Document

10-Q 1 dtla201693010q.htm QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2016
	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 (Address of principal executive offices)		10281 (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)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

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



Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨

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

As of November 11, 2016, 100% of the registrant’s common stock (all of which is privately owned and is not traded on any public market) was held by Brookfield DTLA Holdings LLC.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2016

TABLE OF CONTENTS



			Page
PART I—FINANCIAL INFORMATION

	Item 1.	Financial Statements.
		Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2016 and December 31, 2015	1
		Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2016 and 2015	3
		Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2016 and 2015	4
		Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the nine months ended September 30, 2016 and 2015	5
		Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2016 and 2015	6
		Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	49
	Item 4.	Controls and Procedures.	49

PART II—OTHER INFORMATION

	Item 1.	Legal Proceedings.	50
	Item 1A.	Risk Factors.	53
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	55
	Item 3.	Defaults Upon Senior Securities.	55
	Item 4.	Mine Safety Disclosures.	55
	Item 5.	Other Information.	55
	Item 6.	Exhibits.	56
	Signatures		57

		Exhibit 31.1
		Exhibit 31.2
		Exhibit 32.1
		Exhibit 101 Instance Document
		Exhibit 101 Schema Document
		Exhibit 101 Calculation Linkbase Document
		Exhibit 101 Definition Linkbase Document
		Exhibit 101 Label Linkbase Document
		Exhibit 101 Presentation Linkbase Document

Table of Contents

PART I—FINANCIAL INFORMATION


Item 1.	Financial Statements.

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)



	September 30, 2016		December 31, 2015

ASSETS
Investments in Real Estate:
Land	$	227,555	$	227,555
Buildings and improvements	2,177,539		2,167,746
Tenant improvements	301,810		279,948
	2,706,904		2,675,249
Less: accumulated depreciation	310,886		256,130
Investments in real estate, net	2,396,018		2,419,119

Cash and cash equivalents	65,504		53,736
Restricted cash	59,662		53,830
Rents, deferred rents and other receivables, net	110,270		95,690
Intangible assets, net	81,474		99,710
Deferred charges, net	62,225		66,791
Prepaid and other assets, net	3,549		9,134
Total assets	$	2,778,702	$	2,798,010

LIABILITIES AND DEFICIT
Liabilities:
Mortgage loans, net	$	2,121,223	$	2,111,405
Accounts payable and other liabilities	73,868		105,004
Due to affiliates, net	3,272		9,335
Intangible liabilities, net	24,035		30,208
Total liabilities	$	2,222,398	$	2,255,952

Commitments and Contingencies (See Note 13)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited; in thousands, except share amounts)



	September 30, 2016			December 31, 2015

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, 2016 and December 31, 2015	$	368,215		$	354,304
Noncontrolling Interests:
Series A-1 preferred interest	361,993			349,084
Senior participating preferred interest	24,835			23,207
Series B preferred interest	43,949			—
Total mezzanine equity	798,992			726,595

Stockholders’ Deficit:
Common stock, $0.01 par value, 1,000 shares issued and outstanding as of September 30, 2016 and December 31, 2015	—			—
Additional paid-in capital	194,210			191,710
Accumulated deficit	(205,217		)	(177,879		)
Accumulated other comprehensive loss	(4,148		)	(2,580		)
Noncontrolling interest – Series B common interest	(227,533		)	(195,788		)
Total stockholders’ deficit	(242,688		)	(184,537		)
Total liabilities and deficit	$	2,778,702		$	2,798,010

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands)



	For the Three Months Ended						For the Nine Months Ended
	Sept. 30, 2016			Sept. 30, 2015			Sept. 30, 2016			Sept. 30, 2015
Revenue:
Rental income	$	40,334		$	41,211		$	124,071		$	119,200
Tenant reimbursements	23,481			21,545			69,318			66,756
Parking	9,251			8,746			27,772			26,238
Interest and other	4,342			3,059			10,028			13,313
Total revenue	77,408			74,561			231,189			225,507

Expenses:
Rental property operating and maintenance	24,435			24,893			71,509			71,106
Real estate taxes	9,573			6,934			28,413			26,412
Parking	2,213			2,119			6,259			5,948
Other expense	1,428			405			3,125			1,773
Depreciation and amortization	25,695			25,618			78,032			74,191
Interest	23,458			23,939			71,479			71,213
Total expenses	86,802			83,908			258,817			250,643

Net loss	(9,394		)	(9,347		)	(27,628		)	(25,136		)
Net loss attributable to noncontrolling interests:
Series A-1 preferred interest – current dividends	4,303			4,303			12,909			12,909
Senior participating preferred interest – current dividends	—			608			—			1,792
Senior participating preferred interest – redemption measurement adjustment	908			804			1,964			3,104
Series B preferred interest – current dividends	881			—			949			—
Series B common interest – allocation of net loss	(10,532		)	(10,310		)	(30,023		)	(29,756		)
Net loss attributable to Brookfield DTLA	(4,954		)	(4,752		)	(13,427		)	(13,185		)
Series A preferred stock – current dividends	4,637			4,637			13,911			13,911
Net loss available to common interest holders of Brookfield DTLA	$	(9,591	)	$	(9,389	)	$	(27,338	)	$	(27,096	)

See accompanying notes to condensed consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited; in thousands)



	For the Three Months Ended						For the Nine Months Ended
	Sept. 30, 2016			Sept. 30, 2015			Sept. 30, 2016			Sept. 30, 2015

Net loss	$	(9,394	)	$	(9,347	)	$	(27,628	)	$	(25,136	)

Other comprehensive loss:
Derivative transactions:
Derivative holding gains (losses)	1,832			(3,579		)	(3,290		)	(3,707		)

Comprehensive loss	(7,562		)	(12,926		)	(30,918		)	(28,843		)
Comprehensive loss attributable to noncontrolling interests	3,481			6,468			15,922			13,891
Comprehensive loss available to common interest holders of Brookfield DTLA	$	(4,081	)	$	(6,458	)	$	(14,996	)	$	(14,952	)

See accompanying notes to condensed consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited; in thousands, except share amounts)



	Number of Shares	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Non- controlling Interest			Total Stockholders’ Deficit
	Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Non- controlling Interest			Total Stockholders’ Deficit

Balance, December 31, 2015	1,000	$	—	$	191,710	$	(177,879	)	$	(2,580	)	$	(195,788	)	$	(184,537	)
Net loss						(13,427		)				(14,201		)	(27,628		)
Other comprehensive loss									(1,568		)	(1,722		)	(3,290		)
Contribution from Brookfield DTLA Holdings				2,500											2,500
Dividends on Series A preferred stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest						(13,911		)				(15,822		)	(29,733		)
Balance, September 30, 2016	1,000	$	—	$	194,210	$	(205,217	)	$	(4,148	)	$	(227,533	)	$	(242,688	)



	Number of Shares	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Non- controlling Interest			Total Stockholders’ Deficit
	Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Non- controlling Interest			Total Stockholders’ Deficit

Balance, December 31, 2014	1,000	$	—	$	191,710	$	(137,339	)	$	(2,066	)	$	(150,703	)	$	(98,398	)
Net loss						(13,185		)				(11,951		)	(25,136		)
Other comprehensive loss									(1,767		)	(1,940		)	(3,707		)
Dividends on Series A preferred stock, Series A-1 preferred interest and senior participating preferred interest						(13,911		)				(17,805		)	(31,716		)
Balance, September 30, 2015	1,000	$	—	$	191,710	$	(164,435	)	$	(3,833	)	$	(182,399	)	$	(158,957	)

See accompanying notes to condensed consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)



	For the Nine Months Ended
	September 30, 2016			September 30, 2015
Cash flows from operating activities:
Net loss	$	(27,628	)	$	(25,136	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Gain on sale of land held for investment	—			(28		)
Depreciation and amortization	78,032			74,191
(Recovery of) provision for doubtful accounts	(239		)	72
Amortization of below-market leases/ above-market leases	(2,733		)	(2,214		)
Straight-line rent amortization	(14,574		)	(14,036		)
Amortization of tenant inducements	2,502			1,916
Amortization of discounts and deferred financing costs	3,499			3,797
Changes in assets and liabilities:
Rents, deferred rents and other receivables	(2,508		)	343
Deferred charges	(3,912		)	(16,243		)
Prepaid and other assets	5,585			7,797
Accounts payable and other liabilities	(2,761		)	5,978
Due to affiliates, net	(6,064		)	(3,688		)
Net cash provided by operating activities	29,199			32,749
Cash flows from investing activities:
Proceeds from sale of land held for investment	—			2,028
Expenditures for improvements to real estate	(41,189		)	(40,743		)
Increase in restricted cash	(5,832		)	(10,233		)
Net cash used in investing activities	(47,021		)	(48,948		)
Cash flows from financing activities:
Proceeds from mortgage loans	470,000			—
Principal payments on mortgage loans	(460,543		)	—
Dividends paid on Series A preferred stock	(21,893		)	—
Distribution to senior participating preferred interest	(336		)	—
Contributions from Series B preferred interest	43,000			—
Contribution from Brookfield DTLA Holdings	2,500			—
Financing fees paid	(3,138		)	(43		)
Net cash provided by (used in) financing activities	29,590			(43		)
Net change in cash and cash equivalents	11,768			(16,242		)
Cash and cash equivalents at beginning of period	53,736			125,004
Cash and cash equivalents at end of period	$	65,504		$	108,762

See accompanying notes to condensed consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited; in thousands)



	For the Nine Months Ended
	September 30, 2016			September 30, 2015
Supplemental disclosure of cash flow information:
Cash paid for interest	$	67,901		$	67,425

Supplemental disclosure of non-cash activities:
Accrual for real estate improvements	$	6,758		$	12,633
Accrual for deferred leasing costs	2,169			5,257
Decrease in fair value of interest rate swap, net	(3,290		)	(3,707		)

See accompanying notes to condensed consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 (the “Merger Agreement”), 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 (“Brookfield DTLA Holdings”), a Delaware limited liability company, and an indirect subsidiary of Brookfield Office Properties Inc. (“BPO”).

Brookfield DTLA owns BOA Plaza, EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, each of which are Class A office properties located in the Los Angeles Central Business District (the “LACBD”).

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

Note 2—Basis of Presentation

As used in these condensed 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.

Principles of Consolidation and Combination and Basis of Presentation

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

The condensed consolidated balance sheet data as of December 31, 2015 has been derived from Brookfield DTLA’s audited financial statements; however, the accompanying notes to the condensed consolidated financial statements do not include all disclosures required by GAAP.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The financial information included herein should be read in conjunction with the consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 28, 2016.

Reclassifications

In December 2015, Brookfield DTLA adopted the guidance in Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. We have combined the amortization of deferred financing costs ($901) and the amortization of debt discounts ($2,896) and presented a new total ($3,797) in the condensed consolidated statement of cash flows for the nine months ended September 30, 2015 so as to reflect the presentation of such costs in the condensed consolidated balance sheet as of December 31, 2015.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for applying the acquisition method of accounting, the useful lives of assets, recoverable amounts of receivables, impairment of long-lived assets and fair value of debt. Actual results could ultimately differ from such estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluating the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This topic provides guidance on management’s responsibility to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and requires related footnote disclosures. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-15 on Brookfield DTLA’s consolidated financial statements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis to ASC Topic 810, Consolidation. ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidated analysis of reporting entities that are involved with VIEs, and (iv) provide a scope exception for certain entities. The guidance in ASU 2015-02 became effective for Brookfield DTLA beginning January 1, 2016. The implementation of this pronouncement did not have a material impact on Brookfield DTLA’s consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03 that requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, as opposed to being presented as assets. Brookfield DTLA elected to early adopt ASU 2015-03 effective as of December 31, 2015. There was no effect on our consolidated statements of operations for the three and nine months ended September 30, 2015 as a result of adopting this pronouncement.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments to ASC Topic 230, Statement of Cash Flows. ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, with early adoption permitted. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements.

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 (the “Code”), commencing with its tax period ended December 31, 2013. Brookfield DTLA conducts and intends to conduct its operations so as 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 distributions to its stockholders, if any, generally equal or exceed its taxable income. Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to both federal and state income taxes.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Qualification and taxation as a REIT depends upon Brookfield DTLA’s ability to meet the various qualification tests imposed under the Code related to annual operating results, asset diversification, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that Brookfield DTLA will be organized or be able to operate in a manner so as to continue to qualify as a REIT. If Brookfield DTLA fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax on its taxable income at regular corporate tax rates, and it may be ineligible to qualify as a REIT for four subsequent tax years. Brookfield DTLA may also be subject to certain state or local income taxes, or franchise taxes on its REIT activities.

Brookfield DTLA made no provision for income taxes in its condensed consolidated financial statements for the three and nine months ended September 30, 2016 and 2015, respectively. Brookfield DTLA’s taxable income or loss is different than its financial statement income or loss.

Brookfield DTLA recognizes tax benefits from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition threshold. Brookfield DTLA had no unrecognized tax benefits as of September 30, 2016 and December 31, 2015, and Brookfield DTLA does not expect its unrecognized tax benefits balance to change during the next 12 months. As of September 30, 2016, Brookfield DTLA’s 2013 tax period and 2014 and 2015 tax years remain open due to the statute of limitations and may be subject to examination by federal, state and local authorities. The 2012 tax year as well as the short tax period ended October 15, 2013 for Brookfield DTLA and its subsidiaries remain open due to the statute of limitations and may be subject to examination by federal, state and local tax authorities.

Note 3—Rents, Deferred Rents and Other Receivables, Net

Brookfield DTLA’s rents, deferred rents and other receivables are presented net of the following amounts in the condensed consolidated balance sheets (in thousands):



	September 30, 2016		December 31, 2015

Allowance for doubtful accounts	$	245	$	484
Accumulated amortization of tenant inducements	9,027		6,525

Brookfield DTLA recorded a $(311) thousand and $(239) thousand recovery of doubtful accounts during the three and nine months ended September 30, 2016, respectively. Brookfield DTLA recorded a $182 thousand and $72 thousand provision for doubtful accounts during the three and nine months ended September 30, 2015, respectively.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 4—Intangible Assets and Liabilities

Brookfield DTLA’s intangible assets and liabilities are summarized as follows (in thousands):



	September 30, 2016		December 31, 2015
Intangible Assets
In-place leases	$	110,519	$	110,519
Tenant relationships	46,248		46,248
Above-market leases	39,936		39,936
	196,703		196,703
Less: accumulated amortization	115,229		96,993
Intangible assets, net	$	81,474	$	99,710

Intangible Liabilities
Below-market leases	$	76,344	$	76,344
Less: accumulated amortization	52,309		46,136
Intangible liabilities, net	$	24,035	$	30,208

The impact of the amortization of acquired below-market leases, net of acquired above-market leases, on rental income and of acquired in-place leases and tenant relationships on depreciation and amortization expense is as follows (in thousands):



	For the Three Months Ended					For the Nine Months Ended
	Sept. 30, 2016			Sept. 30, 2015		Sept. 30, 2016		Sept. 30, 2015

Rental income	$	(158	)	$	943	$	2,733	$	2,214
Depreciation and amortization expense	4,994			5,819		14,796		16,591

As of September 30, 2016, the estimate of the amortization/accretion of intangible assets and liabilities during the remainder of 2016, the next four years and thereafter is as follows (in thousands):



	In-Place Leases		Other Intangible Assets		Intangible Liabilities

2016	$	4,013	$	1,874	$	1,808
2017	10,477		6,324		5,656
2018	6,754		5,146		3,812
2019	5,704		4,313		3,238
2020	5,059		3,417		3,031
Thereafter	14,441		13,952		6,490
	$	46,448	$	35,026	$	24,035

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 5—Deferred Charges, Net

Brookfield DTLA’s deferred charges are presented net of the following amounts in the condensed consolidated balance sheets (in thousands):



	September 30, 2016		December 31, 2015

Accumulated amortization of leasing costs	$	46,713	$	38,234

Note 6—Mortgage Loans

Brookfield DTLA’s debt is as follows (in thousands, except percentage amounts):



	Contractual Maturity Date			Principal Amount as of
	Contractual Maturity Date	Interest Rate		September 30, 2016		December 31, 2015
Floating-Rate Debt
Variable-Rate Loans:
Wells Fargo Center–South Tower (1)	12/1/2016	2.33	%	$	290,000	$	290,000
777 Tower (2)	11/1/2018	2.71	%	220,000		200,000
Figueroa at 7th (3)	9/10/2017	2.77	%	35,000		35,000
Total variable-rate loans				545,000		525,000

Variable-Rate Swapped to Fixed-Rate Loan:
EY Plaza (4)	11/27/2020	3.93	%	181,834		184,377
Total floating-rate debt				726,834		709,377

Fixed-Rate Debt:
Wells Fargo Center–North Tower	4/6/2017	5.70	%	550,000		550,000
BOA Plaza	9/1/2024	4.05	%	400,000		400,000
Gas Company Tower	8/6/2021	3.47	%	319,000		—
Gas Company Tower	8/6/2021	6.50	%	131,000		—
Total fixed-rate debt				1,400,000		950,000

Debt Refinanced:
Gas Company Tower				—		458,000

Total debt				2,126,834		2,117,377
Less: unamortized discounts and debt issuance costs				5,611		5,972
Total debt, net				$	2,121,223	$	2,111,405

__________

(1)

This loan bears interest at LIBOR plus 1.80%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 4.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). As of December 31, 2015 and September 30, 2016, the Company did not meet the criteria specified in the loan agreement to extend this loan on its contractual maturity date.

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(2)	This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).


(3)	This loan bears interest at LIBOR plus 2.25%. Brookfield DTLA has two options to extend the maturity date of this loan, each for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).


(4)	This loan bears interest at LIBOR plus 1.75%. As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178%. The effective interest rate of 3.93% includes interest on the swap.

Debt Refinanced

On July 11, 2016, Brookfield DTLA Holdings refinanced the $458.0 million mortgage loan secured by Gas Company Tower. In connection with the refinancing, Brookfield DTLA Holdings repaid $8.0 million of principal and was required to fund various loan reserves, including a $20.7 million tenant improvement and leasing commission reserve, a $4.5 million rent concession reserve, and a $3.0 million tax reserve at closing. During July 2016, the Company received $37.0 million in cash contributions from Brookfield DTLA Holdings, of which $19.7 million was used to pay for costs associated with the refinancing of Gas Company Tower.

The new $450.0 million mortgage loan is comprised of a $319.0 million senior loan and a $131.0 million mezzanine loan, which bear interest at fixed rates equal to 3.4727% and 6.50%, respectively, mature on August 6, 2021, and require the payment of interest-only until maturity. The senior loan is locked out from prepayment until September 6, 2017, after which it can be prepaid, in whole or in part, with prepayment penalties (as defined in the underlying loan agreement) until April 6, 2021 after which the loan can be repaid without penalty. The mezzanine loan is locked out from prepayment until September 6, 2017, after which the loan can be repaid, in whole or in part, without penalty.

Debt Modification

On September 1, 2016, Brookfield DTLA Holdings modified the mortgage loan secured by 777 Tower, which increased the loan amount from $200.0 million to $220.0 million. As a result of the modification, the Company received net proceeds of $19.7 million, which will be used for general corporate purposes.

The terms of the modified loan increased the interest rate by 48 basis points to LIBOR plus 2.18%, effective September 1, 2016. No other terms or conditions of the original loan were changed as part of the modification.

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(Unaudited)

Debt Maturities

As Brookfield DTLA’s debt matures, principal payment obligations present significant future cash requirements. As of September 30, 2016, our debt to be repaid during the remainder of 2016, the next four years and thereafter is as follows (in thousands):



2016	$	290,976
2017	589,026
2018	224,232
2019	4,449
2020	168,151
Thereafter	850,000
	$	2,126,834

As of September 30, 2016, $506.8 million of our debt may be prepaid without penalty, $550.0 million may be prepaid with prepayment penalties or defeased (as defined in the underlying loan agreement) at our option, $400.0 million may be defeased (as defined in the underlying loan agreement), $220.0 million may be prepaid with prepayment penalties, and $450.0 million is locked out from prepayment until September 6, 2017.

Wells Fargo Center–South Tower—

Brookfield DTLA currently intends to refinance the $290.0 million mortgage loan secured by Wells Fargo Center–South Tower on or about its December 1, 2016 maturity date. We do not have a commitment from the lenders to extend the maturity date of or to refinance this loan. As of December 31, 2015 and September 30, 2016, the Company did not meet the criteria specified in the loan agreement to extend this loan on its contractual maturity date.

This loan will most likely require a paydown upon extension or refinancing (depending on market conditions), funding of additional reserve amounts, or both. As of September 30, 2016, Brookfield DTLA anticipates the need for additional cash of approximately $51 million to complete the refinancing. We may use cash on hand to make any such payments or cash received as a capital contribution from Brookfield DTLA Holdings. If we are unable or unwilling to use cash on hand or do not use cash contributed by Brookfield DTLA Holdings to make such payments, we may face challenges in repaying, extending or refinancing this loan on favorable terms or at all, and we may be forced to give back the asset to the lenders.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Wells Fargo Center–North Tower—

Brookfield DTLA currently intends to refinance the $550.0 million mortgage loan secured by Wells Fargo Center–North Tower on or about its April 6, 2017 maturity date with new debt with a lower leverage ratio. We do not have a commitment from the lenders to extend the maturity date of or to refinance this loan.

This loan will most likely require a paydown upon extension or refinancing (depending on market conditions), funding of additional reserve amounts, or both. As of September 30, 2016 Brookfield DTLA anticipates the need for additional cash of approximately $125 million to complete the refinancing. We may use cash on hand to make any such payments or cash received as a capital contribution from Brookfield DTLA Holdings. If we are unable or unwilling to use cash on hand or do not use cash contributed by Brookfield DTLA Holdings to make such payments, we may face challenges in repaying, extending or refinancing this loan on favorable terms or at all, and we may be forced to give back the asset to the lenders.

Non-Recourse Carve Out Guarantees

All of Brookfield DTLA’s $2.1 billion of mortgage debt is subject to “non-recourse carve out” guarantees that expire upon elimination of the underlying loan obligations. Under these guarantees, these otherwise non‑recourse loans can become partially or fully recourse against Brookfield DTLA Holdings if certain triggering events occur as defined in the loan agreements.

Debt Reporting

Pursuant to the terms of certain of our mortgage loan agreements, Brookfield DTLA is required to report a debt service coverage ratio (“DSCR”) calculated using the formulas specified in the underlying loan agreements. We have submitted the required reports to the lenders for the measurement periods ended September 30, 2016 and were in compliance with the amounts required by the loan agreements.

Pursuant to the terms of the Wells Fargo Center–South Tower, Wells Fargo Center–North Tower, EY Plaza, and Figueroa at 7th mortgage loan agreements, we are required to provide annual audited financial statements of Brookfield DTLA Holdings to the lenders or agents. The receipt of any opinion other than an “unqualified” audit opinion on our annual audited financial statements is an event of default under the loan agreements for the properties listed above. If an event of default occurs, the lenders have the right to pursue the remedies contained in the loan documents, including acceleration of all or a portion of the debt and foreclosure.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 7—Mezzanine Equity

Mezzanine equity in the condensed consolidated balance sheets is comprised of the Series A preferred stock, a Series A-1 preferred interest, a senior participating preferred interest and, as of September 30, 2016, a Series B preferred interest (collectively, the “Preferred Interests”). The Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest are held by a noncontrolling interest holder. The Preferred Interests are classified in 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. There is no commitment or obligation on the part of Brookfield DTLA or Brookfield DTLA Holdings to redeem the Preferred Interests. See “—Series B Preferred Interest” below for a discussion of the issuance of the Series B preferred interest during the nine months ended September 30, 2016.

The Preferred Interests included within mezzanine equity were recorded at fair value on the date of issuance and have been adjusted to the greater of their carrying amount or redemption value as of September 30, 2016 and December 31, 2015. Adjustments to increase the carrying amount to redemption value are recorded in the consolidated statement of operations as a redemption measurement adjustment.

Dividends and Distributions

On January 4, 2016, Brookfield DTLA paid a cash dividend of $2.25 per share to holders of record of its Series A preferred stock at the close of business on December 15, 2015 using cash on hand. This dividend payment reduced the accumulated and unpaid dividends owed on the Series A preferred stock by $21.9 million. Any future dividends declared would be at the discretion of Brookfield DTLA’s board of directors and would depend on its financial condition, results of operations, contractual obligations and the terms of its financing agreements at the time a dividend is considered, and other relevant factors.

On April 5, 2016, Brookfield DTLA made a $0.3 million cash distribution to Brookfield DTLA Holdings as a return of investment related to the senior participating preferred interest held by Brookfield DTLA Holdings using cash on hand.

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Series A Preferred Stock

As of September 30, 2016 and December 31, 2015, 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 Brookfield DTLA Holdings.

On January 4, 2016, Brookfield DTLA paid a cash dividend of $2.25 per share to holders of record of its Series A preferred stock at the close of business on December 15, 2015 using cash on hand. This dividend payment reduced the accumulated and unpaid dividends owed on the Series A preferred stock by $21.9 million. The dividend was declared on December 4, 2015 by the board of directors in connection with the settlement on a class-wide basis of the litigation brought in Maryland State Court and styled as In re MPG Office Trust Inc. Preferred Shareholder Litigation, Case No. 24-C-13-004097. See Note 13 “Commitments and Contingencies—Litigation—Merger-Related Litigation” for additional information regarding the dividend payment.

No dividends were declared on the Series A preferred stock during the nine months ended September 30, 2016 and 2015. 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 September 30, 2016, the cumulative amount of unpaid dividends totals $125.0 million and has been reflected in the carrying amount of the Series A preferred stock.

The Series A preferred stock does not have a stated maturity and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A preferred stock will rank senior to our common stock with respect to the payment of distributions. We may, at our option, redeem the Series A preferred stock, in whole or in part, for cash at a redemption price of $25.00 per share, plus all accumulated and unpaid dividends on such Series A preferred stock up to and including the redemption date. The Series A preferred stock is not convertible into or exchangeable for any other property or securities of Brookfield DTLA.

As of September 30, 2016, the Series A preferred stock is reported at its redemption value of $368.2 million calculated using the redemption price of $25.00 per share plus all accumulated and unpaid dividends on such Series A preferred stock through September 30, 2016.

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(Unaudited)

Series A-1 Preferred Interest

The Series A-1 preferred interest has mirror rights to the Series A preferred interests issued by Brookfield DTLA Fund Properties II LLC (“New OP”), which are held by a wholly owned subsidiary of Brookfield DTLA, but only with respect to their respective preferred liquidation preferences, and share pro rata with 48.13% to the Series A-1 preferred interest and 51.87% to the Series A preferred interest based on their current liquidation preferences in accordance with their respective preferred liquidation preferences in distributions from New OP, until their preferred liquidation preferences have been reduced to zero. Thereafter, distributions will be made 47.66% to the common component of the Series A interest and 52.34% to the common component of the Series B interest, which is held by Brookfield DTLA Holdings. The economic terms of the Series A preferred stock mirror those of the New OP Series A preferred interests, including distributions in respect of the preferred liquidation preference.

As of September 30, 2016, the Series A-1 preferred interest is reported at its redemption value of $362.0 million calculated using its liquidation value of $225.7 million plus $136.3 million of accumulated and unpaid dividends on such Series A-1 preferred interest through September 30, 2016.

Senior Participating Preferred Interest

On October 15, 2013, Brookfield DTLA Fund Properties III LLC (“DTLA OP”) issued a senior participating preferred interest to Brookfield DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition. The senior participating preferred interest was comprised of $240.0 million in preferred interests with a 7.0% coupon and a 4.0% participating interest in the residual value of DTLA OP, which owns 333 South Hope Co. LLC and EYP Realty LLC. As of December 31, 2015, the 7.0% preferred interest portion of the senior participating preferred interest had been fully repaid to Brookfield DTLA Holdings.

As of September 30, 2016, the senior participating preferred interest is reported at its redemption value of $24.8 million using the value of the participating interest.

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(Unaudited)

Series B Preferred Interest

Brookfield DTLA Holdings made a commitment to make future capital contributions in cash or property to New OP, which directly or indirectly owns the Brookfield DTLA properties, to fund up to $260.0 million of its future cash needs, for which it would be entitled to receive a preferred return, if and when called by New OP.

On May 16, 2016, New OP issued a Series B preferred interest to Brookfield DTLA Holdings in connection with a $6.0 million cash contribution from Brookfield DTLA Holdings to the Company under this commitment, which is entitled to receive a preferred return of 9.0%. The Company used these funds for general corporate purposes.

On July 11, 2016 and July 13, 2016, the Company received $30.0 million and $7.0 million, respectively, in cash contributions from Brookfield DTLA Holdings, which are entitled to receive a preferred return of 9.0% as part of the Series B preferred interest. Of the $37.0 million contributed during July 2016, $19.7 million was used to pay for costs associated with the refinancing of Gas Company Tower, with the remainder to be used for general corporate purposes.

As of September 30, 2016, the Series B preferred interest is reported at its redemption value of $43.9 million calculated using its liquidation value of $43.0 million plus $0.9 million of dividends on the preferred interest through September 30, 2016.

Change in Mezzanine Equity

A summary of the change in mezzanine equity for the nine months ended September 30, 2016 is as follows (in thousands, except share amounts):



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

Balance, December 31, 2015	9,730,370	$	354,304	$	349,084	$	23,207		$	—	$	726,595
Issuance of Series B preferred interest									43,000		43,000
Current dividends		13,911		12,909		—			949		27,769
Other payment to noncontrolling interest						(336		)			(336		)
Redemption measurement adjustment						1,964					1,964
Balance, September 30, 2016	9,730,370	$	368,215	$	361,993	$	24,835		$	43,949	$	798,992

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(Unaudited)

Note 8—Noncontrolling Interests

Mezzanine Equity Component

The Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest consist of equity interests of New OP, DTLA OP and New OP, respectively, which are owned directly by Brookfield DTLA Holdings. These noncontrolling interests are presented as mezzanine equity in the condensed consolidated balance sheet. See Note 7 “Mezzanine Equity.”

Stockholders’ Deficit Component

The Series B common interest ranks junior to the Series A preferred stock as to dividends and upon liquidation and is presented in the condensed consolidated balance sheet as noncontrolling interest.

On April 21, 2016, Brookfield DTLA received a $2.5 million capital contribution from Brookfield DTLA Holdings, which was used for general corporate purposes.

Note 9—Accumulated Other Comprehensive Loss

A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s cash flow hedges is as follows (in thousands):



	For the Three Months Ended						For the Nine Months Ended
	Sept. 30, 2016			Sept. 30, 2015			Sept. 30, 2016			Sept. 30, 2015

Balance at beginning of period	$	(10,537	)	$	(4,465	)	$	(5,415	)	$	(4,337	)
Other comprehensive gain (loss) before reclassifications	1,832			(3,579		)	(3,290		)	(3,707		)
Amounts reclassified from accumulated other comprehensive loss	—			—			—			—
Net current-period other comprehensive gain (loss)	1,832			(3,579		)	(3,290		)	(3,707		)
Balance at end of period	$	(8,705	)	$	(8,044	)	$	(8,705	)	$	(8,044	)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 10—Fair Value Measurements

The valuation of Brookfield DTLA’s interest rate swap is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flow of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We have incorporated credit valuation adjustments to appropriately reflect both our own and the respective counterparty’s non-performance risk in the fair value measurements.

Brookfield DTLA’s (liabilities) assets measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, are as follows (in thousands):



				Fair Value Measurements Using
	Total Fair Value			Quoted Prices in Active Markets for Identical (Liabilities) Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest rate swap at:
September 30, 2016	$	(8,705	)	$	—	$	(8,705	)	$	—
December 31, 2015	(5,415		)	—		(5,415		)	—

Interest rate caps at:
September 30, 2016	$	—		$	—	$	—		$	—
December 31, 2015	19			—		19			—

Note 11—Financial Instruments

Derivative Financial Instruments

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



	Fair Value
	September 30, 2016			December 31, 2015
Derivatives designated as cash flow hedging instruments:
Interest rate swap	$	(8,705	)	$	(5,415	)

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(Unaudited)

A summary of the effect of derivative financial instruments reported in the condensed consolidated financial statements is as follows (in thousands):



	Amount of Loss Recognized in AOCL			Amount of Loss Reclassified from AOCL to Statement of Operations
Derivatives designated as cash flow hedging instruments:
Interest rate swap for the nine months ended:
September 30, 2016	$	(3,290	)	$	—
September 30, 2015	(3,707		)	—

Interest Rate Swap—

As of September 30, 2016 and December 31, 2015, Brookfield DTLA held an interest rate swap with a notional amount of $185.0 million, which was assigned to the EY Plaza mortgage loan. The swap requires net settlement each month and expires on November 2, 2020.

Interest Rate Caps—

Brookfield DTLA holds interest rate caps pursuant to the terms of certain of its mortgage loan agreements with the following notional amounts (in thousands):



	September 30, 2016		December 31, 2015

Wells Fargo Center–South Tower	$	290,000	$	290,000
777 Tower	220,000		200,000
	$	510,000	$	490,000

On September 1, 2016, the Company increased the notional amount of the interest rate cap agreement related to its 777 Tower mortgage loan from $200.0 million to $220.0 million pursuant to the terms of the modified loan agreement.

Other Financial Instruments

The estimated fair value and carrying amount of Brookfield DTLA’s mortgage loans are as follows (in thousands):



	September 30, 2016		December 31, 2015

Estimated fair value	$	2,128,930	$	2,114,761
Carrying amount	2,126,834		2,117,377

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(Unaudited)

We calculated the estimated fair value of our mortgage loans by discounting the future contractual cash flows of the loans using current risk adjusted rates available to borrowers with similar credit ratings. The estimated fair value of mortgage loans is classified as Level 3.

Note 12—Related Party Transactions

Management Agreements

Brookfield DTLA has entered into arrangements with BOP Management Inc., an affiliate of BPO, under which the affiliate provides property management and various other services. Property management fees under these agreements are calculated based on 2.75% of rents collected (as defined in the management agreements). In addition, the Company pays BOP Asset Manager LLC an asset management fee, which is calculated based on 0.75% of the capital contributed by Brookfield DTLA Holdings.

A summary of costs incurred by Brookfield DTLA under these arrangements is as follows (in thousands):



	For the Three Months Ended				For the Nine Months Ended
	Sept. 30, 2016		Sept. 30, 2015		Sept. 30, 2016		Sept. 30, 2015

Property management fee expense	$	1,955	$	1,843	$	5,864	$	5,679
Asset management fee expense	1,583		1,578		4,748		4,645
General, administrative and reimbursable expenses	615		664		1,857		1,950
Leasing and construction management fees	410		2,436		1,321		5,964

Insurance Agreements

Insurance premiums for Brookfield DTLA are paid by an affiliate of BPO. Brookfield DTLA reimburses this BPO affiliate for the actual cost of such premiums.

A summary of costs incurred by Brookfield DTLA under this arrangement is as follows (in thousands):



	For the Three Months Ended				For the Nine Months Ended
	Sept. 30, 2016		Sept. 30, 2015		Sept. 30, 2016		Sept. 30, 2015

Insurance expense	$	1,950	$	2,172	$	5,873	$	6,517

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(Unaudited)

Note 13—Commitments and Contingencies

Litigation

General—

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.

Merger-Related Litigation—

Following the announcement of the execution of the Agreement and Plan of Merger dated as of April 24, 2013, as amended (the “Merger Agreement”), seven putative class actions were filed against Brookfield Office Properties Inc. (“BPO”), Brookfield DTLA, Brookfield DTLA Holdings LLC, Brookfield DTLA Fund Office Trust Inc., Brookfield DTLA Fund Properties (collectively, the “Brookfield Parties”), MPG Office Trust, Inc., MPG Office, L.P., and the members of MPG Office Trust, Inc.’s board of directors. Five of these lawsuits were filed on behalf of MPG Office Trust, Inc.’s common stockholders: (i) two lawsuits, captioned Coyne v. MPG Office Trust, Inc., et al., No. BC507342 (the “Coyne Action”), and Masih v. MPG Office Trust, Inc., et al., No. BC507962 (the “Masih Action”), were filed in the Superior Court of the State of California in Los Angeles County (the “California State Court”) on April 29, 2013 and May 3, 2013, respectively; and (ii) three lawsuits, captioned Kim v. MPG Office Trust, Inc. et al., No. 24‑C-13-002600 (the “Kim Action”), Perkins v. MPG Office Trust, Inc., et al., No. 24-C-13-002778 (the “Perkins Action”) and Dell’Osso v. MPG Office Trust, Inc., et al., No. 24‑C-13-003283 (the “Dell’Osso Action”) were filed in the Circuit Court for Baltimore City, Maryland on May 1, 2013, May 8, 2013 and May 22, 2013, respectively (collectively, the “Common Stock Actions”). Two lawsuits, captioned Cohen v. MPG Office Trust, Inc. et al., No. 24-C-13-004097 (the “Cohen Action”) and Donlan v. Weinstein, et al., No. 24‑C-13-004293 (the “Donlan Action”), were filed on behalf of MPG Office Trust, Inc.’s preferred stockholders in the Circuit Court for Baltimore City, Maryland on June 20, 2013 and July 2, 2013, respectively (collectively, the “Preferred Stock Actions”). In each of the Common Stock Actions, the plaintiffs allege, among other things, that MPG Office Trust, Inc.’s board of directors breached their fiduciary duties in connection with the merger by failing to maximize the value of MPG Office Trust, Inc. and ignoring or failing to protect against conflicts of interest, and that the relevant Brookfield Parties named as defendants aided and abetted those breaches of fiduciary duty. The Kim Action further alleges that MPG Office, L.P. also aided and abetted the breaches of fiduciary duty by MPG Office Trust, Inc.’s board of directors, and the Dell’Osso Action further alleges that MPG Office Trust, Inc. and MPG Office, L.P. aided and abetted the breaches of fiduciary duty by MPG Office Trust, Inc.’s board of directors. On June 4, 2013, the Kim and Perkins plaintiffs filed identical, amended complaints in the Circuit Court for Baltimore City, Maryland. On June 5, 2013, the Masih plaintiffs also filed an amended complaint in the Superior Court of the State of California in Los Angeles County. The three amended complaints, as well as the Dell’Osso Action complaint, allege that the preliminary proxy statement filed by MPG Office Trust, Inc. with the SEC on May 21, 2013 is false and/or misleading because it fails to include certain details of the process leading up to the merger and fails to provide adequate information concerning MPG Office Trust, Inc.’s financial advisors.

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(Unaudited)

In each of the Preferred Stock Actions, which were brought on behalf of MPG Office Trust, Inc.’s preferred stockholders, the plaintiffs allege, among other things, that, by entering into the Merger Agreement and tender offer, MPG Office Trust, Inc. breached the Articles Supplementary, which governs the issuance of the MPG preferred shares, that MPG Office Trust, Inc.’s board of directors breached their fiduciary duties by agreeing to a merger agreement that violated the preferred stockholders’ contractual rights and that the relevant Brookfield Parties named as defendants aided and abetted those breaches of contract and fiduciary duty. On July 15, 2013, the plaintiffs in the Preferred Stock Actions filed a joint amended complaint in the Circuit Court for Baltimore City, Maryland that further alleged that MPG Office Trust, Inc.’s board of directors failed to disclose material information regarding BPO’s extension of the tender offer.

The plaintiffs in the seven lawsuits sought an injunction against the merger, rescission or rescissory damages in the event the merger was consummated, an award of fees and costs, including attorneys’ and experts’ fees, and other relief.

On July 10, 2013, solely to avoid the costs, risks and uncertainties inherent in litigation, the Brookfield Parties and the other named defendants in the Common Stock Actions signed a memorandum of understanding, regarding a proposed settlement of all claims asserted therein. The parties subsequently entered into a stipulation of settlement dated November 21, 2013 providing for the release of all asserted claims, additional disclosures by MPG concerning the merger made prior to the merger’s approval, and the payment, by the defendants, of an award of attorneys’ fees and expenses in an amount not to exceed $475,000. After a hearing on June 4, 2014, the California State Court granted plaintiffs’ motion for final approval of the settlement, and entered a Final Order and Judgment, awarding the plaintiffs’ counsel’s attorneys’ fees and expenses in the amount of $475,000, which was paid by MPG Office LLC on June 18, 2014.

On July 13, 2016, BPO and the Company entered into a settlement agreement with the insurance carrier under the MPG directors and officers liability insurance policy that was in effect at the time of the merger. On August 17, 2016, the Company received a settlement totaling $1,106,344, which partially reimbursed the Company for amounts paid to settle both the Common Stock Actions and the Preferred Stock Actions. The Company included the settlement in interest and other revenue in its condensed consolidated statements of operations for the three and nine months ended September 30, 2016.

In the Preferred Stock Actions, at a hearing on July 24, 2013, the Maryland State Court denied the plaintiffs’ motion for preliminary injunction seeking to enjoin the tender offer. The plaintiffs filed a second amended complaint on November 22, 2013 that added additional arguments in support of their allegations that the new preferred shares do not have the same rights as the MPG preferred shares. The defendants moved to dismiss the second amended complaint on December 20, 2013, and briefing on the motion concluded on February 28, 2014. At a hearing on June 18, 2014, the Maryland State Court heard oral arguments on the defendants’ motion to dismiss and reserved judgment on the decision. On October 21, 2014, the parties sent a joint letter to the Maryland State Court stating that since the June 18 meeting, the parties have commenced discussions towards a possible resolution of the lawsuit, requesting that the court temporarily refrain from deciding the pending motion to dismiss to facilitate the discussions.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

On March 30, 2015, the plaintiff in the Cohen Action and the defendants entered into a memorandum of understanding setting forth an agreement in principle to settle the Preferred Stock Actions on a class-wide basis and dismiss the case with prejudice in exchange for the payment of $2.25 per share of Series A preferred stock of accumulated and unpaid dividends (the “Dividend Payment”) to holders of record on a record date to be set after final approval of the settlement by the Maryland State Court, plus any attorneys’ fees awarded by the Maryland State Court to the plaintiff’s counsel. The dividend will reduce the amount of accumulated and unpaid dividends on the Series A preferred stock, and the terms of the Series A preferred stock will otherwise remain unchanged.

On August 18, 2015, the Maryland State Court entered an order preliminarily approving the settlement and scheduling a final fairness hearing for October 27, 2015. On September 28, 2015, the plaintiff filed a motion for final certification of the settlement class, final approval of the class action settlement and approval of attorneys’ fees and reimbursement of expenses, seeking a total fee and expense award of $5,250,000. The defendants submitted their opposition to the plaintiff’s fee application on October 13, 2015.

On October 16, 2015, the plaintiff filed a motion seeking discovery related to the valuation of the Dividend Payment in connection with its fee application and served related discovery requests on the defendants. On October 23, 2015, the defendants filed their opposition to that motion, as well as a motion for a protective order precluding discovery. On October 27, 2015, the Maryland State Court held a hearing to decide whether to grant final approval of the settlement and to rule on the parties’ discovery motions. At the hearing, the Court ordered limited discovery to occur prior to ruling on the fee application.

On October 28, 2015, the Maryland State Court issued an order granting final approval of the settlement. The time to appeal the order expired on November 30, 2015 without any appeals having been filed. On December 4, 2015, in accordance with the final approval order and the terms of the parties’ settlement agreement, the board of directors declared a cash dividend of $2.25 per share to holders of record of its Series A preferred stock at the close of business on December 15, 2015. On January 4, 2016, Brookfield DTLA paid the Dividend Payment totaling $21.9 million using cash on hand.

On December 16, 2015, after taking certain limited discovery permitted by the Maryland State Court during the October 27 hearing, the plaintiff served the defendants with its reply memorandum of law in support of its motion for attorneys’ fees and expenses. That same day, the plaintiff requested that the Court permit it to file the reply memorandum and an exhibit thereto under seal given the confidential nature of the information contained therein. On December 17, 2015, the plaintiff provided the Court with plaintiff’s counsel’s time records for the Court’s in camera review. On January 15, 2016, the defendants filed a surreply to the plaintiff’s reply memorandum after obtaining the Court’s permission to do so. After a hearing on April 6, 2016, the Maryland State Court issued an order on April 18, 2016 granting an award of attorneys’ fees and expenses to the plaintiffs totaling $2,212,688. On April 21, 2016, the Company paid the awarded amount to the plaintiffs’ counsel.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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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 the condensed consolidated financial statements and the related notes thereto that appear in Part I, Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q.

Overview and Background

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Liquidity and Capital Resources

General

Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover Brookfield DTLA’s operating, financing and investing activities, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease, or that it will not increase, in the future. If Brookfield DTLA’s operating cash flow 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 the holders of the Series A preferred stock. See “—Potential Uses of Liquidity—Property Operations” below.

Sources and Uses of Liquidity

Brookfield DTLA’s potential liquidity sources and uses are, among others, as follows:



	Sources		Uses
•	Cash on hand;	•	Property operations;
•	Cash generated from operations;	•	Capital expenditures;
•	Contributions from Brookfield DTLA Holdings; and	•	Payments in connection with loans;
•	Proceeds from additional secured or unsecured debt financings.	•	Distributions to Brookfield DTLA Holdings; and
		•	Dividend payment in connection with legal settlement.

Potential Sources of Liquidity—

Cash on Hand—

As of September 30, 2016 and December 31, 2015, Brookfield DTLA had cash and cash equivalents totaling $65.5 million and $53.7 million, respectively.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Cash Generated from Operations—

Brookfield DTLA’s cash generated from operations is primarily dependent upon (1) the occupancy level of its portfolio, (2) the rental rates achieved on its leases, and (3) the collectability of rent and other amounts billed to its tenants. Net cash generated from operations is tied to the level of operating expenses, described below under “—Potential Uses of Liquidity.”

Occupancy levels. The following table presents leasing information for Brookfield DTLA for leases in place as of September 30, 2016:



	Square Feet			Leased % and In-Place Rents
Property	Net Building Rentable	% of Net Rentable		% Leased		Total Annualized Rents (1)		Annualized Rent $/RSF (2)

BOA Plaza	1,405,428	18.67	%	93.8	%	$	31,914,970	$	24.21
Wells Fargo Center–North Tower	1,400,639	18.61	%	82.3	%	29,131,777		25.27
Gas Company Tower	1,345,163	17.87	%	85.4	%	26,644,146		23.20
EY Plaza	1,224,967	16.28	%	87.9	%	25,334,102		23.53
Wells Fargo Center–South Tower	1,124,960	14.95	%	77.7	%	22,199,549		25.39
777 Tower	1,024,835	13.62	%	85.5	%	20,770,226		23.70
	7,525,992	100.00	%	85.7	%	$	155,994,770	$	24.19

__________

(1)

Annualized rent represents the annualized monthly contractual rent under existing leases as of September 30, 2016. This amount reflects total base rent before any rent abatements as of September 30, 2016 and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a fully gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of September 30, 2016 for the twelve months ending September 30, 2017 are approximately $8.0 million, or $1.25 per leased square foot.


(2)	Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of the same date.

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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 for leases in place at September 30, 2016, plus currently available space, for the remainder of 2016, each of the nine calendar years beginning January 1, 2017 and thereafter. 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)

2016	17,401	0.3	%	$	379,332	0.2	%	$	21.80	$	21.80
2017	511,160	7.9	%	12,585,793		8.1	%	24.62		24.86
2018	626,078	9.7	%	12,079,902		7.7	%	19.29		20.00
2019	474,463	7.4	%	13,032,301		8.4	%	27.47		30.55
2020	295,002	4.6	%	7,423,912		4.8	%	25.17		28.41
2021	449,310	7.0	%	11,206,271		7.2	%	24.94		29.04
2022	813,857	12.6	%	19,935,634		12.8	%	24.50		29.74
2023	706,782	11.0	%	17,189,209		11.0	%	24.32		29.76
2024	391,323	6.1	%	9,718,755		6.2	%	24.84		30.98
2025	696,051	10.8	%	18,784,936		12.0	%	26.99		33.07
Thereafter	1,466,077	22.6	%	33,658,725		21.6	%	22.96		34.68
Total expiring leases	6,447,504	100.0	%	$	155,994,770	100.0	%	$	24.19	$	29.90
Currently available	1,078,488
Total rentable square feet	7,525,992

__________

(1)


(2)	Current rent per leased square foot represents current base rent, divided by total leased square feet as of the same date.


(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.

Rental Rates and Leasing Activity. Average asking rental rates in the LACBD were essentially flat during the nine months ended September 30, 2016. Management believes that on average the current in‑place rents are generally close to market in the LACBD.

The following table summarizes leasing activity at Brookfield DTLA for the nine months ended September 30, 2016:



	Leasing Activity		Percentage Leased

Leased square feet as of December 31, 2015	6,443,905		85.6	%
Expirations	(483,764	)	(6.4	)%
New leases	237,075		3.2	%
Renewals	250,288		3.3	%
Leased square feet as of September 30, 2016	6,447,504		85.7	%

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Collectability of rent from our tenants. Brookfield DTLA’s rental income depends on collecting rent from its tenants, and in particular from its major tenants. In the event of tenant defaults, Brookfield DTLA may experience delays in enforcing its rights as landlord and may incur substantial costs in pursuing legal possession of the tenant’s space and recovery of any amounts due from the tenant. This is particularly true in the case of the bankruptcy or insolvency of a major tenant or where the Federal Deposit Insurance Corporation is acting as receiver.

Contributions from Brookfield DTLA Holdings—

Drawdowns under Capital Commitment—

Brookfield DTLA Holdings has made a commitment to contribute up to $260.0 million in cash or property to Brookfield DTLA Fund Properties II LLC (“New OP”), which directly or indirectly owns the Brookfield DTLA properties, for which it will be entitled to receive a preferred return, if and when called by New OP.

On May 16, 2016, the Company received a $6.0 million cash contribution from Brookfield DTLA Holdings under this commitment, which is entitled to receive a preferred return of 9.0%. The Company used these funds for general corporate purposes.

On July 11, 2016 and July 13, 2016, the Company received $30.0 million and $7.0 million, respectively, in cash contributions from Brookfield DTLA Holdings, which are entitled to receive a preferred return of 9.0%. Of the $37.0 million contributed during July 2016, $19.7 million was used to pay for costs associated with the refinancing of Gas Company Tower, with the remainder to be used for general corporate purposes.

As of November 14, 2016, $217.0 million is available to the Company under this commitment for future funding.

Other Contribution—

In addition to amounts received under the commitment described above, on April 21, 2016, Brookfield DTLA received a $2.5 million capital contribution from Brookfield DTLA Holdings, which was used for general corporate purposes.

Proceeds from Additional Secured or Unsecured Debt Financings—

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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 Uses of Liquidity—

The following are the projected uses, and some of the potential uses, of cash in the near term.

Property Operations—

BOA Plaza and EY Plaza have historically generated sufficient cash from operations to fund their operating activities. In the future, should the cash generated by Brookfield DTLA’s properties, including the properties acquired from MPG, not be sufficient to fund their operations, such cash would be provided by Brookfield DTLA Holdings or another source of funds available to the Company or, if such cash were not made available, the Company might not have sufficient cash to fund its operations.

Brookfield DTLA Holdings has made a commitment to make future capital contributions in cash or property to New OP, which directly or indirectly owns the Brookfield DTLA properties, for up to $260.0 million of its future cash needs, for which it would be entitled to receive a preferred return, if and when called by New OP.

During the nine months ended September 30, 2016, the Company received cash contributions totaling $43.0 million from Brookfield DTLA Holdings under the $260.0 million commitment. As of November 14, 2016, $217.0 million is available to the Company under this commitment for future funding.

Capital Expenditures—

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 of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

Brookfield DTLA expects that leasing activities at its properties, including the properties acquired from MPG, will require material amounts of cash for at least several years. Excluding tenant improvements and leasing commissions, Brookfield DTLA projects spending approximately $149 million over the next ten years, with the majority (approximately $123 million) over the next five years. The expected expenditures include, but are not limited to, renovations and physical capital upgrades to Brookfield DTLA’s properties, such as lobby renovations, upgrades to fire alarm, security and HVAC systems, and roof replacements.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Payments in Connection with Loans—

Debt Refinanced—

Debt Maturities—

As Brookfield DTLA’s debt matures, principal payment obligations present significant future cash requirements. Brookfield DTLA currently intends to refinance the existing mortgage loan on Wells Fargo Center–North Tower on or about its scheduled maturity (April 2017) with new debt with a lower leverage ratio. As of September 30, 2016, Brookfield DTLA anticipates the need for additional cash of approximately $125 million to complete the refinancing of the Wells Fargo Center–North Tower mortgage loan.

In addition, Brookfield DTLA currently intends to refinance the existing mortgage loan on Wells Fargo Center–South Tower on or about its scheduled maturity (December 2016) with new debt. As of September 30, 2016, the Company did not meet the criteria specified in the loan agreement to extend this loan on its contractual maturity date. Brookfield DTLA anticipates the need for additional cash of approximately $51 million to complete the refinancing of the Wells Fargo Center–South Tower mortgage loan.

There can be no assurance that either or both of these refinancings can be accomplished or what terms will be available in the market for these type of financings at the time of any refinancing.

Distributions to Brookfield DTLA Holdings—

During the nine months ended September 30, 2016, Brookfield DTLA made a $0.3 million cash distribution to Brookfield DTLA Holdings as a return of investment related to the senior participating preferred interest held by Brookfield DTLA Holdings using cash on hand. During the nine months ended September 30, 2015, the Company made no cash distributions to Brookfield DTLA Holdings.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Dividend Payment in Connection with Legal Settlement—

On January 4, 2016, Brookfield DTLA paid a cash dividend of $2.25 per share to holders of record of its Series A preferred stock at the close of business on December 15, 2015 using cash on hand. This dividend payment reduced the accumulated and unpaid dividends owed on the Series A preferred stock by $21.9 million. The dividend was declared on December 4, 2015 by the board of directors in connection with the settlement on a class-wide basis of the litigation brought in Maryland State Court and styled as In re MPG Office Trust Inc. Preferred Shareholder Litigation, Case No. 24-C-13-004097. See Part II, Item 1. “Legal Proceedings—Merger‑Related Litigation” for additional information regarding the dividend payment.

Indebtedness

As of September 30, 2016, Brookfield DTLA’s debt was comprised of mortgage loans secured by seven properties. A summary of our debt as of September 30, 2016 is as follows (in millions, except percentage and year amounts):



	Principal Amount		Percent of Total Debt		Effective Interest Rate		Weighted Average Term to Maturity

Fixed-rate	$	1,400.0	65.83	%	4.79	%	4 years
Variable-rate swapped to fixed-rate	181.8		8.55	%	3.93	%	4 years
Variable-rate	545.0		25.62	%	2.51	%	1 year
	$	2,126.8	100.00	%	4.14	%	3 years

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Certain information with respect to our indebtedness as of September 30, 2016 is as follows (in thousands, except percentage amounts):



	Interest Rate		Contractual Maturity Date	Principal Amount (1)		Annual Debt Service
Floating-Rate Debt
Variable-Rate Loans:
Wells Fargo Center–South Tower (2)	2.33	%	12/1/2016	$	290,000	$	6,851
777 Tower (3)	2.71	%	11/1/2018	220,000		6,045
Figueroa at 7th (4)	2.77	%	9/10/2017	35,000		982
Total variable-rate loans				545,000		13,878

Variable-Rate Swapped to Fixed-Rate Loan:
EY Plaza (5)	3.93	%	11/27/2020	181,834		7,242
Total floating-rate debt				726,834		21,120

Fixed-Rate Debt
Wells Fargo Center–North Tower	5.70	%	4/6/2017	550,000		31,769
BOA Plaza	4.05	%	9/1/2024	400,000		16,425
Gas Company Tower	3.47	%	8/6/2021	319,000		11,232
Gas Company Tower	6.50	%	8/6/2021	131,000		8,633
Total fixed-rate rate debt				1,400,000		68,059
Total debt				2,126,834		$	89,179

Less: unamortized discounts and debt issuance costs				5,611
Total debt, net				$	2,121,223

__________


(1)	Assuming no payment has been made in advance of its due date.

(2)

This loan bears interest at LIBOR plus 1.80%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 4.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). As of September 30, 2016, the Company did not meet the criteria specified in the loan agreement to extend this loan on its contractual maturity date.


(3)	This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).


(4)	This loan bears interest at LIBOR plus 2.25%. Brookfield DTLA has two options to extend the maturity date of this loan, each for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement).


(5)	This loan bears interest at LIBOR plus 1.75%. As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178%. The effective interest rate of 3.93% includes interest on the swap.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Debt Refinanced

Debt Modification

Debt Maturities

Wells Fargo Center–South Tower—

Brookfield DTLA currently intends to refinance the $290.0 million mortgage loan secured by Wells Fargo Center–South Tower on or about its December 1, 2016 maturity date. We do not have a commitment from the lenders to extend the maturity date of or to refinance this loan. As of September 30, 2016, the Company did not meet the criteria specified in the loan agreement to extend this loan on its contractual maturity date.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Wells Fargo Center–North Tower—

This loan will most likely require a paydown upon extension or refinancing (depending on market conditions), funding of additional reserve amounts, or both. As of September 30, 2016 Brookfield DTLA anticipates the need for additional cash of approximately $125 million to complete the refinancing. We may use cash on hand to make any such payments or cash received as a capital contribution from Brookfield DTLA Holdings. If we are unable or unwilling to use cash on hand or do not use cash contributed by Brookfield DTLA Holdings to make such payments, we may face challenges in repaying, extending or refinancing this loan on favorable terms or at all, and we may be forced to give back the asset to the lenders. There can be no assurance that this refinancing can be accomplished or what terms will be available in the market for this type of financing at the time of any refinancing.

Non-Recourse Carve Out Guarantees

Debt Reporting

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Results of Operations

Comparison of the Three Months Ended September 30, 2016 to September 30, 2015

Condensed Consolidated Statements of Operations Information

(In millions, except percentage amounts)



	For the Three Months Ended						Increase/ (Decrease)			% Change
	Sept. 30, 2016			Sept. 30, 2015			Increase/ (Decrease)			% Change
Revenue:
Rental income	$	40.4		$	41.2		$	(0.8	)	(2	)%
Tenant reimbursements	23.4			21.6			1.8			8	%
Parking	9.3			8.7			0.6			7	%
Interest and other	4.3			3.1			1.2			39	%
Total revenue	77.4			74.6			2.8			4	%

Expenses:
Rental property operating and maintenance	24.4			24.9			(0.5		)	(2	)%
Real estate taxes	9.6			6.9			2.7			39	%
Parking	2.2			2.1			0.1			5	%
Other expense	1.4			0.4			1.0			247	%
Depreciation and amortization	25.7			25.6			0.1			—	%
Interest	23.5			24.0			(0.5		)	(2	)%
Total expenses	86.8			83.9			2.9			3	%
Net loss	$	(9.4	)	$	(9.3	)	$	(0.1	)

Tenant Reimbursements Revenue

Tenant reimbursements revenue increased $1.8 million, or 8%, for the three months ended September 30, 2016 as compared to the three months ended September 30, 2015, primarily as a result of an increase in real estate taxes passed through to tenants.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Interest and Other Revenue

Interest and other revenue increased $1.2 million, or 39%, for the three months ended September 30, 2016 as compared to the three months ended September 30, 2015, mainly as a result of a $1.1 million settlement received from the insurance carrier under the MPG directors and officers liability insurance policy that partially reimbursed the Company for amounts paid to settle the merger litigation with the MPG common and preferred stockholders.

Real Estate Taxes

Real estate taxes increased $2.7 million, or 39%, for the three months ended September 30, 2016 as compared to the three months ended September 30, 2015 due to accrued property tax assessment reversals that were recorded during the third quarter of 2015 related to the MPG properties for which there was no comparable activity during 2016.

Other Expense

Other expense increased $1.0 million for the three months ended September 30, 2016 as compared to the three months ended September 30, 2015, mainly as a result of increased marketing, insurance and legal expenses at our 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, 2016 to September 30, 2015

Condensed Consolidated Statements of Operations Information

(In millions, except percentage amounts)



	For the Nine Months Ended						Increase/ (Decrease)			% Change
	Sept. 30, 2016			Sept. 30, 2015			Increase/ (Decrease)			% Change
Revenue:
Rental income	$	124.1		$	119.2		$	4.9		4	%
Tenant reimbursements	69.3			66.8			2.5			4	%
Parking	27.8			26.2			1.6			6	%
Interest and other	10.0			13.3			(3.3		)	(25	)%
Total revenue	231.2			225.5			5.7			3	%

Expenses:
Rental property operating and maintenance	71.5			71.1			0.4			1	%
Real estate taxes	28.4			26.4			2.0			8	%
Parking	6.3			5.9			0.4			7	%
Other expense	3.1			1.8			1.3			73	%
Depreciation and amortization	78.0			74.2			3.8			5	%
Interest	71.5			71.2			0.3			—	%
Total expenses	258.8			250.6			8.2			3	%
Net loss	$	(27.6	)	$	(25.1	)	$	(2.5	)

Rental Income

Rental income increased $4.9 million, or 4%, for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015, primarily as a result of income earned from tenants that executed leases in prior years but began occupancy in the current year.

Tenant Reimbursements Revenue

Tenant reimbursements revenue increased $2.5 million, or 4%, for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015, primarily as a result of an increase in real estate taxes passed through to tenants.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Parking Revenue

Parking revenue increased $1.6 million, or 6%, for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015 due to increased usage of our parking facilities.

Interest and Other Revenue

Interest and other revenue decreased $3.3 million, or 25%, for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015, mainly as a result of a $3.5 million recovery received during 2015 related to a property disposed of by MPG prior to the merger for which there was no comparable activity during 2016.

Real Estate Taxes

Real estate taxes increased $2.0 million, or 8%, for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015 due to accrued property tax assessment reversals that were recorded during the third quarter of 2015 related to the MPG properties for which there was no comparable activity during 2016.

Other Expense

Other expense increased $1.3 million, or 73%, for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015, mainly as a result of increased marketing, insurance and legal expenses at our properties.

Depreciation and Amortization Expense

Depreciation and amortization expense increased $3.8 million, or 5%, for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015, largely as a result of an acceleration of depreciation and amortization expense related to lease termination activity.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Cash Flow

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 Brookfield DTLA’s operating, financing and investing activities, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease, or that it will not increase, in the future. If Brookfield DTLA’s operating cash flow 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. See “Liquidity and Capital Resources—Potential Uses of Liquidity—Property Operations” above.

The following summary discussion of Brookfield DTLA’s cash flow is based on the condensed 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 flow for the periods presented below.



	For the Nine Months Ended						Increase/ (Decrease)
	September 30, 2016			September 30, 2015			Increase/ (Decrease)
	(In thousands)
Net cash provided by operating activities	$	29,199		$	32,749		$	(3,550	)
Net cash used in investing activities	(47,021		)	(48,948		)	(1,927		)
Net cash provided by (used in) financing activities	29,590			(43		)	29,633

Operating Activities

Brookfield DTLA’s cash flow from operating activities is primarily dependent upon (1) the occupancy level of its portfolio, (2) the rental rates achieved on its leases, and (3) the collectability of rent and other amounts billed to tenants and is also tied to the level of operating expenses. Net cash provided by operating activities during the nine months ended September 30, 2016 totaled $29.2 million, compared to net cash provided by operating activities of $32.7 million during the nine months ended September 30, 2015. The $3.6 million decrease is primarily related to changes in other working capital amounts.

Investing Activities

Brookfield DTLA’s cash flow from investing activities is generally impacted by the amount of capital expenditures for its properties. Net cash used in investing activities totaled $47.0 million during the nine months ended September 30, 2016, compared to net cash used in investing activities of $48.9 million during the nine months ended September 30, 2015, as a result of a reduction of restricted cash, which was partially offset by cash received from the sale of land held for investment during 2015 for which there was no comparable activity during 2016.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Financing Activities

Brookfield DTLA’s cash flow from financing activities is generally impacted by our loan activity, less any dividends and distributions paid to stockholders and distributions to affiliated companies, if any. Net cash provided by financing activities was $29.6 million during the nine months ended September 30, 2016, comprised primarily of cash received from the issuance of the Series B preferred interest, a contribution from Brookfield DTLA Holdings and proceeds from the modification of the 777 Tower mortgage loan, which was partially offset by the payment of dividends on the Series A preferred stock and payments made in connection with the refinancing of the Gas Company Tower mortgage loan.

Off-Balance Sheet Arrangements

Brookfield DTLA did not have any off-balance sheet arrangements as of September 30, 2016 and December 31, 2015, respectively.

Contractual Obligations

The following table provides information with respect to Brookfield DTLA’s commitments as of September 30, 2016, including any guaranteed or minimum commitments under contractual obligations (in thousands):



	2016		2017		2018		2019		2020		Thereafter		Total

Principal payments on mortgage loans	$	290,976	$	589,026	$	224,232	$	4,449	$	168,151	$	850,000	$	2,126,834
Interest payments –
Fixed-rate debt (1)	17,155		44,646		36,290		36,290		36,390		72,164		242,935
Variable-rate swapped to fixed-rate debt	1,802		7,130		6,982		6,785		6,363		—		29,062
Variable-rate debt (2)	2,936		6,726		5,051		—		—		—		14,713
Tenant-related commitments (3)	35,132		23,230		11,385		843		491		5,344		76,425
	$	348,001	$	670,758	$	283,940	$	48,367	$	211,395	$	927,508	$	2,489,969

__________


(1)	Interest payments on fixed-rate debt are calculated based on contractual interest rates and scheduled maturity dates.


(2)	Interest payments on variable-rate debt are calculated based on scheduled maturity dates and the one-month LIBOR rate in place on the debt as of September 30, 2016 plus the contractual spread per the loan agreements.


(3)	Tenant-related commitments include tenant improvements and leasing commissions and are based on executed leases as of September 30, 2016.

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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

Management Agreements

A summary of costs incurred by Brookfield DTLA under these arrangements is as follows (in thousands):



	For the Three Months Ended				For the Nine Months Ended
	Sept. 30, 2016		Sept. 30, 2015		Sept. 30, 2016		Sept. 30, 2015

Property management fee expense	$	1,955	$	1,843	$	5,864	$	5,679
Asset management fee expense	1,583		1,578		4,748		4,645
General, administrative and reimbursable expenses	615		664		1,857		1,950
Leasing and construction management fees	410		2,436		1,321		5,964

Insurance Agreements

Insurance premiums for Brookfield DTLA are paid by an affiliate of BPO. Brookfield DTLA reimburses this BPO affiliate for the actual cost of such premiums.

A summary of costs incurred by Brookfield DTLA under this arrangement is as follows (in thousands):



	For the Three Months Ended				For the Nine Months Ended
	Sept. 30, 2016		Sept. 30, 2015		Sept. 30, 2016		Sept. 30, 2015

Insurance expense	$	1,950	$	2,172	$	5,873	$	6,517

Litigation

See Part II, Item 1. “Legal Proceedings.”

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Critical Accounting Policies

Please refer to Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 28, 2016 for a discussion of our critical accounting policies for “Business Combinations,” “Consolidation,” “Impairment Evaluation,” “Revenue Recognition,” and “Allowance for Doubtful Accounts.” There have been no changes to these policies during the three months ended September 30, 2016.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluating the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, that requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, as opposed to being presented as assets. Brookfield DTLA elected to early adopt ASU 2015-03 effective as of December 31, 2015. There was no effect on our consolidated statements of operations for the three and nine months ended September 30, 2015 as a result of adopting this pronouncement.

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BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

See Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Brookfield DTLA’s Annual Report on Form 10-K filed with the SEC on March 28, 2016 for a discussion regarding our exposure to market risk. Our exposure to market risk has not changed materially since year end 2015.


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

As required by SEC Rule 13a-15(b), Brookfield DTLA carried out an evaluation, under the supervision and with the participation of its management, including its principal executive officer and its principal financial officer, of the effectiveness of the design and operation of Brookfield DTLA’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, Paul L. Schulman, our principal executive officer, and Edward F. Beisner, our principal financial officer, concluded that these disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2016.

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 fiscal quarter ended September 30, 2016 that have materially affected, or that are reasonable likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION


Item 1.	Legal Proceedings.

General

Merger-Related Litigation

In each of the Common Stock Actions, the plaintiffs allege, among other things, that MPG Office Trust, Inc.’s board of directors breached their fiduciary duties in connection with the merger by failing to maximize the value of MPG Office Trust, Inc. and ignoring or failing to protect against conflicts of interest, and that the relevant Brookfield Parties named as defendants aided and abetted those breaches of fiduciary duty. The Kim Action further alleges that MPG Office, L.P. also aided and abetted the breaches of fiduciary duty by MPG Office Trust, Inc.’s board of directors, and the Dell’Osso Action further alleges that MPG Office Trust, Inc. and MPG Office, L.P. aided and abetted the breaches of fiduciary duty by MPG Office Trust, Inc.’s board of directors. On June 4, 2013, the Kim and Perkins plaintiffs filed identical, amended complaints in the Circuit Court for Baltimore City, Maryland. On June 5, 2013, the Masih plaintiffs also filed an amended complaint in the Superior Court of the State of California in Los Angeles County. The three amended complaints, as well as the Dell’Osso Action complaint, allege that the preliminary proxy statement filed by MPG Office Trust, Inc. with the U.S. Securities and Exchange Commission (the “SEC”) on May 21, 2013 is false and/or misleading because it fails to include certain details of the process leading up to the merger and fails to provide adequate information concerning MPG Office Trust, Inc.’s financial advisors.

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Item 1A.	Risk Factors.

Factors That May Affect Future Results

(Cautionary Statement Under the Private Securities Litigation Reform Act of 1995)

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 U.S. Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (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 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 generally incident to the ownership of real property, including the ability to retain tenants and rent space upon lease expirations, the financial condition and solvency of our tenants, the relative illiquidity of real estate and changes in real estate taxes, regulatory compliance costs and other operating expenses;


•	Risks associated with the Downtown Los Angeles market, which is characterized by challenging leasing conditions, including limited numbers of new tenants coming into the market and the downsizing of large tenants in the market such as accounting firms, banks and law firms;


•	Risks related to increased competition for tenants in the Downtown Los Angeles market, including aggressive attempts by competing landlords to fill large vacancies by providing tenants with lower rental rates, increasing amounts of free rent and providing larger allowances for tenant improvements;


•	The impact or unanticipated impact of general economic, political and market factors in the regions in which Brookfield DTLA or any of its subsidiaries does business;


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

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


•	Uncertainties of real estate development or redevelopment;


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


•	Risks relating to Brookfield DTLA’s insurance coverage;


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


•	Potential environmental liabilities;


•	Dependence on management personnel;


•	The ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom;


•	Operational and reputational risks;


•	Catastrophic events, such as earthquakes and hurricanes; and


•	Other risks and factors relating to the transactions contemplated by the Merger Agreement including, but not limited to:


•	Increases in operating costs resulting from expenses related to the MPG acquisition;


•	Failure to realize the anticipated benefits and synergies of the transactions contemplated by the Merger Agreement, including as a result of an increase in costs associated with integration or difficulty in integrating the businesses of Brookfield DTLA, BOA Plaza and EY Plaza and their respective subsidiaries, and MPG;


•	Risks resulting from any lawsuits that may arise out of or have arisen as a result of the MPG acquisition or other transactions contemplated by the Merger Agreement; and


•	The impact of legislative, regulatory and competitive changes and other risk factors relating to the real estate industry, as detailed from time to time in the reports of Brookfield DTLA and BPO filed with the SEC.

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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Additional material risk factors are discussed in other sections of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on March 28, 2016. Those risks are also relevant to our performance and financial condition. Moreover, we operate in a highly competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.


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, 2016, the cumulative amount of unpaid dividends totaled $126.5 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 14, 2016 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer dated November 14, 2016 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Principal Executive Officer and Principal Financial Officer dated November 14, 2016 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

__________



*	Filed herewith.
**	Furnished herewith.


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

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SIGNATURES

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



Date:	As of November 14, 2016



	BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC.
	Registrant

	By:	/s/ PAUL L. SCHULMAN
		Paul L. Schulman
		President and Chief Operating Officer,
		U.S. Commercial Operations
		(Principal executive officer)

	By:	/s/ EDWARD F. BEISNER
		Edward F. Beisner
		Chief Financial Officer
		(Principal financial officer)