FORM 20-F/A Brookfield Property Partners L.P. - Brookfield Asset ...

NOTE 5: INVESTMENT PROPERTIES(US$ Millions)OperatingpropertiesDec. 31, 2011 Dec. 31, 2010DevelopmentOperating Developmentproperties Total properties propertiesTotalBalance at beginning of year $ 19,395 $ 1,565 $ 20,960 $ 17,073 $ 1,297 $ 18,370Additions (1) 6,424 158 6,582 1,266 124 1,390Dispositions (2) (1,661) - (1,661) (704) - (704)Reclassification of development to operating 166 (166) - - - -Capitalized construction costs 293 251 544 135 135 270Capitalized interest costs 37 90 127 - 63 63Fair value gains (losses) (3) 1,374 (15) 1,359 895 (97) 798Foreign currency translation and other changes (298) (19) (317) 730 43 773Balance at end of year $ 25,730 $ 1,864 $ 27,594 $ 19,395 $ 1,565 $ 20,960(1) Additions include property acquisitions and investment, capital expenditures and initial direct leasing costs.(2) Dispositions represent fair value at time of sale, or the selling price.(3) Fair value gains (losses) includes realized gains of $365 million (2010 - $250 million).The Business determines the fair value of each operating property based upon, among other things, rental income fromcurrent leases and assumptions about rental income from future leases reflecting market conditions at the applicablebalance sheet dates, less future cash outflows in respect of such leases. Fair values are primarily determined bydiscounting the expected future cashflows, generally over a term of 10 years including a terminal value based on theapplication of a capitalization rate to estimated year 11 cashflows. Certain operating properties are valued using a directcapitalization approach whereby a capitalization rate is applied to estimated current year cashflows. Developmentsproperties under active development are also measured using a discounted cashflow model, net of costs to complete, asof the balance sheet date. Development sites in the planning phases are measured using comparable market values forsimilar assets. In accordance with its policy, the Business measures its operating properties and development propertiesusing valuations prepared by management. In connection with determining these values, the Business obtainsvaluations of selected operating properties and development properties prepared by qualified external valuationprofessionals and considers the results of such valuations in arriving at its own conclusions on values. Investmentproperties with an aggregate fair value of $11,910 million were valued by qualified external valuation professionalsduring the year ended December 31, 2011 (2010 - $6,806 million).The key valuation metrics for operating properties, including properties accounted for under the equity method,are set out in the following tables:(US$ Millions)Valuation MethodDiscountRateDecember 31, 2011 December 31, 2010Terminal InvestmentTerminalCapitalization Horizon Discount CapitalizationRate (yrs) Rate RateInvestmentHorizon(yrs)OfficeUnited States DCF 7.5% 6.3% 12 8.1% 6.7% 10Canada DCF 6.7% 6.2% 11 6.9% 6.3% 11Australia DCF 9.1% 7.5% 10 9.2% 7.7% 10Europe Direct Capitalization 6.1% (1) n/a n/a 6.5% (1) n/a n/aRetailUnited States Direct Capitalization 6.0% (1) n/a n/a 6.7% (1) n/a n/aAustralia DCF 9.8% 8.9% 10 9.8% 9.0% 10Brazil DCF 9.6% 7.3% 10 10.0% 7.3% 10Europe Direct Capitalization - - - 8.1% (1) n/a n/aMulti-Family and IndustrialUnited States DCF 8.6% 8.3% 10 8.4% 6.6% 10Canada DCF 8.7% 7.7% 10 9.0% 7.6% 10Opportunistic InvestmentsUnited States DCF 8.2% 8.1% 10 8.7% 8.1% 10(1) The valuation method used is the direct capitalization method. The amounts presented as the discount rate relate to the impliedcapitalization rate. The terminal capitalization rate and investment horizon are not applicable.F-19