governing “going private” transactions, each of the Purchaser Parties may be deemed an affiliate of BPY and therefore the Transaction contemplated in this Document constitutes a “going private” transaction under Rule 13e-3 under the U.S. Exchange Act. Rule 13e-3 under the U.S. Exchange Act requires, among other things, that certain financial information concerning BPY and certain information relating to the fairness of the Transaction to Unaffiliated BPY Unitholders be filed with the SEC and disclosed to BPY Unitholders prior to consummation of the Transaction. The Purchaser Parties have provided or incorporated by reference such information in this document and a Transaction Statement on Schedule 13e-3 and the respective exhibits thereto filed with the SEC. If permitted by applicable Laws, subsequent to the completion of the Transaction, the Purchaser Parties intend to apply to Nasdaq and the TSX to de list the BPY Units from trading. The BPY preferred units will not be affected by the Transaction and are expected to remain listed on Nasdaq, and the New LP Preferred Units are expected to be listed on Nasdaq and the TSX, subject to customary approvals of each exchange; therefore, BPY is expected to remain a reporting issuer under Canadian Securities Laws and continue to be subject to the reporting obligations under the U.S. Exchange Act following completion of the Transaction.

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Governance of BPY following the Transaction

As of the date hereof, there has been no determination made by the Purchaser Parties with respect to the composition or structure of the BPY Board of Directors or the governance structure and practices of BPY following consummation of the Transaction.

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