Brookfield

Overview

Brookfield Asset Management Inc. ("Brookfield Asset Management"), which is listed on the NYSE and TSX, will distribute the LP units of BPP LP to its shareholders as a special dividend, with such distribution being referred to as the spin-off. BPP LP will hold an approximate 16% economic interest in the Property Partnership, which will indirectly acquire substantially all of the commercial real estate portfolio of Brookfield Asset Management, including its office (56%), retail (39%), multi-family and industrial assets – with a geographic distribution of 63%-U.S., 15%-Australia, 10%-Europe, 9%-Canada, and 3%-Brazil. The other economic interest of approximately 90% in the Property Partnership will be held by Brookfield Asset Management directly or through the GP. BPP LP will apply for TSX and NYSE listings.

Special dividend

Brookfield Asset Management will declare a special dividend, to holders of its (620M) Class A limited voting shares and (85.1M) Class B limited voting shares, comprising approximately 47% of the units of the Property Partnership on the basis of 5.74 units for every 100 shares. Holders who otherwise would be entitled to receive a fractional unit will receive a cash payment.

Withholding on special dividend

To satisfy withholding tax liabilities in respect of registered shareholders, Brookfield Asset Management will withhold a portion of the BPP LP units which otherwise would be distributed (plus a portion of the cash distribution), and purchase the withheld units at a price equal to the fair market value of the unit determined by reference to the five day VWAP of the BPP LP units following closing of the spin-off. For non-Canadian beneficial owners, the withholding tax obligations will be satisfied in the ordinary course through arrangements with their brokers or other intermediaries.

Shareholder approvals/exemptions

BPP LP has applied for exemptive relief from the minority approval and valuation requirements for transactions that would have a value of less than 25% of BPP LP's market capitalization if the indirect equity interest of Brookfield Asset Management in BPP LP, through its ownership of the Redemption-Exchange Units, were included in the calculation of BPP LP's market capitalization. BPP LP will be a reporting issuer in Canada, and expects to be an SEC foreign issuer.

Structure

BPP LP. BPP LP is Bermuda exempted limited partnership. It will hold Class A LP units of the Property Partnership representing an approximate 15.9% interest therein. The general partner of BPP LP (holding a 0.2% GP interest) is a Bermuda company ("BPY GP") which was 1648285 Alberta ULC and, following the completion of the spin-off, will be Brookfield Property Partners Limited, a wholly-owned subsidiary of Brookfield Asset Management. The central management and control of BPY GP is expected to be outside Canada. It will have sole authority for the management and control of BPP LP. Income allocations will be made on a quarterly basis.

Property Partnership

Brookfield Asset Management will hold non-voting units (the "Redemption-Exchange Units"), representing an 83.1% interest in the Property Partnership. The Redemption-Exchange Units will be redeemable for cash subject to a right of BPP LP to acquire such units in exchange for units of BPP LP.

Property GP LP

The general partner of the Property Partnership will be a Bermuda limited partnership ("Property GP LP") holding a 1% GP interest. It has the sole authority for management and control of the Property Partnership. The general partner of Property GP LP is the Property General Partner. The Property General Partner (which initially was an Alberta ULC, but will become a Bermuda company) will be wholly-owned by Brookfield Asset Management, but will be controlled by BPP LP pursuant to a voting agreement.

Holding Entities

The Holding Entities are newly-created entities held by the Property Partnership. They include CanHoldco, an Ontario corporation in which Brookfield Asset Management will hold $1.25B of Class B and C redeemable preferred shares "received as partial consideration for causing the Property Partnership to directly acquire all of Brookfield Asset Management's commercial property operations." BPP LP will use commercially reasonable efforts to cause the redemption of the Class C preferred shares (of $0.5B bearing a cumulative dividend of 6.75%) as soon as reasonably practicable. Each class of preferred shares is entitled to 1% of the total votes of CanHoldco. Also included are two Bermuda holding companies.

Operating Entities

The direct and indirect holdings of the Holding Entities include various wholly- or partially-owned private or public non-resident companies, U.S. REITs and publicly traded trusts.

Distributions

Initially quarterly, amounting to $1.00 per annum per BPP LP unit, representing 80% of FFO, and 4% of the initial estimated BPP LP unit value of $25. A DRIP will be adopted.

Managers

The managers (the "Managers') will be Brookfield Global Management Limited and other wholly-owned subsidiaries of Brookfield Asset Management. The Managers receive a base fee of $12.5M per quarter, plus 0.3125% of each quarterly increase of BPP LP's total capitalization, plus (in the case of Property GP LP) further incentives of 15% then 25% based on exceeding distribution thresholds.

Canadian tax consequences

Dividend. The reported amount of the dividend will be based on the fair market value of the unit BPP LP units determined by reference to the five day VWAP of the BPP LP units following closing of the spin-off (pp. 38, 184).

Partnership taxation/SIFT tax

BPP LP and the Property Partnership would be considered to be "Canadian resident partnerships" and, therefore taxable as SIFT partnerships, if their central management and control were in Canada. BPY GP and the Property General Partner intend to take appropriate steps so that this does not occur (p. 39). Such GPs also intend to manage the affairs of the two partnerships so that, to the extent possible, they are not considered to carry on business in Canada (p. 40). BPP LP will include its share of fapi of the Property Partnership in computing its income.

Withholding tax

The Holding Entities intend to withhold on a reduced (look-through) basis taking into account the treaty-residence of the ultimate partners of the Property Partnership , including that of the unitholders of BPP LP.

TCP

It is not expected that the BPP LP units will be taxable Canadian property (p. 41).

U.S. tax consequences

Entity classification. BPP LP and the Property Partnership will make protective elections to be classified as partnerships for Code purposes. Their affairs will be managed so that they meet the Qualifying Income Exception (so as to not be deemed to be corporations under rules otherwise applicable to publicly-traded partnerships).

Distribution

The distribution will be treated as a dividend to the extent of current and accumulated earnings and profits of Brookfield Asset Management, which it does not calculate. Brookfield Asset Management does not believe it was a PFIC in the current or preceding taxable year, so that such dividend should qualify as a qualified dividend subject to exceptions.

Partnership taxation

BPP LP and the Property Partnership intend to make the Code s. 754 election (to step up or down inside basis respecting a transferee of units based on outside basis). BPP LP's functional currency will be the U.S. dollar.

Non-resident unitholders

BPP LP is unlikely to earn effectively connected income, so that non-US holders who are not otherwise engaged in a U.S. trade of business should not be subject to U.S. tax return filing requirements. However, there will be U.S. withholding tax on the gross amount of certain U.S. source income.