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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑

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

			For the quarterly period ended			June 30, 2021

or

☐

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

			For the transition period from _____________________ to __________________

Commission File Number: 001-36135

________________________

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

(Exact name of registrant as specified in its charter)

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

250 Vesey Street, 15th Floor

New York, NY, 10281

(Address of principal executive offices and zip code)

(212) 417-7000

(Registrant’s telephone number, including area code)

None

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

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

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

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

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

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

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

☑

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of August 6, 2021, none of the registrant’s common stock was traded on any public market.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2021

TABLE OF CONTENTS

									Page
PART I—FINANCIAL INFORMATION
			Item 1.			Financial Statements (Unaudited).
						Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020			1
						Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020			3
						Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2021 and 2020			4
						Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2021 and 2020			5
						Consolidated Statements of Cash Flows for the three and six months ended June 30, 2021 and 2020			6
						Notes to Consolidated Financial Statements			8
			Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations.			38
			Item 3.			Quantitative and Qualitative Disclosures About Market Risk.			58
			Item 4.			Controls and Procedures.			58
PART II—OTHER INFORMATION
			Item 1.			Legal Proceedings.			59
			Item 1A.			Risk Factors.			59
			Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds.			59
			Item 3.			Defaults Upon Senior Securities.			59
			Item 4.			Mine Safety Disclosures.			59
			Item 5.			Other Information.			59
			Item 6.			Exhibits.			60
			Signatures						61

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 (as set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act). Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the potential future impact of the novel strain of coronavirus (“COVID-19”) pandemic, our operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts,” “likely,” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.”

Although Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or “we”) believes that its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond its control, which may cause Brookfield DTLA’s actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

In particular, in the near term, we expect to be impacted by the COVID-19 pandemic, which has interrupted business activities and supply chains; disrupted travel; and adversely impacted local, regional, national and international economic conditions, as well as the labor markets.

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

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

•The impact or unanticipated impact of general economic, political and market factors in the regions in which Brookfield DTLA or any of its subsidiaries does business, including as a result of the capacity limits imposed by both local and state governments on higher-risk activities and businesses, such as dine-in restaurants, bars, gyms and conference or convention centers, to combat the spread of the COVID-19 pandemic;

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

•Business competition;

•Dependence on tenants’ financial condition;

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

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

•Uncertainties of real estate development or redevelopment;

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

•Risks relating to Brookfield DTLA’s insurance coverage;

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

•Potential environmental liabilities;

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

•Dependence on management personnel;

•Illiquidity of investments in real estate;

•Operational and reputational risks;

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

•Other factors that are described in Part I, “Item IA. Risk Factors” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 25, 2021, and Part II, “Item IA. Risk Factors” in this Report; and

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

Brookfield DTLA cautions that the foregoing list of important factors that may affect future results is not exhaustive. When relying on Brookfield DTLA’s forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, Brookfield DTLA undertakes no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

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PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

			June 30, 2021						December 31, 2020
ASSETS
Investments in Real Estate:
Land			$	222,555					$	222,555
Buildings and improvements			2,308,799						2,307,762
Tenant improvements			437,364						437,114
Investments in real estate, gross			2,968,718						2,967,431
Less: accumulated depreciation			561,443						517,329
Investments in real estate, net			2,407,275						2,450,102
Investment in unconsolidated real estate joint venture			42,691						42,395
Cash and cash equivalents			34,491						37,394
Restricted cash			47,865						46,089
Rents, deferred rents and other receivables, net			127,772						133,639
Intangible assets, net			18,941						22,046
Deferred charges, net			57,572						63,406
Due from affiliates, net of allowance for loan losses of $2,653 as of June 30, 2021 and December 31, 2020			9,736						10,847
Prepaid and other assets, net			4,205						10,538
Total assets			$	2,750,548					$	2,816,456
LIABILITIES AND DEFICIT
Liabilities:
Secured debt, net			$	2,252,053					$	2,239,640
Accounts payable and other liabilities			79,490						96,041
Due to affiliates			1,737						1,700
Intangible liabilities, net			5,225						6,005
Total liabilities			2,338,505						2,343,386
Commitments and Contingencies (See Note 15)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited; in thousands, except share amounts)

			June 30, 2021						December 31, 2020
LIABILITIES AND DEFICIT (continued)
Mezzanine Equity:
7.625% Series A Cumulative Redeemable Preferred Stock,    $0.01 par value, 9,730,370 shares issued and outstanding     as of June 30, 2021 and December 31, 2020			$	456,303					$	447,028
Noncontrolling Interests:
Series A-1 preferred interest			443,847						435,242
Senior participating preferred interest			20,938						20,413
Series B preferred interest			177,455						198,827
Total mezzanine equity			1,098,543						1,101,510
Stockholders’ Deficit:
Common stock, $0.01 par value, 1,000 shares     issued and outstanding as of June 30, 2021     and December 31, 2020			—						—
Additional paid-in capital			202,869						202,369
Accumulated deficit			(793,464)						(726,369)
Noncontrolling interests			(95,905)						(104,440)
Total stockholders’ deficit			(686,500)						(628,440)
Total liabilities and deficit			$	2,750,548					$	2,816,456

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands)

			For the Three Months Ended												For the Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Revenue:
Lease income			$	62,737					$	63,264					$	126,975					$	128,716
Parking			6,183						5,188						11,371						15,167
Interest and other			290						70						556						493
Total revenue			69,210						68,522						138,902						144,376
Expenses:
Rental property operating and maintenance			23,224						23,059						44,999						46,892
Real estate taxes			10,040						9,692						20,080						19,380
Parking			1,879						2,371						3,466						6,051
Other expenses			2,549						1,868						5,969						4,574
Depreciation and amortization			26,638						26,527						53,660						53,339
Interest			18,595						20,271						42,376						43,517
Total expenses			82,925						83,788						170,550						173,753
Other Income (Expense):
Equity in earning (loss) of unconsolidated     real estate joint venture			97						(28)						296						(703)
Total other income (expense)			97						(28)						296						(703)
Net loss			(13,618)						(15,294)						(31,352)						(30,080)
Net loss (income) attributable to    noncontrolling interests:
Series A-1 preferred interest returns			4,302						4,303						8,605						8,606
Senior participating preferred interest     redemption measurement adjustment			299						(2,081)						900						(2,306)
Series B preferred interest returns			4,146						4,567						8,428						8,775
Series B common interest –     allocation of net income			(6,669)						90,090						8,535						99,912
Net loss attributable to Brookfield DTLA			(15,696)						(112,173)						(57,820)						(145,067)
Series A preferred stock dividends			4,638						4,637						9,275						9,274
Net loss attributable to common interest     holders of Brookfield DTLA			$	(20,334)					$	(116,810)					$	(67,095)					$	(154,341)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited; in thousands)

			For the Three Months Ended												For the Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Net loss			$	(13,618)					$	(15,294)					$	(31,352)					$	(30,080)
Other comprehensive loss:
Interest rate swap contracts designated as cash flow hedges:
Unrealized derivative holding gains (losses)			—						820						—						(422)
Total other comprehensive gain (loss)			—						820						—						(422)
Comprehensive loss			(13,618)						(14,474)						(31,352)						(30,502)
Less: comprehensive income attributable to noncontrolling interests			2,078						96,879						26,468						114,987
Comprehensive loss attributable to common interest holders of Brookfield DTLA			$	(15,696)					$	(111,353)					$	(57,820)					$	(145,489)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited; in thousands, except share amounts)

						Number of Shares						Common Stock						Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Non- controlling Interests						Total Stockholders’ Deficit
						Common Stock
Balance, December 31, 2020						1,000						$	—					$	202,369					$	(726,369)					$	—					$	(104,440)					$	(628,440)
Net (loss) income																								(42,124)												24,390						(17,734)
Other comprehensive loss																														—												—
Contributions																		—																								—
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,637)												(9,186)						(13,823)
Balance, March 31, 2021						1,000						—						202,369						(773,130)						—						(89,236)						(659,997)
Net (loss) income																								(15,696)												2,078						(13,618)
Other comprehensive income																														—												—
Contributions																		500																								500
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,638)												(8,747)						(13,385)
Balance, June 30, 2021						1,000						$	—					$	202,869					$	(793,464)					$	—					$	(95,905)					$	(686,500)

						Number of Shares						Common Stock						Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Non- controlling Interests						Total Stockholders’ Deficit
						Common Stock
Balance, December 31, 2019						1,000						$	—					$	197,535					$	(499,793)					$	(2,341)					$	(216,183)					$	(520,782)
Net (loss) income																								(32,894)												18,108						(14,786)
Other comprehensive loss																														(1,242)												(1,242)
Contributions																		—																								—
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,637)												(8,286)						(12,923)
Balance, March 31, 2020						1,000						—						197,535						(537,324)						(3,583)						(206,361)						(549,733)
Net (loss) income																								(112,173)												96,879						(15,294)
Other comprehensive income																														820												820
Contributions																		—																								—
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,637)												(6,789)						(11,426)
Balance, June 30, 2020						1,000						$	—					$	197,535					$	(654,134)					$	(2,763)					$	(116,271)					$	(575,633)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

			For the Six Months Ended
			June 30,
			2021						2020
Cash flows from operating activities:
Net loss			$	(31,352)					$	(30,080)
Adjustments to reconcile net loss to net cash      provided by operating activities:
Depreciation and amortization			53,660						53,339
Equity in (earning) loss of unconsolidated real estate joint venture			(296)						703
Write-off of lease receivables deemed uncollectible			576						—
Amortization of acquired below-market leases,     net of acquired above-market leases			158						167
Straight-line rent amortization			(1,027)						2,591
Amortization of tenant inducements			1,603						1,699
Amortization and write-off of debt financing costs			3,956						2,604
Loss on early extinguishment of debt			4,575						—
Unrealized gain on interest rate cap contracts			(15)						(35)
Changes in assets and liabilities:
Rents, deferred rents and other receivables, net			4,444						(1,092)
Deferred charges, net			(1,647)						(4,042)
Due from affiliates, net			1,261						1,053
Prepaid and other assets, net			6,410						5,610
Accounts payable and other liabilities			787						(373)
Due to affiliates			37						(270)
Net cash provided by operating activities			43,130						31,874
Cash flows from investing activities:
Expenditures for real estate improvements			(18,401)						(31,730)
Net cash used in investing activities			(18,401)						(31,730)
Cash flows from financing activities:
Proceeds from secured debt			465,000						—
Principal payments on secured debt			(450,000)						—
Proceeds from Series B preferred interest			6,000						25,150
Proceeds from senior participating preferred interest			171						302
Distributions to Series B preferred interest			(8,527)						(7,901)
Repurchases of Series B preferred interest			(27,273)						(6,869)
Distributions to senior participating preferred interest			(546)						(308)
Contributions to additional paid-in capital			500						—
Purchase of interest rate cap contracts			(62)						—
Payment for early extinguishment of debt			(4,575)						—
Debt financing costs paid			(6,544)						(141)
Net cash (used in) provided by financing activities			(25,856)						10,233
Net change in cash, cash equivalents and restricted cash			(1,127)						10,377
Cash, cash equivalents and restricted cash at beginning of period			83,483						58,988
Cash, cash equivalents and restricted cash at end of period			$	82,356					$	69,365

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited; in thousands)

			For the Six Months Ended
			June 30,
			2021						2020
Supplemental disclosure of cash flow information:
Cash paid for interest			$	33,306					$	41,510
Cash paid for income taxes			$	1,851					$	6
Supplemental disclosure of non-cash investing and     financing activities:
Accrual for current-period additions to real estate     investments			$	8,699					$	26,400
Decrease in fair value of interest rate swaps			$	—					$	(422)

The following is a reconciliation of Brookfield DTLA’s cash, cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2021 and 2020:

			For the Six Months Ended
			June 30,
			2021						2020
Cash and cash equivalents at beginning of period			$	37,394					$	33,964
Restricted cash at beginning of period			46,089						25,024
Cash, cash equivalents and restricted cash at     beginning of period			$	83,483					$	58,988
Cash and cash equivalents at end of period			$	34,491					$	39,698
Restricted cash at end of period			47,865						29,667
Cash, cash equivalents and restricted cash at     end of period			$	82,356					$	69,365

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 1—Organization and Description of Business

Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or the “Company”) is a Maryland corporation and was incorporated on April 19, 2013. Brookfield DTLA was formed for the purpose of consummating the transactions contemplated in the Agreement and Plan of Merger dated as of April 24, 2013, as amended, and the issuance of shares of 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series A preferred stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC, a Delaware limited liability company (“DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”). DTLA Holdings is an indirect partially‑owned subsidiary of Brookfield Property Partners L.P. (“BPY”), an exempted limited partnership under the Laws of Bermuda, which in turn is the flagship commercial property entity and the primary vehicle through which Brookfield Asset Management Inc. (“BAM”), a corporation under the Laws of Canada, invests in real estate on a global basis. On April 1, 2021, BAM and BPY announced an agreement for BAM to acquire 100% of the limited partnership units of BPY. The acquisition was completed in July 2021. We do not expect the acquisition to have any impact to the Company.

As of June 30, 2021 and December 31, 2020, Brookfield DTLA owned Bank of America Plaza (“BOA Plaza”), EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, which are Class A office properties, and FIGat7th, a retail center nestled between EY Plaza and 777 Tower. Additionally, Brookfield DTLA Fund Properties II LLC (“Fund II”) has a noncontrolling interest in an unconsolidated real estate joint venture with Brookfield DTLA FP IV Holdings LLC (“DTLA FP IV Holdings”), a wholly‑owned subsidiary of DTLA Holdings, which owns 755 South Figueroa, a residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”).

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 2—Basis of Presentation

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

Principles of Consolidation and Basis of Presentation

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

The consolidated balance sheets as of June 30, 2021 and December 31, 2020 include the accounts of Brookfield DTLA and subsidiaries in which it has a controlling financial interest. All intercompany transactions have been eliminated in consolidation as of June 30, 2021 and December 31, 2020, and for each of the three and six months ended June 30, 2021 and 2020.

The accompanying notes to the unaudited consolidated financial statements do not include all disclosures required by GAAP. The unaudited consolidated financial information included herein should be read in conjunction with the audited consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 25, 2021.

Determination of Controlling Financial Interest

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

We consolidate entities through which we conduct substantially all of our business, and own, directly and through subsidiaries, substantially all of our assets. As of June 30, 2021, these consolidated VIEs had in aggregate total consolidated assets of $2.7 billion (of which $2.4 billion is related to investments in real estate) and total consolidated liabilities of $2.3 billion (of which $2.3 billion is related to non-recourse debt secured by our office and retail properties). The Company is obligated to repay substantially all of the liabilities of our consolidated VIEs, except for the non-recourse secured debt.

Investment in Unconsolidated Real Estate Joint Venture. Fund II has a noncontrolling interest in a joint venture, Brookfield DTLA Fund Properties IV LLC (“Fund IV”), with DTLA FP IV Holdings. The Company determined that the joint venture is a VIE mainly because its equity investment at risk is insufficient to finance the joint venture’s activities without additional subordinated financial support. While the joint venture meets the definition of a VIE, Brookfield DTLA is not its primary beneficiary as the Company lacks the power through voting or similar rights to direct the activities that most significantly impact the joint venture’s economic performance. Therefore, the Company accounts for its ownership interest in the joint venture under the equity method. As of June 30, 2021, the Company’s ownership interest in the joint venture was 41.7%, a decrease from 47.8% as of December 31, 2020 as a result of additional capital contributed by DTLA FP IV Holdings to the joint venture during the six months ended June 30, 2021.

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

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Impact of COVID-19

Prior to the end of the first quarter of 2020, there was a global outbreak of a new strain of Coronavirus (“COVID-19”) which prompted government and businesses to take unprecedented measures in response. Many states, including California where our properties are located, have implemented “stay-at-home” restrictions to help combat the spread of COVID-19. The State of California order includes the shutdown of all nonessential services, such as dine-in restaurants, bars, gyms and conference or convention centers, and other businesses not deemed to support critical infrastructure (the “Shutdown”). Essential services, such as grocery stores, pharmacies, gas stations, food banks, convenience stores and delivery restaurants, were allowed to remain open. Consequently, business activities and supply chains were interrupted; travel was disrupted; and local, regional, national and international economic conditions were adversely impacted.

The U.S. began a large-scale COVID-19 vaccination campaign in December 2020. In the second quarter of 2021, Los Angeles County officially moved into the less restrictive Orange Tier and the least restrictive Yellow Tier of the California state’s reopening framework, which eases more rules for businesses amid the ongoing pandemic. On June 15, 2021, with California fully reopened its economy, restrictions such as physical distancing, capacity limits and the county tier system were lifted. However, the spread of the delta variant brings uncertainty to the economic recovery. In July 2021, amid a rise in coronavirus cases and hospitalizations, Los Angeles County reinstated its mask mandate that requires masking indoors regardless of vaccination status.

During the first half of 2021, the COVID-19 pandemic and the measures taken to combat the spread of the pandemic has continued to impact numerous aspects of our business and our properties, which are located in the City of Los Angeles. Some of the effects include the following:

•Capacity limits were imposed on higher-risk activities and businesses such as indoor dining, bars, fitness centers and movie theaters according to the tier system of the California state’s reopening framework. As a result, our tenants in FIGat7th, which include retail shops, restaurants and a big box gym, experienced the most immediate impact of the restrictions imposed. Due to the uncertainties posed to our tenants in FIGat7th by these restrictions, during the six months ended June 30, 2021, the Company recognized adjustments of $0.5 million, compared to $1.4 million during the three and six months ended June 30, 2020, to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. No material adjustments were made to our retail lease income during the three months ended June 30, 2021.

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•While our office properties have remained open, most of our office tenants have been working remotely since the “stay-at-home” order was issued. Although state and local authorities began easing restrictions on businesses throughout the first half of 2021, the physical occupancy of our office properties has remained well below capacity as infection rates fluctuated and most employers continued their COVID-19 response protocols and allowed employees to work from home when possible. As of June 30, 2021, most of our office tenants have been current in paying amounts due to us under their leases. Due to the uncertainties posed to our office property tenants by the COVID-19 pandemic, during the six months ended June 30, 2021, the Company recognized adjustments of $0.1 million, compared to $1.0 million during the three and six months ended June 30, 2020, to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. No material adjustments were made to our office lease income during the three months ended June 30, 2021.

•Decline in property values resulting from lower than anticipated revenues due to reduced increases in forecasted rental rates on new or renewal leases, applied credit losses, lower leasing velocity and reductions in projected leasing of available space. While the carrying values of the properties are recorded at cost less accumulated depreciation, we estimate the undiscounted cashflows and fair values of the properties as part of our impairment review of investments in real estate. See Note 2—“Basis of Presentation—Impairment Review” for further discussion.

Use of Estimates

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

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Impairment Review

Investments in long-lived assets, including our investments in real estate, are reviewed for impairment quarterly or if events or changes in circumstances indicate that the carrying amount of the long-lived assets might not be recoverable, which is referred to as a “triggering event” or an “impairment indicator.” The carrying amount of long-lived assets to be held and used is deemed not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. Triggering events or impairment indicators for long-lived assets to be held and used are assessed by property and include significant fluctuations in estimated net operating income, changes in occupancy, significant near-term lease expirations, current and historical operating and/or cash flow losses, rental rates, and other market factors. The impact of the measures imposed to combat the spread of the COVID-19 pandemic on economic and market conditions, together with many of our office property tenants working from home, was deemed to be a triggering event during the three and six months ended June 30, 2021.

When conducting the impairment review of our investments in real estate, we assessed the expected undiscounted cash flows based upon numerous factors, including the impact of the Shutdown. These factors include, but are not limited to, the credit quality of our tenants, available market information, known trends, current market/economic conditions that may affect the asset, and historical and forecasted financial and operating information relating to the property, such as net operating income, occupancy statistics, vacancy projections, renewal percentage, and rent collection rates. If the undiscounted cash flows expected to be generated by a property are less than its carrying amount, the Company determines the fair value of the property and an impairment loss would be recorded to write down the carrying amount of such property to its fair value. Based on its review, management concluded that none of Brookfield DTLA’s real estate properties were impaired as of June 30, 2021 and December 31, 2020.

The Company’s investment in its unconsolidated real estate joint venture is also reviewed for impairment quarterly or if events or changes in circumstances indicate that the carrying amount of our investment might not be recoverable using similar criteria as its investments in real estate. An impairment loss is measured based on the excess of the carrying amount of an investment compared to its estimated fair value. Impairment analyses are based on current plans, intended holding periods and information available at the time the analyses are prepared. Based on its review, management concluded that Brookfield DTLA’s investment in its unconsolidated real estate joint venture was not impaired as of June 30, 2021 and December 31, 2020.

Our future results may continue to be impacted by risks associated with the Shutdown and the related global reduction in services, investments, commerce, and travel, which may result in a decrease in our cash flows and a potential increase in impairment losses and/or revaluations of our investments in real estate and unconsolidated real estate joint venture.

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Rents, Deferred Rents and Other Receivables

Under Accounting Standards Codification (“ASC”) Topic 842, Leases, Brookfield DTLA must assess on an individual lease basis whether it is probable that the Company will collect the future lease payments throughout the term of the lease. The Company considers the tenant’s payment history and current credit status when assessing collectibility. If the collectibility of the lease payments is probable at lease commencement, the Company recognizes lease income over the term of the lease on a straight-line basis. During the term of the lease, Brookfield DTLA monitors the credit quality and any related material changes of our tenants by (i) reviewing financial statements of the tenants that are publicly available or that are required to be delivered to us pursuant to the applicable lease, (ii) monitoring news reports regarding our tenants and their respective businesses, including the impact of the measures taken to combat the spread of the COVID-19 pandemic on the tenant’s business, (iii) monitoring the tenant’s payment history and current credit status, and (iv) analyzing current economic trends. When collectibility is not deemed probable at the lease commencement date, the Company’s lease income is constrained to the lesser of (i) the income that would have been recognized if collection were probable, or (ii) the lease payments that have been collected from the lessee. If the collectibility assessment changes to probable after the lease commencement date, any difference between the lease income that would have been recognized if collectibility had always been assessed as probable and the lease income recognized to date is recognized as a current-period adjustment to lease income. If the collectibility assessment changes to not probable after the lease commencement date, lease income is reversed to the extent that the lease payments that have been collected from the lessee are less than the lease income recognized to date. Changes to the collectibility of operating leases are recorded as adjustments to lease income in the consolidated statements of operations. As the result of our assessment of the collectibility of amounts due under leases with our tenants, the Company recognized a reduction in lease income totaling $576 thousand during the six months ended June 30, 2021, and $2.4 million during the three and six months ended June 30, 2020. No material collectibility adjustments were made to our lease income during the three months ended June 30, 2021.

The Company received certain rent relief requests for certain periods in 2020 and 2021 from many of our retail tenants and some of our office tenants as a result of the measures taken to combat the spread of the COIVD-19 pandemic. Some of our tenants have availed themselves of various federal and state relief funds, such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program, which can be utilized to partially meet rental obligations. While our tenants are required to fulfill their commitments to us under their leases, we have implemented and will continue to carefully consider temporary rent deferrals and rent abatements on a lease-by-lease basis and only consider those which have a justifiable financial basis. For leases with deferrals, the Company elected to account for the lease concessions as if they were part of the enforceable rights rather than as a modification. For leases with abatements, the Company accounted for the lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework. During the three and six months ended June 30, 2021 and 2020, the impact of lease concessions granted did not have a material effect on the Company’s consolidated financial statements.

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Income Taxes

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

Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). A TRS is permitted to engage in activities that a REIT cannot engage in directly, such as performing non‑customary services for the Company’s tenants, holding assets that the Company cannot hold directly and conducting certain affiliate transactions. A TRS is subject to both federal and state income taxes. The Company’s various TRS incurred income tax expense of $0.6 million and $1.6 million, respectively, during the three and six months ended June 30, 2021. The Company’s various TRS did not have significant tax provisions or deferred taxes during the three and six months ended June 30, 2020.

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Note 3—Recently Issued Accounting Literature

New Accounting Pronouncements Adopted

There have been no new accounting pronouncements adopted during the six months ended June 30, 2021.

Accounting Pronouncements Issued But Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides accounting relief from the future impact of the cessation of LIBOR by, among other things, providing optional expedients to treat contract modifications resulting from such reference rate reform as a continuation of the existing contract and for hedging relationships to not be de-designated resulting from such changes provided certain criteria are met. The guidance is effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refines the scope of ASC Topic 848, Reference Rate Reform, and clarifies some of its guidance as part of the FASB’s ongoing monitoring of global reference rate reform activities. ASU 2021-01 permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company’s variable debt and interest rate cap contracts currently reference LIBOR. The Company is currently in the process of identifying its LIBOR-based contracts that will be impacted by the cessation of LIBOR, incorporating fallback language in negotiated contracts and incorporating non-LIBOR reference rate and/or fallback language in new contracts to prepare for these changes. Notwithstanding these efforts, the Company expects to utilize the optional expedients provided by ASU 2020-04 for debt contracts left unmodified. In addition, the fair value of interest rate cap contracts was de minimis as of June 30, 2021 and the Company does not use hedge accounting for these contracts. As such, we do not expect the adoption of ASU 2020-04 and 2021-01 to have a material effect on the Company’s consolidated financial statements.

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

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

			June 30, 2021						December 31, 2020
Straight-line and other deferred rents			$	110,079					$	109,196
Tenant inducements receivable			32,669						33,280
Tenant receivables			1,944						5,057
Other receivables			656						2,079
Rents, deferred rents and other receivables, gross			145,348						149,612
Less: accumulated amortization of tenant inducements			17,576						15,973
Rents, deferred rents and other receivables, net			$	127,772					$	133,639

See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of assessments regarding the collectibility of rents and deferred rent receivables and related adjustments made during the three and six months ended June 30, 2021 and 2020 due to the measures taken to combat the spread of the COVID-19 pandemic.

Note 5—Intangible Assets and Liabilities

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

			June 30, 2021						December 31, 2020
Intangible Assets
In-place leases			$	46,448					$	46,448
Tenant relationships			6,900						6,900
Above-market leases			19,874						19,874
Intangible assets, gross			73,222						73,222
Less: accumulated amortization			54,281						51,176
Intangible assets, net			$	18,941					$	22,046
Intangible Liabilities
Below-market leases			$	46,945					$	46,945
Less: accumulated amortization			41,720						40,940
Intangible liabilities, net			$	5,225					$	6,005

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

			For the Three Months Ended												For the Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Lease income			$	(48)					$	(191)					$	(158)					$	(166)
Depreciation and amortization expense			$	1,066					$	1,426					$	2,167					$	2,962

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As of June 30, 2021, the estimated amortization/accretion of intangible assets and liabilities in future periods is as follows:

			In-Place Leases						Other Intangible Assets						Intangible Liabilities
Remainder of 2021			$	1,574					$	1,277					$	770
2022			2,757						2,275						1,493
2023			1,947						1,949						794
2024			1,091						1,864						278
2025			951						1,191						263
2026			580						449						245
Thereafter			1,032						4						1,382
Total future amortization/accretion of intangibles			$	9,932					$	9,009					$	5,225

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Note 6—Secured Debt, Net

Brookfield DTLA’s secured debt is as follows:

			Maturity Date (1)						Contractual Interest Rates						Principal Amount as of
															June 30, 2021						December 31, 2020
Variable-Rate Loans:
Wells Fargo Center–North Tower (2)			10/9/2023						LIBOR + 1.65%						$	400,000					$	400,000
Wells Fargo Center–North Tower (2)			10/9/2023						LIBOR + 4.00%						65,000						65,000
Wells Fargo Center–North Tower (2)(3)			10/9/2023						LIBOR + 5.00%						35,000						35,000
Wells Fargo Center–South Tower (4)			11/4/2023						LIBOR + 1.80%						260,796						260,796
777 Tower (5)			10/31/2024						LIBOR + 1.60%						231,842						231,842
777 Tower (6)			10/31/2024						LIBOR + 4.15%						43,158						43,158
EY Plaza (7)			10/9/2025						LIBOR + 2.86%						275,000						275,000
EY Plaza (7)			10/9/2025						LIBOR + 6.85%						30,000						30,000
Gas Company Tower (7)			2/9/2026						LIBOR + 1.89%						350,000						—
Gas Company Tower (7)			2/9/2026						LIBOR + 5.00%						65,000						—
Gas Company Tower (7)			2/9/2026						LIBOR + 7.75%						50,000						—
Total variable-rate loans															1,805,796						1,340,796
Fixed-Rate Debt:
BOA Plaza			9/1/2024						4.05		%				400,000						400,000
FIGat7th			3/1/2023						3.88		%				58,500						58,500
Total fixed-rate debt															458,500						458,500
Debt Refinanced:
Gas Company Tower															—						319,000
Gas Company Tower															—						131,000
Total debt refinanced															—						450,000
Total secured debt															2,264,296						2,249,296
Less: unamortized debt financing costs															12,243						9,656
Total secured debt, net															$	2,252,053					$	2,239,640

(1)Maturity dates include the effect of extension options that the Company controls, if applicable. As of June 30, 2021 and December 31, 2020, we meet the criteria specified in the loan agreements to extend the loan maturity dates.

(2)As required by the loan agreements, we have entered into interest rate cap contracts that limit the LIBOR portion of the interest rate to 3.85%.

(3)BAM owns a significant interest in a company whose subsidiary is the lender of this loan. See Note 13—“Related Party Transactions.”

(4)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 3.63%. As of June 30, 2021, a future advance amount of $29.2 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, leasing commissions, and common area improvements.

(5)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.00%. As of June 30, 2021, a future advance amount of $36.8 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mezzanine loan future advance amount.

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(6)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.00%. As of June 30, 2021, a future advance amount of $6.8 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mortgage loan future advance amount.

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

The weighted average interest rate of the Company’s secured debt was 2.88% and 3.19% as of June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021, the weighted average term to maturity of our debt was approximately three years.

Debt Maturities

The following table provides information regarding the Company’s minimum future principal payments due on the Company’s secured debt (after the impact of extension options that the Company controls, if applicable) as of June 30, 2021:

Remainder of 2021			$	—
2022			—
2023			819,296
2024			675,000
2025			305,000
2026			465,000
Total secured debt			$	2,264,296

As of June 30, 2021, $1,035.8 million of the Company’s secured debt may be prepaid without penalty, $400.0 million may be defeased (as defined in the underlying loan agreements) and $828.5 million may be prepaid with prepayment penalties.

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Gas Company Tower—

On February 5, 2021, Brookfield DTLA refinanced its Gas Company Tower secured loans. The original $450.0 million secured loans were replaced with secured loans of $465.0 million, comprised of a $350.0 million mortgage loan, a $65.0 million mezzanine loan and a $50.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 1.89%, 5.00% and 7.75%, respectively. The initial maturity date of these interest-only loans is February 9, 2023. The mortgage loan can be prepaid, in whole or in part, with prepayment fees (as defined in the underlying loan agreement) until February 2022 after which the loan may be repaid without prepayment fees. A voluntary prepayment of the mortgage or mezzanine loans requires a simultaneous pro-rata prepayment of all loans encumbering this property. Brookfield DTLA has three options to extend the loans maturity dates for a period of one year each, as long as the maturity date of the mezzanine loans is extended simultaneously with the mortgage loan, and no Event of Default (as defined in the underlying loan agreements) has occurred. All proceeds from the new secured loans were used to pay off the original $450.0 million encumbrance and to satisfy the new loans’ required reserves. The Company recognized a loss on early extinguishment of debt of $4.6 million, which represented a prepayment premium and debt yield maintenance fee, in interest expense in the consolidated statements of operations.

Non-Recourse Carve Out Guarantees

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

Debt Compliance

As of June 30, 2021 and December 31, 2020, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements.

Certain loan agreements held by Brookfield DTLA contain debt yield and debt service coverage ratios. As of June 30, 2021, Brookfield DTLA was meeting or exceeding these financial ratios, with the exception of the loans secured by Wells Fargo Center—South Tower and Wells Fargo Center—North Tower that did not meet their respective minimum debt yield ratio.

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Wells Fargo Center–South Tower —

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

Wells Fargo Center–North Tower —

As of June 30, 2021, the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, following the occurrence of such debt yield event, any excess operating cash flows are to be swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses, capital expenditures and leasing costs; property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; reserve accounts; and fees and expenses due to the loan administrative agent. The cash sweep has not started as of June 30, 2021.

London Interbank Offered Rate (“LIBOR”) Transition

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

We have outstanding variable debt and interest rate cap contracts that are indexed to LIBOR. The Company is currently in the process of identifying its LIBOR-based contracts that will be impacted by the cessation of LIBOR, incorporating fallback language in negotiated contracts and incorporating non-LIBOR reference rate and/or fallback language in new contracts to prepare for these changes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

If LIBOR changes or is replaced, the interest rates on our debt which is indexed to USD-LIBOR will be determined using a different successor rate, which may adversely affect interest expense and may result in interest obligations which are more than the payments that would have been made on such debt if USD-LIBOR was available in its current form.

Note 7—Accounts Payable and Other Liabilities

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

			June 30, 2021						December 31, 2020
Tenant improvements and inducements payable			$	33,338					$	47,679
Unearned rent and tenant payables			30,607						27,331
Accrued capital expenditures and leasing commissions			10,653						15,201
Accrued expenses and other liabilities			4,892						5,830
Accounts payable and other liabilities			$	79,490					$	96,041

Note 8—Noncontrolling Interests

Mezzanine Equity Component

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

Series A Preferred Stock. As of June 30, 2021 and December 31, 2020, 9,730,370 shares of Series A preferred stock were outstanding, of which 9,357,469 shares were issued to third parties and 372,901 shares were issued to DTLA Fund Holding Co., a subsidiary of DTLA Holdings.

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Series B Preferred Interest. Pursuant to the Limited Liability Company Agreement (“LLCA”) of Fund II and the subsequent amendment to the LLCA, DTLA Holdings made a commitment to contribute up to $310.0 million in cash or property to Fund II, which directly or indirectly owns the Brookfield DTLA properties. As of June 30, 2021, $40.7 million is available to the Company under this commitment for future funding. The Series B preferred interest in Fund II held by DTLA Holdings is effectively senior to the interest in Fund II indirectly held by the Company and has a priority on distributions senior to the equity securities of such subsidiaries held indirectly by the Company and, as a result, effectively rank senior to the Series A preferred stock. The Series B preferred interest in Fund II may limit the amount of funds available to the Company for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock.

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

Stockholders’ Deficit Component

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 9—Mezzanine Equity

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

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

    

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

						Number of Shares of Series A Preferred Stock						Series A Preferred Stock						Noncontrolling Interests																		Total Mezzanine Equity
																		Series A-1 Preferred Interest						Senior Participating Preferred Interest						Series B Preferred Interest
Balance, December 31, 2019						9,730,370						$	428,480					$	418,029					$	22,362					$	185,352					$	1,054,223
Issuance of Series B preferred interest																														7,800						7,800
Dividends												4,637																								4,637
Preferred returns																		4,303												4,208						8,511
Redemption measurement adjustments																								(225)												(225)
Contributions from noncontrolling     interests																								—												—
Repurchases of noncontrolling interests																														(6,869)						(6,869)
Distributions to noncontrolling interests																								(263)						(4,401)						(4,664)
Balance, March 31, 2020						9,730,370						433,117						422,332						21,874						186,090						1,063,413
Issuance of Series B preferred interest																														17,350						17,350
Dividends												4,637																								4,637
Preferred returns																		4,303												4,567						8,870
Redemption measurement adjustments																								(2,081)												(2,081)
Contributions from noncontrolling     interests																								302												302
Repurchases of noncontrolling interests																														—						—
Distributions to noncontrolling interests																								(45)						(3,500)						(3,545)
Balance, June 30, 2020						9,730,370						$	437,754					$	426,635					$	20,050					$	204,507					$	1,088,946

During the three and six months ended June 30, 2021 and 2020, the Company used cash received from the issuance of the Series B preferred interest for capital expenditures and leasing costs. During the three and six months ended June 30, 2021, repurchases of and distributions to noncontrolling interests were made using the excess operating cash flows generated from properties. During the three and six months ended June 30, 2020, repurchases of and distributions to noncontrolling interests were made using the excess cash from upsized refinancing of the loans secured by 777 Tower in October 2019 and operating activities generated from other properties.

Series A Preferred Stock

As of June 30, 2021, the Series A preferred stock is reported at its redemption value of $456.3 million calculated using the redemption price of $243.3 million plus $213.0 million of accumulated and unpaid dividends on such Series A preferred stock through June 30, 2021.

No dividends were declared on the Series A preferred stock during the three and six months ended June 30, 2021 and 2020. Dividends on the Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.90625 per share.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

Noncontrolling Interests

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

Series A-1 Preferred Interest

As of June 30, 2021, the Series A-1 preferred interest is reported at its redemption value of $443.8 million calculated using its liquidation value of $225.7 million plus $218.1 million of unpaid interest through June 30, 2021. Interest earned on the Series A-1 preferred interest is cumulative and accrues at an annual rate of 7.625%.

Senior Participating Preferred Interest

As of June 30, 2021, the senior participating preferred interest is reported at its redemption value of $20.9 million using the 4.0% participating interest in the residual value of BOA Plaza, EY Plaza and FIGat7th upon disposition or liquidation.

Series B Preferred Interest

As of June 30, 2021, the Series B preferred interest is reported at its redemption value of $177.5 million calculated using its liquidation value of $173.3 million plus $4.1 million of unpaid preferred returns on such Series B preferred interest through June 30, 2021. Brookfield DTLA is entitled to receive a market rate of return on its contributions, currently 9.0% as of June 30, 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Distribution Waterfall

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

First to:

Series B preferred interest unpaid preferred return

Second to:

Series B preferred interest unreturned preferred capital

Third, proportionally in respect of     unpaid preferred return to:

Series A preferred interest unpaid preferred return (2)

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

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

Series A preferred interest unreturned capital

Series A-1 preferred interest unreturned capital (3)

And fifth to:

Common interests to Brookfield DTLA and DTLA Holdings (5)

__________

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

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

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

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 10—Accumulated Other Comprehensive Loss

A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s derivative financial instruments designated as cash flow hedges is as follows:

			For the Three Months Ended												For the Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Balance at beginning of period			$	—					$	(3,583)					$	—					$	(2,341)
Other comprehensive gain (loss) before reclassifications			—						820						—						(422)
Amounts reclassified from accumulated other comprehensive loss			—						—						—						—
Net current-period other comprehensive gain (loss)			—						820						—						(422)
Balance at end of period			$	—					$	(2,763)					$	—					$	(2,763)

Note 11—Financial Instruments

Derivative Financial Instruments

The following table presents the interest rate cap contracts pursuant to the terms of certain of its loan agreements as of June 30, 2021:

						Notional Amount						Strike Rate (1)																		Expiration Date
Interest Rate Caps:
Wells Fargo Center–North Tower						$	400,000					3.85%																		10/15/2021
Wells Fargo Center–North Tower						65,000						3.85%																		10/15/2021
Wells Fargo Center–North Tower						35,000						3.85%																		10/15/2021
Wells Fargo Center–South Tower						290,000						3.63%																		11/4/2022
777 Tower						268,600						4.00%																		11/10/2021
777 Tower						50,000						4.00%																		11/10/2021
EY Plaza						275,000						4.00%																		10/15/2022
EY Plaza						30,000						4.00%																		10/15/2022
Gas Company Tower						350,000						4.00%																		2/15/2023
Gas Company Tower						65,000						4.00%																		2/15/2023
Gas Company Tower						50,000						4.00%																		2/15/2023
Total derivatives not designated     as cash flow hedging instruments						$	1,878,600

__________

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

												Fair Value as of
						Balance Sheet Location						June 30, 2021						December 31, 2020
Derivatives not designated as     hedging instruments:         Interest rate caps						Prepaid and other assets, net						$	20					$	5

The following table presents the gain (loss) recorded on interest rate swaps for the three and six months ended June 30, 2021 and 2020:

			Gain/(Loss) Recognized in OCL						Amount of (Gain) or Loss Reclassified from AOCL to Statements of Operations
Derivatives designated as cash flow hedging instruments:
For the three months ended:
June 30, 2021			$	—					$	—
June 30, 2020			$	820					$	—
For the six months ended:
June 30, 2021			$	—					$	—
June 30, 2020			$	(422)					$	—

Changes in fair value of interest rate cap contracts recognized in the consolidated statements of operations during the three and six months ended June 30, 2021 and 2020 were de minimis.

Other Financial Instruments

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

See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of assessments regarding the collectibility of rents and deferred rents receivable and related adjustments made during the three and six months ended June 30, 2021 and 2020 due to the measures taken to combat the spread of the COVID-19 pandemic.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 12—Fair Value Measurements and Disclosures

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

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

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

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

Recurring Measurements—

The fair value of Brookfield DTLA’s interest rate swap contracts was determined using widely accepted valuation techniques, including discounted cash flow analyses on the expected cash flows of the derivatives. These analyses reflect the contractual terms of the derivatives, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The Company has incorporated credit valuation adjustments to appropriately reflect both our and the respective counterparty’s non‑performance risk in the fair value measurements. The interest rate swap contracts were terminated in September 2020. See Note 11 “Financial Instruments.”

The fair value of interest rate cap contracts was $20 thousand and $5 thousand as of June 30, 2021 and December 31, 2020, respectively. The Company classified them as Level 2 in the fair value hierarchy.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Nonrecurring Measurements—

As of June 30, 2021 and December 31, 2020, the Company did not have any assets or liabilities that are measured at fair value on a nonrecurring basis. Refer to Note 2—“Basis of Presentation —Impairment Review” for further discussion.

Disclosures about Fair Value of Financial Instruments—

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

						June 30, 2021						December 31, 2020
Fair Value						$	2,263,370					$	2,246,225
Carrying value						$	2,252,053					$	2,239,640

Other financial instruments — As of June 30, 2021 and December 31, 2020, the carrying values of cash and cash equivalents, restricted cash, tenant and other receivables, other assets, accounts payable and other liabilities, and balances with affiliates approximate fair value because of the short-term nature of these instruments.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 13—Related Party Transactions

Management Agreements

Certain subsidiaries of Brookfield DTLA have entered into arrangements with the Manager, pursuant to which the Manager provides property management and various other services. The following table presents the basis of fees incurred to the Manager and Brookfield affiliates during the three and six months ended June 30, 2021 and 2020:

Type

Affiliate

Fee Description

Property management fee

The Manager

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

Asset management fee

BPY and BAM

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

Leasing management fee

The Manager and Brookfield affiliates

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

Construction management fee

The Manager

3.00% of hard and soft construction costs

Development management fee

Other

3.00% of hard and soft construction costs

Entitlement fee

Other

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

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

			For the Three Months Ended												For the Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Property management fee expense			$	1,946					$	1,946					$	3,982					$	4,128
Asset management fee expense			$	1,533					$	1,512					$	3,080					$	3,028
Leasing and construction management fees			$	77					$	2,087					$	636					$	2,919
Development management fee (1)			$	357					$	149					$	706					$	436
Entitlement fee			$	142					$	—					$	209					$	—
General, administrative and reimbursable expenses			$	635					$	757					$	1,220					$	1,452

__________

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Insurance Agreements

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

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

			For the Three Months Ended												For the Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Insurance expense (1)			$	3,199					$	2,905					$	6,391					$	5,787

__________

(1)An affiliate of BAM secures insurance policies for the Company through third-party brokers and insurance companies and charges the Company a fee for the services it provides. Fees charged vary but will not exceed 2.50% of the total net insurance premiums of the Company and its covered properties. Fees incurred for these services totaled $76 thousand and $67 thousand, respectively, during the three months ended June 30, 2021 and 2020, and $154 thousand and $134 thousand, respectively, during the six months ended June 30, 2021 and 2020. Additionally, the Company’s terrorism insurance coverage is purchased through a captive facility that is an affiliate of BPY. Insurance premiums incurred totaled $32 thousand and $38 thousand, respectively, during the three months ended June 30, 2021 and 2020, and $64 thousand and $77 thousand, respectively, during the six months ended June 30, 2021 and 2020.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Other Related Party Transactions with BAM Affiliates

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

			For the Three Months Ended												For the Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Lease income (1)			$	4,189					$	3,559					$	8,965					$	7,473
Parking revenue (1)			$	246					$	370					$	496					$	760
Interest and other revenue			$	—					$	49					$	—					$	99
Rental property operating and maintenance expense (2)			$	149					$	138					$	260					$	261
Other expenses			$	—					$	34					$	—					$	68
Interest expense (3)(4)			$	565					$	484					$	1,060					$	1,059

__________

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

(2)Amounts presented are for purchases of chilled water for air conditioning at one of the Company’s properties.

(3)A subsidiary of Oaktree is the lender of the $35.0 million mezzanine loan secured by Wells Fargo Center–North Tower. Interest payable to the lender totaled $79 thousand as of June 30, 2021 and is reported as part of accounts payable and other liabilities in the consolidated balance sheets. See Note 6—“Secured Debt, Net.” Interest expense on this loan has been reported as a related party transaction since the date of acquisition by BAM.

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 14—Future Minimum Base Rents

Brookfield DTLA leases space to tenants primarily under non-cancelable operating leases that generally contain provisions for payment of base rent plus reimbursement of certain operating expenses. The table below presents the undiscounted cash flows for future minimum base rents to be received from tenants under executed non-cancelable office and retail leases as of June 30, 2021:

Remainder of 2021			$	82,068
2022			153,631
2023			140,046
2024			124,370
2025			110,605
2026			98,435
Thereafter			469,350
Total future minimum base rents			$	1,178,505

Note 15—Commitments and Contingencies

Litigation

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

Concentration of Tenant Credit Risk

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

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

The measures taken to combat the spread of the COVID-19 pandemic have increased the risk in the near term of our tenants’ ability to fulfill their lease commitments. Certain tenants could declare bankruptcy or become insolvent and cease business operations as a result of prolonged mitigation efforts. See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of collectibility of lease income for the three and six months ended June 30, 2021 and 2020.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Capital Commitments

As of June 30, 2021, the Company had $38.7 million in tenant-related commitments, including tenant improvements, tenant inducements and leasing commissions, which are based on executed leases. As of June 30, 2021, $10.3 million of our tenant-related commitments were expected to be paid during the remainder of 2021. Additionally, we had $0.5 million in construction-related commitments, mainly related to retention payable to contractors for the atrium redevelopment project at Wells Fargo Center as of June 30, 2021.

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

and Results of Operations.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

Overview and Background

Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or the “Company”) is a Maryland corporation and was incorporated on April 19, 2013. Brookfield DTLA was formed for the purpose of consummating the transactions contemplated in the Agreement and Plan of Merger dated as of April 24, 2013, as amended, and the issuance of shares of 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series A preferred stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC, a Delaware limited liability company (“DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”). DTLA Holdings is an indirect partially‑owned subsidiary of Brookfield Property Partners L.P. (“BPY”), an exempted limited partnership under the Laws of Bermuda, which in turn is the flagship commercial property entity and the primary vehicle through which Brookfield Asset Management Inc. (“BAM”), a corporation under the Laws of Canada, invests in real estate on a global basis. On April 1, 2021, BAM and BPY announced an agreement for BAM to acquire 100% of the limited partnership units of BPY. The acquisition was completed in July 2021. We do not expect the acquisition to have any impact to the Company.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Brookfield DTLA owns and manages six Class A office properties and a retail center, consisting of 7,580,957 rentable square feet in total. Additionally, Brookfield DTLA also has an indirect noncontrolling interest in an unconsolidated real estate joint venture that owns a multifamily residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”). The following table sets forth information regarding these eight properties as of June 30, 2021:

Name						Property Type						Rentable Square Feet						Ownership Percentage						Occupancy (1)						Weighted-Average Remaining Lease Term (Years) (2)
Bank of America Plaza (“BOA Plaza”)						Class A office						1,405,428						100%						86.4%						7.1
Wells Fargo Center–North Tower						Class A office						1,400,639						100%						82.3%						7.1
Gas Company Tower						Class A office						1,345,163						100%						76.1%						6.0
EY Plaza						Class A office						963,682						100%						80.2%						6.1
Wells Fargo Center–South Tower						Class A office						1,124,960						100%						61.0%						4.9
777 Tower						Class A office						1,024,835						100%						76.6%						4.4
FIGat7th						Retail center						316,250						100%						89.2%						6.2
755 South Figueroa						Multifamily (under development)						N/A						41.7%						N/A						N/A
Total												7,580,957												78.1%						6.1

(1)    Represents properties’ leased square feet over total rentable square feet for executed leases as of June 30, 2021.

(2)    Represents weighted-average of the period remaining (denominated in years) for executed lease as of June 30, 2021, excluding tenant lease extension options.

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

Our goal is to continue to be the leading owner and operator of high-quality office properties in the LACBD and to focus on executing long-term leases with financially strong tenants. We operate our business to achieve these objectives with a long term view and will continue to make decisions with that in mind.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Current Period Highlights

COVID-19 Update

Prior to the end of the first quarter of 2020, there was a global outbreak of a new strain of Coronavirus (“COVID-19”) which prompted government and businesses to take unprecedented measures in response. Many states, including California where our properties are located, have implemented “stay-at-home” restrictions to help combat the spread of COVID-19. The State of California order includes the shutdown of all nonessential services, such as dine-in restaurants, bars, gyms and conference or convention centers, and other businesses not deemed to support critical infrastructure (the “Shutdown”). Essential services, such as grocery stores, pharmacies, gas stations, food banks, convenience stores and delivery restaurants, were allowed to remain open. Consequently, business activities and supply chains were interrupted; travel was disrupted; and local, regional, national and international economic conditions were adversely impacted.

The U.S. began a large-scale COVID-19 vaccination campaign in December 2020. In the second quarter of 2021, Los Angeles County officially moved into the less restrictive Orange Tier and the least restrictive Yellow Tier of the California state’s reopening framework, which eases more rules for businesses amid the ongoing pandemic. On June 15, 2021, with California fully reopened its economy, restrictions such as physical distancing, capacity limits and the county tier system were lifted. However, the spread of the delta variant brings uncertainty to the economic recovery. In July 2021, amid a rise in coronavirus cases and hospitalizations, Los Angeles County reinstated its mask mandate that requires masking indoors regardless of vaccination status.

During the first half of 2021, the COVID-19 pandemic and the measures taken to combat the spread of the pandemic has continued to impact numerous aspects of our business and our properties, which are located in the City of Los Angeles. Some of the effects include the following:

•Capacity limits were imposed on higher-risk activities and businesses such as indoor dining, bars, fitness centers and movie theaters according to the tier system of the California state’s reopening framework. As a result, our tenants in FIGat7th, which include retail shops, restaurants and a big box gym, experienced the most immediate impact of the restrictions imposed. During the three and six months ended June 30, 2021, total lease income and parking revenue from FIGat7th represented approximately 4% of the consolidated total, compared to 2% and 3% for the three and six months ended June 30, 2020, respectively. Due to the uncertainties posed to our tenants in FIGat7th by these restrictions, during the six months ended June 30, 2021, the Company recognized adjustments of $0.5 million, compared to $1.4 million during the three and six months ended June 30, 2020, to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. No material adjustments were made to our retail lease income during the three months ended June 30, 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

•While our office properties have remained open, most of our office tenants have been working remotely since the “stay-at-home” order was issued. Although state and local authorities began easing restrictions on businesses throughout the first half of 2021, the physical occupancy of our office properties has remained well below capacity as infection rates fluctuated and most employers continued their COVID-19 response protocols and allowed employees to work from home when possible. As of June 30, 2021, most of our office tenants have been current in paying amounts due to us under their leases. Due to the uncertainties posed to our office property tenants by the COVID-19 pandemic, during the six months ended June 30, 2021, the Company recognized adjustments of $0.1 million, compared to $1.0 million during the three and six months ended June 30, 2020, to lower our lease income related to certain leases where we determined that the collection of future lease payments was not probable. No material adjustments were made to our office lease income during the three months ended June 30, 2021.

•As a result of the restrictions imposed by state and local authorities that impacted the physical occupancy of both our office and retail properties, parking net operating income, which represents parking revenue less parking expense, declined by $1.2 million or 13% from $9.1 million during the six months ended June 30, 2020 to $7.9 million during the same period in 2021.

•Decline in property values resulting from lower than anticipated revenues due to reduced increases in forecasted rental rates on new or renewal leases, applied credit losses, lower leasing velocity and reductions in projected leasing of available space. While the carrying values of the properties are recorded at cost less accumulated depreciation, we estimate the undiscounted cashflows and fair values of the properties as part of our impairment review of investments in real estate. See Item 1. “Financial Statements — Notes to Consolidated Financial Statements — Note 2 — Basis of Presentation — Impairment Review” for further discussion.

The Company received certain rent relief requests for certain periods in 2020 and 2021 from many of our retail tenants and some of our office tenants as a result of the measures taken to combat the spread of the COIVD-19 pandemic. Some of our tenants have availed themselves of various federal and state relief funds, such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program, which can be utilized to partially meet rental obligations. While our tenants are required to fulfill their commitments to us under their leases, we have implemented and will continue to carefully consider temporary rent deferrals and rent abatements on a lease-by-lease basis and only consider those which have a justifiable financial basis.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following table sets forth information regarding the collection percentage as of June 30, 2021 related to the amounts due from our tenants:

									As of June 30, 2021
Property Type												Second Quarter of 2020 Billings Collected(1)						Third Quarter of 2020 Billings Collected(1)						Fourth Quarter of 2020 Billings Collected(1)						First Quarter of 2021 Billings Collected(1)						Second Quarter of 2021 Billings Collected(1)
Office												100		%				100		%				99		%				99		%				99		%
Retail												46		%				63		%				67		%				75		%				82		%
Total												98		%				98		%				98		%				98		%				98		%

(1)    Adjusted for rent concessions granted to tenants.

See Item 1. “Financial Statements — Notes to Consolidated Financial Statements — Note 2 — Basis of Presentation — Rents, Deferred Rents and Other Receivables, Net” for a discussion of how we assess the collectibility of amounts due under leases with our tenants.

While we cannot be certain as to the duration of the impact of COVID-19, we expect impacts of COVID-19 to affect our financial results at least through the second half of 2021. The future impact of the pandemic on the demand for office space is unclear, as companies consider the repercussion of the pandemic on their business and their demand for labor while, at the same time, evaluate their space requirements in light of their current and projected headcounts and the continued focus on social distancing and employees’ desire for more work-location flexibility. See “Risk Factors—The Company’s business, results of operations and financial condition have been adversely affected and could in the future be materially adversely affected by the ongoing global pandemic of novel strain of the coronavirus.” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 25, 2021 for additional information.

Leasing Activity and Occupancy Level

The first half of 2021 has continued to be dominated by the COVID-19 pandemic causing significant uncertainty for most sectors, including the commercial real estate industry. Leasing activity, compared to the first half of 2020, decreased as a result. During the six months ended June 30, 2021, we executed new and renewal leases totaling 107,277 square feet within our portfolio, compared to 190,445 square feet for the same period in 2020, a decrease of 44% year over year. Contractual expirations and early terminations of leases totaled 185,731 square feet during the six months ended June 30, 2021, compared to 333,524 square feet for the same period in 2020, a decrease of 44% year over year. As a result of the negative net absorption, occupancy decreased from 81.1% during the six months ended June 30, 2020 to 78.1% for the same period in 2021. See “Leasing Activity” for details.

Financing

In February 2021, Brookfield DTLA closed a $465.0 million interest-only debt secured by Gas Company Tower. This debt, which is scheduled to mature in February 2026, bears interest at LIBOR plus 2.95%. All the proceeds from this debt were used to pay off the original $450.0 million debt that previously encumbered the property and to satisfy the new loans’ required reserves. See “Indebtedness” for details.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Capital Improvements

The atrium development project at Wells Fargo Center was completed during the third quarter of 2020 and the construction of the food vendor spaces is ongoing with openings starting in the second and third quarter of 2021.

In response to the measures taken to combat the spread of the COVID-19 pandemic, Brookfield DTLA strategically deferred and cancelled various capital expenditure projects of lower priority since April 2020. Further, during the first half of 2021, expenditures for tenant improvements has continued to decline in response to decreased leasing activity. Accordingly, expenditures for real estate improvements decreased from $31.9 million in the first half of 2020 to $8.7 million for the same period in 2021, a decrease of $23.2 million or 73% year over year.

755 South Figueroa Development

The 755 South Figueroa multifamily site is held by an unconsolidated real estate joint venture in which the Company had an ownership interest of 41.7%. As of June 30, 2021, construction is actively underway with concrete construction complete through eight levels of parking and twelve floors of the superblock. Substantial completion is expected in the fourth quarter of 2022. During the three and six months ended June 30, 2021, net proceeds of $19.0 million and $32.3 million, respectively, compared to $16.2 million for the three and six months ended June 30, 2020, were generated from loan draws to fund development costs. Furthermore, during the three and six months ended June 30, 2021, additional capital contributions of $5.0 million and $13.8 million, respectively, compared to $2.0 million for the same period in 2020, was made by DTLA FP IV Holdings to fund development costs.

Liquidity and Capital Resources

General

Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs. As of June 30, 2021, we have $195.8 million of liquidity comprised of $82.4 million of cash and cash equivalents and restricted cash, $40.7 million of unused capital contribution commitments available on Series B preferred interest, and $72.8 million available on our secured debt for future drawdown to fund approved leasing costs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover its investing and financing activities without issuing additional debt or equity, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease, or that it will not increase, in the future. If Brookfield DTLA’s operating cash flows and capital are not sufficient to cover its operating costs or to repay its indebtedness as it comes due, we may issue additional debt and/or equity, including to affiliates of Brookfield DTLA, which issuances could further adversely impact the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock. In many cases, such securities may be issued if authorized by the board of directors of Brookfield DTLA without the approval of holders of the Series A preferred stock.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Brookfield DTLA’s primary liquidity sources and uses during the three and six months ended June 30, 2021 and 2020 are as follows:

Sources:

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

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

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

Uses:

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

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

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

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

Capital Expenditures and Leasing Costs

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

Brookfield DTLA expects that capital improvements and leasing activities at its properties will require material amounts of cash for at least several years. According to our 2021 business plan, Brookfield DTLA projects spending approximately $257.2 million over the next five years consisting of $176.4 million for tenant improvements, $69.7 million for leasing costs and $11.2 million for capital expenditures. The expected capital improvements include, but are not limited to, renovations and physical capital upgrades to Brookfield DTLA’s properties, upgrades to emergency generators and replacement of transformers. These projections are estimates and may be subject to changes per future revisions of speculative leasing plans.

See “Indebtedness” below for more information regarding future advance amounts available as of June 30, 2021 under the loans secured by the Wells Fargo Center–South Tower and 777 Tower office properties that can be drawn to fund approved leasing costs, including tenant improvements and inducements and leasing commissions, and, in the case of Wells Fargo Center–South Tower, common area improvements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Indebtedness

During the six months ended June 30, 2021, our issuances and repayments of debt included the following:

			Interest Rate Type						Effective Date						Maturity Date/Term to Maturity						Interest Rate as of Effective Date																		Principal Amount
Issuances
Gas Company Tower			Variable						2/5/2021						2/9/2026 (1)						2.01		%																$	350,000
Gas Company Tower			Variable						2/5/2021						2/9/2026 (1)						5.12		%																65,000
Gas Company Tower			Variable						2/5/2021						2/9/2026 (1)						7.87		%																50,000
Weighted average/total															5 years						3.07		%																$	465,000
Repayments of debt
Gas Company Tower			Fixed						2/5/2021						8/6/2021						3.47		%																$	319,000
Gas Company Tower			Fixed						2/5/2021						8/6/2021						6.50		%																131,000
Weighted average/total															N/A						4.35		%																$	450,000

(1)    Maturity dates include the effect of extension options that the Company controls.

N/A    Not applicable since the loans were fully repaid as of June 30, 2021.

On February 5, 2021, Brookfield DTLA refinanced its Gas Company Tower secured loans. The original $450.0 million secured loans were replaced with secured loans of $465.0 million, comprised of a $350.0 million mortgage loan, a $65.0 million mezzanine loan and a $50.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 1.89%, 5.00% and 7.75%, respectively. The initial maturity date of these interest-only loans is February 9, 2023. The mortgage loan can be prepaid, in whole or in part, with prepayment fees (as defined in the underlying loan agreement) until February 2022 after which the loan may be repaid without prepayment fees. A voluntary prepayment of the mortgage or mezzanine loans requires a simultaneous pro-rata prepayment of all loans encumbering this property. Brookfield DTLA has three options to extend the loans maturity dates for a period of one year each, as long as the maturity date of the mezzanine loans is extended simultaneously with the mortgage loan, and no Event of Default (as defined in the underlying loan agreements) has occurred. All proceeds from the new secured loans were used to pay off the original $450.0 million encumbrance and to satisfy the new loans’ required reserves. The Company recognized a loss on early extinguishment of debt of $4.6 million, which represented a prepayment premium and debt yield maintenance fee, in interest expense in the consolidated statements of operations.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

As of June 30, 2021, Brookfield DTLA’s debt was comprised of mortgage and mezzanine loans secured by seven properties. A summary of our debt as of June 30, 2021 is as follows:

			Principal Amount						Percent of Total Debt						Effective Interest Rate						Weighted Average Term to Maturity (3)
Fixed-rate			$	458,500					20		%				4.03		%				3 years
Variable-rate (1) (2)			1,805,796						80		%				2.59		%				3 years
Total secured debt			$	2,264,296					100		%				2.88		%				3 years

__________

(1)As of June 30, 2021 and through the date of this Report, a future advance amount of $29.2 million is available under the Wells Fargo Center–South Tower mortgage loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, leasing commissions, and common area improvements.

(2)As of June 30, 2021 and through the date of this Report, a future advance amount of $43.6 million is available under the 777 Tower mortgage and mezzanine loans that can be drawn to fund approved leasing costs (as defined in the underlying loan agreements), including tenant improvements and inducements, and leasing commissions.

(3)Includes the effect of extension options that the Company controls, if applicable. As of June 30, 2021, we meet the criteria specified in the loan agreements to extend the loan maturity dates.

Non-Recourse Carve Out Guarantees

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

Debt Compliance

As of June 30, 2021 and December 31, 2020, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements.

Certain loan agreements held by Brookfield DTLA contain debt yield and debt service coverage ratios. As of June 30, 2021, Brookfield DTLA was meeting or exceeding these financial ratios, with the exception of the loans secured by Wells Fargo Center—South Tower and Wells Fargo Center—North Tower that did not meet their respective minimum debt yield ratio.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Wells Fargo Center–South Tower —

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

Wells Fargo Center–North Tower —

As of June 30, 2021the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, following the occurrence of such debt yield event, any excess operating cash flows are to be swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses, capital expenditures and leasing costs; property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; reserve accounts; and fees and expenses due to the loan administrative agent. The cash sweep has not started as of June 30, 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Leasing Activity

Occupancy level. The following table summarizes leasing activity at Brookfield DTLA’s properties for the six months ended June 30, 2021:

			Leasing Activity						Percentage Leased
Leased square feet as of December 31, 2020			5,995,517						79.1		%
Contractual expirations and early terminations			(185,731)						(2.4)		%
New leases			44,108						0.6		%
Renewals			63,169						0.8		%
Leased square feet as of June 30, 2021			5,917,063						78.1		%

Lease contractual expirations and early terminations. The following table summarizes the large contractual expiries and early terminations at Brookfield DTLA’s properties during the six months ended June 30, 2021:

Tenant

Property

Leased Square Feet

Latham & Watkins LLP

Wells Fargo Center–South Tower, Gas Company Tower

76,607

Nossaman LLP

777 Tower

35,317

CallisonRTKL

BOA Plaza

33,473

Gibson, Dunn & Crutcher LLP

Wells Fargo Center–North Tower

27,009

Total

172,406

Decline in occupancy during the six months ended June 30, 2021 was mainly attributable to contractual expirations and early terminations of lease agreements. Leasing volume for the six months ended June 30, 2021, compared to the same period in 2020, is down significantly due to the continued impact of the measures taken to combat the spread of the COVID-19 pandemic. Many companies have paused anticipated leasing transactions while they re-direct their focus on addressing the impact of the COVID-19 restrictive measures on their business, including protecting their employees and managing financial and operating matters. At the same time, we have ongoing interest and lease negotiations with existing tenants on lease renewals/extensions and expansion of space and continued negotiations with prospective tenants on leasing of space. On June 15, 2021, with California fully reopened its economy, restrictions such as physical distancing, capacity limits and the county tier system were lifted. Non-essential employees are able to reoccupy office space and most of our tenants are making plans to return to the office. As a result of this progress, the leasing market is starting to reflect growing positive sentiment through increased touring activity.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Rental rates. The following table presents leasing information for executed leases at Brookfield DTLA’s properties as of June 30, 2021:

						Square Feet
Property						Net Building Rentable						% of Net Rentable						% Leased						Annualized Rent (1)						Annualized Rent $/RSF (2)
BOA Plaza						1,405,428						18.5		%				86.4		%				$	33,970,755					$	27.96
Wells Fargo Center–North Tower						1,400,639						18.5		%				82.3		%				33,901,575						29.42
Gas Company Tower						1,345,163						17.8		%				76.1		%				28,035,592						27.40
EY Plaza						963,682						12.7		%				80.2		%				21,084,725						27.27
FIGat7th						316,250						4.2		%				89.2		%				6,711,811						23.78
Wells Fargo Center–South Tower						1,124,960						14.8		%				61.0		%				19,373,554						28.23
777 Tower						1,024,835						13.5		%				76.6		%				21,586,994						27.51
						7,580,957						100.0		%				78.1		%				$	164,665,006					$	27.83

__________

(1)Annualized rent represents the annualized monthly contractual rent under executed leases as of June 30, 2021. This amount reflects total base rent before any rent abatements as of June 30, 2021. Total abatements for executed leases as of June 30, 2021 for the twelve months ending June 30, 2022 are approximately $8.6 million, or $1.45 per leased square foot.

(2)Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of June 30, 2021.

Average asking net effective rents in the LACBD were essentially flat during the six months ended June 30, 2021. Management believes that on average our current rents approximate market in the LACBD.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following table presents a summary of lease expirations at Brookfield DTLA’s properties for executed leases as of June 30, 2021, plus currently available space, for future periods. This table assumes that none of our tenants will exercise renewal options or early termination rights, if any, at or prior to their scheduled expirations.

Year						Total Area in Square Feet Covered by  Expiring Leases						Percentage of Leased Square Feet						Annualized Rent (1)						Percentage of Annualized Rent						Current Rent per Leased Square Foot (2)						Rent per Leased Square Foot at Expiration (3)
Remainder of 2021						102,024						1.7		%				$	3,090,307					1.9		%				$	30.29					$	30.40
2022						493,538						8.3		%				13,868,418						8.4		%				28.10						28.61
2023						930,912						15.7		%				23,756,874						14.4		%				25.52						27.12
2024						544,819						9.2		%				16,044,920						9.7		%				29.45						32.15
2025						716,816						12.1		%				20,436,424						12.4		%				28.51						32.47
2026						552,460						9.3		%				13,971,713						8.5		%				25.29						29.42
2027						186,310						3.1		%				5,375,044						3.3		%				28.85						34.55
2028						104,486						1.8		%				3,137,715						1.9		%				30.03						39.13
2029						303,025						5.1		%				10,021,037						6.1		%				33.07						43.05
2030						329,831						5.6		%				10,102,724						6.1		%				30.63						39.96
Thereafter						1,652,842						28.1		%				44,859,830						27.3		%				27.14						40.71
Total expiring leases						5,917,063						100.0		%				$	164,665,006					100.0		%				$	27.83					$	34.40
Currently available						1,663,894
Total rentable square feet						7,580,957

__________

(1)Annualized rent represents the annualized monthly contractual rent under executed leases as of June 30, 2021. This amount reflects total base rent before any rent abatements as of June 30, 2021. Total abatements for executed leases as of June 30, 2021 for the twelve months ending June 30, 2022 are approximately $8.6 million, or $1.45 per leased square foot.

(2)Current rent per leased square foot represents base rent for executed leases, divided by total leased square feet as of June 30, 2021.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Discussion of Consolidated Cash Flows

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

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

			For the Six Months Ended												Dollar Change
			June 30,
			2021						2020
Net cash provided by operating activities			$	43,130					$	31,874					$	11,256
Net cash used in investing activities			$	(18,401)					$	(31,730)					$	13,329
Net cash (used in) provided by financing activities			$	(25,856)					$	10,233					$	(36,089)

Operating Activities

Brookfield DTLA’s cash flows from operating activities are primarily dependent upon (1) the occupancy level of its portfolio, (2) the rental rates achieved on its leases, (3) the collectibility of rent and other amounts billed to tenants and (4) changes in working capital. The increase in cash provided by operating activities is primarily attributable to cash inflows from working capital changes by $10.4 million and decreases in interest payments on secured debt by $8.2 million. The cash inflows were partially offset by decreases in cash lease revenue by $5.5 million and parking net operating income by $1.2 million, reflecting the reduction in both contractual and physical occupancy resulting from the “stay-at-home” order implemented since March 2020.

Investing Activities

Brookfield DTLA’s cash flows from investing activities are generally impacted by the amount of capital expenditures and tenant improvement activities for its properties. The decrease in net cash used in investing activities was mainly due to decreases in capital expenditures by $10.7 million following the completion of the atrium development project at Wells Fargo Center in the third quarter of 2020.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Financing Activities

Brookfield DTLA’s cash flows from financing activities are generally impacted by its loan activity, and contributions from and distributions to its equity holders, if any. During the six months ended June 30, 2021, net proceeds from the refinancing of the loans secured by the Gas Company Tower and the issuance of Series B preferred interest were the main source of cash provided by financing activities. All proceeds from the new secured loans were used to pay off the original $450.0 million encumbrance and to satisfy the new loans’ required reserves. As Brookfield DTLA had excess cash from operating activities generated from properties, it repurchased $27.3 million of the Series B preferred interest and made distributions of $8.5 million to the Series B preferred interest. In comparison, during the six months ended June 30, 2020, proceeds from the issuance of Series B preferred interest of $25.2 million was the main source of cash provided by financing activities. Cash outflows were mainly driven by repurchases of and distributions to Series B preferred interest of $6.9 million and $7.9 million, respectively, using the excess cash from upsized refinancing of the loans secured by 777 Tower in October 2019 and operating activities generated from other properties.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Discussion of Results of Operations

Comparison of the Three Months Ended June 30, 2021 to June 30, 2020

Consolidated Statements of Operations Information

(In millions, except percentage amounts)

			For the Three Months Ended												Increase/ (Decrease)						% Change
			June 30,
			2021						2020
Revenue:
Lease income			$	62.7					$	63.3					$	(0.6)					(1)		%
Parking			6.2						5.2						1.0						19		%
Interest and other			0.3						0.1						0.2						200		%
Total revenue			69.2						68.6						0.6						1		%
Expenses:
Rental property operating and maintenance			23.2						23.1						0.1						—		%
Real estate taxes			10.0						9.7						0.3						3		%
Parking			1.9						2.4						(0.5)						(21)		%
Other expenses			2.5						1.9						0.6						32		%
Depreciation and amortization			26.6						26.5						0.1						—		%
Interest			18.6						20.3						(1.7)						(8)		%
Total expenses			82.8						83.9						(1.1)						(1)		%
Other Income:
Equity in earning of unconsolidated     real estate joint venture			0.1						—						0.1						100		%
Total other income			0.1						—						0.1						100		%
Net loss			$	(13.5)					$	(15.3)					$	1.8					(12)		%

Interest Expense

Interest expense mainly represents interest expense on secured debt. Decrease was primarily due to decline in weighted average LIBOR rates on our variable-rate debt from 0.47% for the three months ended June 30, 2020 to 0.13% for the same period in 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Comparison of the Six Months Ended June 30, 2021 to June 30, 2020

Consolidated Statements of Operations Information

(In millions, except percentage amounts)

			For the Six Months Ended												Increase/ (Decrease)						% Change
			June 30,
			2021						2020
Revenue:
Lease income			$	127.0					$	128.7					$	(1.7)					(1)		%
Parking			11.4						15.2						(3.8)						(25)		%
Interest and other			0.6						0.5						0.1						20		%
Total revenue			139.0						144.4						(5.4)						(4)		%
Expenses:
Rental property operating and maintenance			45.0						46.9						(1.9)						(4)		%
Real estate taxes			20.1						19.4						0.7						4		%
Parking			3.5						6.1						(2.6)						(43)		%
Other expense			6.0						4.6						1.4						30		%
Depreciation and amortization			53.7						53.3						0.4						1		%
Interest			42.4						43.5						(1.1)						(3)		%
Total expenses			170.7						173.8						(3.1)						(2)		%
Other Income (Expense):
Equity in earning (loss) of unconsolidated     real estate joint venture			0.3						(0.7)						1.0						(143)		%
Total other income (expense)			0.3						(0.7)						1.0						(143)		%
Net loss			$	(31.4)					$	(30.1)					$	(1.3)					4		%

Lease Income

Lease income decreased largely as a result of a reduction in occupancy to combat the spread of the COVID-19 pandemic. See “Leasing Activity” for further details.

Parking revenue and expense

Parking revenue includes monthly and transient parking income. With the restrictive measures imposed on non‑essential businesses and employees working from home, both parking revenue and variable expense decreased accordingly.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Rental Property Operating and Maintenance Expense

Rental property operating and maintenance expense mainly includes janitorial, repairs and maintenance, utilities, insurance, and various other recurring expenses. As most of our office tenants have been working remotely since the issuance of the “stay-at-home” order in March 2020, rental property operating and maintenance expense decreased.

Other Expense

Other expense mainly represents asset management fee and income tax expense. Increase was mainly due to an increase in income tax expense incurred by the Company’s TRS by $1.6 million from $4 thousand during the six months ended June 30, 2020 to $1.6 million for the same period in 2021 on taxable lease termination income.

Interest Expense

Interest expense mainly represents interest expense on secured debt and loss on early extinguishment of debt. Interest expense on secured debt was $37.8 million for the six months ended June 30, 2021, compared to $43.5 million for the same period in 2020, primarily due to decline in weighted average LIBOR rates on our variable-rate debt from 0.97% for the six months ended June 30, 2020 to 0.14% for the same period in 2021. Such decrease was offset by the loss on early extinguishment of debt of $4.6 million recorded during the six months ended June 30, 2021 for prepayment premium and debt yield maintenance fee charged on refinancing of loans secured by Gas Company Tower in February 2021.

Off-Balance Sheet Arrangements

Brookfield DTLA did not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital expenditures or capital resources that is material to stockholders as of the date this report was filed, June 30, 2021 and December 31, 2020, respectively.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Contractual Obligations

The following table provides information with respect to Brookfield DTLA’s commitments as of June 30, 2021, including any guaranteed or minimum commitments under contractual obligations:

			Remainder of 2021						2022						2023						2024						2025						Thereafter						Total
Principal payments on      secured debt (1)(2)			$	—					$	—					$	819,296					$	675,000					$	305,000					$	465,000					$	2,264,296
Interest payments –
Fixed-rate debt (3)			9,440						18,726						16,803						11,025						—						—						55,994
Variable-rate debt (4)			23,911						47,432						44,043						29,903						22,207						1,564						169,060
Tenant-related commitments (5)			10,287						23,018						1,169						971						1,848						1,402						38,695
Construction-related commitments (6)			501						—						—						—						—						—						501
			$	44,139					$	89,176					$	881,311					$	716,899					$	329,055					$	467,966					$	2,528,546

__________

(1)BAM owns a significant interest in a company whose subsidiary is the lender of the $35.0 million mezzanine loan secured by Wells Fargo Center–North Tower, which matures in October 2023. See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 13—Related Party Transactions.”

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

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

(4)Interest payments on variable-rate debt are calculated based on the maturity dates (after the impact of extension options that the Company controls, if applicable) and the one-month LIBOR rate in place on the debt as of June 30, 2021 plus the contractual spread per the loan agreements. Interest payments due to the related party lender of the loan described in (1) above total $0.9 million for the remainder of 2021, $1.8 million for 2022, and $1.4 million for 2023.

(5)Tenant-related commitments include tenant improvements and leasing commissions and are based on executed leases as of June 30, 2021. Tenant-related commitments due to the related party lender of the loan described in (1) above total $0.3 million for the remainder of 2021.

(6)Construction-related commitments include amounts due to contractors related to redevelopment projects at Wells Fargo Center based on executed contracts as of June 30, 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Related Party Transactions

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 13—Related Party Transactions” of this Quarterly Report on Form 10-Q.

Litigation

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

Critical Accounting Policies

Please refer to Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 25, 2021 for a discussion of our critical accounting policies for the year ended December 31, 2020.

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 2—Basis of Presentation” of this Quarterly Report on Form 10-Q for a discussion of use of estimates, impairment review of investments in real estate and unconsolidated real estate joint venture, and collectibility assessment on rents, deferred rents and other receivables during the six months ended June 30, 2021.

Recently Issued Accounting Literature

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 3—Recently Issued Accounting Literature” of this Quarterly Report on Form 10-Q for information regarding the impact of the adoption of new accounting pronouncements during the six months ended June 30, 2021.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

See Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 25, 2021 for a discussion regarding our exposure to market risk. Our exposure to market risk has not changed materially since year end 2020.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

As required by SEC Rule 13a-15(b), Brookfield DTLA carried out an evaluation, under the supervision and with the participation of its management, including its principal executive officer and its principal financial officer, of the effectiveness of the design and operation of Brookfield DTLA’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, G. Mark Brown, our principal executive officer, and Bryan D. Smith, our principal financial officer, concluded that these disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021.

Changes in Internal Control over Financial Reporting

There have been no changes in Brookfield DTLA’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2021 that have materially affected, or that are reasonable likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting due to the Shutdown. We are continually monitoring and assessing the impact of the Shutdown on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

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

Item 1A.    Risk Factors.

There have been no material changes to the risk factors included in Part I, “Item IA. Risk Factors” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 25, 2021.

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

None.

Item 3.    Defaults Upon Senior Securities.

Dividends on the Series A preferred stock are cumulative and therefore will continue to accrue at an annual rate of $1.90625 per share. As of July 31, 2021, the cumulative amount of unpaid dividends totaled $214.6 million.

Item 4.    Mine Safety Disclosures.

Not applicable.

Item 5.    Other Information.

None.

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Item 6.    Exhibits.

Exhibit No.						Exhibit Description
31.1						Certification of Principal Executive Officer dated August 12, 2021
31.2						Certification of Principal Financial Officer dated August 12, 2021 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Principal Executive Officer and Principal Financial Officer dated August 12, 2021 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS						Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

__________

*			Furnished herewith.

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

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SIGNATURES

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

Date: As of August 12, 2021

			BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.
			Registrant
			By:			/s/ G. MARK BROWN
						G. Mark Brown
						Chairman of the Board
						(Principal executive officer)
			By:			/s/ BRYAN D. SMITH
						Bryan D. Smith
						Chief Financial Officer
						(Principal financial officer)

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