Morningstar DBRS Confirms Credit Ratings of Brookfield Property Partners L.P., Brookfield Property Finance ULC, and Brookfield Office Properties Inc. at BBB (low)/Pfd-3 (low), Stable

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and Senior Unsecured Debt credit rating of Brookfield Property Partners L.P. (BPP) at BBB (low). Morningstar DBRS also confirmed the credit ratings on Brookfield Property Finance ULC's Senior Unsecured Notes and Brookfield Office Properties Inc.'s Senior Unsecured Notes at BBB (low), and Brookfield Office Properties Inc.'s Cumulative Redeemable Preferred Shares, Class AAA at Pfd-3 (low). All trends are Stable. The credit ratings are based on the credit risk profile of the consolidated entity, including BPP and its subsidiaries (collectively, BPY).

KEY CREDIT RATING CONSIDERATIONS
The Stable trends reflect the progress BPY has made in deleveraging over the last 12 months (LTM) ended December 31, 2024, as reflected by its debt-to-EBITDA metric at 15.8 times (x) versus 16.9x the prior year. BPY has been able to deleverage by way of asset dispositions and continued support from its parent, Brookfield Corporation (BN; rated "A," Stable by Morningstar DBRS). Recent dispositions include outright sales and partial sales across various asset classes, as well as BPY's reduced interest in one of its opportunistic real estate funds in its LP Investments segment, Brookfield Strategic Real Estate Partners (BSREP) IV, by way of a partial sale of its interest to a related entity and subsequent deconsolidation because of loss of control. BPY's residual non-voting interest in BSREP IV is now accounted for as a financial asset. BN continues to demonstrate parental support to BPY through repaying Senior Unsecured Notes and preferred shares (receiving partial equity treatment by Morningstar DBRS) as they mature. The Stable trends also consider (1) BPY's continued supportive operating environment as its office and retail assets generate modest same property net operating income growth and as transaction activity accelerates, allowing continued capital recycling and deleveraging and (2) expected lower interest rates on variable rate debt and refinancings. Current macroeconomic uncertainty (e.g., trade war, recession risk, etc.) is not expected to materially impact BPY's operations at this time because of BPY's portfolio of predominantly core office and retails assets in the U.S., and the prospect of declining interest rates as a mitigating factor.

CREDIT RATING DRIVERS
Morningstar DBRS would consider a negative credit rating action if Morningstar DBRS were to change its views on the level and strength of implicit support provided by BN, or should BPY's total debt-to-EBITDA deteriorate to more than 16.0x, or if BPY's EBITDA interest coverage deteriorates from current levels (0.88x for the LTM ended December 31, 2024), on a sustained basis, all else equal. On the other hand, Morningstar DBRS would consider a positive credit rating action should Morningstar DBRS' outlook for BPY's total debt-to-EBITDA improve to 13.0x or better, all else equal.

FINANCIAL OUTLOOK
Morningstar DBRS has revised its financial risk assessment of BPY modestly higher, based on updated expectations for BPY's primary credit metrics. In the near to medium term, Morningstar DBRS expects that BPY will continue to demonstrate an improving trend in its total debt-to-EBITDA metric toward the sub-15x-range (from 15.8x at LTM ended December 31, 2024), and that BPY's EBITDA interest coverage metric will start an improving trend to higher than the 1.00x-range. These improving metrics will be largely driven by continued disposition activity, associated debt reduction, support from BN in the interim, and the benefit of lower interest rates.

CREDIT RATING RATIONALE
The credit ratings continue to be supported by (1) Morningstar DBRS' view of implicit support from BN, as detailed above; (2) BPY's market position as a pre-eminent global real estate company; (3) high-quality assets, particularly BPY's Office and Retail segments, with long-term leases to large, recognizable investment-grade-rated tenants; and (4) superior diversification, in particular by property, tenant, and geography. The credit ratings continue to be constrained by BPY's weak financial risk assessment as reflected by both its highly leveraged balance sheet; a riskier retail leasing profile in terms of lease maturities and counterparty risk relative to BPY's Office segment; a higher-risk opportunistic LP Investment segment composed primarily of office, retail, industrial, multifamily, and hospitality assets, as well as alternatives; and Morningstar DBRS' assessment of the unmitigated structural subordination of the Senior Unsecured Debt at the BPP level relative to a material amount of debt at its operating subsidiaries.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of BRA Factors
In the analysis of BPY, the BRA factors were considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of BPY, the FRA factors were considered in the order of importance contemplated in the methodology.

(C) Weighting of the BRA and the FRA
In the analysis of BPY, the BRA carries greater weight than the FRA.

Notes:
All figures are in U.S. dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Entities in the Real Estate Industry (April 15, 2024) https://dbrs.morningstar.com/research/431170

Morningstar DBRS credit ratings may use of one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

This are solicited credit ratings.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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