INVESTMENT PROPERTIES

6 Months Ended

Jun. 30, 2021

The following table presents the change in the fair value of the company’s investment properties:


AS AT AND FOR THE SIX MONTHS ENDED JUN. 30, 2021 (MILLIONS)
Fair value, beginning of period	$	96,782
Additions	5,998

Dispositions1	(3,049)
Fair value changes	1,707
Foreign currency translation and other	(428)
Fair value, end of period2	$	101,010

1.Includes amounts reclassified to held for sale.

2.Includes $3.7 billion of ROU investment properties (December 31, 2020 – $3.3 billion).

Investment properties include the company’s office, retail, multifamily, and other properties as well as highest and best-use land within the company’s sustainable resources operations. Additions of $6.0 billion primarily relates to the purchases of investment properties and enhancement of existing assets during the period.

The following table presents our investment properties measured at fair value:


AS AT JUN. 30, 2021 (MILLIONS)
Core office
United States	$	15,326
Canada	4,907
Australia	2,800
Europe	2,873
Brazil	380
Core retail	20,037
LP investments and other
LP investments office	9,095
LP investments retail	2,238

Mixed-use	3,042
Multifamily	2,018
Triple net lease	3,704

Student housing	3,225
Manufactured housing	3,453
Directly held real estate properties	25,941
Other investment properties	1,971
	$	101,010

Significant unobservable inputs (Level 3) are utilized when determining the fair value of investment properties. The significant Level 3 inputs include:

Valuation Technique

Significant Unobservable Inputs

Relationship of Unobservable Inputs to Fair Value

Mitigating Factors

Discounted cash flow analysis1

• Future cash flows – primarily driven by net operating income

• Increases (decreases) in future cash flows increase (decrease) fair value

• Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from cash flows

• Discount rate

• Increases (decreases) in discount rate decrease (increase) fair value

• Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from discount rates

• Terminal capitalization rate

• Increases (decreases) in terminal capitalization rate decrease (increase) fair value

• Increases (decreases) in terminal capitalization rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from terminal capitalization rates

• Investment horizon

• Increases (decreases) in the investment horizon decrease (increase) fair value

• Increases (decreases) in the investment horizon tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

1.Certain investment properties are valued using the direct capitalization method instead of a discounted cash flow model. Under the direct capitalization method, a capitalization rate is applied to estimated current year cash flows.

The company’s investment properties are diversified by asset type, asset class, geography and market. Therefore, there may be mitigating factors in addition to those noted above such as changes to assumptions that vary in direction and magnitude across different geographies and markets.

The following table summarizes the key valuation metrics of the company’s investment properties:



AS AT JUN. 30, 2021	Discount Rate		Terminal Capitalization Rate		Investment Horizon (years)
Core office
United States	6.9	%	5.6	%	12
Canada	5.9	%	5.2	%	10
Australia	6.6	%	5.7	%	10
Europe	4.6	%	3.8	%	10
Brazil	7.6	%	7.0	%	10
Core retail	7.0	%	5.3	%	10
LP investments and other
LP investments office	9.6	%	7.1	%	7
LP investments retail	8.6	%	7.0	%	10
Mixed-use	7.2	%	5.1	%	10

Multifamily1	4.7	%	n/a		n/a
Triple net lease1	6.2	%	n/a		n/a
Student housing1	4.9	%	n/a		n/a
Manufactured housing1	4.6	%	n/a		n/a
Directly held real estate properties2	7.9	%	6.2	%	9
Other investment properties1,3	5.0 – 8.7%		n/a		n/a

1.Multifamily, triple net lease, student housing, manufactured housing and other investment properties are valued using the direct capitalization method. The rates presented as the discount rate represent the overall implied capitalization rate. The terminal capitalization rate and the investment horizon are not applicable.

2.We use either the discounted cash flow or the direct capitalization method when valuing our directly held real estate properties. The rates presented as the discount rate represent the overall implied capitalization rates for investment properties that are valued using the direct capitalization approach.