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## Subsidiary Borrowings 

We endeavour to capitalize our principal subsidiary entities to enable continuous access to the debt capital markets, usually on an investment-grade basis, thereby reducing the demand for capital from the Corporation and sharing the cost of financing equally among other equity holders in partially owned subsidiaries. 

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1. Guaranteed by the Corporation 

Subsidiary borrowings have no recourse to the Corporation with only a limited number of exceptions. Property borrowings increased due to borrowings assumed on acquisitions, including U.S. and UK industrial companies and a Los Angeles office portfolio. During the year we settled the contingent swap accruals at a discount and financed the payment with corporate liquidity and borrowings. We also repaid all of the short-term borrowings within our infrastructure business with the proceeds from asset sales. 

## Capital Securities 

Capital securities are preferred shares that are mostly denominated in Canadian dollars and are classified as liabilities because the holders of the preferred shares have the right, after a fixed date, to convert the shares into common equity of the issuer based on the market price of the common shares at that time unless they are previously redeemed by the issuer. The dividends paid on these securities are recorded in interest expense. As at December 31, 2013, C$175 million of the capital securities were issued by the Corporation and the balance are obligations of BPO and its subsidiaries. 

The average distribution yield on the consolidated capital securities at December 31, 2013 was 5.3% (December 31, 2012 – 5.4%) and the average term to the holders’ conversion date was four years as at December 31, 2013 (December 31, 2012 – two years). 

During 2013, we redeemed C$150 million of 5.0% capital securities at the corporate level and Brookfield Office Properties redeemed C$200 million of 6.0% capital securities. 

On March 6, 2014, the company notified holders that it will redeem all of its outstanding Class A Series 12 preferred shares for cash on April 6, 2014. The redemption price for each preferred share will be C$26.00 plus accrued and unpaid dividends. 

## Preferred Equity 

Preferred equity is comprised of perpetual preferred shares and represents permanent non-participating equity that provides leverage to our common equity. The shares are categorized by their principal characteristics in the following table: 

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We issued C$200 million of 4.9% perpetual fixed rate preferred shares in June 2013 and used the proceeds to redeem C$150 million of 5.0% capital securities. 

On March 13, 2014, the company issued 8.0 million Series 38 preferred shares with an initial dividend rate of 4.4% for total gross proceeds of C$200 million. 

