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FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2022

a)Derivatives and hedging activities

The partnership and its operating entities use derivative and non-derivative instruments to manage financial risks, including interest rate, commodity, equity price and foreign exchange risks. The use of derivative contracts is governed by documented risk management policies and approved limits. The partnership does not use derivatives for speculative purposes. The partnership and its operating entities use the following derivative instruments to manage these risks:

•foreign currency forward contracts to hedge exposures to Canadian Dollar, Australian Dollar, British Pound, Euro, Chinese Yuan, Brazilian Real, Indian Rupee and South Korean Won denominated net investments in foreign subsidiaries and foreign currency denominated financial assets;

•interest rate swaps to manage interest rate risk associated with planned refinancings and existing variable rate debt;

•interest rate caps to hedge interest rate risk on certain variable rate debt; and

•cross currency swaps to manage interest rate and foreign currency exchange rates on existing variable rate debt.

The partnership also designates Canadian Dollar financial liabilities of certain of its operating entities as hedges of its net investments in its Canadian operations.

Interest Rate Hedging

The following table provides the partnership’s outstanding derivatives that are designated as cash flow hedges of variability in interest rates associated with forecasted fixed rate financings and existing variable rate debt as of December 31, 2022 and 2021:


(US$ Millions)	Hedging item	Notional		Rates	Maturity dates	Fair value
Dec. 31, 2022	Interest rate caps of US$ LIBOR debt	$	2,042	2.5% - 5.0%	May 2023 - Apr. 2027	$	20
	Interest rate caps of US$ SOFR debt	3,989		1.0% - 6.0%	Aug. 2023 - Nov. 2024	74
	Interest rate swaps of US$ SOFR debt	2,500		3.7%	Dec. 2027	3
	Interest rate caps of £ SONIA debt	1,024		1.0% - 2.5%	Jul. 2024 - Mar. 2025	41
	Interest rate swaps of £ SONIA debt	804		2.7%	Jan. 2023 - Jul. 2024	20
	Interest rate caps of € EURIBOR debt	96		1.3%	Apr. 2023	—
	Interest rate caps of C$ LIBOR debt	177		4.0%	Oct. 2024	2
	Interest rate swaps of AUD BBSW/BBSY debt	132		5.3% - 5.8%	Apr. 2024	—

Dec. 31, 2021	Interest rate caps of US$ LIBOR debt	$	9,590	2.5% - 5.0%	Jan. 2022 - Jun. 2024	$	—
	Interest rate swaps of US$ LIBOR debt	2,130		1.0% - 2.6%	Nov. 2022 - Feb. 2024	(50)
	Interest rate caps of £ LIBOR debt	2,301		1.0% - 2.5%	Jan. 2022 - Dec. 2023	—
	Interest rate caps of £ SONIA debt	974		2.0%	Oct. 2022 - Mar. 2025	5
	Interest rate caps of € EURIBOR debt	102		1.3%	Apr. 2022	—
	Interest rate caps of C$ LIBOR debt	240		2.0%	Oct. 2022	—
	Interest rate swaps of AUD BBSW/BBSY debt	422		0.8% - 1.6%	Apr. 2023 - Apr. 2024	—

For the year ended December 31, 2022, the amount of hedge ineffectiveness recorded in earnings in connection with the partnership’s interest rate hedging activities was nil (December 31, 2021 - nil).

Foreign Currency Hedging

The following table presents the partnership’s outstanding derivatives that are designated as net investment hedges in foreign subsidiaries or cash flow hedges as of December 31, 2022 and 2021:

(US$ Millions)

Hedging item

Net Notional

Rates

Maturity dates

Fair value

Dec. 31, 2022

Net investment hedges

€

105

€0.91/$ - €1.02/$

Feb. 2023 - Dec. 2025

(7)

Net investment hedges

1,319

£0.76/$ - £0.93/$

Jan. 2023 - Jul. 2023

(243)

Net investment hedges

—

A$1.49/$ - A$1.55/$

May. 2023

(1)

Net investment hedges

C¥

2,703

C¥6.59/$ - C¥6.99/$

Jun. 2023 - Mar. 2025

(9)

Net investment hedges

908

R$6.24/$ - R$7.00/$

May. 2023 - Dec. 2024

(22)

Net investment hedges

₩

820,473

₩1,283.60/$ - ₩1,410.00/$

Jan. 2023 - Nov. 2024

(42)

Net investment hedges

84,251

Rs79.40/$ - Rs89.84/$

Mar. 2023 - Jul. 2024

(5)

Net investment hedges

374

£0.86/€

Jul. 2023

(16)

Cross currency swaps of C$ LIBOR debt

2,500

C$1.25/$ - C$1.38/$

Jul. 2023 - Jan. 2027

(45)

Dec. 31, 2021

Net investment hedges

€

389

€0.81/$ - €0.88/$

Jul. 2022 - Sep. 2024

(2)

Net investment hedges

4,395

£0.71/$ - £0.76/$

Jun. 2022 - Mar. 2023

(89)

Net investment hedges

974

A$1.35/$ - A$1.41/$

Mar. 2022 - Mar. 2023

(14)

Net investment hedges

C¥

1,596

C¥6.68/$ - C¥6.99/$

Jun. 2022 - Jun. 2023

(7)

Net investment hedges

2,546

R$5.87/$ - R$6.54/$

Sep. 2022 - Oct. 2022

(5)

Net investment hedges

₩

720,095

₩1,165.75/$ - ₩1,197.60/$

Jun. 2022 - Jun. 2023

Net investment hedges

75,690

Rs76.35/$ - Rs87.13/$

Jan. 2022 - Jul. 2024

(27)

Net investment hedges

£0.91/€

Apr. 2022

Cross currency swaps of C$ LIBOR debt

2,500

C$1.25/$ - C$1.38/$

Jul. 2023 - Jan. 2027

For the years ended December 31, 2022 and 2021, the amount of hedge ineffectiveness recorded in earnings in connection with the partnership’s foreign currency hedging activities was not significant.

Other Derivatives

The following tables provide detail of the partnership’s other derivatives, not designated as hedges for accounting purposes, that have been entered into to manage financial risks as of December 31, 2022 and 2021:


(US$ millions)	Derivative type	Notional		Rates	Maturity dates	Fair value
Dec. 31, 2022	Interest rate caps	$	7,622	2.0% - 6.0%	Jan. 2023 - Nov. 2032	$	30
	Interest rate swaps on forecasted fixed rate debt	335		3.6% - 5.3%	Jun. 2023	(21)


Dec. 31, 2021	Interest rate caps	$	5,388	3.0% - 5.0%	Jan. 2022 - Feb. 2027	$	—
	Interest rate swaps on forecasted fixed rate debt	1,285		2.7% - 6.4%	Jun. 2022 - Jun. 2033	(253)
	Interest rate swaps of US$ debt	1,696		0.8% - 5.1%	Nov. 2022 - Mar. 2024	(8)

The partnership recognized fair value losses of approximately nil (December 31, 2021 - losses of $31 million) related to the settlement of certain forward starting interest rate swaps that have not been designated as hedges.

b)Measurement and classification of financial instruments

Fair value is the amount that willing parties would accept to exchange a financial instrument based on the current market for instruments with the same risk, principal and remaining maturity. The fair value of interest bearing financial assets and liabilities is determined by discounting the contractual principal and interest payments at estimated current market interest rates for the instrument. Current market rates are determined by reference to current benchmark rates for a similar term and current credit spreads for debt with similar terms and risk.

Classification and Measurement

The following table outlines the classification and measurement basis, and related fair value for disclosures, of the financial assets and liabilities in the consolidated financial statements:


		Dec. 31, 2022				Dec. 31, 2021
(US$ Millions)	Classification and measurement basis	Carrying value		Fair value		Carrying value		Fair value
Financial assets

Loans and notes receivable	Amortized cost	686		686		225		225
Other non-current assets
Securities - FVTPL	FVTPL	2,523		2,523		2,200		2,200
Derivative assets	FVTPL	170		170		111		111
Accounts receivable	Amortized cost	464		464		2		2
Securities - FVTOCI	FVTOCI	69		69		108		108
Restricted cash	Amortized cost	584		584		356		356
Current assets
Securities - FVTOCI	FVTOCI	36		36		—		—
Derivative assets	FVTPL	124		124		33		33
Accounts receivable(1)	Amortized cost	787		787		1,128		1,128
Restricted cash	Amortized cost	342		342		331		331
Cash and cash equivalents	Amortized cost	4,020		4,020		2,576		2,576
Total financial assets		$	9,805	$	9,805	$	7,070	$	7,070
Financial liabilities
Debt obligations(2)	Amortized cost	$	58,562	$	57,790	$	55,327	$	55,474
Capital securities	Amortized cost	2,256		2,256		2,226		2,226
Capital securities - fund subsidiaries	FVTPL	577		577		859		859
Other non-current liabilities
Loan payable	FVTPL	171		171		1		1
Accounts payable	Amortized cost	824		824		499		499
Derivative liabilities	FVTPL	371		371		277		277
Accounts payable and other liabilities
Accounts payable and other(3)	Amortized cost	2,852		2,852		2,097		2,097
Loans and notes payable	Amortized cost	226		226		899		899
Derivative liabilities	FVTPL	167		167		221		221
Total financial liabilities		$	66,006	$	65,234	$	62,406	$	62,553

(1)Includes other receivables associated with assets classified as held for sale on the consolidated balance sheets in the amounts of nil and $276 million as of December 31, 2022 and December 31, 2021, respectively.

(2)Includes debt obligations associated with assets classified as held for sale on the consolidated balance sheets in the amount of nil and $3,006 million as of December 31, 2022 and December 31, 2021, respectively.

(3)Includes accounts payable and other liabilities associated with assets classified as held for sale on the consolidated balance sheets in the amount of nil and $76 million as of December 31, 2022 and December 31, 2021, respectively.

The following table outlines financial assets and liabilities measured at fair value in the financial statements and the level of the inputs used to determine those fair values in the context of the hierarchy as defined above:


	Dec. 31, 2022								Dec. 31, 2021
(US$ Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets

Securities designated as FVTPL	10		305		2,208		2,523		17		218		1,965		2,200
Securities designated as FVTOCI	36		—		69		105		13		—		95		108
Derivative assets	—		294		—		294		—		144		—		144
Total financial assets	$	46	$	599	$	2,277	$	2,922	$	30	$	362	$	2,060	$	2,452

Financial liabilities
Capital securities - fund subsidiaries	$	—	$	—	$	577	$	577	$	—	$	—	$	859	$	859
Derivative liabilities	—		538		—		538		—		498		—		498

Total financial liabilities	$	—	$	538	$	577	$	1,115	$	—	$	498	$	859	$	1,357

The following table presents the valuation techniques and inputs of the partnership’s Level 2 assets and liabilities:


Type of asset/liability						Valuation technique
Foreign currency forward contracts						Discounted cash flow model - forward exchange rates (from observable forward exchange rates at the end of the reporting period) and discounted at a credit adjusted rate
Interest rate contracts						Discounted cash flow model - forward interest rates (from observable yield curves) and applicable credit spreads discounted at a credit adjusted rate

The table below presents the valuation techniques and inputs of Level 3 assets:

Type of asset/liability

Valuation techniques

Significant unobservable input(s)

Relationship of unobservable input(s) to fair value

Securities - FVTPL/FVTOCI

Net asset valuation

(a) Forward exchange rates (from observable forward exchange rates at the end of the reporting period)
(b) Discount rate

(a) Increases (decreases) in the forward exchange rate would increase (decrease) fair value
(b) Decreases (increases) in the discount rate would increase (decrease) fair value

The following table presents the change in the balance of financial assets and financial liabilities classified as Level 3 as of December 31, 2022 and 2021:


	Dec. 31, 2022				Dec. 31, 2021
(US$ Millions)	Financial assets		Financial liabilities		Financial assets		Financial liabilities
Balance, beginning of year	$	2,060	$	859	$	1,682	$	863
Additions	353		—		553		—
Dispositions	(222)		—		(88)		—
Fair value (losses) gains, net and OCI	86		(292)		366		2
Other	—		10		(453)		(6)
Balance, end of year	$	2,277	$	577	$	2,060	$	859

c)Market Risk

Interest rate risk

The partnership faces interest rate risk on its variable rate financial assets and liabilities. In addition, there is interest rate risk associated with the partnership’s fixed rate debt due to the expected requirement to refinance such debt in the year of maturity.

The following table outlines the impact on interest expense of a 100 basis point increase or decrease in interest rates on the partnership’s variable rate liabilities and fixed rate debt maturing within one year:


(US$ Millions)	Dec. 31, 2022		Dec. 31, 2021
Variable rate property debt	$	367	$	255
Fixed rate property debt due within one year	35		31
Total	$	402	$	286

The partnership manages interest rate risk by primarily entering into fixed rate operating property debt and staggering the maturities of its mortgage portfolio over a 10-year horizon when the market permits. The partnership also makes use of interest rate derivatives to manage interest rate risk on specific variable rate debts and on anticipated refinancing of fixed rate debt.

Foreign currency risk

The partnership is structured such that its foreign operations are primarily conducted by entities with a functional currency which is the same as the economic environment in which the operations take place. As a result, the net income impact of currency risk associated with financial instruments is limited as its financial assets and liabilities are generally denominated in the functional currency of the subsidiary that holds the financial instrument. However, the partnership is exposed to foreign currency risk on the net assets of its foreign currency denominated operations.

The partnership’s exposures to foreign currencies and the sensitivity of net income and other comprehensive income, on a pre-tax basis, to a 10% change in the exchange rates relative to the U.S. dollar is summarized below:


	Dec. 31, 2022
(Millions)	Equity attributable to Unitholders		OCI		Net income
Canadian Dollar(1)	C$	142	$	(11)	$	—
Australian Dollar	A$	1,560	(106)		—
British Pound	£	4,059	(490)		—
Euro	€	690	(74)		—
Brazilian Real	R$	3,129	(60)		—
Indian Rupee	Rs	33,212	(40)		—

Chinese Yuan	C¥	2,554	(37)		—
South Korean Won	₩	417,865	(33)		—
United Arab Emirates Dirham	AED	1,287	(35)		—



Total			$	(886)	$	—

(1)Net of Canadian Dollar denominated loans.


	Dec. 31, 2021
(Millions)	Equity attributable to Unitholders		OCI		Net income
Canadian Dollar(1)	C$	339	$	(27)	$	—
Australian Dollar	A$	1,708	(124)		—
British Pound	£	6,375	(863)		—
Euro	€	1,297	(147)		—
Brazilian Real	R$	745	(13)		—
Indian Rupee	Rs	617	(1)		—

Chinese Yuan	C¥	730	(11)		—
South Korean Won	₩	289,443	(24)		—
United Arab Emirates Dirham	AED	342	(9)		—
Czech Koruna	CZK	5	—		—
Hungarian Forint	HUF	5	—		—

Total			$	(1,219)	$	—

(1)Net of Canadian Dollar denominated loans.


	Dec. 31, 2020
(Millions)	Equity attributable to Unitholders		OCI		Net income
Canadian Dollar(1)	C$	521	$	(41)	$	—
Australian Dollar	A$	2,056	(158)		—
British Pound	£	4,206	(575)		—
Euro	€	328	(40)		—
Brazilian Real	R$	3,364	(65)		—
Indian Rupee	Rs	28,281	(39)		—
Hong Kong Dollar	HK$	—	—		—
Chinese Yuan	C¥	1,084	(17)		—
South Korean Won	₩	204,795	(19)		—
United Arab Emirates Dirham	AED	708	(19)		—
Czech Koruna	CZK	8	—		—
Hungarian Forint	HUF	334	—		—
Poland Zloty	PLN	3	—		—
Total			$	(973)	$	—

(1)Net of Canadian Dollar denominated loans.

d)Credit risk

The partnership’s maximum exposure to credit risk associated with financial assets is equivalent to the carrying value of each class of financial asset as separately presented in loans and notes receivable, certain other non-current assets, accounts receivables and other, and cash and cash equivalents.

Credit risk arises on loans and notes receivables in the event that borrowers default on the repayment to the partnership. The partnership mitigates this risk by attempting to ensure that adequate security has been provided in support of such loans and notes.

Credit risk related to accounts receivable arises from the possibility that tenants may be unable to fulfill their lease commitments. The partnership mitigates this risk through diversification, ensuring that tenants meet minimum credit quality requirements and by ensuring that its tenant mix is diversified and by limiting its exposure to any one tenant. The partnership maintains a portfolio that is diversified by property type so that exposure to a business sector is lessened.

Currently no one tenant represents more than 10% of operating property revenue.