Significant dispositions completed or contracted during the second quarter include:

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1 August 5, 2016 Dear Unitholders, We are pleased to report strong earnings growth again this quarter, with Company FFO of $250 million or $0.35 per unit, a 25% increase over the same period last year. The increase was driven primarily by new investments made during the last 12 months, higher net operating income from recently signed leases in our core office portfolio and contributions from our multifamily operations. We have also continued to make good progress toward our goal of surfacing between $1 2 billion of capital from mature, stabilized assets and recycling it into higher returning investment strategies. During the quarter, we closed on dispositions which returned over $1 billion of net equity, bringing our year-todate total to $1.5 billion. These proceeds will be used to fund new investments and development activities which will generate much higher rates of return. Significant dispositions completed or contracted during the second quarter include: Region Sector Interest Sold Net Proceeds Cap Rate One New York Plaza U.S. Office 33% $550m 4.6% Principal Place U.K. Office 50% $350m 4.0% Potsdamer Platz Europe Mixed-Use 25% $170m 3.4% Interhotels Europe Hospitality 50% $265m 5.8% One Shelley Street Australia Office 100% $245m 5.1% Fashion Show U.S. Retail 15% $240m Sub-4% Impact of U.K. Referendum The U.K. s decision late in the quarter to exit the EU came as a surprise to most observers. While the long-term implications of this decision will take some time to play out, the most immediate impact was felt in currency and public equity markets, although both have stabilized somewhat over the past month. In order to protect our balance sheet against unfavourable currency movements, we have over 80% of our assets hedged against the pound, including both locally denominated debt and financial hedges. With only about $1 billion or 5% of our total equity exposed to the pound at June 30, we are largely insulated from any of these short-term impacts. While there may be further uncertainty and volatility in the years ahead as the U.K. adjusts to a new relationship with the rest of Europe, it is our belief that with a favourable tax and regulatory framework for foreign investors, sound rule of law, a respect for capital and culture of free enterprise, the U.K. will continue to be an attractive place to invest and for businesses to locate their operations. Our London office portfolio is 98% leased with an average remaining lease term of nearly 12 years and less than 15% of our leases expire over the next 5 years, providing a great deal of certainty and stability in our portfolio through this period. Our other major business in the U.K., Center Parcs, is a short-stay resort operator, catering primarily to domestic visitors and is likely to benefit from a weaker pound. As we have seen in the past, uncertainty often leads to attractive investment opportunities for patient investors with a long-term view and we will be ready should any such opportunities present themselves. 1

2 Operating Report Core Office Company FFO from our core office business was $150 million in the second quarter compared to $146 million in the prior year. The positive variance was due to same-store growth of $32 million, primarily derived from Brookfield Place New York, largely offset by the impact of asset sales. Office leasing in New York City remains strong with a healthy amount of activity; we are progressing on finalizing a lease with our second major tenant for One Manhattan West, where we are in active discussions with nine tenants representing approximately 3.4 million square feet of space. After a slow 2015, activity in the Toronto market has picked up in During the quarter, we closed on leases totaling 280,000 square feet, including a new tenant at our development, Bay Adelaide East. Investment markets remain healthy with increasing values seen on recent transactions. In Australia, Sydney has shown good absorption, leading to strong rental growth and decreasing tenant incentives. Market occupancy, however, has decreased modestly due to new supply being delivered. Sydney continues to attract investment capital from both domestic and offshore buyers, leading us to sell one property during the quarter. We have made meaningful progress at Potsdamer Platz in Berlin, increasing office occupancy from 53% to 75% in the nine months since we took control of the estate. Including leases currently out for completion, we expect our office occupancy to increase to 80%. There are many positive signs coming out of Berlin market vacancy reached its lowest level in more than 10 years in the second quarter and rental growth has consistently outpaced other major German cities. Demand from TMT-sector tenants is particularly strong with 40% of leases completed in the quarter attributable to these growing industries. While Calgary and Houston remain challenged, we came to an agreement with a second tenant for our Brookfield Place Calgary development following quarter-end; when the lease is finalized it will raise the pre-let level on that project from 71% to 81% with delivery slated for late next year. This can only be explained by a flight to quality with tenants seeking to take advantage of weaker market conditions to upgrade their premises. Our Calgary portfolio remains 92% occupied with only a further 5% of the portfolio expiring over the next 3 years. Core Retail Company FFO from our core retail business was $108 million in the second quarter compared to $109 million in the prior year. This modest decrease reflects dispositions and higher interest expense offset by same-store growth of 2% from higher occupancy and rents. Through June 30, over 1,700 leases were signed to commence in 2016 comprising over 6.9 million square feet. Same-store occupancy is up 50 basis points from last year and leases commencing in 2016 and 2017 are being executed at rates 26% higher than expiring leases. Tenant sales are up 3% on a trailing 12-month basis. Foot traffic in our class A malls has been stable in 2016 after being up about 2% in Retailer demand in our portfolio continues to be strong; underperforming department stores are being replaced with non-traditional mall tenants those include anything from restaurateurs opening quick-service food hall concepts, to high-end grocers, to entertainment venues to e-retailers doing pop-ups or permanent stores. Inserting new technology into malls has been a major driver to elevate the shopping experience this spans everything from shopping and dining to entertainment and even parking. 2

3 As with our office business, we have been taking advantage of strong pricing in private markets to sell down our interest in stable properties and redeploy the proceeds into higher-returning investments and development activities. Five dispositions were executed during or subsequent to the quarter representing gross values of approximately $2.8 billion, generating proceeds of approximately $1 billion ($290 million at BPY s share). The most notable of these was the sale of a 50% interest in Fashion Show mall in Las Vegas at a sub-4% cap rate. Opportunistic Company FFO from our opportunistic segment was $110 million in the second quarter, a 93% increase over the second quarter of This increase was driven by several new investments made during the last twelve months as well as a contribution of $21 million in our multifamily business. Brookfield s second flagship real estate opportunity fund, BSREP II, held its final close in April with total commitments of $9 billion, including $2.3 billion from BPY. To date, the fund has closed on or committed to investments totaling $5.2 billion of equity and should be fully invested next year based on our expected pace of capital deployment. We are seeing no shortage of attractive investment opportunities to put this capital to work and achieve our targeted returns of 20%+. In May, we agreed to acquire a portfolio of 135 manufactured housing communities comprising 33,000 sites across 13 U.S. states for approximately $2 billion (approximately $150 million of equity at BPY s share). Manufactured housing is a property sector that has been on our radar for some time; similar to self-storage it has produced outsized same-store NOI growth and strong tenant retention, even in recessionary environments. This presents an opportunity to gain significant market share in a highly fragmented sector with minimal institutional ownership. We also agreed to acquire six suburban office assets in Maryland comprising 1.2 million square feet. The gross purchase price of $240 million (approximately $28 million of equity at BPY s share), or $200 per square foot, represents a significant discount to replacement cost and an attractive entry point to acquire these assets. The assets are proximate to our existing portfolio in the Greater Washington, DC market and will benefit from their public transit-accessible locations. Following the acquisition of a portfolio of 90 self-storage assets in the first quarter, we acquired an additional 51 facilities located in various regions of the United States for a consolidated gross purchase price of $335 million ($48 million of equity at BPY s share). As discussed previously, these types of consolidation opportunities are plentiful and both the cash-on-cash and long-term investment returns are robust. On June 23 rd, Rouse Properties shareholders approved our offer of $18.25/share. We closed the transaction in early July and are excited to integrate the Rouse business into the greater scope and resources of our global operation. We believe there are numerous opportunities to unlock value within this portfolio. As with our core office and retail businesses, we have also been actively recycling capital within our opportunistic portfolios, disposing of 20 U.S. suburban apartment properties during the quarter at very attractive values relative to where we acquired them. Corporate At the beginning of the year we pledged to remain active in buying back our own units should they continue to trade below fair value. Accordingly, we repurchased 341,700 units in Q2 at an average price 3

4 of $21.99/unit and have now repurchased 2.3 million units for approximately $50 million over the trailing 12 months. As we continue to generate cash gains on our asset sales we will weigh the opportunity to purchase further BPY units against alternative uses while always maintaining a strong long-term capital structure. In Conclusion We are well on track to achieve our stated goals for 2016 and we look forward to updating the investment community in greater detail on our strategy and plans to grow the business further at our annual Investor Day on September 29 in New York City. On behalf of the Board of Directors and everyone at Brookfield, I thank you for your continued support and investment in BPY. Sincerely, Brian Kingston Chief Executive Officer 4

5 Special Note Regarding Forward-looking Statements This letter to unitholders contains forward-looking information within the meaning of Canadian provincial securities laws and applicable regulation and forward looking statements within the meaning of safe harbor provisions of the United States Private Security Litigation Reform Act of 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. Forward-looking statements in this letter include, without limitation, statements regarding our anticipated FFO, cash flow and net asset value (NAV) growth; targeted returns from earnings growth drivers; the growth potential of our existing and new investments; and our strategy for asset sales and equity syndications. Although we believe that our 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 our control, which may cause our 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 incidental to the ownership and operation of real estate properties including local real estate conditions; the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the ability to enter into new leases or renew leases on favorable terms; business competition; dependence on tenants financial condition; the use of debt to finance our business; the behavior of financial markets, including fluctuations in interest and foreign exchanges 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 our insurance coverage; the possible impact of international conflicts and other developments including terrorist acts; potential environmental liabilities; changes in tax laws and other tax related risks; dependence on management personnel; illiquidity of investments; 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 detailed from time to time in our documents filed with the securities regulators in Canada and the United States. We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our 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, we undertake 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. 5