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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			September 30, 2022

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 November 4, 2022, 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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

									Page
PART I—FINANCIAL INFORMATION
			Item 1.			Financial Statements (Unaudited).
						Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021			1
						Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021			3
						Consolidated Statements of Stockholders’ Deficit for the three and nine months ended September 30, 2022 and 2021			4
						Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2022 and 2021			5
						Notes to Consolidated Financial Statements			7
			Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations.			33
			Item 3.			Quantitative and Qualitative Disclosures About Market Risk.			52
			Item 4.			Controls and Procedures.			53
PART II—OTHER INFORMATION
			Item 1.			Legal Proceedings.			55
			Item 1A.			Risk Factors.			55
			Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds.			57
			Item 3.			Defaults Upon Senior Securities.			57
			Item 4.			Mine Safety Disclosures.			57
			Item 5.			Other Information.			57
			Item 6.			Exhibits.			58
			Signatures						58

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Forward-Looking Statements

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

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

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

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

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

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

•Business competition;

•Dependence on tenants’ financial condition which may be impacted by higher interest rates and inflationary pressures;

•The use of debt to finance Brookfield DTLA’s business or that of its subsidiaries, especially given recent increases in market interest rates and their impact on borrowing costs and the ability to refinance;

•The behavior of financial markets, including fluctuations in interest rates, especially given the recent significant increases in market interest rates and their impact on borrowing and hedging costs and the ability to refinance;

•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;

•Risks relating to trends in the office real estate industry including transition to hybrid or remote work policies and employee work-from home arrangements;

•The possible impact of international conflicts and other developments, including the war in Ukraine and terrorist acts;

•Potential environmental liabilities;

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

•Dependence on management personnel;

•Illiquidity of investments in real estate;

•Operational and reputational risks;

•Risks related to climate change;

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

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

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

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

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PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

			September 30, 2022						December 31, 2021
ASSETS
Investments in Real Estate:
Land			$	217,812					$	222,555
Buildings and improvements			2,164,126						2,308,836
Tenant improvements			437,385						418,460
Investments in real estate, gross			2,819,323						2,949,851
Less: accumulated depreciation			564,675						580,403
Investments in real estate, net			2,254,648						2,369,448
Investment in unconsolidated real estate joint venture			44,177						43,191
Cash and cash equivalents			33,354						38,901
Restricted cash			41,340						49,322
Rents, deferred rents and other receivables, net			128,347						125,625
Intangible assets, net			11,250						16,023
Deferred charges, net			55,943						57,529
Due from affiliates			7,147						10,062
Prepaid and other assets, net			4,232						12,377
Total assets			$	2,580,438					$	2,722,478
LIABILITIES AND DEFICIT
Liabilities:
Secured debt, net			$	2,277,534					$	2,255,921
Accounts payable and other liabilities			93,783						77,612
Due to affiliates			4,129						1,782
Intangible liabilities, net			3,228						4,455
Total liabilities			2,378,674						2,339,770
Commitments and Contingencies (See Note 14)

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited; in thousands, except share amounts)

			September 30, 2022						December 31, 2021
LIABILITIES AND DEFICIT (continued)
Mezzanine Equity:
7.625% Series A Cumulative Redeemable Preferred Stock,    $0.01 par value, 9,730,370 shares issued and outstanding     as of September 30, 2022 and December 31, 2021			$	479,488					$	465,577
Noncontrolling Interests:
Series A-1 preferred interest			465,363						452,454
Senior participating preferred interest			16,074						21,191
Series B preferred interest			146,133						177,290
Total mezzanine equity			1,107,058						1,116,512
Stockholders’ Deficit:
Common stock, $0.01 par value, 1,000 shares     issued and outstanding as of September 30, 2022     and December 31, 2021			—						—
Additional paid-in capital			204,369						203,369
Accumulated deficit			(1,109,702)						(865,927)
Noncontrolling interests			39						(71,246)
Total stockholders’ deficit			(905,294)						(733,804)
Total liabilities and deficit			$	2,580,438					$	2,722,478

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands)

			For the Three Months Ended												For the Nine Months Ended
			September 30,												September 30,
			2022						2021						2022						2021
Revenue:
Lease income			$	66,402					$	61,880					$	196,924					$	188,855
Parking			7,962						6,816						22,504						18,187
Interest and other			167						124						846						680
Total revenue			74,531						68,820						220,274						207,722
Expenses:
Rental property operating and maintenance			27,711						24,895						77,609						69,894
Real estate taxes			10,035						10,132						29,749						30,212
Parking			2,781						2,474						7,712						5,940
Other expenses			1,905						707						5,709						6,676
Depreciation and amortization			25,125						26,523						76,273						80,183
Interest			28,046						18,755						67,793						61,131
Impairment of real estate and intangible assets			95,447						—						95,447						—
Total expenses			191,050						83,486						360,292						254,036
Other Income:
Equity in earning of unconsolidated     real estate joint venture			395						268						986						564
Total other income			395						268						986						564
Net loss			(116,124)						(14,398)						(139,032)						(45,750)
Net loss (income) attributable to    noncontrolling interests:
Series A-1 preferred interest returns			4,303						4,303						12,909						12,908
Senior participating preferred interest     redemption measurement adjustment			(4,016)						(325)						(4,075)						575
Series B preferred interest returns			3,401						3,896						10,713						12,324
Series B common interest –     allocation of net income			86,545						27,222						71,285						35,757
Net loss attributable to Brookfield DTLA			(206,357)						(49,494)						(229,864)						(107,314)
Series A preferred stock dividends			4,637						4,637						13,911						13,912
Net loss attributable to common interest     holders of Brookfield DTLA			$	(210,994)					$	(54,131)					$	(243,775)					$	(121,226)

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												Non- controlling Interests						Total Stockholders’ Deficit
						Common Stock
Balance, December 31, 2021						1,000						$	—					$	203,369					$	(865,927)											$	(71,246)					$	(733,804)
Net (loss) income																								(15,185)												4,788						(10,397)
Contributions																		500																								500
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,637)												(7,852)						(12,489)
Balance, March 31, 2022						1,000						—						203,869						(885,749)												(74,310)						(756,190)
Net loss																								(8,322)												(4,189)						(12,511)
Contributions																		—																								—
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,637)												(8,007)						(12,644)
Balance, June 30, 2022						1,000						—						203,869						(898,708)												(86,506)						(781,345)
Net (loss) income																								(206,357)												90,233						(116,124)
Contributions																		500																								500
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,637)												(3,688)						(8,325)
Balance, September 30, 2022						1,000						$	—					$	204,369					$	(1,109,702)											$	39					$	(905,294)

						Number of Shares						Common Stock						Additional Paid-in Capital						Accumulated Deficit												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)
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)
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)
Net (loss) income																								(49,494)												35,096						(14,398)
Contributions																		—																								—
Dividends, preferred returns and   redemption measurement   adjustments on mezzanine equity																								(4,637)												(7,874)						(12,511)
Balance, September 30, 2021						1,000						$	—					$	202,869					$	(847,595)											$	(68,683)					$	(713,409)

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 Nine Months Ended
			September 30,
			2022						2021
Cash flows from operating activities:
Net loss			$	(139,032)					$	(45,750)
Adjustments to reconcile net loss to net cash      provided by operating activities:
Depreciation and amortization			76,273						80,183
Equity in earning of unconsolidated real estate joint venture			(986)						(564)
Recovery of lease receivables previously deemed uncollectible			(280)						(880)
Amortization of acquired below-market leases,     net of acquired above-market leases			(147)						207
Straight-line rent amortization			(1,690)						(2,414)
Amortization of tenant inducements			1,943						3,233
Amortization and write-off of debt financing costs			5,251						5,976
Unrealized gain on interest rate cap contracts			(449)						(2)
Impairment of real estate and intangible assets			95,447						—
Loss on early extinguishment of debt			—						4,575
Changes in assets and liabilities:
Rents, deferred rents and other receivables, net			(1,093)						4,282
Deferred charges, net			(5,948)						(3,415)
Due from affiliates			1,324						4,969
Prepaid and other assets, net			8,537						8,278
Accounts payable and other liabilities			7,589						7,761
Due to affiliates			2,347						(401)
Net cash provided by operating activities			49,086						66,038
Cash flows from investing activities:
Expenditures for real estate improvements			(37,065)						(20,211)
Net cash used in investing activities			(37,065)						(20,211)
Cash flows from financing activities:
Proceeds from secured debt			16,362						465,000
Principal payments on secured debt			—						(450,000)
Proceeds from Series B preferred interest			14,930						6,000
Proceeds from senior participating preferred interest			146						254
Distributions to Series B preferred interest			(9,825)						(12,672)
Repurchases of Series B preferred interest			(46,975)						(37,528)
Distributions to senior participating preferred interest			(1,188)						(700)
Contributions to additional paid-in capital			1,000						500
Purchase of interest rate cap contracts			—						(62)
Payment for early extinguishment of debt			—						(4,575)
Debt financing costs paid			—						(6,544)
Net cash used in financing activities			(25,550)						(40,327)
Net change in cash, cash equivalents and restricted cash			(13,529)						5,500
Cash, cash equivalents and restricted cash at beginning of period			88,223						83,483
Cash, cash equivalents and restricted cash at end of period			$	74,694					$	88,983

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 Nine Months Ended
			September 30,
			2022						2021
Supplemental disclosure of cash flow information:
Cash paid for interest			$	60,350					$	51,383
Cash (refund) paid for income taxes			$	(12)					$	1,723
Supplemental disclosure of non-cash investing and     financing activities:
Accrual for current-period additions to real estate     investments			$	17,541					$	11,072

The following is a reconciliation of Brookfield DTLA’s cash, cash equivalents and restricted cash at the beginning and end of the nine months ended September 30, 2022 and 2021:

			For the Nine Months Ended
			September 30,
			2022						2021
Cash and cash equivalents at beginning of period			$	38,901					$	37,394
Restricted cash at beginning of period			49,322						46,089
Cash, cash equivalents and restricted cash at     beginning of period			$	88,223					$	83,483
Cash and cash equivalents at end of period			$	33,354					$	36,480
Restricted cash at end of period			41,340						52,503
Cash, cash equivalents and restricted cash at     end of period			$	74,694					$	88,983

See accompanying notes to consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 1—Organization and Description of Business

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

As of September 30, 2022 and December 31, 2021, Brookfield DTLA owned Bank of America Plaza (“BOA Plaza”), EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, which are Class A office properties, and FIGat7th, a retail center nestled between EY Plaza and 777 Tower. Additionally, Brookfield DTLA Fund Properties II LLC (“Fund II”) has a noncontrolling interest in an unconsolidated real estate joint venture with Brookfield DTLA FP IV Holdings LLC (“DTLA FP IV Holdings”), a wholly‑owned subsidiary of DTLA Holdings, which owns 755 South Figueroa, a residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”) in Downtown Los Angeles, which has long been a major office district for law firms, accounting firms and government agencies.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 2—Basis of Presentation

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

Principles of Consolidation and Basis of Presentation

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

The consolidated balance sheets as of September 30, 2022 and December 31, 2021 include the accounts of Brookfield DTLA and subsidiaries in which it has a controlling financial interest. All material intercompany transactions have been eliminated in consolidation as of September 30, 2022 and December 31, 2021, and for each of the three and nine months ended September 30, 2022 and 2021.

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

Determination of Controlling Financial Interest

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

We consolidate entities through which we conduct substantially all of our business, and own, directly and through subsidiaries, substantially all of our assets. As of September 30, 2022, these consolidated VIEs had in aggregate total consolidated assets of $2.5 billion (of which $2.3 billion is related to investments in real estate) and total consolidated liabilities of $2.4 billion (of which $2.3 billion is related to non-recourse debt secured by our office and retail properties). The Company is obligated to repay substantially all of the liabilities of our consolidated VIEs, except for the non-recourse secured debt.

Investment in Unconsolidated Real Estate Joint Venture. Fund II has a noncontrolling interest in a joint venture, Brookfield DTLA Fund Properties IV LLC (“Fund IV”), with DTLA FP IV Holdings. The Company determined that the joint venture is a VIE mainly because its equity investment at risk is insufficient to finance the joint venture’s activities without additional subordinated financial support. While the joint venture meets the definition of a VIE, Brookfield DTLA is not its primary beneficiary as the Company lacks the power through voting or similar rights to direct the activities that most significantly impact the joint venture’s economic performance. Therefore, the Company accounts for its ownership interest in the joint venture under the equity method. Under the equity method of accounting, we initially recognize our investment at cost and subsequently adjust the carrying amount of the investment for our share of the investee’s earnings or losses, distributions received (if any), and other-than-temporary impairments. As of September 30, 2022, the Company’s ownership interest in the joint venture was 24.7%, a decrease from 33.6% as of December 31, 2021 as a result of additional capital contributed by DTLA FP IV Holdings to the joint venture during the nine months ended September 30, 2022.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Impact of COVID-19 pandemic

Post-Labor Day physical occupancy levels improved slightly when compared to the prior quarter. However, leasing activity and physical occupancy in the LACBD has not caught up to pre-pandemic levels as businesses consider how to best implement return-to-office plans and transition to hybrid or remote work policies. Office tenants are still active in the leasing markets but being more selective in making real estate decisions. Relocating and renewing tenants are pursuing space efficiencies which are often accompanied by size reduction and a focus on highest quality assets. Retail tenants have continued to benefit from higher visitor traffic since COVID mandates throughout California were lifted in June 2021 (the “Reopening”) but short of pre-pandemic levels. Overall, there were no material adjustments to our office and retail lease income during each of the three and nine months ended September 30, 2022 and 2021.

Use of Estimates

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

Impairment Review

Investments in long-lived assets, including our investments in real estate, are individually reviewed for impairment quarterly or if events or changes in circumstances indicate that the carrying amount of the long-lived assets might not be recoverable, which is referred to as a “triggering event” or an “impairment indicator.” Indicators of potential impairment include the following:

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

•Lower stabilized occupancy levels;

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

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

•Significant decrease in properties’ market price;

•Tenant financial problems; and/or

•Comparable market barriers of competitors in the same submarket.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

When conducting the impairment review of our investments in real estate, we assessed the expected undiscounted cash flows based upon numerous factors. These factors include, but are not limited to, the credit quality of our tenants, available market information, known trends, current market/economic conditions that may affect the asset, and historical and forecasted financial and operating information relating to the property, such as net operating income, leasing activity statistics, vacancy projections, renewal percentage, and rent collection rates. If the undiscounted cash flows expected to be generated by a property are less than its carrying amount, the Company determines the fair value of the property and an impairment loss would be recorded to write down the carrying amount of such property to its fair value. During the three and nine months ended September 30, 2022, the Company recognized impairment charges on Wells Fargo Center–South Tower’s investments in real estate of $94.6 million and intangible assets associated with this property of $0.9 million to reduce their carrying amounts to their estimated fair value. While there were no impairment charges on other properties in our portfolio during the three and nine months ended September 30, 2022, in light of the evolving office rental business environment and the slowdown in economic growth in the near term because of rising interest rates, decreases in our property valuations may lead to additional impairment charges in our portfolio in the near future. In comparison, during the same periods in 2021, none of Brookfield DTLA’s real estate properties were impaired. See “Note 11 - Fair Value Measurements” for a detailed discussion of the factors that were considered when determining the fair value of Wells Fargo Center–South Tower.

The Company’s investment in its unconsolidated real estate joint venture is also reviewed for impairment quarterly or when conditions exist that may indicate that the decrease in the carrying amount of the investment has occurred and is other than temporary. Triggering events or impairment indicators for the Company’s unconsolidated real estate joint venture include its recurring operating losses, and other events such as significant changes in construction costs, estimated completion dates, intended holding periods, and other factors related to 755 South Figueroa development. Upon determination that an other-than-temporary impairment has occurred, a write-down is recognized to reduce the carrying amount of the investment to its estimated fair value. Based on its review, management concluded that Brookfield DTLA’s investment in its unconsolidated real estate joint venture was not impaired as of September 30, 2022 and December 31, 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Rents, Deferred Rents and Other Receivables

Under Accounting Standards Codification (“ASC”) Topic 842, Leases, Brookfield DTLA must assess on an individual lease basis whether it is probable that the Company will collect the future lease payments throughout the term of the lease. The Company considers the tenant’s payment history and current credit status when assessing collectibility. If the collectibility of the lease payments is probable at lease commencement, the Company recognizes lease income over the term of the lease on a straight-line basis. During the term of the lease, Brookfield DTLA monitors the credit quality and any related material changes of our tenants by (i) reviewing financial statements of the tenants that are publicly available or that are required to be delivered to us pursuant to the applicable lease, (ii) monitoring news reports regarding our tenants and their respective businesses, (iii) monitoring the tenant’s payment history and current credit status, and (iv) analyzing current economic trends, and reasonable and supportable forecasts of future economic conditions. When collectibility is not deemed probable at the lease commencement date, the Company’s lease income is constrained to the lesser of (i) the income that would have been recognized if collection were probable, or (ii) the lease payments that have been collected from the lessee. If the collectibility assessment changes to probable after the lease commencement date, any difference between the lease income that would have been recognized if collectibility had always been assessed as probable and the lease income recognized to date is recognized as a current-period adjustment to lease income. If the collectibility assessment changes to not probable after the lease commencement date, lease income is reversed to the extent that the lease payments that have been collected from the lessee are less than the lease income recognized to date. Changes to the collectibility of operating leases are recorded as adjustments to lease income in the consolidated statements of operations. As the result of our assessment of the collectibility of amounts due under leases with our tenants, the Company recognized a (reduction) and recovery of lease income totaling $(56) thousand and $280 thousand, respectively, during the three and nine months ended September 30, 2022, compared to a recovery of lease income totaling $1.5 million and $881 thousand, respectively, during the three and nine months ended September 30, 2021.

Income Taxes

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

Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). A TRS is permitted to engage in activities that a REIT cannot engage in directly, such as performing non‑customary services for the Company’s tenants, holding assets that the Company cannot hold directly and conducting certain affiliate transactions. A TRS is subject to both federal and state income taxes. During the three and nine months ended September 30, 2022, the Company’s various TRS reversed income tax expenses of $69 thousand and $118 thousand, respectively. During the three months ended September 30, 2021, the Company reversed income tax expenses of $1.1 million and recorded an accrual of $446 thousand during the nine months ended September 30, 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 3—Recently Issued Accounting Literature

New Accounting Pronouncements 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 amends the scope of ASU 2020-04 to include derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company adopted ASU 2020-04 and ASU 2021-01 on a prospective basis on January 1, 2022. At the time of adoption, the guidance did not have a material impact on the Company’s consolidated financial statements. The Company will continue to track the exposure as of each reporting period and to assess the impact as the reference rate transition occurs through the cessation of LIBOR.

Accounting Pronouncements Issued But Not Yet Adopted

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

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

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

			September 30, 2022						December 31, 2021
Straight-line and other deferred rents			$	112,194					$	108,913
Tenant inducements receivable			29,597						28,445
Tenant receivables			3,220						3,316
Other receivables			704						362
Rents, deferred rents and other receivables, gross			145,715						141,036
Less: accumulated amortization of tenant inducements			17,368						15,411
Rents, deferred rents and other receivables, net			$	128,347					$	125,625

See Note 2 “Basis of Presentation—Rents, Deferred Rents and Other Receivables” for a discussion of assessments regarding the collectibility of rents and deferred rent receivables and related adjustments made during the three and nine months ended September 30, 2022 and 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 5—Intangible Assets and Liabilities

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

			September 30, 2022						December 31, 2021
Intangible Assets
In-place leases			$	34,854					$	41,422
Tenant relationships			6,432						6,432
Above-market leases			8,520						16,734
Intangible assets, gross			49,806						64,588
Less: accumulated amortization			38,556						48,565
Intangible assets, net			$	11,250					$	16,023
Intangible Liabilities
Below-market leases			$	33,416					$	33,416
Less: accumulated amortization			30,188						28,961
Intangible liabilities, net			$	3,228					$	4,455

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

			For the Three Months Ended												For the Nine Months Ended
			September 30,												September 30,
			2022						2021						2022						2021
Lease income			$	74					$	(49)					$	147					$	(207)
Depreciation and amortization expense			$	1,010					$	1,058					$	2,842					$	3,225

As of September 30, 2022, 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 2022			$	615					$	479					$	328
2023			1,768						1,725						732
2024			987						1,640						278
2025			891						1,092						263
2026			580						440						245
2027			115						—						154
Thereafter			918						—						1,228
Total future amortization/accretion of intangibles			$	5,874					$	5,376					$	3,228

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 6—Secured Debt, Net

Brookfield DTLA’s secured debt is as follows:

			Maturity Date (1)						Contractual Interest Rates						Principal Amount as of
															September 30, 2022						December 31, 2021
Variable-Rate Loans:
Wells Fargo Center–North Tower (2)			10/9/2023						LIBOR + 1.65%						$	400,000					$	400,000
Wells Fargo Center–North Tower (2)			10/9/2023						LIBOR + 4.00%						65,000						65,000
Wells Fargo Center–North Tower (2)(3)			10/9/2023						LIBOR + 5.00%						35,000						35,000
Wells Fargo Center–South Tower (4)			11/4/2023						LIBOR + 1.80%						263,219						260,796
777 Tower (5)			10/31/2024						LIBOR + 1.60%						243,594						231,842
777 Tower (6)			10/31/2024						LIBOR + 4.15%						45,345						43,158
EY Plaza (7)			10/9/2025						LIBOR + 2.86%						275,000						275,000
EY Plaza (7)			10/9/2025						LIBOR + 6.85%						30,000						30,000
Gas Company Tower (7)			2/9/2026						LIBOR + 1.89%						350,000						350,000
Gas Company Tower (7)			2/9/2026						LIBOR + 5.00%						65,000						65,000
Gas Company Tower (7)			2/9/2026						LIBOR + 7.75%						50,000						50,000
Total variable-rate loans															1,822,158						1,805,796
Fixed-Rate Debt:
BOA Plaza			9/1/2024						4.05		%				400,000						400,000
FIGat7th			3/1/2023						3.88		%				58,500						58,500
Total fixed-rate debt															458,500						458,500
Total secured debt															2,280,658						2,264,296
Less: unamortized debt financing costs															3,124						8,375
Total secured debt, net															$	2,277,534					$	2,255,921

(1)Maturity dates include the effect of extension options that the Company controls, if applicable. As of September 30, 2022 and December 31, 2021, we meet the criteria specified in the loan agreements to extend the loan maturity dates.

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

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

(4)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 3.63%. As of September 30, 2022, a future advance amount of $26.8 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, 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 September 30, 2022, a future advance amount of $25.0 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mezzanine loan future advance amount.

(6)As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.00%. As of September 30, 2022, a future advance amount of $4.7 million is available under this loan that can be drawn to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, and leasing commissions. The Company can draw against this future advance amount as long as a pro rata draw is made against the mortgage loan future advance amount.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The weighted average interest rate of the Company’s secured debt was 4.95% and 2.91% as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022, the weighted average term to maturity of our debt (after the impact of extension options that the Company controls, if applicable) was approximately two years.

Debt Maturities

The following table provides information regarding the Company’s minimum future principal payments due on the Company’s secured debt (after the impact of extension options that the Company controls, if applicable) as of September 30, 2022:

Remainder of 2022			$	—
2023			821,719
2024			688,939
2025			305,000
2026			465,000
Total secured debt			$	2,280,658

As of September 30, 2022, $1,822.2 million of the Company’s secured debt may be prepaid without penalty, $400.0 million may be defeased (as defined in the underlying loan agreements) and $58.5 million may be prepaid with prepayment penalties.

Non-Recourse Carve Out Guarantees

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

Debt Compliance

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Wells Fargo Center–South Tower —

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

Wells Fargo Center–North Tower —

As of September 30, 2022, the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, following the occurrence of such debt yield event, any excess operating cash flows are to be swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses; tenant improvement costs and leasing commissions (capped at the leasing reserve deposit amount as specified in the loan agreements); property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; reserve accounts; and fees and expenses due to the loan administrative agent. The cash sweep started in January 2022.

London Interbank Offered Rate (“LIBOR”) Transition

The chief executive of the United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, previously announced that the FCA intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In response, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (“ARRC”) which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. In November 2020, the Intercontinental Exchange (“ICE”) Benchmark Administration Limited, the benchmark administrator for USD-LIBOR rates, proposed extending the publication of certain commonly-used USD-LIBOR settings until June 30, 2023 and the FCA issued a statement supporting such proposal. In connection with this proposal, certain U.S. banking regulators issued guidance strongly encouraging banks to generally cease entering into new contracts referencing USD-LIBOR as soon as practicable and in any event by December 31, 2021.

As of September 30, 2022, we have outstanding variable debt and interest rate cap contracts that are indexed to LIBOR. All of the Company’s variable debt contracts contain fallback languages that lay out the process through which a replacement rate can be identified or used when LIBOR is not available. The LIBOR interest rate index for the debt secured by Wells Fargo Center–North Tower was replaced by SOFR in October 2022.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

Note 7—Accounts Payable and Other Liabilities

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

			September 30, 2022						December 31, 2021
Tenant improvements and inducements payable			$	39,728					$	32,973
Unearned rent and tenant payables			27,864						31,249
Accrued capital expenditures and leasing commissions			9,270						7,422
Accrued expenses and other liabilities			16,921						5,968
Accounts payable and other liabilities			$	93,783					$	77,612

Note 8—Noncontrolling Interests

Mezzanine Equity Component

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

Series A Preferred Stock. As of September 30, 2022 and December 31, 2021, 9,730,370 shares of Series A preferred stock were outstanding, of which 9,357,469 shares were issued to third parties and 372,901 shares were issued to DTLA Fund Holding Co., a subsidiary of DTLA Holdings.

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

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Series B Preferred Interest. Pursuant to the Limited Liability Company Agreement of Fund II and the First Amendment to the Limited Liability Company Agreement of Fund II, DTLA Holdings made a commitment to contribute up to $310.0 million in cash or property to Fund II, which directly or indirectly owns the Brookfield DTLA properties. Effective May 2022, pursuant to the Second Amendment to the Limited Liability Company Agreement of Fund II, such contribution commitment by DTLA Holdings increased by $40.0 million to $350.0 million. As of September 30, 2022, $46.2 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 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, 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, 2021						9,730,370						$	465,577					$	452,454					$	21,191					$	177,290					$	1,116,512
Issuance of Series B preferred interest																														10,330						10,330
Dividends												4,637																								4,637
Preferred returns																		4,303												3,750						8,053
Redemption measurement adjustments																								(201)												(201)
Contributions from noncontrolling     interests																								125												125
Repurchases of noncontrolling interests																														(15,795)						(15,795)
Distributions to noncontrolling interests																								(379)						(5,005)						(5,384)
Balance, March 31, 2022						9,730,370						470,214						456,757						20,736						170,570						1,118,277
Issuance of Series B preferred interest																														—						—
Dividends												4,637																								4,637
Preferred returns																		4,303												3,562						7,865
Redemption measurement adjustments																								142												142
Contributions from noncontrolling     interests																								—												—
Repurchases of noncontrolling interests																														(15,441)						(15,441)
Distributions to noncontrolling interests																								(638)						(1,259)						(1,897)
Balance, June 30, 2022						9,730,370						474,851						461,060						20,240						157,432						1,113,583
Issuance of Series B preferred interest																														4,600						4,600
Dividends												4,637																								4,637
Preferred returns																		4,303												3,401						7,704
Redemption measurement adjustments																								(4,016)												(4,016)
Contributions from noncontrolling     interests																								21												21
Repurchases of noncontrolling interests																														(15,739)						(15,739)
Distributions to noncontrolling interests																								(171)						(3,561)						(3,732)
Balance, September 30, 2022						9,730,370						$	479,488					$	465,363					$	16,074					$	146,133					$	1,107,058

    

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

						Number of Shares of Series A Preferred Stock						Series A Preferred Stock						Noncontrolling Interests																		Total Mezzanine Equity
																		Series A-1 Preferred Interest						Senior Participating Preferred Interest						Series B Preferred Interest
Balance, December 31, 2020						9,730,370						$	447,028					$	435,242					$	20,413					$	198,827					$	1,101,510
Issuance of Series B preferred interest																														2,600						2,600
Dividends												4,637																								4,637
Preferred returns																		4,303												4,282						8,585
Redemption measurement adjustments																								601												601
Contributions from noncontrolling     interests																								171												171
Repurchases of noncontrolling interests																														(16,156)						(16,156)
Distributions to noncontrolling interests																								(242)						(4,244)						(4,486)
Balance, March 31, 2021						9,730,370						451,665						439,545						20,943						185,309						1,097,462
Issuance of Series B preferred interest																														3,400						3,400
Dividends												4,638																								4,638
Preferred returns																		4,302												4,146						8,448
Redemption measurement adjustments																								299												299
Contributions from noncontrolling     interests																								—												—
Repurchases of noncontrolling interests																														(11,117)						(11,117)
Distributions to noncontrolling interests																								(304)						(4,283)						(4,587)
Balance, June 30, 2021						9,730,370						456,303						443,847						20,938						177,455						1,098,543
Issuance of Series B preferred interest																														—						—
Dividends												4,637																								4,637
Preferred returns																		4,303												3,896						8,199
Redemption measurement adjustments																								(325)												(325)
Contributions from noncontrolling     interests																								83												83
Repurchases of noncontrolling interests																														(10,255)						(10,255)
Distributions to noncontrolling interests																								(154)						(4,145)						(4,299)
Balance, September 30, 2021						9,730,370						$	460,940					$	448,150					$	20,542					$	166,951					$	1,096,583

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

Series A Preferred Stock

As of September 30, 2022, the Series A preferred stock is reported at its redemption value of $479.5 million calculated using the redemption price of $243.3 million plus $236.2 million of accumulated and unpaid dividends on such Series A preferred stock through September 30, 2022.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

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 provisions. We may, at our option, redeem the Series A preferred stock, in whole or in part, for $25.00 per share, plus all accumulated and unpaid dividends on such Series A preferred stock up to and including the redemption date. Other than as required under the “Distribution Waterfall” in this footnote, there is no commitment or obligation on the part of Brookfield DTLA or DTLA Holdings to redeem or make distributions to 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 September 30, 2022, the Series A-1 preferred interest is reported at its redemption value of $465.4 million calculated using its liquidation value of $225.7 million plus $239.6 million of unpaid interest through September 30, 2022. Interest earned on the Series A-1 preferred interest is cumulative and accrues at an annual rate of 7.625%.

Senior Participating Preferred Interest

As of September 30, 2022, the senior participating preferred interest is reported at its redemption value of $16.1 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 September 30, 2022, the Series B preferred interest is reported at its redemption value of $146.1 million calculated using its liquidation value of $142.7 million plus $3.4 million of unpaid preferred returns on such Series B preferred interest through September 30, 2022. Brookfield DTLA is entitled to receive a market rate of return on its contributions, currently 9.0% as of September 30, 2022.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Distribution Waterfall

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

First to:

Series B preferred interest unpaid preferred return

Second to:

Series B preferred interest unreturned preferred capital

Third, proportionally in respect of     unpaid preferred return to:

Series A preferred interest unpaid preferred return (2)

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

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

Series A preferred interest unreturned capital

Series A-1 preferred interest unreturned capital (3)

And fifth to:

Common interests to Brookfield DTLA and DTLA Holdings (5)

__________

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

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

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

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 10—Financial Instruments

Derivative Financial Instruments

The following table presents the interest rate cap contracts pursuant to the terms of certain of its loan agreements as of September 30, 2022:

						Notional Amount						Strike Rate (1)																		Expiration Date
Interest Rate Caps:
Wells Fargo Center–North Tower (2)						$	400,000					2.57%																		10/15/2022
Wells Fargo Center–North Tower (2)						65,000						2.57%																		10/15/2022
Wells Fargo Center–North Tower (2)						35,000						2.57%																		10/15/2022
Wells Fargo Center–South Tower (4)						290,000						3.63%																		11/4/2022
777 Tower						268,600						4.00%																		11/10/2022
777 Tower						50,000						4.00%																		11/10/2022
EY Plaza (3)						275,000						4.00%																		10/15/2022
EY Plaza (3)						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.

(2)In September 2022, Brookfield DTLA exercised the last one-year option to extend the maturity date of the $500.0 million mortgage and mezzanine loans secured by Wells Fargo Center—North Tower to October 2023. In October 2022, Brookfield DTLA entered into interest rate cap contracts of aggregate notional amount of $500.0 million that limit the SOFR portion of the interest rate to 3.40% with expiration date on October 15, 2023.

(3)In September 2022, Brookfield DTLA exercised the first one-year option to extend the maturity date of the $305.0 million mortgage and mezzanine loans secured by EY Plaza to October 2023. In October 2022, Brookfield DTLA entered into interest rate cap contracts of aggregate notional amount of $305.0 million that limit the LIBOR portion of the interest rate to 3.41% with expiration date on October 15, 2023.

(4)In September 2022, Brookfield DTLA exercised the only one-year option to extend the maturity date of the $263.2 million mortgage loan secured by Wells Fargo Center—South Tower to November 2023. In November 2022, Brookfield DTLA entered into interest rate cap contracts of aggregate notional amount of $263.2 million that limit the SOFR portion of the interest rate to 2.87% with expiration date on November 4, 2023.

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

												Fair Value as of
						Balance Sheet Location						September 30, 2022						December 31, 2021
Derivatives not designated as hedging instruments: Interest rate caps						Prepaid and other assets, net						$	495					$	46

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Changes in fair value of interest rate cap contracts recognized in the consolidated statements of operations during the three and nine months ended September 30, 2022 and 2021 were de minimis.

Other Financial Instruments

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

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 nine months ended September 30, 2022 and 2021.

Note 11—Fair Value Measurements and Disclosures

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

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

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

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

Recurring Measurements—

The fair value of interest rate cap contracts was $495 thousand and $46 thousand as of September 30, 2022 and December 31, 2021, respectively. The Company classified them as Level 2 in the fair value hierarchy.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Nonrecurring Measurements—

As of September 30, 2022, assets measured at fair value on a nonrecurring basis on our consolidated balance sheets consisted of real estate assets and their associated intangible assets that have been written down to estimated fair value for impairment losses. Such impairment losses of $95.4 million were related to Wells Fargo Center — South Tower. While there were no impairment charges on other properties in our portfolio during the three and nine months ended September 30, 2022, in light of the evolving office rental business environment and the slowdown in economic growth in the near term because of rising interest rates, decreases in our property valuations may lead to additional impairment charges in our portfolio in the near future. In comparison, as of December 31, 2021, the Company did not have any assets or liabilities that are measured at fair value on a nonrecurring basis. Refer to Note 2—“Basis of Presentation —Impairment Review” for further discussion.

The Company uses the discounted cash flow method to assess the fair value of investments in real estate, including Wells Fargo Center — South Tower. All inputs used to value investments in real estate fall within Level 3 of the fair value hierarchy. Even if observable market data is available, such inputs are considered Level 3 if any significant data point used in the valuation process is not observable. When estimating the fair value of our investments in real estate, we assessed the expected undiscounted cash flows based upon numerous factors. These factors include, but are not limited to, available market information, known trends, current market/economic conditions that may affect the asset, and historical and forecasted financial and operating information relating to the property, such as net operating income, leasing activity statistics, vacancy projections, renewal percentage, and rent collection rates. Fair value is primarily determined by discounting the expected future cash flows, generally over a term of 10 years including a terminal value based on the application of a capitalization rate to estimated year 11 cash flows. The measurement of the fair value of the Company's investment is impacted by the discount rate and terminal capitalization rate utilized in the discounted cash flows model which are significant unobservable inputs. As of September 30, 2022, the discount and terminal capitalization rates used in the discounted cash flows model of Wells Fargo Center — South Tower, which was measured at fair value on a nonrecurring basis, were 9.3% and 5.8%, respectively.

The following table presents the carrying amounts of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of September 30, 2022:

						Total						Quoted Price in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Investments in Real Estate Assets						$	331,800					$	—					$	—					$	331,800

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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:

						September 30, 2022						December 31, 2021
Fair Value						$	2,268,406					$	2,263,160
Carrying value						$	2,277,534					$	2,255,921

Other financial instruments — As of September 30, 2022 and December 31, 2021, the carrying values of cash and cash equivalents, restricted cash, tenant and other receivables, other assets, accounts payable and other liabilities, and balances with affiliates approximate fair value because of the short-term nature of these instruments.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 12—Related Party Transactions

Management Agreements

Certain subsidiaries of Brookfield DTLA have entered into arrangements with the Manager, pursuant to which the Manager provides property management and various other services. The following table presents the basis of fees incurred to the Manager and Brookfield affiliates during the three and nine months ended September 30, 2022 and 2021:

Fee Type

Affiliate

Fee Description

Property management

The Manager

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

Asset management

BPY and BAM

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

Leasing

The Manager and Brookfield affiliates

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

Construction management

The Manager

3.00% of hard and soft construction costs

Development management

Affiliate of the Manager

3.00% of hard and soft construction costs

Entitlement

Affiliate of the Manager

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

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

			For the Three Months Ended												For the Nine Months Ended
			September 30,												September 30,
			2022						2021						2022						2021
Property management			$	2,050					$	1,949					$	6,025					$	5,931
Asset management			$	1,583					$	1,538					$	4,714					$	4,618
Leasing			$	488					$	86					$	1,153					$	589
Construction management			$	559					$	206					$	697					$	339
Development management (1)			$	241					$	586					$	1,208					$	1,292
Entitlement			$	30					$	185					$	101					$	394
General, administrative and reimbursable expenses			$	1,090					$	676					$	2,830					$	1,895

__________

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Insurance Agreements

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

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

			For the Three Months Ended												For the Nine Months Ended
			September 30,												September 30,
			2022						2021						2022						2021
Insurance expense (1)			$	3,106					$	3,051					$	9,271					$	9,442

__________

(1)An affiliate of BAM secures insurance policies for the Company through third-party brokers and insurance companies and charges the Company a fee for the services it provides. Fees charged vary but will not exceed 2.50% of the total net insurance premiums of the Company and its covered properties. Effective November 1, 2021, this affiliate of BAM ceased charging such fee. During the three and nine months ended September 30, 2021, fees incurred for these services totaled $76 thousand and $230 thousand, respectively. Additionally, the Company’s terrorism insurance coverage is purchased through a captive facility that is an affiliate of BPY. Insurance premiums incurred totaled $32 thousand and $96 thousand, respectively, during each of the three and nine months ended September 30, 2022 and 2021.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Other Related Party Transactions with BAM Affiliates

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

			For the Three Months Ended												For the Nine Months Ended
			September 30,												September 30,
			2022						2021						2022						2021
Accrual (reversal) of lease income (1)			$	3,770					$	(204)					$	10,855					$	8,761
Parking revenue (1)			$	247					$	248					$	741					$	744
Rental property operating and maintenance expense (2)			$	—					$	57					$	—					$	318
Interest expense (3)(4)			$	861					$	569					$	2,055					$	1,629

__________

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

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

(3)A subsidiary of Oaktree is the lender of the $35.0 million mezzanine loan secured by Wells Fargo Center–North Tower. Interest payable to the lender totaled $122 thousand as of September 30, 2022 and is reported as part of accounts payable and other liabilities in the consolidated balance sheets. See Note 6—“Secured Debt, Net.” Interest expense on this loan has been reported as a related party transaction since the date of acquisition by BAM.

(4)In February 2021, BAM purchased $18.2 million of commercial mortgage-backed securities (“CMBS”) secured by the Gas Company Tower loans in the open market. The CMBS are payable in monthly installments over a two-year period at a floating interest rate of one-month LIBOR + 2.35%. The transaction was conducted on an arm’s length basis at fair market value. In September 2021, this CMBS was sold to Brookfield Asset Management Reinsurance Partners Ltd., an affiliate of BAM. During the three and nine months ended September 30, 2022, the Company incurred interest expense of $220 thousand and $449 thousand, respectively, on this CMBS, compared to $113 thousand and $275 thousand, respectively, during the three and nine months ended September 30, 2021.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 13—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 September 30, 2022:

Remainder of 2022			$	38,144
2023			150,309
2024			143,781
2025			129,907
2026			114,943
2027			87,559
Thereafter			461,769
Total future minimum base rents			$	1,126,412

Note 14—Commitments and Contingencies

Litigation

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

Concentration of Tenant Credit Risk

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

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Capital Commitments

As of September 30, 2022, the Company had $44.6 million in tenant-related commitments, including tenant improvements, tenant inducements and leasing commissions, which are based on executed leases. As of September 30, 2022, $39.4 million of our tenant-related commitments were expected to be paid during the remainder of 2022.

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

and Results of Operations.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

Overview and Background

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

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Brookfield DTLA owns and manages six Class A office properties and a retail center, consisting of 7,580,113 rentable square feet in total. Additionally, Brookfield DTLA also has an indirect noncontrolling interest in an unconsolidated real estate joint venture that owns a multifamily residential development property. All of these properties are located in the Los Angeles Central Business District (the “LACBD”) in Downtown Los Angeles, which has long been a major office district for law firms, accounting firms and government agencies. The following table sets forth information regarding these eight properties as of September 30, 2022:

Name						Property Type						Rentable Square Feet						Ownership Percentage						Percentage Leased (1)						Weighted-Average Remaining Lease Term (Years) (2)
Bank of America Plaza (“BOA Plaza”)						Office (4)						1,405,428						100%						88.7%						6.2
Wells Fargo Center–North Tower						Office (4)						1,399,795						100%						79.9%						7.2
Gas Company Tower						Office (4)						1,345,163						100%						72.9%						4.9
EY Plaza						Office (4)						963,682						100%						76.6%						6.6
Wells Fargo Center–South Tower						Office (4)						1,124,960						100%						63.0%						4.9
777 Tower						Office (4)						1,024,835						100%						73.1%						4.4
FIGat7th						Retail						316,250						100%						89.8%						6.3
755 South Figueroa						Multifamily (3)						N/A						24.7%						N/A						N/A
Total												7,580,113												76.9%						5.8

(1)Represents properties’ leased square feet over total rentable square feet for executed leases as of September 30, 2022.

(2)Represents weighted-average of the period remaining (denominated in years) for executed lease as of September 30, 2022, excluding tenant lease extension options.

(3)Under development as of September 30, 2022.

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

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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FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Current Period Highlights

Leasing Market and COVID-19 Pandemic Update; Increase in Interest Rates; and Turbulence in Financing Markets

Post-Labor Day physical occupancy levels improved slightly when compared to the prior quarter. However, leasing activity and physical occupancy in the LACBD has not caught up to pre-pandemic levels as businesses consider how to best implement return-to-office plans and transition to hybrid or remote work policies. Office tenants are still active in the leasing markets but being more selective in making real estate decisions. Relocating and renewing tenants are pursuing space efficiencies which are often accompanied by size reduction and a focus on highest quality assets. Retail tenants have continued to benefit from higher visitor traffic since COVID mandates throughout California were lifted in June 2021 (the “Reopening”) but short of pre-pandemic levels. Overall, there were no material adjustments to our office and retail lease income during each of the three and nine months ended September 30, 2022 and 2021.

While we cannot be certain as to the duration of the impact of COVID-19, we expect impacts of COVID-19 to continue affecting our financial results and the LACBD Class A office leasing market in general. The future impact of the pandemic on the demand for office space is unknown, as companies consider the evolving business environment and labor requirements to evaluate their future space demands in light of their current and projected headcount and the increased desire for more work-location flexibility. In addition, during the second and third quarter of 2022, uncertainty in the overall economy has returned due to the Federal Reserve raising interest rates to fight inflation and the war in the Ukraine. In addition, the cost of acquiring interest rate cap contracts, which we are required to obtain with respect to the Company’s initiation and extension of floating rate secured loans, has risen sharply. With the Los Angeles regional economy operating in a post-pandemic environment, the labor market remains historically tight and regional unemployment is back to pre-pandemic levels. While these strong underlying fundamentals would normally result in higher leasing activity and decreased availability, the continued widespread adoption of hybrid workspace strategies and uncertainty in the overall economy continue to suppress the Los Angeles office demand and remain a tenant-favorable market for the foreseeable future. As interest rates continue to increase, a slowdown in economic growth could be seen in the near-term which could adversely affect leasing activity and result in rising availability levels. See “Risk Factors—The Company’s business, results of operations and financial condition have been adversely affected and could in the future be materially adversely affected by the ongoing global pandemic of novel strain of the coronavirus.” and “Risk Factors—We may be adversely affected by trends in the office real estate industry.” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022 and “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, continuing uncertainty in the office leasing market, the marked increase in interest rates; and turbulence in financing markets” in Part II, Item 1A. Risk Factors of this Quarterly Report for additional information.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Leasing Activity

Following the Reopening, leasing activity improved with new and renewal leases totaling 588,428 square feet within our portfolio in the nine months ended September 30, 2022, compared to 185,747 square feet for the same period in 2021, an increase of 217% year over year. Contractual expirations and early terminations of leases totaled 618,209 square feet during the nine months ended September 30, 2022, compared to 294,324 square feet for the same period in 2021, an increase of 110% year over year. As a result of the negative net absorption, leased space decreased slightly from 77.7% during the nine months ended September 30, 2021 to 76.9% for the same period in 2022. See “Liquidity and Capital Resources — Leasing Activity” for details.

Capital Improvements

The atrium development project at Wells Fargo Center was completed in 2020 and the construction of the various food vendor spaces is in progress and expected to be completed in 2023.

Expenditures for real estate improvements increased from $10.9 million in the nine months ended September 30, 2021 to $45.4 million for the same period in 2022, an increase of $34.5 million or 317% year over year, mainly for tenant improvements and landlord works in Wells Fargo Center and 777 Tower, mainly due to substantial completion of tenant improvement projects for several existing and new tenants during the nine months ended September 30, 2022.

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 24.7% as of September 30, 2022. In April 2022, vertical concrete construction for the development site was completed and a ceremony for the topping out of the project was held with the residential building officially named “Beaudry”. Interior work continued and substantial completion is expected in the first quarter of 2023. The property will accommodate 785 residential rental units, approximately 5,300 square feet of retail space and 800 parking spaces. As the development progresses towards the targeted completion by the first quarter of 2023, $34.9 million and $157.0 million was capitalized as development cost during the three and nine months ended September 30, 2022, respectively, compared to $54.4 million and $111.7 million during the three and nine months ended September 30, 2021, respectively. As such, during the three and nine months ended September 30, 2022, additional capital contributions of $19.0 million and $48.2 million, respectively, compared to $13.0 million and $26.8 million during the three and nine months ended September 30, 2021, respectively, were made by DTLA FP IV Holdings to fund development costs.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Liquidity and Capital Resources

General

The following table presents the major sources of Brookfield DTLA’s liquidity as of September 30, 2022 and December 31, 2021:

			September 30, 2022						December 31, 2021
Cash and cash equivalents			$	33,354					$	38,901
Unused capital contribution commitments available on Series B preferred interest			46,248						21,178
Availability under secured debt to fund approved leasing costs			56,441						72,804
Total Liquidity			$	136,043					$	132,883

Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover its investing and financing activities, including upcoming debt obligations, leasing costs and capital expenditures, without issuing additional debt or equity, resulting in “negative cash burn,” and it is likely that the amount of Brookfield DTLA’s negative cash burn will increase, or that it will not improve, in the future. If Brookfield DTLA’s operating cash flows and capital are not sufficient to cover its operating costs or to repay its indebtedness as it comes due, we may issue additional debt and/or equity, including to affiliates of Brookfield DTLA, which issuances could further adversely impact the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock. In many cases, such securities may be issued if authorized by the board of directors of Brookfield DTLA without the approval of holders of the Series A preferred stock. Given the uncertainty in the economy, current office leasing volume, volatile financial markets created by the continued rise in interest rates in the near future and the war in the Ukraine, and the Company’s upcoming debt maturities, management believes that access to liquidity will be challenging and is planning accordingly. We are also working to proactively address challenges to our long-term liquidity position. However, if uncertainty in the economy and financial and leasing markets do not improve, or the Company is not able to find additional sources of liquidity, the property-owning subsidiary debt obligors may not be able to successfully refinance the debt obligations when they fall due, which could result in foreclosure on the encumbered properties.

The following are our expected actual and potential sources of liquidity:

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

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

•Potential asset dispositions, see “Potential Asset Dispositions”

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

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

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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

The following are our uses of liquidity:

•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, such as debt service, principal payment obligations and acquisition of interest rate cap contracts, see “Indebtedness” and

•Distributions to mezzanine equity holders, see “Distributions to Mezzanine Equity Holders”.

As of September 30, 2022, the Company had $2.3 billion of total consolidated debt. Our substantial indebtedness requires us to use a material portion of our cash flow to service interest on our debt. As our debt matures between 2023 and 2026, with $821.7 million due by the end of 2023, our principal payment obligations also present significant future cash requirements. It is likely that in some cases we will not be able to successfully extend, refinance or repay our debt due to a number of factors, including decreased property valuations, limited availability of credit, tightened lending standards, increases in interest rates, worsening outlook in the office leasing market and deteriorating economic conditions. Because of our limited unrestricted cash when compared with the significant debt balances, upcoming debt maturities present cash obligations that the property-owning subsidiary obligor may not be able to satisfy. For assets that we do not or cannot dispose of and for which the relevant property-owning subsidiary, or the Company (or its affiliates) is unable or unwilling to fund the resulting obligations, we may seek to extend or refinance the applicable loans or engage in negotiations with loan servicers to modify loans or may default upon such loans. Historically, extending or refinancing loans has required the payment of certain fees to, and expenses of, the applicable lenders, as well as the purchase of interest rate cap contracts. Any future extensions or refinancings will likely require increased fees. These fees and cash flow restrictions will affect our ability to fund our other liquidity uses. In addition, the terms of the extensions or refinancings may include operational and financial covenants significantly more restrictive than our current debt covenants.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Unrestricted and Restricted Cash

A summary of our cash position is as follows:

			September 30, 2022						December 31, 2021
Restricted cash:
Leasing costs, tenant improvements and capital expenditure reserves			$	6,460					$	23,511
Tax and insurance reserves			14,974						7,881
Other working capital reserves			8,701						10,117
Cash sweep reserves			11,205						7,813
Total restricted cash			$	41,340					$	49,322
Unrestricted cash and cash equivalents			$	33,354					$	38,901
Total restricted cash and unrestricted cash and cash equivalents			$	74,694					$	88,223

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

Capital Expenditures and Leasing Costs

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

As of September 30, 2022, the Company had $44.6 million in tenant-related commitments, including tenant improvements, tenant inducements and leasing commissions, which are based on executed leases. As of September 30, 2022, $39.4 million of our tenant-related commitments were expected to be paid during the remainder of 2022, relating mainly to tenant improvement works performed for a major tenant in the Wells Fargo Center–North Tower of $20.4 million.

Brookfield DTLA expects that capital improvements and leasing activities at its properties will require material amounts of cash for at least several years. According to our 2022 business plan, Brookfield DTLA projects spending approximately $402.7 million over the next five years consisting of $296.0 million for tenant improvements and landlord works, $92.1 million for leasing costs and $14.5 million for capital expenditures. The expected capital improvements include, but are not limited to, renovations and physical capital upgrades to Brookfield DTLA’s properties, elevator modernization, replacement of transformers and boilers, and upgrades to emergency generators. These projections are estimates and may be subject to changes per future revisions of speculative leasing plans.

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

Distributions to Mezzanine Equity Holders

Other than as required under the “Distribution Waterfall” as described in Item 1. Financial Statements — Note 9 — “Mezzanine Equity”, there is no commitment or obligation on the part of Brookfield DTLA or DTLA Holdings to redeem or make distributions to the Series A preferred stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest (collectively, the “Preferred Interests”). If we are unable to obtain sufficient sources of liquidity, including through asset sales above their secured debt balances, and/ or through contributions from stockholders or from affiliates that hold interests in our subsidiaries, it is unlikely that we would be able to make distributions to the Preferred Interests in amounts equal to their redemption values. In particular, in the event of waterfall distributions, the Series A preferred stock ranks junior to Series B preferred interest. Given our current and future property valuations, as well as our obligations and liabilities, there is no assurance that there would be any cash available for distributions to holders of the Series A preferred stock after the Company satisfies its debt obligations and makes the distributions to the Series B preferred interest holders to which they are entitled.

Indebtedness

As of September 30, 2022, Brookfield DTLA’s secured debt was comprised of mortgage and mezzanine loans secured by seven properties. A summary of our secured debt as of September 30, 2022 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		%				2 years
Variable-rate (1) (2)			1,822,158						80		%				5.18		%				2 years
Total secured debt			$	2,280,658					100		%				4.95		%				2 years

__________

(1)As of September 30, 2022 and through the date of this Report, a future advance amount of $26.8 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 September 30, 2022 and through the date of this Report, a future advance amount of $29.7 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 September 30, 2022, we meet the criteria specified in the loan agreements to extend the loan maturity dates.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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

			Remainder of 2022						2023						2024						2025						2026						Thereafter						Total
Principal payments on      secured debt (1)(2)			$	—					$	821,719					$	688,939					$	305,000					$	465,000					$	—					$	2,280,658
Interest payments –
Fixed-rate debt (3)			4,720						16,803						11,025						—						—						—						32,548
Variable-rate debt (4)			24,434						89,350						57,616						41,706						2,982						—						216,088
			$	29,154					$	927,872					$	757,580					$	346,706					$	467,982					$	—					$	2,529,294

__________

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

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

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

(4)Interest payments on variable-rate debt are calculated based on the maturity dates (after the impact of extension options that the Company controls, if applicable) and the one-month LIBOR rate (or, from 2023 onwards, its successor rate) in place on the debt as of September 30, 2022 plus the contractual spread per the loan agreements. Interest payments due to the related party lender of the loan described in (1) above total $0.7 million for the remainder of 2022 and $2.1 million for 2023.

Management currently intends to seek to extend or refinance the existing loans maturing within the next twelve months on or about their scheduled maturities. As the leverage ratio for the Company’s properties may be significantly above leverage ratios acceptable in the market, it is likely that some of these refinancings may not be successfully accomplished or may result in proceeds that are insufficient to repay the maturing loan or loans being refinanced.

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 September 30, 2022 and December 31, 2021, Brookfield DTLA was in compliance with all material financial covenants contained in the loan agreements. However, given the decline in the Company’s (and its subsidiaries) operating cash flows, net operating income and fair value of the properties, accentuated by continued increases in interest rates, DTLA Holdings and the property-owning subsidiary debt obligors may face challenges in meeting the material financial covenants contained in the loan agreements as the guarantor and the borrowers, respectively, which could result in events of default that could potentially allow lenders to exercise their remedies under the loans, including accelerating such debt and foreclosing on the asset.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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

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 September 30, 2022, the borrower’s debt yield ratio was under the minimum debt yield ratio. While this does not constitute an Event of Default under the terms of the mortgage loan agreement, following the occurrence of such debt yield event, any excess operating cash flows are to be swept to a cash account controlled by the loan administrative agent. Funds within this account shall be applied to the borrower's approved operating expenses; tenant improvement costs and leasing commissions (capped at the leasing reserve deposit amount as specified in the loan agreements); property taxes and insurance; interest and any other amounts due and payable under the loan and interest rate cap contracts; reserve accounts; and fees and expenses due to the loan administrative agent. The cash sweep started in January 2022.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Leasing Activity

The following table summarizes leasing activity at Brookfield DTLA’s properties for the nine months ended September 30, 2022:

			Leasing Activity						Percentage Leased
Leased square feet as of December 31, 2021			5,855,604						77.2		%
Contractual expirations and early terminations			(618,209)						(8.1)		%
New leases			264,498						3.5		%
Renewals			323,930						4.3		%
Remeasurement adjustments			(77)						—		%
Leased square feet as of September 30, 2022			5,825,746						76.9		%

Lease contractual expirations and early terminations. The following table summarizes the large contractual expiries and early terminations at Brookfield DTLA’s properties during the nine months ended September 30, 2022:

Tenant

Property

Leased Square Feet

Wells Fargo Bank National Association (1)

Wells Fargo Center–North Tower, BOA Plaza

241,819

Orrick, Herrington & Sutcliffe

777 Tower

75,627

The Capital Group Companies

Wells Fargo Center–South Tower

53,316

City Storage Systems (2)

777 Tower

44,958

HSBC Bank USA National Association

EY Plaza

20,523

DBS Bank

EY Plaza

16,955

Zurich American Insurance Company (3)

777 Tower

16,401

Lamb & Kawakami LLP

Wells Fargo Center–North Tower

16,379

Kindercare Education At Work LLC (3)

Wells Fargo Center–North Tower

12,765

HyreCar Inc.

Wells Fargo Center–South Tower

11,839

Mindshow, Inc.

Wells Fargo Center–North Tower

5,829

Progressive Affordable Development, LLC

Gas Company Tower

5,673

Wilson Associates

Wells Fargo Center–South Tower

4,817

Aspen Insurance U.S. Services, Inc.

777 Tower

4,606

Charles Schwab & Co., Inc. (3)

Wells Fargo Center–South Tower

3,562

Total

535,069

(1)    Out of the expired 241,819 square feet, 191,407 square feet were renewed during the nine months ended September 30, 2022.

(2)    Out of the expired 44,958 square feet, 39,291 square feet were renewed during the nine months ended September 30, 2022.

(3)    All expired leased square feet were renewed during the nine months ended September 30, 2022.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Occupancy rate declined slightly during the nine months ended September 30, 2022. Office tenants are still active in the leasing markets but are being more selective in making real estate decisions. LACBD remained tenant favorable. Many companies consider the evolving business environment and labor requirements to evaluate their future space demands in light of their current and projected headcount and the increased desire for more work-location flexibility. Tenants are seeking higher quality spaces modernized with new amenities that are more inviting and collaborative. Landlords are curating premier tenant experiences to better align with an active work environment, leveraging diverse food and beverage options with hospitality-focused tenant engagement services. Lease concessions, particularly tenant improvement allowances, continue to remain high as landlords continued to market increased vacant space in the slow-recovering LACBD leasing market.

Rental rates. The following table presents leasing information for executed leases at Brookfield DTLA’s properties as of September 30, 2022:

						Square Feet
Property						Net Building Rentable						% of Net Rentable						% Leased						Annualized Rent (1)						Annualized Rent $/RSF (2)
BOA Plaza						1,405,428						18.5		%				88.7		%				$	36,439,503					$	29.23
Wells Fargo Center–North Tower						1,399,795						18.5		%				79.9		%				34,041,149						30.43
Gas Company Tower						1,345,163						17.8		%				72.9		%				27,379,412						27.93
EY Plaza						963,682						12.7		%				76.6		%				21,674,570						29.36
FIGat7th						316,250						4.2		%				89.8		%				6,913,867						24.36
Wells Fargo Center–South Tower						1,124,960						14.8		%				63.0		%				21,628,352						30.51
777 Tower						1,024,835						13.5		%				73.1		%				20,502,571						27.37
						7,580,113						100.0		%				76.9		%				$	168,579,424					$	28.94

__________

(1)Annualized rent represents the annualized monthly contractual rent under executed leases as of September 30, 2022. This amount reflects total base rent before any rent abatements as of September 30, 2022. Total abatements for executed leases as of September 30, 2022 for the twelve months ending September 30, 2023 are approximately $16.6 million, or $2.85 per leased square foot.

(2)Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of September 30, 2022.

Average asking net effective rents in the LACBD declined significantly during the nine months ended September 30, 2022, mainly attributable to surging leasing concessions granted in the tenant-favorable LACBD office leasing market. 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 September 30, 2022, plus currently available space, for future periods. This table assumes that none of our tenants will exercise renewal options or early termination rights, if any, at or prior to their scheduled expirations.

Year						Total Area 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 2022						27,226						0.5		%				$	829,576					0.5		%				$	30.47					$	30.47
2023						640,316						11.0		%				18,485,923						11.0		%				28.87						29.13
2024						659,260						11.3		%				17,674,761						10.5		%				26.81						28.12
2025						745,181						12.8		%				22,742,924						13.5		%				30.52						32.27
2026						788,819						13.5		%				20,264,760						12.0		%				25.69						28.58
2027						299,580						5.1		%				9,188,119						5.5		%				30.67						35.74
2028						126,016						2.2		%				4,123,244						2.4		%				32.72						40.05
2029						302,989						5.2		%				10,068,324						6.0		%				33.23						42.05
2030						329,893						5.7		%				10,319,053						6.1		%				31.28						39.74
2031						358,684						6.2		%				10,710,304						6.4		%				29.86						39.40
Thereafter						1,547,782						26.5		%				44,172,436						26.1		%				28.54						41.74
Total expiring leases						5,825,746						100.0		%				$	168,579,424					100.0		%				$	28.94					$	35.18
Currently available						1,754,367
Total rentable square feet						7,580,113

__________

(1)Annualized rent represents the annualized monthly contractual rent under executed leases as of September 30, 2022. This amount reflects total base rent before any rent abatements as of September 30, 2022. Total abatements for executed leases as of September 30, 2022 for the twelve months ending September 30, 2023 are approximately $16.6 million, or $2.85 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 September 30, 2022.

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

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Potential Asset Dispositions

We may pursue the disposal of assets in order to (1) preserve cash through the disposition of properties with current or projected negative cash flow and/or other potential near-term cash outlay requirements (including debt maturities) or (2) generate cash through the disposition of strategically-identified properties with positive equity value. If we choose to pursue asset dispositions as our source of liquidity, we cannot assure you that such a disposition could be completed in a timely manner or on terms acceptable to us.

In addition, the ordinance, Measure United to House L.A. (“Measure ULA”), which is expected to pass in November 2022, would reduce the net sales proceeds from our potential asset dispositions. This ordinance increases real estate transfer taxes in the City of Los Angeles effective April 1, 2023. Such real estate transfer taxes are levied when a property is sold, and usually paid by the seller. Prior to the effective date of this ordinance, the City of Los Angeles taxed all real estate transactions at 0.45% applied to the fair value of the property net of debt. This ordinance implements a new progressive structure for the transfer tax, which taxes real estate sales transactions valued at $10.0 million and above at 5.5% on the gross fair value of the property without regard to debt.

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 Nine Months Ended												Dollar Change
			September 30,
			2022						2021
Net cash provided by operating activities			$	49,086					$	66,038					$	(16,952)
Net cash used in investing activities			$	(37,065)					$	(20,211)					$	(16,854)
Net cash used in financing activities			$	(25,550)					$	(40,327)					$	14,777

Operating Activities

Brookfield DTLA’s cash flows from operating activities are primarily dependent upon (1) the leasing activity of its portfolio, (2) the rental rates achieved on its leases, (3) the collectibility of rent and other amounts billed to tenants, (4) changes in working capital, and (5) interest payments. The decrease in cash provided by operating activities is primarily attributable to increases in interest payments on secured debt of $9.0 million due to the rising interest rate environment in 2022, as well as increases in rental property operating and maintenance expense by $7.7 million as a result of increased physical occupancy.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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 increase in net cash used in investing activities was mainly due to increases in tenant improvement expenditures at Wells Fargo Center and 777 Tower.

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 nine months ended September 30, 2022, proceeds from drawings on loans secured by 777 Tower and Wells Fargo Center–South Tower of $13.9 million and $2.4 million, respectively, as well as net proceeds from the issuance of Series B preferred interest of $14.9 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 $47.0 million and $9.8 million, respectively, using the excess operating cash flows generated from properties. In comparison, during the same period in 2021, net proceeds from the refinancing of the loans secured by the Gas Company Tower and the issuance of Series B preferred interest of $6.0 million 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 $37.5 million of the Series B preferred interest and made distribution of $12.7 million to the Series B preferred interest.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Discussion of Results of Operations

Comparison of the Three Months Ended September 30, 2022 to September 30, 2021

Consolidated Statements of Operations Information

(In millions, except percentage amounts)

			For the Three Months Ended												Increase/ (Decrease)						% Change
			September 30,
			2022						2021
Revenue:
Lease income			$	66.4					$	61.9					$	4.5					7		%
Parking			8.0						6.8						1.2						18		%
Interest and other			0.2						0.1						0.1						100		%
Total revenue			74.6						68.8						5.8						8		%
Expenses:
Rental property operating and maintenance			27.7						24.9						2.8						11		%
Real estate taxes			10.0						10.1						(0.1)						(1)		%
Parking			2.8						2.5						0.3						12		%
Other expenses			1.9						0.7						1.2						171		%
Depreciation and amortization			25.1						26.5						(1.4)						(5)		%
Interest			28.0						18.8						9.2						49		%
Impairment of real estate and intangible assets			95.4						—						95.4						100		%
Total expenses			190.9						83.5						107.4						129		%
Other Income:
Equity in earning of unconsolidated     real estate joint venture			0.4						0.3						0.1						33		%
Total other income			0.4						0.3						0.1						33		%
Net loss			$	(115.9)					$	(14.4)					$	(101.5)					705		%

Lease income

Increase in lease revenue during the three months ended September 30, 2022 was mainly due to higher recoveries, driven by increased operating and maintenance expenses as a result of higher physical occupancy as discussed in “Current Period Highlights”.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Rental Property Operating and Maintenance Expense

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

Interest Expense

An increase in interest expense during the three months ended September 30, 2022 was mainly due to the rise in interest rates during 2022.

Impairment of Real Estate and Intangible Assets

During the three months ended September 30, 2022, upon our review of the current market conditions, the Company recognized impairment charges on Wells Fargo Center–South Tower’s investments in real estate of $94.6 million and intangible assets associated with this property of $0.9 million to reduce their carrying amounts to their estimated fair value. No impairment loss was recorded in the same period in 2021 on any of the Company’s 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)

Comparison of the Nine Months Ended September 30, 2022 to September 30, 2021

Consolidated Statements of Operations Information

(In millions, except percentage amounts)

			For the Nine Months Ended												Increase/ (Decrease)						% Change
			September 30,
			2022						2021
Revenue:
Lease income			$	196.9					$	188.9					$	8.0					4		%
Parking			22.5						18.2						4.3						24		%
Interest and other			0.8						0.7						0.1						15		%
Total revenue			220.2						207.8						12.4						6		%
Expenses:
Rental property operating and maintenance			77.6						69.9						7.7						11		%
Real estate taxes			29.7						30.2						(0.5)						(2)		%
Parking			7.7						5.9						1.8						30		%
Other expenses			5.7						6.7						(1.0)						(15)		%
Depreciation and amortization			76.3						80.2						(3.9)						(5)		%
Interest			67.8						61.1						6.7						11		%
Impairment of real estate and intangible assets			95.4						—						95.4						100		%
Total expenses			360.2						254.0						106.2						42		%
Other Income:
Equity in earning of unconsolidated     real estate joint venture			1.0						0.6						0.4						67		%
Total other income			1.0						0.6						0.4						67		%
Net loss			$	(139.0)					$	(45.6)					$	(93.4)					205		%

Lease income and parking revenue

Increase in lease income during the nine months ended September 30, 2022 was mainly due to higher recoveries, driven by increased operating and maintenance expenses as a result of higher physical occupancy as discussed in “Current Period Highlights”. Increase in parking revenue was also due to higher physical occupancy.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Rental Property Operating and Maintenance Expense

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

Interest Expense

An increase in interest expense on secured debt by $12.0 million was primarily due to the rise in interest rates during 2022. Such increase was partially offset by the $4.6 million nonrecurring loss on early extinguishment of the debt secured by Gas Company Tower in February 2021.

Impairment of Real Estate and Intangible Assets

During the nine months ended September 30, 2022, upon our review of the current market conditions, the Company recognized impairment charges on Wells Fargo Center–South Tower’s investments in real estate of $94.6 million and intangible assets associated with this property of $0.9 million to reduce their carrying amounts to their estimated fair value. No impairment loss was recorded in the same period in 2021 on any of the Company’s 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)

Related Party Transactions

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

Litigation

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

Critical Accounting Policies

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

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 2—Basis of Presentation” of this Quarterly Report on Form 10-Q for a discussion of use of estimates, impairment review of investments in real estate and unconsolidated real estate joint venture, and collectibility assessment on rents, deferred rents and other receivables during the three and nine months ended September 30, 2022.

Recently Issued Accounting Literature

See Item 1. “Financial Statements—Notes to Consolidated Financial Statements—Note 3—Recently Issued Accounting Literature” of this Quarterly Report on Form 10-Q for information regarding the impact of the adoption of new accounting pronouncements during the nine months ended September 30, 2022.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

As of September 30, 2022, $1.8 billion, or 80%, of Brookfield DTLA’s debt bears interest at variable rates based on one‑month LIBOR. Brookfield DTLA does not trade in financial instruments for speculative purposes. The primary market risk to which we believe we may be exposed is interest rate risk, which result from many factors, including government monetary and tax policies, economic considerations, and other factors that are beyond our control.

We utilize interest rate cap contracts to manage the interest rate risk of our outstanding debt and to limit the effects of interest rate risks on our operations. The use of interest rate cap contracts to hedge a portion of our exposure to changes in interest rates may carry additional risks, such as counterparty credit risk. Brookfield DTLA’s interest rate cap contracts in place as of September 30, 2022 are as follows:

Notional Value

Strike Rate (1)

Effective Date

Expiration Date

Wells Fargo Center–North Tower (2)

$

400,000

2.57%

10/15/2021

10/15/2022

Wells Fargo Center–North Tower (2)

65,000

2.57%

10/15/2021

10/15/2022

Wells Fargo Center–North Tower (2)

35,000

2.57%

10/15/2021

10/15/2022

Wells Fargo Center–South Tower (4)

290,000

3.63%

11/4/2020

11/4/2022

777 Tower

268,600

4.00%

11/10/2021

11/10/2022

777 Tower

50,000

4.00%

11/10/2021

11/10/2022

EY Plaza (3)

275,000

4.00%

9/22/2020

10/15/2022

EY Plaza (3)

30,000

4.00%

9/22/2020

10/15/2022

Gas Company Tower

350,000

4.00%

2/3/2021

2/15/2023

Gas Company Tower

65,000

4.00%

2/3/2021

2/15/2023

Gas Company Tower

50,000

4.00%

2/3/2021

2/15/2023

Total

$

1,878,600

__________

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

(2)In September 2022, Brookfield DTLA exercised the last one-year option to extend the maturity date of the $500.0 million mortgage and mezzanine loans secured by Wells Fargo Center—North Tower to October 2023. In October 2022, Brookfield DTLA entered into interest rate cap contracts of aggregate notional amount of $500.0 million that limit the SOFR portion of the interest rate to 3.40% with expiration date on October 15, 2023.

(3)In September 2022, Brookfield DTLA exercised the first one-year option to extend the maturity date of the $305.0 million mortgage and mezzanine loans secured by EY Plaza to October 2023. In October 2022, Brookfield DTLA entered into interest rate cap contracts of aggregate notional amount of $305.0 million that limit the LIBOR portion of the interest rate to 3.41% with expiration date on October 15, 2023.

(4)In September 2022, Brookfield DTLA exercised the only one-year option to extend the maturity date of the $263.2 million mortgage loan secured by Wells Fargo Center—South Tower to November 2023. In November 2022, Brookfield DTLA entered into interest rate cap contracts of aggregate notional amount of $263.2 million that limit the SOFR portion of the interest rate to 2.87% with expiration date on November 4, 2023.

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Interest Rate Sensitivity

Our future earnings and fair value relating to our outstanding debt are primarily dependent upon prevalent market interest rates. The following table illustrates the effect of a 1% change in interest rates on our fixed- and variable-rate debt as of September 30, 2022:

									Fair Value of
			Annualized Effect on Future Interest Expense due to Variable-rate Debt:						Secured Debt
Rate increase of 1%			$	13,405					$	(7,532)
Rate decrease of 1%			$	(18,475)					$	6,774

The impact of a 1% increase or decrease in interest rates would have an immaterial effect on the fair value of Brookfield DTLA’s interest rate cap contracts as of September 30, 2022.

These amounts were determined considering the impact of hypothetical interest rates on Brookfield DTLA’s financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Furthermore, in the event of a change of the magnitude discussed above, management may take actions to further mitigate Brookfield DTLA’s exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in Brookfield DTLA’s financial structure.

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.

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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 September 30, 2022.

Changes in Internal Control over Financial Reporting

There have been no changes in Brookfield DTLA’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2022 that have materially affected, or that are reasonable likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting due to the measures taken in response to the COVID-19 pandemic. We are continually monitoring and assessing the impact of these measures 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.

In addition to the risk factors included in Part I, “Item IA. Risk Factors” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022, we include the following updates:

COMPANY AND REAL ESTATE INDUSTRY RISKS

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, continuing uncertainty in the office leasing market, the marked increase in interest rates; and turbulence in financing markets

While physical occupancy levels have improved slightly when compared to the prior quarter, leasing activity and physical occupancy in the LACBD has not caught up to pre-pandemic levels as businesses consider how to best implement return-to-office plans and transition to hybrid or remote work policies. Office tenants are still active in the leasing markets but being more selective in making rental decisions, and relocating and renewing tenants are pursuing space efficiencies which are often accompanied by size reduction and a focus on highest quality assets. We expect impacts of COVID-19 to continue adversely affecting our financial results and the LACBD Class A office leasing market in general. In addition, during the second and third quarter of 2022, uncertainty in the overall economy has returned due to the Federal Reserve materially raising interest rates to fight inflation and the impact of the war in the Ukraine. See “Risk Factors—We may be adversely affected by trends in the office real estate industry.” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022 for additional information.

If interest rates remain high or further increase and uncertainty in the overall economy continues, a slowdown in economic growth could be seen in the near-term which could adversely affect leasing activity and adversely affect our ability to refinance our secured debt as it becomes due. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — General” for additional discussions.

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There are numerous risks associated with the use of debt to finance our business, including refinancing and interest rate risks.

Brookfield DTLA incurs debt in the ordinary course of its business and therefore is subject to the risks associated with debt financing. These risks, including the following, may adversely impact our operating results and financial condition: our cash flows may be insufficient to meet required payments of principal and interest; payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses and meet all of our other obligations; for our variable-rate debt, the benchmark rates and credit spreads on which these debts are based have materially increased and there can be no assurance that the rate will not further increase in the future, increasing our interest expense. In addition, the cost of acquiring interest rate caps, which we are required to obtain with respect to the Company’s existing floating rate secured loans (and which we expect will be required to obtain similar loan to refinance our maturing debt), has risen sharply and there is no assurance that we will be able hedge such exposure effectively or at all in the future or bear the increased cost of such hedges. We may not be able to refinance indebtedness (or negotiate extensions) on our properties at maturity due to these business and market factors (including: disruptions and volatility in the capital and credit markets, the estimated cash flows of our properties, and the value (or appraised value) of our properties), financial, competitive, business and other factors, including factors beyond our control.

If current market conditions continue (or deteriorate further) and unless we can raise additional funds from outside sources, including our affiliates, it is likely that in some cases we will not be able to repay or refinance the debt secured by our properties at maturity, and we could default on such debt unless we can obtain an extension of the maturity date. A default may permit the lenders to foreclose on the applicable property. Proceeds from any disposition of a foreclosed property may not be sufficient to repay the full amount of the underlying debt. If, in some cases, we are unable to extend, refinance or repay our debt as it comes due, our business, financial condition and operating results may be materially and adversely affected. If we are unable to refinance our debt as it matures on acceptable terms, or at all, we may need to dispose of one or more of our properties on disadvantageous terms. Furthermore, even if we are able to obtain extensions on or refinance our existing debt, such extensions or new debt is likely to be on terms that are expected to be materially less favorable than the current terms of the related indebtedness and include operational and financial covenants significantly more restrictive than our current debt covenants which may limit the operation or growth of our business. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — General” and “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Indebtedness” for additional discussions.

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RISKS RELATED TO THE OWNERSHIP OF BROOKFIELD DTLA SERIES A PREFERRED STOCK

The Series A preferred stock ranks junior to any indebtedness of Brookfield DTLA and its subsidiaries.

Brookfield DTLA is a holding company and does not own any material assets other than the equity interests of its subsidiaries, which conduct all of the Company’s operations. As a result, distributions or advances from the Company’s subsidiaries will be the primary source of funds available to meet the obligations of the Company, including any obligation to pay dividends, if declared, or other distributions in respect of the Series A preferred stock. Other than as required under the “Distribution Waterfall” as described in Part I — Item 1. Financial Statements — Note 9 — “Mezzanine Equity”, there is no commitment or obligation on the part of Brookfield DTLA or DTLA Holdings to redeem or make distributions to the Series A preferred stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest (collectively, the “Preferred Interests”). If we are unable to obtain sufficient sources of liquidity, including through asset sales above their secured debt balances, and/ or through contributions from stockholders or from affiliates that hold interests in our subsidiaries, it is unlikely that we would be able to make distributions to the Preferred Interests in amounts equal to their redemption values. In particular, in the event of waterfall distributions, the Series A preferred stock ranks junior to Series B preferred interest. Given our current and future property valuations, as well as our obligations and liabilities, there is no assurance that there would be any cash available for distributions to holders of the Series A preferred stock after the Company satisfies its debt obligations and makes the distributions to the Series B preferred interest holders to which they are entitled.

These risk factors supplement the risk factors included in Part I, “Item IA. Risk Factors” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 24, 2022.

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

None.

Item 3.    Defaults Upon Senior Securities.

Dividends on the Series A preferred stock are cumulative and therefore will continue to accrue at an annual rate of $1.90625 per share. As of October 31, 2022, the cumulative amount of unpaid dividends totaled $237.8 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 November 10, 2022 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Principal Financial Officer dated November 10, 2022 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Principal Executive Officer and Principal Financial Officer dated November 10, 2022 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS						Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

__________

*			Furnished herewith.

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

SIGNATURES

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

Date: As of November 10, 2022

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

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