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Building Momentum
2014 Annual Report
Building Momentum
In 2014 we continued to build value
by acquiring high-quality, well-located,
value-add assets in our key markets that
provide opportunities for growth through
strategic leasing and repositioning.
We also continued to develop local teams
and relationships with the expertise to
compete in these key markets.
These steps contributed greatly to our
strong results in 2014 and position us well
for 2015 and beyond.
Strong Execution
n Expanded in San Francisco with two value-add
acquisitions totaling $539 million and have already
brought the first, 221 Main Street, to 95% leased at
favorable rates1
n Improved our CBD and multi-tenant
concentrations by selling Lenox Park in Atlanta
and four other suburban assets
n Established regional management offices
in San Francisco and Washington, D.C., to enhance
our local expertise in key markets
n Appointed two additional highly accomplished
directors, Mike Robb and Glenn Rufrano, to our
Board of Directors
n Increased our holdings in target markets
in January 2015 with acquisitions in Manhattan’s
Midtown South and Boston’s Back Bay
Portfolio
Transformation
Through more than $1.3 billion in
asset dispositions and $2.2 billion
of select acquisitions in gateway
markets, we have significantly
improved the portfolio since 2011.
Along with a much greater CBD/multi-
tenant focus, we expect to have nearly
half our revenue coming from high-
barrier markets by the end of 2015.2, 4
Target Portfolio Allocations – YE20152
% of Annualized Lease Revenue
15%
Urban
Infill
20%
Single
Tenant
15%
Suburban
80%
Multi-
Tenant
70%
CBD
High-Barrier Market Exposure3, 4
Compared with Select Publicly Traded Office REITs
100%
8%
20%
8%
5%
67%
24%
9%
11%
21%
35%
92%
e
u
n
e
v
e
R
l
a
t
o
T
f
o
%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
52%
14%
21%
2%
11%
67%
76%
6%
27%
9%
8%
7%
New York City
Boston (cBd)
San Francisco
D.C.
West L.A.
All other
100%
100%
100%
100%
SLG
vNo
Bxp
cxp
kRc
pdM
BdN
cuz
Hiw
pkY
YE20152
High-Barrier REITs
Low-Barrier REITs
1 Includes impact of leases executed through February 28, 2015.
2 As of 12/31/14, and pro forma for the January Acquisitions and the impact of planned 2015 dispositions.
3 Source for other companies (identified by NYSE ticker symbol): Green Street Advisors Company Snapshots as of
2/28/2015, company filings, and SNL Financial.
4 “High-Barrier Markets” as defined by Green Street Advisors.
Columbia Property Trust 2014 | 1
To Our Stockholders:
We have taken key steps over the last few years to position Columbia Property Trust among the
best office REITs in terms of strength of team and platform, quality of assets, and concentrations
in premier markets. After our planned dispositions for 2015, nearly half our lease revenues will be
derived from the top five “high-barrier” markets in the country. we are further enhancing the value
of this quality portfolio through proactive leasing, strategic capital improvements, and efficient
operations. While our share price has yet to fully reflect the embedded value of the portfolio and
platform in these early days as a listed company, we believe we are taking the right steps to realize
this value over time.
Since 2012, we have been diligently repositioning the portfolio for long-term stability and growth. our acquisitions over the
past year in San Francisco, New York, and Boston have certainly accelerated that transformation. These investments have
not only expanded our holdings in some of the best high-barrier markets but also provided the opportunity to substantially
increase revenue as we fill current vacancies and renew or replace near-term expirations at market rates well above in-place
rents. we’ve highlighted these latest acquisitions in greater detail on the following pages.
To ensure we have the talent and resources necessary to capture this upside opportunity, we’ve established capable and
experienced regional management teams and strengthened our relationships with market-leading brokers and service
providers in our target markets. This local expertise is critical to achieving our goals of sourcing competitive, value-add
acquisition opportunities, as well as creating leasing solutions that lead to strong occupancy with desirable tenants at
favorable terms.
Leasing Focus
we’ve made significant progress in addressing lease renewals or securing replacements for the 35% of our annualized lease
revenues derived from leases expiring between now and 2017. In San Francisco, we have already executed leases that will
take 221 Main Street, which we acquired in April of last year, from 81% to over 95% leased, well ahead of schedule and at
higher rates than contemplated in our acquisition underwriting. We will strive for similar leasing success at our other recent
acquisitions in San Francisco, Manhattan, and Boston.
we also are proactively addressing near-term expirations in our “same store” portfolio. one of the largest opportunities in our
existing portfolio is 222 East 41st Street in Manhattan. we are working with one of the leading leasing teams in the market to
promote the large block of upcoming availability at this property and to reposition it as a multi-tenant asset. We expect this
attractive, relatively new building to be very competitive in its strengthening submarket.
At Market Square in washington, d.c., we are aggressively tackling upcoming expirations and have been able to secure
several new leases, as well as a renewal and extension of one of the larger tenants at the property, Edison Electric. We are
making modest capital improvements to the main lobbies and other common areas to strengthen demand for this iconic
Pennsylvania Avenue property. We also executed several other key leases in 2014, including a renewal of T. Rowe Price
for over 400,000 square feet at 100 East Pratt in Baltimore.
Portfolio Transformation
Another key component of our strategy has been to efficiently exit assets and markets that are not best positioned for value
growth. We sold $426 million of noncore properties in 2014, further concentrating our holdings into fewer markets and
improving our cBd and multi-tenant percentages to 61% and 72%, respectively.1 In 2015, we expect to execute another
2 | Columbia Property Trust 2014
$500 million to $600 million in selected
dispositions that will “finish the drill” on the
strategic portfolio transformation we began
three years ago. The goal of this transition has
been to convert the portfolio from a suburban,
single-tenant emphasis to predominantly CBD
and urban in-fill holdings, with a high majority
of multi-tenant assets.
“The portfolio is now
substantially better positioned
to deliver growth in both asset
value and future income.”
Positioned for Growth
The portfolio is now substantially better positioned to deliver growth in both asset value and future income. However, exiting
low-growth assets with higher current yield, in exchange for growth assets with lower initial yields, has reduced our near-term
cash flows. This reduction will impact our funds from operations in 2015, likely also in 2016, and perhaps beyond, depending
on the timing of our planned dispositions, leasing execution, and future transactions. However, this was a necessary step in
order to optimize growth in portfolio value and, ultimately, growth in income in the future.
we have effected this transition while continuing to maintain a strong and flexible balance sheet. our capital sources are robust
and diversified, and we recently received a credit-rating upgrade from Moody’s and a positive outlook from Standard & poor’s.
our demonstrated progress, our competitive platform, and the viability of our strategy have also allowed us to recruit
highly accomplished real estate industry veterans to our board of directors. we recently welcomed Mike Robb, who led the
Real Estate division of pacific Life insurance company for 27 years, and Glenn Rufrano, head of real estate investment
and management firm o’conner capital partners and the former president and cEo of cushman & wakefield. Each
brings a wealth of relationships, knowledge, and public company experience, and we look forward to benefiting from their
contributions to our company’s leadership.
we expect the momentum we’ve generated in 2014 to continue as we make further progress in 2015 toward our goals of
growing NAv and, ultimately, cash flows. our portfolio is positioned in better markets, with substantial embedded upside from
rent roll-up and lease-up opportunities in the relatively near-term, and we have a qualified and committed team in place to
capitalize on those opportunities.
In closing, we are on the path to creating substantial value for shareholders and are pleased with
the accomplishments we made toward that end in 2014. While we have more work ahead in 2015
and beyond, we are confident that our team will continue to strengthen columbia property Trust’s
position as one of the best office companies in the country.
Sincerely,
E. Nelson Mills
president, chief Executive officer and director
March 20, 2015
1As of 12/31/14, and pro forma for our January Acquisitions.
Columbia Property Trust 2014 | 3
San Francisco
In 2014, we made the City by the Bay our largest market as we acquired two additional office buildings
in the city’s Financial district: 221 Main Street and 650 california Street (adding to our existing
core assets there, 333 Market Street and university circle in palo Alto). Both of these well-located,
multi-tenant acquisitions have desirable upgrades and amenities and offer significant value growth
opportunities. our local team is working to capitalize on not only the city’s soaring market fundamentals
but also each property’s unique positioning and the ability to aggressively manage the rent roll.
221 Main Street
South Financial District
Acquired April 2014
n LEED Platinum 388,000 SF asset
with excellent views and convenient
transit access
n At acquisition, the building was 81% leased
at rates significantly below market
By creatively responding to tenants’ needs and
proactively tackling upcoming lease expirations,
we brought the property to over 95% leased, at
rates well in excess of our initial underwriting. As
a result, we have already executed leases that
will bring us to our three-year targeted yield.
4 | Columbia Property Trust 2014
650 California Street
North Financial District
Acquired September 2014
n LEEd Gold 478,000 SF asset with protected panoramic Bay
views and iconic modernist architecture
n 88% leased at acquisition, with one third of tenancy rolling
in the next two years and in-place rents well below current
market levels1
our local team is working to assemble a large block of available
space at the property to meet the market demand for large-space
users. current vacancy in the market has fallen to just over 8%.
1Management’s estimate.
Columbia Property Trust 2014 | 5
Boston remains one of the nation’s most
attractive office markets. We have owned
assets in the greater metropolitan area since
2004, but our goal has been to acquire a
presence in the city’s urban core to create
greater value. our first step in that direction
was the acquisition of 116 Huntington Avenue,
an attractive, well-located asset in Boston’s
Back Bay, one of the city’s most desirable
office submarkets.
116 Huntington Avenue
Back Bay
Acquired January 2015
n 274,000 SF asset located between Prudential
Center and Copley Place and offering exceptional
transportation access
n Evaluating modest renovations to the property (built
in 1991) to further increase demand
with 22% current vacancy, including the premium top
two floors, the property offers an immediate lease-up
opportunity in one of the nation’s best-performing
submarkets.
Boston
6 | Columbia Property Trust 2014
New York City
Manhattan continues to be a world leader in office investment fundamentals with its robust and diverse
demand and constrained supply. Investment in this market is undoubtedly competitive, but we believe
the city offers exceptional potential for long-term value and growth when the right opportunity meets
the right operational strategy. We believe we found that match in our newest acquisition there,
315 park Avenue South. Additionally, our other Midtown property, 222 East 41st Street, which is one
of the newest office buildings in its submarket, should also benefit from Midtown’s strong leasing and
tight vacancy trends as we aggressively market and reposition it from single- to multi-tenant.
315 Park Avenue South
Midtown South / Flatiron District
Acquired January 2015
n Historical (c. 1910) 341,00 SF building with extensive recent
upgrades, including a new lobby and updated elevator
banks, and exceptional Midtown South views
n L&L Holding company LLc, a leading office developer
and operator in Manhattan, will oversee onsite leasing and
management and will work with us to position the building
as a top office destination in the submarket.
over 75% of the existing leases roll within the next three
years and are well below current market rates,1 which offers
us a significant opportunity to increase revenues at this
property in the near-term.
1Management’s estimate.
Columbia Property Trust 2014 | 7
Proactive Operations
over the past four years, we have leased over 8 million square feet of space across our portfolio.
In 2015, we will build on this success with proactive leasing in our same-store portfolio and at our
new acquisitions, which provide a significant opportunity as below-market leases expire and are
marked to market over the next three years.
Pro Forma Annualized Lease Revenues Expiring, by Year1
30%
25%
20%
15%
10%
5%
0%
2014 and 2015 Acquisitions
Same Store
2015
2016
2017
2018
2019
20202
1 As of 12/31/14, pro forma for the January Acquisitions and
for the impact of the 2015 planned dispositions.
2 47.9% of ALR expires after 2020, pro forma as noted above.
8 | Columbia Property Trust 2014
Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 10-K
_______________________________________________
(mark one)
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2014
OR
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from ______ to ______
Commission file number 000-51262
COLUMBIA PROPERTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation or organization)
20-0068852
(I.R.S. Employer Identification Number)
One Glenlake Parkway, Suite 1200
Atlanta, Georgia 30328
(Address of principal executive offices) (Zip Code)
(404) 465-2200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class
Common Stock
Name of exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes
No
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
No
As of June 30, 2014, the aggregate market value of the common stock of Columbia Property Trust, Inc. held by non-affiliates was
$3,246,733,390 based on the closing price as reported by the New York Stock Exchange. As of January 31, 2015, 125,090,973 shares of
common stock were outstanding.
Registrant incorporates by reference portions of the Columbia Property Trust, Inc. Definitive Proxy Statement for the 2015 Annual Meeting of
Stockholders (Items 10, 11, 12, 13, and 14 of Part III) to be filed prior to April 30, 2015.
FORM 10-K
COLUMBIA PROPERTY TRUST, INC.
TABLE OF CONTENTS
PART I.
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
PART II.
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III.
Item 10.
Directors, Executive Officers, and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV.
Item 15.
Exhibits and Financial Statement Schedules
Signatures
Page No.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-K of Columbia Property Trust, Inc. and its subsidiaries ("Columbia Property Trust,"
"we," "our," or "us"), other than historical facts may be considered forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend for all such forward-looking
statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such
statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and
uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or
anticipated. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may,"
"will," "expect," "intend," "anticipate," "estimate," "believe," "continue," or other similar words. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S. Securities
and Exchange Commission ("SEC"). We do not intend to update or revise any forward-looking statements, whether as a result of
new information, future events, or otherwise. See Item 1A herein for a discussion of some of the risks and uncertainties, although
not all risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking
statements may be included therein.
Page 3
ITEM 1.
BUSINESS
General
PART I
Columbia Property Trust, Inc. ("Columbia Property Trust") (NYSE: CXP) is a Maryland corporation that operates as a real estate
investment trust ("REIT") for federal income tax purposes and owns and operates commercial real estate properties. Columbia
Property Trust was incorporated in 2003, commenced operations in 2004, and conducts business primarily through Columbia
Property Trust Operating Partnership, L.P. ("Columbia Property Trust OP"), a Delaware limited partnership. Columbia Property
Trust is the general partner and sole owner of Columbia Property Trust OP and possesses full legal control and authority over its
operations. Columbia Property Trust OP acquires, develops, owns, leases, and operates real properties directly, through wholly
owned subsidiaries, or through joint ventures. References to Columbia Property Trust, "we," "us," or "our" herein shall include
Columbia Property Trust and all subsidiaries of Columbia Property Trust, direct and indirect, and consolidated joint ventures.
Columbia Property Trust typically invests in high-quality, income-generating office properties. As of December 31, 2014, Columbia
Property Trust owned 35 office properties and one hotel, which included 52 operational buildings comprising approximately
15.7 million square feet of commercial space, located in 12 states and the District of Columbia. All of the properties are wholly
owned except for one property, which is owned through a consolidated subsidiary. As of December 31, 2014, the office properties
were approximately 93.3% leased. In January 2015, Columbia Property Trust acquired three additional office properties comprising
0.9 million square feet. See the Transaction Activity section below for additional information.
Real Estate Investment Objectives
Columbia Property Trust seeks to invest in and manage a commercial real estate portfolio that provides the size, quality, and market
specialization needed to deliver both income and long-term growth, as measured in the total return to our shareholders. Our value
creation and growth strategies are founded in the following:
Targeted Market Strategy
Our portfolio is comprising a combination of multi- and single-tenant office properties located in Central Business District ("CBD")
and suburban areas. We are focusing our acquisition efforts in select primary markets with strong fundamentals and liquidity,
including CBD and urban in-fill locations. We believe that the major U.S. office markets provide a greater propensity for producing
increasing net income and property values over time. We maintain a long-term goal of increasing our market concentrations in
order to leverage our scale, efficiency, and market knowledge.
New Investment Targets
We look to acquire strategic and premier office assets with quality tenants in our target markets, with an emphasis on value-added
opportunities. We pursue high-quality assets that are competitive within the top tier of their markets or can be repositioned as such.
Our asset selection criteria include the property's location attributes, physical quality, tenant/lease characteristics, competitive
positioning, and pricing level in comparison to long-term, normalized value or replacement cost.
Strong and Flexible Balance Sheet
We are committed to maintaining an investment-grade balance sheet with a strong liquidity profile and proven access to capital.
Our low leverage level and other credit metrics provide the financial flexibility to pursue new acquisitions and other growth
opportunities that will further our long-term performance objectives.
Capital Recycling
We consistently evaluate our existing portfolio to identify assets in which the value has been optimized and/or those that are
considered nonstrategic, based on their market location or investment characteristics. The goal of our disposition efforts is to
harvest capital from these mature and nonstrategic assets, and redeploy it into properties in our target markets to maximize growth
in net operating income and long-term value.
Proactive Asset Management
We believe our team is well equipped to deliver exceptional operating results in all facets of the management process. Our leasing
efforts are founded in understanding the varied and complex needs of tenants in the marketplace today. We aggressively pursue
meeting those needs through new and renewal leases, as well as strategic lease restructures that further our long-term goals. We
Page 4
are committed to prudent capital investment in our assets to ensure their competitive positioning and status, and rigorously pursue
efficient operations and cost containment at the property level.
Transaction Activity
In connection with furthering our real estate investment objectives, we have executed the following real estate transactions in 2014
and 2015 (through February 12, 2015):
Acquisitions
Property
Location
2015 (through February 12, 2015)
Rentable
Square
Footage
Acquisition Date
Purchase Price
116 Huntington Avenue Building
Boston, MA
274,000
January 8, 2015
Portfolio acquisition:
January 7, 2015
315 Park Avenue South Building
New York, NY
1881 Campus Commons Building
Reston, VA
341,000
245,000
2014
650 California Street Building
San Francisco, CA
478,000
September 9, 2014
221 Main Street Building
San Francisco, CA
388,000
April 22, 2014
$
$
$
$
152,000
436,000
310,200
228,800
Dispositions
2014
Property
Location
Rentable
Square
Footage
Disposition Date
Sale Price
Lenox Park Property
Atlanta, GA
1,040,000
October 3, 2014
9 Technology Drive Building
Westborough, MA
7031 Columbia Gateway Drive Building
Columbia, MD
200 South Orange Building
160 Park Avenue Building
Orlando, FL
Florham Park, NJ
251,000
248,000
128,000
240,000
August 22, 2014
July 1, 2014
June 30, 2014
June 4, 2014
$
$
$
$
$
290,000
47,000
59,500
18,800
10,200
Employees
As of December 31, 2014, we employed 99 people.
Competition
Leasing real estate is highly competitive in the current market; as a result, we experience competition for high-quality tenants
from owners and managers of competing projects. Therefore, we may experience delays in re-leasing vacant space, or we may
have to provide rent concessions, incur charges for tenant improvements, or offer other inducements to enable us to timely lease
vacant space, all of which may have an adverse impact on our results of operations. In addition, we are in competition with other
potential buyers for the acquisition of the same properties, which may result in an increase in the amount we must pay to purchase
a property. Further, at the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties
to locate suitable purchasers.
Concentration of Credit Risk
We are dependent upon the ability of our current tenants to pay their contractual rent amounts as they become due. The inability
of a tenant to pay future rental amounts would have a negative impact on our results of operations. We are not aware of any reason
why our current tenants will not be able to pay their contractual rental amounts as they become due in all material respects.
Situations preventing our tenants from paying contractual rents could result in a material adverse impact on our results of operations.
Based on our 2014 annualized lease revenue, no single tenant accounts for more than 10% of our portfolio.
Page 5
Website Address
Access to copies of each of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
proxy statements, and other documents filed with, or furnished to, the SEC, including amendments to such filings, may be
obtained free of charge from our website, http://www.columbiapropertytrust.com, or through a link to the http://www.sec.gov
website. The information contained on our website is not incorporated by reference herein. These filings are available promptly
after we file them with, or furnish them to, the SEC.
ITEM 1A. RISK FACTORS
Below are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our
forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks
and uncertainties that we believe are material to our business, operating results, prospects, and financial condition. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.
Risks Related to Our Business and Properties
If we are unable to find suitable investments or pay too much for properties, we may not be able to achieve our investment objectives,
and the returns on our investments will be lower than they otherwise would be.
We are competing for real estate investments with other REITs; real estate limited partnerships, pension funds and their advisors;
bank and insurance company investment accounts; individuals; and other entities. The market for high-quality commercial real
estate assets is highly competitive given how infrequently those assets become available for purchase. As a result, many real estate
investors, including us, have built up their cash positions and face aggressive competition to purchase quality office real estate
assets. A significant number of entities and resources competing for high-quality office properties support relatively high acquisition
prices for such properties, which may reduce the number of acquisition opportunities available to, or affordable for, us and could
put pressure on our profitability and our ability to pay distributions to stockholders. We cannot be sure that we will be successful
in obtaining suitable investments on financially attractive terms or that, if we make investments, our objectives will be achieved.
Economic conditions may cause the creditworthiness of our tenants to deteriorate and occupancy and market rental rates to
decline.
Although U.S. macroeconomic conditions have shown signs of improvement, during 2014, several economic factors continued
to adversely affect the financial condition and liquidity of many businesses, as well as the demand for office space generally.
Should economic conditions worsen or fail to recover fully, our tenants' ability to honor their contractual obligations may suffer.
Further, it may become increasingly difficult to maintain our occupancy rate and achieve future rental rates comparable to the
rental rates of our currently in-place leases as we seek to re-lease space and/or renew existing leases.
Our office properties were approximately 93.3% leased at December 31, 2014, and provisions for uncollectible tenant receivables,
net of recoveries, were less than 0.1% of total revenues for the year then ended. As a percentage of 2014 annualized lease revenue,
approximately 6% of leases expire in 2015, 12% of leases expire in 2016, and 15% of leases expire in 2017 (see Item 2, Properties).
No assurances can be given that economic conditions will not have a material adverse effect on our ability to re-lease space at
favorable rates or on our ability to maintain our current occupancy rate and our low provisions for uncollectible tenant receivables.
Changes in general economic conditions and regulatory matters germane to the real estate industry may cause our operating
results to suffer and the value of our real estate properties to decline.
Our operating results are subject to risks generally incident to the ownership of real estate, including:
•
•
•
•
•
changes in general or local economic conditions;
changes in supply of or demand for similar or competing properties in an area;
changes in interest rates and availability of permanent mortgage funds, which may render the sale of a property difficult
or unattractive;
changes in tax, real estate, environmental, and zoning laws; and
periods of high interest rates and tight money supply.
In addition, market and economic conditions in the metropolitan areas in which we derive a substantial portion of our revenue
such as San Francisco, California; the greater Washington, D.C. area; New York City, New York; Newark, New Jersey; and Houston,
Texas, may have a greater impact on our overall occupancy levels and rental rates and therefore our profitability. Furthermore,
our business strategy involves continued focus on select core markets, which will increase the impact of the local economic
Page 6
conditions in such markets on our results of operations in future periods. These and other reasons may prevent us from being
profitable or from realizing growth or maintaining the value of our real estate properties.
We depend on tenants for our revenue, and lease defaults or terminations could negatively affect our financial condition and
results of operations and limit our ability to make distributions to our stockholders.
The success of our investments materially depends on the financial stability of our tenants. A default or termination by a significant
tenant on its lease payments to us would cause us to lose the revenue associated with such lease and require us to find an alternative
source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a mortgage. In the event of a
tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs in
protecting our investment and re-letting our property. If a tenant defaults on or terminates a significant lease, we may be unable
to lease the property for the rent previously received or sell the property without incurring a loss. In addition, significant expenditures
for our properties, such as mortgage payments, real estate taxes, and insurance and maintenance costs are generally fixed and do
not decrease when revenues at the related property decreases. Therefore, these events could have a material adverse effect on our
results of operations or cause us to reduce the amount of distributions to stockholders.
Future acquisitions may fail to perform in accordance with our expectations and may require renovation costs exceeding our
estimates and may be located in new markets where we may face risks associated with investing in an unfamiliar market.
In the normal course of business, we typically evaluate potential acquisitions, enter into nonbinding letters of intent, and may, at
any time, enter into contracts to acquire additional properties. Acquired properties may fail to perform in accordance with our
expectations due to lease-up risk, renovation cost risks, and other factors. In addition, the renovation and improvement costs we
incur in bringing an acquired property up to market standards may exceed our estimates. We may not have the financial resources
to make suitable acquisitions or renovations on favorable terms or at all.
Furthermore, we may acquire properties located in markets in which we do not have an established presence. We may face risks
associated with a lack of market knowledge or understanding of the local economy, forging new business relationships in the area
and unfamiliarity with local government and permitting procedures. As a result, the operating performance of properties acquired
in new markets may be less than we anticipate, and we may have difficulty integrating such properties into our existing portfolio.
In addition, the time and resources that may be required to obtain market knowledge and/or integrate such properties into our
existing portfolio could divert our management’s attention from our existing business or other attractive opportunities in our
established markets.
Our inability to sell a property when we plan to do so could limit our operational and financial flexibility, including our ability
to pay cash distributions to our stockholders.
Purchasers may not be willing to pay acceptable prices for properties that we wish to sell. General economic conditions, availability
of financing, interest rates, and other factors, including supply and demand, all of which are beyond our control, affect the real
estate market. Therefore, we may be unable to sell a property for the price, on the terms, or within the time frame that we want.
That inability could reduce our cash flow and cause our results of operations to suffer, limiting our ability to make distributions
to our stockholders. Furthermore, our properties' market values depend principally upon the value of the properties' leases. A
property may incur vacancies either by the default of tenants under their leases or the expiration of tenant leases. If vacancies
occur and continue for a prolonged period of time, it may become difficult to locate suitable buyers for any such property, and
property resale values may suffer, which could result in lower returns for our stockholders.
Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our net income,
or materially and adversely affect our business or financial condition.
We may incur losses from time to time that are uninsurable or not economically feasible to insure, or may be insured subject to
limitations, such as large deductibles or co-payments. Some of these losses could be catastrophic in nature, such as losses due to
earthquakes, wars, acts of terrorism, floods, hurricanes, pollution, or environmental matters. For example, we have properties
located in San Francisco, California, an area especially susceptible to earthquakes, and collectively, these properties represent
approximately 19% of our 2014 Annualized Lease Revenue. Because these properties are located in close proximity to one another,
an earthquake in the San Francisco area could materially damage, destroy or impair the use by tenants of all of these properties.
Furthermore, insurance risks associated with potential terrorist acts could sharply increase the premiums we pay for coverage
against property and casualty claims. Additionally, mortgage lenders in some cases insist that commercial property owners purchase
coverage against terrorism as a condition of providing mortgage loans. Such insurance policies may not be available at a reasonable
cost, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide
other financial support, either through financial assurances or self-insurance, to cover potential losses. In addition, we may not
have adequate coverage for losses. If any of our properties incur a loss that is not fully insured, the value of that asset will be
reduced by such uninsured loss. Furthermore, other than any working capital reserves or other reserves that we may establish, or
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our existing line of credit, we do not have sources of funding specifically designated for repairs or reconstruction of any our
properties. To the extent we incur significant uninsured losses, or are required to pay unexpectedly large amounts for insurance,
our results of operations or financial condition could be adversely effected.
We are currently evaluating options for significant repairs to the outer walls of one of our properties located in suburban Pittsburgh,
Pennsylvania, and leased to Westinghouse Electric Company LLC, which we believe relates to the original design or construction
of the property. We have engaged consultants to help us determine the scope of the repairs and to develop various remediation
strategies. We are evaluating whether there is insurance coverage or other potential sources of recovery for the necessary
remediation. In the event such funds are not available, we expect to incur significant costs in connection with the remediation of
this property.
If we are unable to fund the future capital needs of our properties, cash distributions to our stockholders and the value of our
investments could decline.
When tenants do not renew their leases or otherwise vacate their space, we often need to expend substantial funds for tenant
improvements to the vacated space in order to attract replacement tenants. In addition, although we expect that our leases with
tenants will require tenants to pay routine property maintenance costs, we will likely be responsible for any major structural repairs,
such as repairs to the foundation, exterior walls, and rooftops.
If we need significant capital in the future to improve or maintain our properties or for any other reason, we will have to obtain
financing from sources such as cash flow from operations, borrowings, property sales, or future equity offerings. These sources
of funding may not be available on attractive terms or at all. If we cannot procure the necessary funding for capital improvements,
our investments may generate lower cash flows or decline in value, or both, which would limit our ability to make distributions
to our stockholders.
Our operating results may suffer because of potential development and construction risks and delays and resultant increased
costs.
We may acquire and develop properties, including unimproved real estate, upon which we will construct improvements. We will
be subject to uncertainties associated with rezoning for development and our ability to obtain required permits and authorizations;
environmental concerns of governmental entities and/or community groups; and our builders' ability to build in conformity with
plans, specifications, budgeted costs, and timetables. If a builder fails to perform, we may resort to legal action to rescind the
purchase or the construction contract or to compel performance. A builder's performance may also be affected or delayed by
conditions beyond the builder's control, and we may incur additional risks when we make periodic progress payments or other
advances to builders before they complete construction. Delays in completing construction could also give tenants the right to
terminate preconstruction leases. These and other factors can result in increased costs of a project or loss of our investment. In
addition, we will be subject to normal lease-up risks relating to newly constructed projects. We must rely on rental income and
expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a
purchase price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and our
return on our investment could suffer.
We have incurred and are likely to continue to incur mortgage and other indebtedness, which may increase our business risks.
As of January 31, 2014, our total indebtedness was approximately $2.1 billion, which includes a $450.0 million term loan, a
$300 million bridge loan, $249.2 million of bonds, $131.0 million in borrowings on our line of credit and $980.0 million of
mortgage loans, all with fixed interest rates, or with interest rates that are effectively fixed when considered in connection with
an interest rate swap agreement; and no outstanding balance on our variable-rate line of credit. We are likely to incur additional
indebtedness to acquire properties, to fund property improvements and other capital expenditures, to pay our distributions, and
for other purposes.
Significant borrowings by us increase the risks of an investment in us. If there is a shortfall between the cash flow from properties
and the cash flow needed to service our indebtedness, then the amount available for distributions to stockholders may be reduced.
In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in
lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default. For tax purposes,
a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance
of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the
property, we would recognize taxable income on foreclosure, but we would not receive any cash proceeds. We may give full or
partial guarantees to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guaranty on behalf
of an entity that owns one of our properties, we are responsible to the lender for satisfaction of the debt if it is not paid by such
entity.
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If any mortgages or other indebtedness contain cross-collateralization or cross-default provisions, a default on a single loan could
affect multiple properties. Our unsecured credit facility with a syndicate of lenders led by JPMorgan Chase Bank, N.A. ("JPMorgan
Chase Bank"), as administrative agent (the "JPMorgan Chase Credit Facility"), our unsecured term loan facility with a syndicate
of lenders led by JPMorgan Chase Bank (the "$450 Million Term Loan"), as administrative agent and our unsecured term loan
with a syndicate of lenders led by JPMorgan Chase Bank (the "Bridge Loan"), as administrative agent, each includes a cross-
default provision that provides that a payment default under any recourse obligation of $50 million or more by us, Columbia
Property Trust OP, or any of our subsidiaries, constitutes a default under the line of credit and term loan facilities. If any of our
properties are foreclosed due to a default, our ability to pay cash distributions to our stockholders will be limited.
Increases in interest rates could increase the amount of our debt payments and make it difficult for us to finance or refinance
properties, which could reduce the number of properties we can acquire, our net income, and the amount of cash distributions we
can make.
We expect to incur additional indebtedness in the future, which may include mortgages, unsecured bonds, term loans, or borrowings
under a credit facility. Increases in interest rates will increase interest costs on our variable-interest debt instruments, which would
reduce our cash flows and our ability to pay distributions. If mortgage debt is unavailable at reasonable interest rates, we may not
be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance
the properties when the loans become due, or of being unable to refinance on favorable terms. In addition, if we need to repay
existing debt during periods of higher interest rates, we may need to sell one or more of our investments in order to repay the debt,
which sale at that time might not permit realization of the maximum return on such investments. If any of these events occur, our
cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our
ability to raise capital in the future through additional borrowings or debt or equity offerings. For additional information, please
refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, for additional information regarding interest rate
risk.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make
distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability
to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property
or discontinue insurance coverage. These or other limitations may limit our flexibility and our ability to execute on our operating
plans.
A downgrade in the credit rating of our debt could materially adversely affect our business and financial condition.
Our senior unsecured debt is rated investment grade by Standard & Poor's Corporation and Moody's Investors Service. In
determining our credit ratings, the rating agencies consider a number of both quantitative and qualitative factors, including earnings,
fixed charges, cash flows, total debt outstanding, total secured debt, off balance sheet obligations, total capitalization and various
ratios calculated from these factors. The rating agencies also consider predictability of cash flows, business strategy, property
development risks, industry conditions and contingencies. Therefore, any deterioration in our operating performance could cause
our investment grade rating to come under pressure. Our corporate credit rating at Standard & Poor's Ratings Service is currently
BBB- with a positive outlook, and our corporate credit rating at Moody's Investor Service is currently Baa2 with a stable outlook.
There can be no assurance that our credit ratings will not be lowered or withdrawn in their entirety. A negative change in our
ratings outlook or any downgrade in our current investment-grade credit ratings by rating agencies could adversely affect our cost
and access to sources of liquidity and capital. Additionally, a downgrade could, among other things, increase the costs of borrowing
under our credit facility and term loan, adversely impact our ability to obtain unsecured debt or refinance our unsecured debt on
competitive terms in the future, or require us to take certain actions to support our obligations, any of which would adversely
affect our business and financial condition.
We are and may continue to be subject to litigation, which could have a material adverse effect on our financial condition.
We currently are, and are likely to continue to be, subject to a variety of claims arising in the ordinary course of business, including
contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, discrimination,
and similar matters. Some of these claims may result in significant defense costs and potentially significant judgments against us,
some of which are not, or cannot be, insured against. Although we defend ourselves against any such claims, we cannot be certain
of the ultimate outcomes of currently asserted claims or of those that arise in the future. Resolution of these types of matters against
us may result in our having to pay significant fines, judgments, or settlements, which, if uninsured, or if the fines, judgments, and
settlements exceed insured levels, would adversely impact our earnings and cash flows, thereby impacting our ability to service
debt and make distributions to our stockholders.
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If our disclosure controls or internal control over financial reporting is not effective, investors could lose confidence in our reported
financial information, which could adversely affect the perception of our business and the trading price of our common stock.
Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), requires that we evaluate the effectiveness of our internal control
over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of our
internal control over financial reporting. Deficiencies, including any material weakness, in our internal control over financial
reporting that may occur in the future could result in misstatements of our results of operations, restatements of our financial
statements, a decline in the trading price of our common stock, or otherwise materially adversely affect our business, reputation,
results of operations, financial condition, or liquidity.
Costs of complying with governmental laws and regulations may reduce our net income and the cash available for distributions
to our stockholders.
All real property and the operations conducted on real property are subject to federal, state, and local laws and regulations relating
to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability
on tenants, owners, or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether
the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly remediate
these substances, may hinder our ability to sell, rent, or pledge such property as collateral for future borrowings.
Compliance with new laws or regulations, or stricter interpretation of existing laws may require us to incur material expenditures.
Future laws, ordinances, or regulations may impose material environmental liability. Additionally, our tenants' operations, the
existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage
tanks or activities of unrelated third parties may affect our properties. Furthermore, there are various local, state, and federal
regulatory requirements, such as fire, health, life-safety, and similar regulations, and the Americans with Disabilities Act, with
which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance.
Any material expenditures, fines, or damages we must pay will reduce our ability to make distributions.
Discovery of previously undetected environmentally hazardous conditions may decrease our revenues and limit our ability to make
distributions.
Under various federal, state, and local environmental laws, ordinances, and regulations, a current or previous real property owner
or operator may be liable for the cost to remove or remediate hazardous or toxic substances on, under, or in such property. These
costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which
property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us
from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions
for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain
environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous
substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for
personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against
claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of
paying personal injury claims could have an adverse impact on our business and results of operations.
If we sell properties and provide financing to purchasers, defaults by the purchasers would decrease our cash flows and limit our
ability to make distributions.
In some instances we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we
will bear the risk that the purchaser may default, which could negatively impact our liquidity and results of operations. Even in
the absence of a purchaser default, the distribution of the proceeds of sales to our stockholders, or the reinvestment of proceeds
in other assets, will be delayed until the promissory notes or other property we may accept upon a sale are actually paid, sold,
refinanced, or otherwise disposed.
We are dependent on our own executive officers and employees.
We rely on a small number of persons, particularly E. Nelson Mills and James A. Fleming, to carry out our business and investment
strategies. Any of our senior management, including Messrs. Mills and Fleming, may cease to provide services to us at any time.
The loss of the services of any of our key management personnel or our inability to recruit and retain qualified personnel in the
future, could have an adverse effect on our business and financial results. As we expand, we will continue to try to attract and
retain qualified additional senior management and other employees, but may not be able to do so on acceptable terms.
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A breach of our privacy or information security systems could materially adversely affect our business and financial condition.
Privacy and information security risks have generally increased in recent years because of the proliferation of new technologies
and the increased sophistication and activities of perpetrators of cyber attacks. As our reliance on technology has increased, so
have the risks posed to our systems, both internal and those we have outsourced. Risks that could directly result from the occurrence
of a cyber incident include operational interruption, damage to our relationships with our tenants, potential errors from misstated
financial reports, missed reporting deadlines, and private data exposure, among others. Any or all of the preceding risks could
have a material adverse effect on our results of operations, financial condition, and cash flows. Although we make efforts to
maintain the security and integrity of these types of information technology networks and related systems, there can be no assurance
that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful
or damaging. As cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our
information security measures and to investigate and remediate any information security vulnerabilities.
Risks Related to Ownership of Our Common Stock
We may be unable to pay or maintain cash distributions or increase distributions over time, which could reduce the funds we have
available for investment and the return to our investors.
There are many factors that can affect the availability and timing of distributions to stockholders. We expect to continue to fund
distributions principally from cash flow from operations; however, from time to time, we may elect to fund a portion of our
distributions from borrowings. If we fund distributions from financings, we will have fewer funds available for the investment in,
and acquisition of, properties; thus, the overall return to our investors may be reduced. Further, to the extent distributions exceed
cash flow from operations, a stockholder's basis in our stock will be reduced and, to the extent distributions exceed a stockholder's
basis, the stockholder may recognize capital gain. We can give no assurance that we will be able to pay or maintain cash distributions
or increase distributions over time.
Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to sell your
shares at a desirable price.
The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot
control, including those described under this section and the following:
•
•
•
•
•
•
•
changes in capital market conditions that could affect valuations of real estate companies in general or other adverse
economic conditions;
our failure to meet any earnings estimates or expectations;
future sales of our common stock by our officers, directors, and significant stockholders;
global economic, legal, and regulatory factors unrelated to our performance;
investors' perceptions of our prospects;
announcements by us or our competitors of significant contracts, acquisitions, joint ventures, or capital commitments;
and
investor perceptions of the investment opportunity associated with our common stock relative to other investment
alternatives.
In addition, the stock markets, and in particular The New York Stock Exchange, have experienced extreme price and volume
fluctuations that have affected and continue to affect the market prices of equity securities of many real estate companies. In the
past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in
securities litigation, we could incur substantial costs, and our resources and the attention of management could be diverted from
our business. Furthermore, we currently have limited research coverage by securities and industry analysts. If additional securities
or industry analysts do not commence coverage of our company, the long-term trading price for our common stock could be
negatively impacted. If one or more of present or future analysts who cover us downgrade our common stock or publish inaccurate
or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage
of us or fail to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price
and trading volume to decline.
Our common stock has experienced and may continue to experience low trading volumes, which may make it more difficult for
you to sell your shares at any given time at prevailing prices.
The daily trading volumes for our common stock are, and may continue to be, relatively small compared to many other publicly
traded securities. For example, since our listing, our daily trading volume has been as low as 249,810 shares. If our stock continues
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to experience low trading volumes, it may be difficult for individuals to sell their shares when they want and at a price that is
desirable to them. Furthermore, low trading volumes for our common stock may cause the price of our stock to be highly volatile.
Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a
premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our
qualification as a REIT. Unless exempted by our board of directors, no person may own more than 9.8% of our outstanding common
stock. This restriction may have the effect of delaying, deferring, or preventing a change in control, including an extraordinary
transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for
holders of our common stock.
Our organizational documents contain provisions that may discourage a takeover of us and could depress the price of our shares
of common stock.
Our organizational documents contain provisions that may discourage a takeover of us and could depress the price of our common
stock. Our organizational documents contain provisions that may have an anti-takeover effect, inhibit a change of our management,
or inhibit in certain circumstances, tender offers for our common stock or proxy contests to change our board. These provisions
include: ownership limits and restrictions on transferability that are intended to enable us to continue to qualify as a REIT; broad
discretion of our board to take action, without stockholder approval, to issue new classes of securities that may discourage a third
party from acquiring us; the ability, through board action or bylaw amendment to opt-in to certain provisions of Maryland law
that may impede efforts to effect a change in control of us; advance notice requirements for stockholder proposals and stockholder
nominations of directors; and the absence of cumulative voting rights.
In addition, our board of directors may classify or reclassify any unissued preferred stock and establish the preferences; conversion;
or other rights, voting powers, restrictions, or limitations as to distributions, qualifications, and terms or conditions of redemption
of any such stock. Thus, our board of directors could authorize the issuance of preferred stock with terms and conditions that could
have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such
preferred stock could also have the effect of delaying, deferring, or preventing a change in control of us, including an extraordinary
transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price to
holders of our common stock.
Maryland General Corporation Law provides certain protections relating to deterring or defending hostile takeovers, which may
discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their
stock in connection with a business combination.
Under Maryland law, "business combinations" between a Maryland corporation and certain interested stockholders or affiliates
of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an
interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified
in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a
Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-
thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation, or an employee of
the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the
control shares. These provisions may therefore discourage others from trying to acquire control of us and increase the difficulty
of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the Maryland General Corporation Law, commonly
referred to as the "Maryland Unsolicited Takeover Act," could provide similar anti-takeover protection.
Our board of directors has determined to opt out of these provisions of Maryland law; in the case of the business combination
provisions of Maryland law, by resolution of our board of directors; in the case of the control share provisions of Maryland law,
pursuant to a provision in our bylaws; and in the case of certain provisions of the Maryland Unsolicited Takeover Act, pursuant
to Articles Supplementary. Only upon the approval of our stockholders, our board of directors may repeal the foregoing opt-outs
from the anti-takeover provisions of Maryland General Corporation Law.
Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net income and cash available for distributions.
Our qualification as a REIT depends upon our ability to meet requirements regarding our organization and ownership, distributions
of our income, the nature and diversification of our income and assets, and other tests imposed by the Internal Revenue Code (the
"Code"). If we fail to qualify as a REIT for any taxable year, we will be subject to federal and state income tax on our taxable
income at corporate rates and/or penalties. In addition, we would generally be disqualified from treatment as a REIT for the four
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taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for
investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would
no longer qualify for the dividends-paid deduction, and we would no longer be required to make distributions. If this occurs, we
might be required to borrow funds or liquidate some investments in order to pay the applicable tax.
Recharacterization of sale-leaseback transactions may cause us to lose our REIT status, which would reduce the return to our
stockholders.
We may purchase properties and lease them back to the sellers of such properties. While we will use our best efforts to structure
any such sale-leaseback transaction such that the lease will be characterized as a "true lease," thereby allowing us to be treated as
the owner of the property for federal income tax purposes, we can give no assurance that the Internal Revenue Service will not
challenge such characterization. In the event that any such sale-leaseback transaction is challenged and recharacterized as a
financing transaction or loan for federal income tax purposes, deductions for depreciation and cost recovery relating to such
property would be disallowed. If a sale-leaseback transaction was so recharacterized, we might fail to satisfy the REIT qualification
asset tests or income tests and, consequently, lose our REIT status. Alternatively, the amount of our REIT taxable income could
be recalculated, which might also cause us to fail to meet the distribution requirement for a taxable year.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow
and our ability to make distributions to our stockholders.
Even if we remain qualified as a REIT for federal income tax purposes, we may be subject to some federal, state, and local taxes
on our income or property. For example:
•
In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders
(which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy
the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal and
state corporate income tax on the undistributed income.
• We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar
year are less than the sum of 85% of our ordinary income, 95% of our capital gains net income, and 100% of our
undistributed income from prior years.
•
•
If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary
course of business or other nonqualifying income from foreclosure property, we must pay a tax on that income at the
highest corporate income tax rate.
If we sell a property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course
of business, our gain would be subject to the 100% "prohibited transaction" tax.
• We may perform additional, noncustomary services for tenants of our buildings through our taxable REIT subsidiary,
including real estate or non-real-estate-related services; however, any earnings related to such services are subject to
federal and state income taxes.
To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions to make distributions to
our stockholders, which could increase our operating costs and decrease the value of an investment in us.
To qualify as a REIT, we must distribute to our stockholders each year 90% of our REIT taxable income (which is determined
without regard to the dividends-paid deduction or net capital gains). At times, we may not have sufficient funds to satisfy these
distribution requirements and may need to borrow funds to maintain our REIT status and avoid the payment of income and excise
taxes. These borrowing needs could result from (i) differences in timing between the actual receipt of cash and inclusion of income
for federal income tax purposes; (ii) the effect of nondeductible capital expenditures; (iii) the creation of reserves; or (iv) required
debt or amortization payments. We may need to borrow funds at times when market conditions are unfavorable. Such borrowings
could increase our costs and reduce the value of our common stock.
To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which could delay or hinder our
ability to meet our investment objectives and lower the return to our stockholders.
To qualify as a REIT, we must satisfy tests on an ongoing basis concerning, among other things, the sources of our income, the
nature of our assets, and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders
at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for
distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
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Because of the ownership structure of our hotel property, we face potential adverse effects from changes to the applicable tax
laws.
We own one hotel property. However, under the Code, REITs are not allowed to operate hotels directly or indirectly. Accordingly,
we lease our hotel property to our taxable REIT subsidiary, or TRS. As lessor, we are entitled to a percentage of the gross receipts
from the operation of the hotel property. Marriott Hotel Services, Inc. manages the hotel under the Marriott® name pursuant to a
management contract with the TRS as lessee. While the TRS structure allows the economic benefits of ownership to flow to us,
the TRS is subject to tax on its income from the operations of the hotel at the federal and state levels. In addition, the TRS is
subject to detailed tax regulations that affect how it may be capitalized and operated. If the tax laws applicable to our TRS are
changed, we may be forced to modify the structure for owning our hotel property or selling our hotel property, which may adversely
affect our cash flows. In addition, the Internal Revenue Service, the U. S. Department of the Treasury, and Congress frequently
review federal income tax legislation, and we cannot predict whether, when, or to what extent new federal tax laws, regulations,
interpretations, or rulings will be adopted. Any of such actions may prospectively or retroactively modify the tax treatment of the
TRS and, therefore, may adversely affect our after-tax returns from our hotel property.
Legislative or regulatory action could adversely affect investors.
In recent years, numerous legislative, judicial, and administrative changes have been made in the provisions of federal and state
income tax laws applicable to investments similar to an investment in shares of Columbia Property Trust. Additional changes to
tax laws are likely to continue to occur in the future, and we cannot assure you that any such changes will not adversely affect the
taxation of our stockholders. Any such changes could have an adverse effect on an investment in shares or on the market value or
the resale potential of our properties. You are urged to consult with your own tax advisor with respect to the impact of recent
legislation on your ownership of shares and the status of legislative, regulatory, or administrative developments and proposals,
and their potential effect on ownership of shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
Overview
As of December 31, 2014, we owned interests in 35 office properties and one hotel located in 12 states and the District of Columbia.
All of the properties are wholly owned except for one, which is owned through a consolidated subsidiary. As of December 31,
2014, our office properties were approximately 93.3% leased.
Property Statistics
The tables below include statistics for properties that we own directly as well as through our consolidated subsidiary. Annualized
Lease Revenue is (i) annualized rental payments (defined as base rent plus operating expense reimbursements, excluding rental
abatements) for executed and commenced leases, as well as leases executed but not yet commenced for vacant space, and
(ii) annualized parking revenues, payable either under the terms of an executed lease or vendor contract. Annualized Lease Revenue
excludes rental payments for executed leases that have not yet commenced for space covered by an existing lease.
Page 14
The following table shows lease expirations of our office properties as of December 31, 2014, and during each of the next 10 years
and thereafter. This table assumes no exercise of renewal options or termination rights.
Year of Lease Expiration
Vacant
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Thereafter
2014 Annualized
Lease Revenue
(in thousands)
Rentable
Square Feet
(in thousands)
Percentage of
2014 Annualized
Lease Revenue
$
$
—
27,744
59,723
72,256
41,002
16,436
40,176
62,007
25,151
24,503
5,095
116,814
490,907
1,034
803
1,238
2,476
935
415
1,308
1,999
735
641
150
3,694
15,428
—%
6%
12%
15%
8%
3%
8%
13%
5%
5%
1%
24%
100%
The following table shows the geographic diversification of our office properties as of December 31, 2014.
Location
San Francisco
Washington, D.C.
Northern New Jersey
Houston
Cleveland
Atlanta
Baltimore
Chicago
New York
Boston
Pittsburgh
Denver
Other(1)
2014 Annualized
Lease Revenue
(in thousands)
Leased
Square Feet
(in thousands)
Percentage of
2014 Annualized
Lease Revenue
$
94,100
61,072
47,751
41,775
38,526
38,049
33,533
30,808
28,111
19,949
15,329
13,035
28,869
1,866
878
1,729
992
1,201
1,625
961
1,325
354
948
824
478
1,213
14,394
19%
12%
10%
9%
8%
8%
7%
6%
6%
4%
3%
3%
5%
100%
(1) No more than 3% is attributable to any individual geographic location.
$
490,907
Page 15
The following table shows the tenant industry diversification of our office properties as of December 31, 2014.
Industry
Legal Services
Depository Institutions
Business Services
Electric, Gas & Sanitary Services
Security & Commodity Brokers
Engineering & Management Services
Communication
Industrial Machinery & Equipment
Transportation Equipment
Nondepository Institutions
Heavy Construction
Miscellaneous Retail
Other(1)
2014 Annualized
Lease Revenue
(in thousands)
Leased
Square Feet
(in thousands)
Percentage of
2014 Annualized
Lease Revenue
$
87,285
69,314
41,057
38,856
32,492
30,576
28,239
23,253
16,457
12,600
12,350
12,298
86,130
1,564
2,003
1,160
1,827
764
939
1,096
1,027
479
378
332
575
2,250
14,394
18%
14%
8%
8%
7%
6%
6%
5%
3%
3%
3%
3%
16%
100%
(1) No more than 3% is attributable to any individual industry.
$
490,907
The following table shows the tenant diversification of our office properties as of December 31, 2014.
Tenant
Wells Fargo
Jones Day
AT&T
PSEG Services
IBM
Key Bank
Pershing
Westinghouse
T. Rowe Price
CH2M Hill
Foster Wheeler
Other(1)
2014 Annualized
Lease Revenue
(in thousands)
Percentage of
2014 Annualized
Lease Revenue
$
$
27,924
27,581
21,704
20,735
20,506
19,819
17,158
15,329
15,094
13,035
12,350
279,672
490,907
6%
6%
4%
4%
4%
4%
3%
3%
3%
3%
3%
57%
100%
(1) No more than 3% is attributable to any individual tenant.
The following table shows certain information related to significant properties as of December 31, 2014.
Number
of
Buildings
Leased
Square Feet
(in thousands)
Total Real
Estate, Net
(in thousands)
% of
Total
Assets
2014 Annualized
Lease Revenue
(in thousands)
Average
Annualized
Lease
Revenue per
Square Foot Occupancy
2
627
$
535,746
13.1% $
48,161
$
76.8
91.7%
Property &
Location
Market Square
Buildings,
Washington, D.C.
Page 16
ITEM 3.
LEGAL PROCEEDINGS
From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently
involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of
operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Page 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our common stock was listed on the New York Stock Exchange (the "NYSE") on October 10, 2013, under the symbol "CXP."
Prior to October 10, 2013, none of our common stock was listed on a national securities exchange and there was no established
public trading market for such shares. As of January 31, 2015, we had approximately 125.1 million shares of common stock
outstanding held by a total of 73,507 stockholders of record.
The closing high and low prices for our stock during 2014 and the fourth quarter of 2013 were as follows:
2014 Quarters:
First
Second
Third
Fourth
2013 Quarters:
First
Second
Third
Fourth
Distributions
High
Low
Dividends
$
$
$
$
$
27.73
29.13
26.09
25.79
$
$
$
$
n/a
n/a
n/a
25.07
$
23.12
26.01
23.85
23.80
n/a
n/a
n/a
22.16
$
$
$
$
$
$
$
$
0.30
0.30
0.30
0.30
0.38
0.38
0.38
0.30
We intend to make distributions each taxable year (not including a return of capital for federal income tax purposes) equal to at
least 90% of our taxable income. One of our primary goals is to pay regular quarterly distributions to our stockholders. The amount
of distributions paid and the taxable portion thereof in prior periods are not necessarily indicative of amounts anticipated in future
periods.
The amount of distributions to common stockholders is determined by our board of directors and is dependent upon a number of
factors, including funds deemed available for distribution based principally on our current and future projected operating cash
flows, reduced by capital requirements necessary to maintain our existing portfolio. In determining the amount of distributions to
common stockholders, we also consider our future capital needs and future sources of liquidity, as well as the annual distribution
requirements necessary to maintain our status as a REIT under the Code. Investments in new property acquisitions and first-
generation capital improvements, as well as equity repurchases, are generally funded with recycled capital proceeds from property
sales, debt, or cash on hand.
Page 18
Performance Graph
The following graph compares the cumulative total return of our common stock with the Morgan Stanley REIT Index, the FTSE
NAREIT Equity Index, and the SNL US Office Index for the period beginning on October 10, 2013 (the date of our initial listing
on the NYSE) through December 31, 2014. The graph assumes a $100 investment in each of the indices on October 10, 2013, and
the reinvestment of all dividends.
Index
Columbia Property Trust
S&P 500 Index
Morgan Stanley REIT Index
FTSE NAREIT US Real Estate Index
Share Repurchases
October 10, 2013
December 31, 2013 December 31, 2014
$
$
$
$
100.00
100.00
100.00
100.00
$
$
$
$
112.10
109.70
97.70
97.68
$
$
$
$
119.00
124.70
127.38
127.40
During the quarter ended December 31, 2014, we redeemed shares as follows:
Period
October 2014
November 2014
December 2014
Total Number
of Shares
Purchased(1)
Average Price
Paid per
Share(1)
— $
— $
838
$
—
—
25.35
(1) All activity for the fourth quarter related to the remittances of shares for income taxes associated with accelerated
vesting of certain stock grants made under the Long-Term Incentive Plan (see Note 7, Stockholders' Equity).
Unregistered Issuance of Securities
During the years 2012, 2013, and 2014, we did not issue any securities that were not registered under the Securities Act of 1933.
Page 19
Securities Authorized for Issuance under Equity Compensation Plans
We have reserved 2,000,000 shares of common stock for issuance under the Long-Term Incentive Plan and 25,000 shares of
common stock under the Independent Director Stock Option Plan. See Note 7, Stockholders' Equity, for more information about
these plans. The Long-Term Incentive Plan was approved by our shareholders in 2013, and the Independent Director Stock Option
Plan was approved by our stockholders in 2003, before we commenced our initial public offering. The following table provides
summary information about securities issuable under our equity compensation plans as of December 31, 2014:
Number of securities
to be issued upon
exercise of
outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding options,
warrants, and rights
Common stock
issued under the
Long-Term
Incentive Plan
Number of securities
remaining available for
future issuance under
equity compensation
plans(1)
7,375
$
—
7,375
$
48.00
—
48.00
164,848
—
164,848
1,852,777
—
1,852,777
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
(1)
Includes 1,835,152 shares reserved for issuance under the Long-Term Incentive Plan and 17,625 shares reserved for issuance under
the Independent Director Stock Option Plan.
Page 20
ITEM 6.
SELECTED FINANCIAL DATA
The following selected financial data for 2014, 2013, 2012, 2011, and 2010 should be read in conjunction with the accompanying
consolidated financial statements and related notes in Item 8, Financial Statements and Supplementary Data, hereof (amounts in
thousands, except per-share data).
Total assets
Total stockholders' equity
Outstanding debt
Outstanding long-term debt
Obligations under capital leases
Total revenues(1)
Net income attributable to the common
stockholders of Columbia Property Trust, Inc.
Net cash provided by operating activities
Net cash provided by (used in) investing
activities
Net cash provided by (used in) financing
activities
Distributions paid
Net proceeds raised through issuance of our
common stock(2)
Net debt proceeds (repayments)(2)
Acquisitions, earnest money paid, and
investments in real estate(2)
Per weighted-average common share data:
Net income (loss) – basic(3)
Net income (loss) – diluted(3)
Distributions declared(3)
Weighted-average common shares
outstanding – basic(3)
Weighted-average common shares
outstanding – diluted(3)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2014
2013
2012
2011
As of December 31,
4,738,878
2,733,478
1,680,066
1,469,245
120,000
2014
540,797
92,635
236,906
$
$
$
$
$
$
$
$
4,592,482
2,787,823
1,489,179
1,477,563
120,000
$
$
$
$
$
5,730,949
3,163,980
1,650,296
1,621,541
586,000
$
$
$
$
$
5,776,567
3,346,655
1,469,486
1,433,295
646,000
Years Ended December 31,
2013
526,578
15,720
218,329
2012
494,271
48,039
252,839
31,047
$
$
$
$
$
$
$
$
2011
492,887
56,642
279,158
2010
5,371,685
3,455,697
886,939
838,556
646,000
2010
433,885
23,266
270,106
$
$
$
$
$
$
$
$
(23,788) $
495,389
(666,090) $
(312,708)
(163,183) $
(667,417) $
(269,729) $
149,962
$
191,473
— $
46,402
$
$
256,020
118,388
$
$
(11,739) $
(160,940) $
(28,191) $
387,610
270,720
130,289
375,222
$
$
$
$
(20,429)
313,815
483,559
(74,742)
(416,991) $
(44,856) $
(233,798) $
(638,783) $
(318,948)
0.74
0.74
1.20
$
$
$
0.12
0.12
1.44
$
$
$
0.35
0.35
1.88
$
$
$
0.42
0.42
2.00
$
$
$
0.18
0.18
2.28
124,860
134,085
136,672
135,680
131,212
124,918
134,085
136,672
135,680
131,212
(1) The amounts for 2012, 2011, and 2010 have been adjusted to conform with current-period presentation, including classifying revenues
generated by sold properties as discontinued operations (see Note 12, Discontinued Operations, to the accompanying consolidated
financial statements).
(2) Activity is presented on a cash basis. Please refer to our accompanying consolidated statements of cash flows.
(3) Where applicable, share and per-share amounts have been retroactively adjusted to reflect the impact of the August 14, 2013, four-
for-one reverse stock split for all periods presented (See Note 7, Stockholders' Equity).
Page 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the Selected Financial Data in Item 6, Selected Financial
Data, above and our accompanying consolidated financial statements and notes thereto. See also Cautionary Note Regarding
Forward-Looking Statements preceding Part I.
Overview
We continue to focus on improving our market concentration by growing our economic presence in key markets through strategic
investment opportunities, and by divesting of properties with single tenants, in suburban locations, and/or in low barrier markets,
which we believe face more challenging appreciation prospects. In January 2015, we acquired the 116 Huntington Avenue Building
in Boston, Massachusetts, for $152.0 million, and the a portfolio of two assets, containing the 315 Park Avenue South Building
in New York City, New York, and the 1881 Campus Commons Building in Reston, Virginia, for $436.0 million. During 2014, we
acquired two properties in San Francisco, California, for a total of $539.0 million, sold a single-tenant asset in Atlanta for
$290.0 million, and sold four smaller properties in outlying markets for total gross proceeds of $135.5 million.
As a result of these capital recycling transactions, we have improved our concentration in key markets and central business districts,
as well as reduced our exposure to single-tenant assets. Over the intermediate and longer term, we are continuing to seek to optimize
the allocation between our traditional, stabilized core investments, and growth-oriented, core-plus, and value-add investments.
While transitioning the portfolio to more growth-oriented, core-plus, and value-add properties is likely to cause some dilution in
earnings for a period of time, we believe that it will improve the opportunity for growth over the longer term.
Liquidity and Capital Resources
Overview
Cash flows generated from the operation of our properties are primarily used to fund dividends to our stockholders and recurring
expenditures. We maintained a quarterly stockholder distribution rate of $0.30 per share throughout 2014. The amount of
distributions to common stockholders is determined by our board of directors and is dependent upon a number of factors, including
funds deemed available for distribution based principally on our current and future projected operating cash flows, reduced by
capital requirements necessary to maintain our existing portfolio. In determining the amount of distributions to common
stockholders, we also consider our future capital needs and future sources of liquidity, as well as the annual distribution requirements
necessary to maintain our status as a REIT under the Code. Investments in new property acquisitions and first-generation capital
improvements are generally funded with recycled capital proceeds from property sales, debt, or cash on hand.
Short-term Liquidity and Capital Resources
During 2014, we generated net cash flows from operating activities of $236.9 million, which consists primarily of receipts from
tenants for rent and reimbursements, reduced by payments for operating costs, administrative expenses, and interest expense.
During the same period, we paid total distributions to stockholders of $150.0 million.
During 2014, we acquired two properties in San Francisco, California, for a total of $539.0 million by assuming two mortgage
notes totaling $203.0 million and funding the balance with a combination of cash on hand and borrowings under our line of credit.
During the same period, we sold five properties for total gross proceeds of $425.5 million, which enabled us to fully repay our
line of credit in October 2014. In January 2015, we acquired three properties in two transactions for a total of $588.0 million with
a $300 million bridge loan, $140.0 million of borrowings on our line of credit, and cash generated from the 2014 property sales
described above.
On a short-term basis, we expect our primary sources of capital to be operating cash flows and proceeds from select property
dispositions. We expect that our principal demands for funds will be distributions to stockholders, capital improvements to our
existing assets, operating expenses, property acquisitions, and interest and principal on current debt and any future debt financings.
We believe that we have adequate liquidity and capital resources to meet our current obligations as they come due. As of January 31,
2015, we had access to $369.0 million of our borrowing capacity under the JPMorgan Chase Credit Facility. Additionally, in 2014,
we filed a universal shelf-registration statement with the Securities and Exchange Commission, which provides us with future
flexibility to offer a variety of debt and equity securities, from time-to-time in one or more offerings.
Long-term Liquidity and Capital Resources
Over the long term, we expect that our primary sources of capital will include operating cash flows, select property dispositions,
and proceeds from secured or unsecured borrowings from third-party lenders. We may also opt to offer shares of our common
stock from time to time, subject to current stock price and market conditions. We expect that our primary uses of capital will
Page 22
continue to include stockholder distributions; acquisitions; capital expenditures, such as building improvements, tenant
improvements, and leasing costs; and repaying or refinancing debt.
Consistent with our financing objectives and operational strategy, we continue to maintain low debt levels, historically less than
40% of the cost of our assets. This conservative leverage goal could reduce the amount of current income we can generate for our
stockholders, but it also reduces their risk of loss. We believe that preserving investor capital while generating stable current
income is in the best interest of our stockholders. Our debt-to-real-estate-asset ratio is calculated using the outstanding debt balance
and real estate at cost. As of December 31, 2014, our debt-to-real-estate-asset ratio (calculated on a cost basis) was approximately
32.2%.
Contractual Commitments and Contingencies
As of December 31, 2014, our contractual obligations will become payable in the following periods (in thousands):
Contractual Obligations
Debt obligations
Interest obligations on debt(1)
Capital lease obligations(2)
Operating lease obligations
Total
1,680,574
$
2015
2016-2017
2018-2019
$
210,511
$
748,188
$
396,875
Thereafter
325,000
$
264,859
120,000
216,076
66,301
—
2,557
95,361
—
5,259
45,526
—
5,463
57,671
120,000
202,797
705,468
Total
$
2,281,509
$
279,369
$
848,808
$
447,864
$
(1)
Interest obligations on variable-rate debt are measured at the rate at which they are effectively fixed with interest rate
swap agreements (where applicable), a portion of which is reflected as loss on interest rate swaps in our consolidated
statements of operations of the accompanying consolidated financial statements. Interest obligations on all other debt
instruments are measured at the contractual rate. See Item 7A, Quantitative and Qualitative Disclosure About Market
Risk, for more information regarding our interest rate swaps.
(2) Amounts include principal obligations only. We made interest payments on these obligations of $7.2 million during 2014,
all of which was funded with interest income earned on the corresponding investments in development authority bonds.
2018 Bonds Payable
In 2011, we issued $250.0 million of seven-year, unsecured 5.875% senior notes at 99.295% of their face value. We received
proceeds from the 2018 Bonds Payable, net of fees, of $246.7 million. The 2018 Bonds Payable require semiannual interest
payments in April and October based on a contractual annual interest rate of 5.875%, which is subject to adjustment in certain
circumstances. The principal amount of the 2018 Bonds Payable is due and payable on the maturity date, April 1, 2018. Interest
payments of $14.7 million were made on the 2018 Bonds Payable during 2014 and 2013.
The restrictive covenants on the 2018 Bonds Payable as defined pursuant to an indenture include:
•
•
•
•
•
limits to our ability to merge or consolidate with another entity or transfer all or substantially all of our property and
assets, subject to important exceptions and qualifications;
a limitation on the ratio of debt to total assets, as defined, to 60%;
limits to our ability to incur debt if the consolidated income available for debt service to annual debt service charge, as
defined, for four previous consecutive fiscal quarters is less than 1.5:1 on a pro forma basis;
limits to our ability to incur liens if, on an aggregate basis for us, the secured debt amount would exceed 40% of the value
of the total assets; and
a requirement that the ratio of unencumbered asset value, as defined, to total unsecured debt be at least 150% at all times.
As of December 31, 2014, we believe we were in compliance with the restrictive covenants on the 2018 Bonds Payable.
Universal Shelf Registration Statement
On September 15, 2014, we filed a universal shelf registration statement on Form S-3 (No. 333-198764) with the Securities and
Exchange Commission (the "Universal Shelf Registration Statement"), which was effective upon filing. The Universal Shelf
Registration Statement provides us with future flexibility to offer, from time to time and in one or more offerings, debt securities,
common stock, preferred stock, depositary shares, warrants, or any combination thereof. The terms of any such future offerings
would be established at the time of an offering.
Page 23
JPMorgan Chase Credit Facility
The JPMorgan Chase Credit Facility has a capacity of $500 million and matures on August 21, 2017, with a one-year extension
option. Amounts outstanding under the JPMorgan Chase Credit Facility bear interest at the London Interbank Offered Rate
("LIBOR"), plus an applicable margin ranging from 1.00% to 1.70% for LIBOR borrowings, or an applicable base rate, plus an
applicable margin ranging from 0.00% to 0.70% for base rate borrowings, based on our applicable credit rating. The per annum
facility fee on the aggregate revolving commitment (used or unused) ranges from 0.15% to 0.35%, also based on our applicable
credit rating. Additionally, we have the ability to increase the capacity of the JPMorgan Chase Credit Facility up to $800.0 million,
subject to certain limitations.
We are subject to a $25.0 million limitation on letters of credit that may be issued under the JPMorgan Chase Credit Facility. The
JPMorgan Chase Credit Facility contains the following restrictive covenants:
•
•
•
•
•
•
•
limits the ratio of debt to total asset value, as defined, to 50% or less during the term of the facility;
limits the ratio of secured debt to total asset value, as defined, to 40% or less during the term of the facility;
requires the ratio of unencumbered asset value, as defined, to total unsecured debt to be at least 2:1 at all times;
requires maintenance of certain interest and fixed-charge coverage ratios;
limits the ratio of secured recourse debt to total asset value, as defined, to 10% or less at all times;
requires maintenance of certain minimum tangible net worth balances; and
limits investments that fall outside our core investments of improved office properties located in the United States.
As of December 31, 2014, we believe we were in compliance with the restrictive covenants on our outstanding debt obligations.
$450 Million Term Loan
The $450 Million Term Loan matures on February 3, 2016, with two, one-year extension options available. The interest rate on
the $450 Million Term Loan continues to be effectively fixed with an interest rate swap agreement. Based on the terms of the
interest rate swap and our current credit rating, the interest rate on the $450 Million Term Loan is effectively fixed at 2.07%.
Additionally, we have the ability to increase the borrowing capacity of the $450 Million Term Loan up to $700.0 million, subject
to certain limitations.
Bridge Loan
We entered into the Bridge Loan on January 6, 2015. The $300 million in proceeds from the Bridge Loan was used to fund the
real estate acquisitions in January 2015. At our option, borrowings under the Bridge Loan bear interest at either (i) an alternate
base rate plus an applicable margin ranging from 0.00% to 0.80% or (ii) LIBOR plus an applicable margin based on four stated
pricing levels ranging from 1.00% to 1.80%, in each case based on our credit rating. Subject to customary conditions, we may
increase the borrowings under the Bridge Loan two times, up to an aggregate additional amount of $150 million. Each increase
must be in an increment of $25 million.
The Bridge Loan matures on July 6, 2015, with a six-month extension at our option, and may be prepaid at any time without
premium or penalty. The Bridge Loan contains restrictive covenants that are substantially similar to the covenants contained in
the JPMorgan Chase Credit Facility. In addition, amounts under the Bridge Loan must be repaid with the net cash proceeds of
certain financing activities and asset sales, including (i) the issuance of common or preferred equity securities, (ii) the incurrence
of mortgage indebtedness on any property, (iii) the incurrence of unsecured indebtedness, or (iv) the sale of certain real estate
assets of or any equity interests.
Debt Repayments, Maturities, and Interest Payments
On October 8, 2014, we repaid the mortgage note for the 544 Lakeview Building (the "544 Lakeview Building Mortgage Note")
for $9.1 million, resulting in a loss on early extinguishment of debt of $23,000. The original maturity date for the 544 Lakeview
Building mortgage note was December 1, 2014. There were no other debt maturities or repayments during 2014.
During 2014 and 2013, we made interest payments of approximately $56.1 million and $59.6 million, respectively, related to our
line of credit and notes payable. In addition, we made interest payments of approximately $14.7 million in both 2014 and 2013,
related to our 2018 Bonds Payable (see Note 5, Bonds Payable).
Page 24
Results of Operations
Overview
As of December 31, 2014, we owned controlling interests in 35 office properties, which were approximately 93.3% leased, and
one hotel. Our real estate operating income was $88.9 million for 2014, which represents a decrease from $94.6 million for 2013,
primarily due to the impact of 2014 impairment charges and acquisition expenses incurred in connection with our portfolio
repositioning activities, partially offset by one-time general and administrative expenses incurred in 2013 to transition the company
to a self-managed platform. In the near-term, we expect future operating income to continue to fluctuate, primarily based on leasing
activities, property dispositions, and acquisitions for our portfolio.
Portfolio Activity
During 2014, we entered into leases for 1.1 million square feet of office space with an average lease term of 11.8 years. This
activity consisted of 359,000 square feet of new leasing and 741,000 square feet of renewal leasing. For leases executed during
he year, we experienced a 7.3% increase in rental rates on a GAAP basis.
Comparison of the year ended December 31, 2014 versus the year ended December 31, 2013
Continuing Operations
Rental income was $414.5 million for 2014, which represents an increase from $406.9 million for 2013, due to the acquisition of
the 221 Main Street Building and the 650 California Street Building in April 2014 and September 2014, respectively, partially
offset by the impact of 2014 dispositions. We expect rental income to fluctuate based on leasing, acquisition, and disposition
activity.
Tenant reimbursements and property operating costs were $95.4 million and $163.7 million, respectively, for 2014, which represents
a slight increase as compared with $90.9 million and $154.6 million, respectively, for 2013, as the additional costs related to our
recently acquired properties and increased property taxes resulting from annual assessments were partially offset by the impact
of the disposition of properties in late 2013 and 2014. Tenant reimbursements and property operating costs are expected to fluctuate
with changes in our portfolio.
Hotel income, net of hotel operating costs, was $4.1 million for 2014, which represents a decrease as compared with $5.4 million
for 2013, primarily due to unfavorable weather in Cleveland, Ohio, and renovations at the Key Center Marriott, which resulted
in lower occupancy during the first quarter of 2014. Hotel income and hotel operating costs are primarily driven by the local
economic conditions and, as a result, are expected to fluctuate in the future primarily based on changes in the supply of, and
demand for, hotel and banquet space in Cleveland, Ohio, similar to that offered by the Key Center Marriott hotel.
Other property income was $8.0 million for 2014, which represents an increase from $5.0 million for 2013, primarily due to fees
earned in connection with a lease termination at one of the Market Square Buildings and the 222 East 41st Street Building in 2014.
Future other property income is expected to fluctuate primarily as a result of lease restructuring and termination activities.
Asset and property management fees were $2.3 million for 2014, which represents a decrease from $6.4 million for 2013, due to
the termination of the Advisory Agreement effective February 28, 2013. See Note 10, Related-Party Transactions and Agreements,
for additional information. Future asset and property management fees are expected to fluctuate with acquisition and disposition
activity, as no related-party asset or property management fees will be incurred.
Depreciation was $117.8 million for 2014, which represents an increase from $108.1 million for 2013, due to the timing of current
year acquisitions, net of dispositions, and the completion of capital improvements at certain of our existing properties. Depreciation
is expected to fluctuate in future periods due to additional changes in the composition of our portfolio and ongoing capital
improvements at our existing properties.
Amortization was relatively stable at $78.8 million and $78.7 million for 2014 and 2013, respectively, as the impact of 2014
acquisitions was offset by the impact of 2013 and 2014 dispositions. Amortization is expected to fluctuate in future periods due
to future leasing and future acquisitions and dispositions.
In 2014, we recognized the following impairment losses in connection with changing our investment strategy and disposition
expectations for the following assets: $13.6 million on the 160 Park Avenue Building in Florham Park, New Jersey, in the first
quarter of 2014 (sold in June 2014); $1.4 million on the 200 South Orange Building in Orlando, Florida, in the second quarter of
2014 (sold in June 2014); and $10.1 million on the Bannockburn Lake III Building in Bannockburn, Illinois, in the fourth quarter
of 2014 (currently being marketed for sale). We have identified $500 million to $600 million of real estate assets that are candidates
Page 25
for near-term disposition. Future impairment losses on these properties will depend principally on the progress of our marketing
efforts, and the disposition strategies evaluated and, ultimately, pursued.
General and administrative expenses were $31.3 million for 2014, which represents a decrease as compared with $61.9 million
for 2013, primarily due to the impact of transitioning to a self-managed structure and the expiration of contracts related thereto.
See Note 10, Related-Party Transactions and Agreements, of the accompanying financial statements for details. We expect general
and administrative expenses to fluctuate somewhat in the near-term as we continue to develop our regionalized investment and
asset management platform.
We incurred $4.1 million in listing costs during 2013 in connection with listing our shares on the New York Stock Exchange on
October 10, 2013 and no listing costs in 2014.
We incurred total acquisition expenses of $14.1 million for 2014 in connection with acquiring two properties in San Francisco,
California, and no acquisition expenses in 2013. See Note 3, Real Estate and Other Transactions, of the accompanying financial
statements for additional details. We expect future acquisition expenses to fluctuate with acquisition activity.
Interest expense was $75.7 million for 2014, which represents a decrease as compared with $101.9 million for 2013, primarily
due to settling $466.0 million of our $586.0 million total capital lease obligations, and the related and offsetting development
authority bond investments, in December 2013. Interest expense is expected to fluctuate with future acquisitions and financing
activities.
Interest and other income was $7.3 million for 2014, which represents a decrease from $34.0 million for 2013, due to the December
2013 settlement of $466.0 million of the $586.0 million total development authority bonds, and the related and offsetting obligations
under capital leases. Interest income is expected to remain at comparable levels in future periods, as the majority of this activity
consists of interest income earned on investments in development authority bonds, with a remaining term of approximately seven
years as of December 31, 2014. Interest income earned on investments in development authority bonds is entirely offset by interest
expense incurred on the corresponding capital leases.
We recognized a loss on interest rate swaps that do not qualify for hedge accounting treatment of approximately $0.4 million for
2014, as compared with $0.3 million for 2013. We anticipate that future gains and losses on interest rate swaps that do not qualify
for hedge accounting treatment will fluctuate, primarily due to changes in the estimated fair value of our interest rate swaps relative
to then-current market conditions. Market value adjustments to swaps that qualify for hedge accounting treatment are recorded
directly to equity and therefore do not impact net income.
We recognized a loss on early extinguishment of debt of $23,000 in 2014, related to the early repayment of the $9.1 million
mortgage note for the 544 Lakeview Building. This note was originally due on December 1, 2014, and fully repaid on October 8,
2014.
We recognized gains of sales of real estate assets of $75.3 million in 2014. In July 2014, we sold the 7031 Columbia Gateway
Drive Building in Columbia, Maryland, for $59.5 million, exclusive of transaction costs, yielding a gain on sale of real estate
assets of $7.7 million; in August 2014, we sold the 9 Technology Drive Building in Westborough, Massachusetts, for $47.0 million,
exclusive of purchase price adjustments and transaction costs, yielding a gain on sale of real estate assets of $11.1 million; and in
October 2014, we sold the Lenox Park Property in Atlanta, Georgia, for $290.0 million, exclusive of transaction costs, yielding a
gain on sale of real estate assets of approximately $56.5 million.
Discontinued Operations
Loss from discontinued operations was $2.0 million for 2014, as compared with $10.1 million for 2013. The decrease in loss from
discontinued operations is due to our adoption of Accounting Standards Update 2014-08, Reporting Discontinued Operations and
Disclosures of Disposals of Components on an Entity ("ASU 2014-08"), which requires only dispositions that represent a strategic
shift in our operations be reclassified to discontinued operations. Therefore, the operating results of properties disposed of
subsequent to April 1, 2014, have not been reclassified to discontinued operations. As further explained in Note 12, Discontinued
Operations, to the accompanying consolidated financial statements, prior to our adoption of ASU 2014-08, properties meeting
certain criteria for disposal were classified as "discontinued operations" in the accompanying consolidated statements of operations
for all periods presented.
Net Income
Net income attributable to Columbia Property Trust was $92.6 million, or $0.74 per share, for 2014, which represents an increase
from $15.7 million, or $0.12 per share, for 2013, primarily due to gains recognized on 2014 property sales. We expect future
earnings to fluctuate as a result of leasing activity at our existing properties and acquisition and disposition activity.
Page 26
Comparison of the year ended December 31, 2013 versus the year ended December 31, 2012
Rental income was $406.9 million for 2013, which represents an increase from $381.8 million for 2012, primarily due to the
acquisition of the 333 Market Street Building in December 2012.
Tenant reimbursements remained relatively stable at $90.9 million for 2013, as compared with $88.4 million for 2012. Property
operating costs, however, increased to $154.6 million for 2013 from $147.2 million for 2012, primarily due to increases in property
taxes resulting from annual reassessments; increased costs primarily driven by noncapital project initiatives, such as facade
maintenance and build-outs to prepare space for leasing; and the acquisition of the 333 Market Street Building in December 2012.
Tenant reimbursements of the additional 2013 property operating costs were neutralized by the impact of concessions offered with
new and modified leases.
Hotel income, net of hotel operating costs, remained relatively stable at $5.4 million for 2013 and $4.7 million for 2012.
Other property income was $5.0 million for 2013, which represents an increase from $1.0 million for 2012, primarily due to fees
earned in connection with lease restructurings and terminations during the fourth quarter of 2013.
Asset and property management fees were $6.4 million for 2013, which represents a decrease from $31.8 million for 2012, due
to terminating the Advisory Agreement effective February 28, 2013, as further discussed in Note 10, Related-Party Transactions
and Agreements.
Depreciation was $108.1 million for 2013, which represents an increase from $98.7 million for 2012, primarily due to the acquisition
of the 333 Market Street Building in December 2012 and capital improvements at certain of our existing properties.
Amortization was $78.7 million for 2013, which represents a decrease from $86.5 million for 2012, primarily due to the expiration
of in-place leases at our properties during 2012 and 2013 and lease terminations.
General and administrative expenses were $61.9 million for 2013, which represents an increase from $24.6 million for 2012,
primarily due to the impact of transitioning to a self-managed platform (see Note 10, Related-Party Transactions and Agreements,
for details).
We incurred $4.1 million in listing costs during 2013 in connection with listing our shares on the NYSE on October 10, 2013.
Acquisition fees and expenses were $1.9 million for 2012, attributable to the December 2012 acquisition of the 333 Market Street
Building in San Francisco, California.
Interest expense was $101.9 million for 2013 and 2012, as the impact of the settlement of the development authority bonds in
December 2012 and 2013 was offset by the 333 Market Street Building mortgage note, assumed at acquisition in December 2012.
Interest and other income was $34.0 million for 2013, which represents a decrease from $39.9 million for 2012, due to the settlement
of the development authority bonds and the related obligations under capital lease in December 2012 and 2013.
We recognized a loss on interest rate swaps that do not qualify for hedge accounting treatment of approximately $0.3 million for
2013, as compared with $1.2 million for 2012.
Discontinued Operations
Income (loss) from discontinued operations was $(10.1) million for 2013, which represents a decrease from $26.6 million for
2012, primarily due to impairment charges related to the 18 Property Sale (as defined hereafter), which closed in 2013, and gains
on 2012 property sales. As further explained in Note 12, Discontinued Operations, to the accompanying consolidated financial
statements during 2012 and 2013, properties meeting certain criteria for disposal are classified as "discontinued operations" in the
accompanying consolidated statements of operations for all periods presented. For 2013 and 2012, discontinued operations include
the properties sold through December 31, 2013. See Note 12, Discontinued Operations, to the accompanying consolidated financial
statements for additional discussion of these transactions.
Net Income
Net income attributable to Columbia Property Trust was $15.7 million, or $0.12 per share, for 2013, which represents a decrease
from $48.0 million, or $0.35 per share, for 2012. The decrease is primarily due to impairment losses incurred in connection with
the 18 Property Sale, partially offset by additional income from the full-year impact of acquiring 333 Market Street in December
2012 and new leases and lease restructuring activities in 2013.
Page 27
Funds From Operations
Funds from operations ("FFO") is not computed in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").
This non-GAAP measure is used by many investors and analysts who follow the real estate industry to measure the performance
of an equity REIT. We consider FFO a useful measure of our performance because it principally adjusts for the effects of GAAP
depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time.
Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful
supplemental measure of our performance. We believe that the use of FFO, combined with the required GAAP presentations, is
beneficial in improving our investors' understanding of our operating results and allowing for comparisons among other companies
who define FFO as we do.
FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), represents net income (computed in
accordance with GAAP), excluding gains (losses) on sales of real estate and impairments of real estate assets, plus real estate-
related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures, for both continuing
and discontinued operations. We compute FFO in accordance with NAREIT's definition, which may differ from the methodology
for calculating FFO, or similarly titled measures, used by other companies, and this may not be comparable to those presentations.
FFO does not represent amounts available for management's discretionary use because of needed capital replacement or expansion,
debt service obligations, or other commitments and uncertainties, nor is it indicative of funds available to fund our cash needs,
including our ability to make distributions. Our presentation of FFO should not be considered as an alternative to net income
(computed in accordance with GAAP) as an indicator of financial performance.
Reconciliations of net income to FFO (in thousands):
Years ended December 31,
2013
2012
2014
Reconciliation of Net Income to Funds From Operations:
Net income attributable to the common stockholders of Columbia
Property Trust, Inc.
$
92,635
$
15,720
$
48,039
Adjustments:
Depreciation of real estate assets
Amortization of lease-related costs
Impairment loss on real estate assets
Gain on sale of real estate assets – continuing operations
Gain (loss) on sale of real estate assets – discontinued operations
Total Funds From Operations adjustments
117,766
78,843
25,130
(75,275)
1,627
148,091
119,835
86,300
29,737
—
(11,225)
224,647
120,307
102,234
18,467
—
(20,117)
220,891
Funds From Operations
$
240,726
$
240,367
$
268,930
Page 28
Portfolio Information
As of December 31, 2014, we owned controlling interests in 35 office properties and one hotel, which includes 52 operational
buildings. These properties comprise approximately 15.7 million square feet of commercial space located in 12 states and the
District of Columbia. All of our office properties are wholly owned except for one, which is owned through a consolidated
subsidiary. As of December 31, 2014, the office properties were approximately 93.3% leased. Annualized Lease Revenue is defined
in Item 2, Properties.
As of December 31, 2014, our five highest geographic concentrations were as follows:
Location
San Francisco
Washington, D.C.
Northern New Jersey
Houston
Cleveland
2014 Annualized
Lease Revenue
(in thousands)
Leased
Square Feet
(in thousands)
Percentage of
2014 Annualized
Lease Revenue
$
$
94,100
61,072
47,751
41,775
38,526
283,224
1,866
878
1,729
992
1,201
6,666
19%
12%
10%
9%
8%
58%
As of December 31, 2014, our five highest tenant industry concentrations were as follows:
Industry
Legal Services
Depository Institutions
Business Services
Electric, Gas & Sanitary Services
Security & Commodity Brokers
2014 Annualized
Lease Revenue
(in thousands)
Leased
Square Feet
(in thousands)
Percentage of
2014 Annualized
Lease Revenue
$
$
87,285
69,314
41,057
38,856
32,492
269,004
1,564
2,003
1,160
1,827
764
7,318
18%
14%
8%
8%
7%
55%
As of December 31, 2014, our five highest tenant concentrations were as follows:
Tenant
Wells Fargo
Jones Day
AT&T
PSEG Services
IBM
2014 Annualized
Lease Revenue
(in thousands)
Percentage of
2014 Annualized
Lease Revenue
$
$
27,924
27,581
21,704
20,735
20,506
118,450
6%
6%
4%
4%
4%
24%
For more information on our portfolio, see Item 2, Properties.
Election as a REIT
We have elected to be taxed as a REIT under the Code, and have operated as such beginning with our taxable year ended
December 31, 2003. To qualify as a REIT, we must meet certain organizational and operational requirements, including a
requirement to distribute at least 90% of our adjusted taxable income, as defined in the Code, to our stockholders, computed
without regard to the dividends-paid deduction and by excluding our net capital gain. As a REIT, we generally will not be subject
to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will
then be subject to federal income taxes on our taxable income for that year and for the four years following the year during which
qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could
Page 29
materially affect our net income and net cash available for distribution to our stockholders. However, we believe that we are
organized and operate in such a manner as to qualify for treatment as a REIT for federal income tax purposes.
Columbia Property Trust TRS, LLC ("Columbia TRS"), Columbia KCP TRS, LLC ("Columbia KCP TRS"), and Columbia Energy
TRS, LCC ("Columbia Energy TRS"), (collectively the "TRS Entities") are wholly owned subsidiaries of Columbia Property
Trust, are organized as Delaware limited liability companies, and operate, among other things, a full-service hotel. We have elected
to treat the TRS Entities as taxable REIT subsidiaries. We may perform certain additional, noncustomary services for tenants of
our buildings through the TRS Entities; however, any earnings related to such services are subject to federal and state income
taxes. In addition, for us to continue to qualify as a REIT, we must limit our investments in taxable REIT subsidiaries to 25% of
the value of our total assets. Deferred tax assets and liabilities are established for temporary differences between the financial
reporting basis and the tax basis of assets and liabilities at the enacted rates expected to be in effect when the temporary differences
reverse.
No provisions for federal income taxes have been made in our accompanying consolidated financial statements, other than the
provisions relating to Columbia Property Trust TRS, Columbia KCP TRS, and Columbia Energy TRS, as we made distributions
in excess of taxable income for the periods presented. We are subject to certain state and local taxes related to property operations
in certain locations, which have been provided for in our accompanying consolidated financial statements.
Inflation
We are exposed to inflation risk, as income from long-term leases is the primary source of our cash flows from operations. There
are provisions in the majority of our tenant leases that are intended to protect us from, and mitigate the risk of, the impact of
inflation. These provisions include rent steps, reimbursement billings for operating expense pass-through charges, real estate tax
and insurance reimbursements on a per-square-foot basis, or in some cases, annual reimbursement of operating expenses above a
certain per-square-foot allowance. However, due to the long-term nature of the leases, the leases may not reset frequently enough
to fully cover inflation.
Application of Critical Accounting Policies
Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with
GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions.
These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or
interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting
policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies
may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar
businesses.
Investment in Real Estate Assets
We are required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future
benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated
useful lives of our assets by class are as follows:
Buildings
Building and site improvements
40 years
5-25 years
Tenant improvements
Intangible lease assets
Shorter of economic life or lease term
Lease term
Evaluating the Recoverability of Real Estate Assets
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate and
related intangible assets of both operating properties and properties under construction, in which we have an ownership interest,
either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are
present that suggest that the carrying amounts of real estate assets and related intangible assets (liabilities) may not be recoverable,
we assess the recoverability of these assets by determining whether the respective carrying values will be recovered through the
estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition. In the event
that such expected undiscounted future cash flows do not exceed the carrying values, we adjust the carrying value of the real estate
assets and related intangible assets to the estimated fair values, pursuant to the property, plant, and equipment accounting standard
Page 30
for the impairment or disposal of long-lived assets, and recognize an impairment loss. Estimated fair values are calculated based
on the following information, in order of preference, depending upon availability: (i) recently quoted market prices; (ii) market
prices for comparable properties; or (iii) the present value of future cash flows, including estimated salvage value. Certain of our
assets may be carried at more than an amount that could be realized in a current disposition transaction.
Projections of expected future operating cash flows require that we estimate future market rental income amounts subsequent to
the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property,
and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the
future cash flow analysis, including discount rates, could result in an incorrect assessment of the property's fair value and could
result in the misstatement of the carrying value of our real estate assets and related intangible assets and net income (loss).
In the third quarter of 2012, we focused on refining our portfolio by marketing and negotiating the sale of a collection of nine
assets in outlying markets (the "Nine Property Sale"). We evaluated the recoverability of the carrying values of these assets pursuant
to the accounting policy outlined above and determined that the carrying value of the 180 E 100 South property in Salt Lake City,
Utah, one of the properties in the Nine Property Sale, was no longer recoverable due to the change in disposition strategy and the
shortening of the expected hold period for this asset in the third quarter of 2012. As a result, we reduced the carrying value of the
180 E 100 South property to reflect fair value and recorded a corresponding property impairment loss of $18.5 million in the third
quarter of 2012, which is included in operating income from discontinued operations in the accompanying statement of operations.
In connection with furthering our portfolio repositioning efforts, in the first quarter of 2013, we began to market 18 properties for
sale. Pursuant to the accounting policy outlined above, we evaluated the recoverability of the carrying values of each of these
properties and determined that the 120 Eagle Rock property in East Hanover, New Jersey, and the 333 & 777 Republic Drive
property in Allen Park, Michigan, were no longer recoverable due to shortening the respective expected property holding periods
in connection with these repositioning efforts. As a result, we reduced the carrying value of the 120 Eagle Rock property and the
333 & 777 Republic Drive property to reflect their respective fair values estimated, based on projected discounted future cash
flows and recorded corresponding property impairment losses of $11.7 million and $5.2 million, respectively, in the first quarter
of 2013, which are included in operating income (loss) from discontinued operations in the accompanying statement of operations.
In connection with finalizing the terms of the sale agreement for these 18 properties (the "18 Property Sale") in November of 2013,
we reduced the aggregate carrying value of the assets therein to fair value, as estimated based on the approximate contract price
of $500 million, by recognizing an additional impairment loss of $12.9 million in the third quarter of 2013, which is included in
operating income (loss) from discontinued operations in the accompanying statement of operations.
In the first quarter of 2014, we revised our investment strategy for the 160 Park Avenue Building (formerly known as the 180 Park
Avenue, #103 Building) in Florham Park, New Jersey, to sell the property to a user in the near-term. As a result, management
reduced its intended holding period for the building and reevaluated the property's carrying value as of March 31, 2014, pursuant
to the accounting policy outlined above. We concluded that the 160 Park Avenue Building was not recoverable and reduced its
carrying value to reflect its fair value, estimated based on recently quoted market prices (Level 2), by recording an impairment
loss of approximately $13.6 million in the first quarter of 2014. The sale of the160 Park Avenue Building closed on June 4, 2014,
for $10.2 million, exclusive of transaction costs.
In the second quarter of 2014, we decided to pursue a near-term sale of the 200 South Orange Building (formerly known as the
SunTrust Building) in Orlando, Florida. As a result, management reduced its intended holding period for the building and
reevaluated the property's carrying value in the second quarter of 2014. In connection with negotiating the terms of the sale, we
reduced the carrying value of the 200 South Orange Building to reflect fair value, estimated based on an approximate net contract
price of $18.4 million (Level 1), by recording an impairment loss of $1.4 million in the second quarter. The sale of the 200 South
Orange Building closed on June 30, 2014, for $18.4 million, net of transaction costs.
In the fourth quarter of 2014, we identified $500 million to $600 million of properties in our portfolio that fall outside of our
targeted investment strategy, which are candidates for near-term disposition. We are in the process of developing our marketing
strategy for these assets. We plan to carefully evaluate the disposition options revealed through our marketing efforts, and to pursue
those which provide the best opportunity to optimize shareholder value. In connection with initiating this process, we evaluated
the recoverability of the carrying values of each of these properties and determined that the carrying value of the Bannockburn
Lake III property, a vacant property located in Bannockburn, Illinois, is no longer recoverable due to reducing its expected property
holding period to less than one year. As a result, in the fourth quarter of 2014, we reduced the carrying value of the Bannockburn
Lake III property to $5.0 million, estimated based on current projected discounted future cash flows, by recording an impairment
loss of $10.1 million.
The fair value measurements used in this evaluation of nonfinancial assets are considered to be Level 3 valuations within the fair
value hierarchy outlined above, as there are significant unobservable inputs. Examples of inputs that were utilized in the fair value
Page 31
calculations include estimated holding periods, discount rates, market capitalization rates, expected lease rental rates, and potential
sales prices. The table below represents the detail of the adjustments recognized, using Level 3 inputs.
Property
2014
Bannockburn Lake III
2013
120 Eagle Rock
333 & 777 Republic Drive
2012
180 E 100 South
Net Book
Value
Impairment Loss
Recognized
Fair Value
$
$
$
$
15,148
23,808
13,359
30,847
$
$
$
$
(10,148) $
5,000
(11,708) $
(5,159) $
12,100
8,200
(18,467) $
12,380
Allocation of Purchase Price of Acquired Assets
Upon the acquisition of real properties, we allocate the purchase price of properties to tangible assets, consisting of land and
building, site improvements, and identified intangible assets and liabilities, including the value of in-place leases, based in each
case on our estimate of their fair values.
The fair values of the tangible assets of an acquired property (which includes land and building) are determined by valuing the
property as if it were vacant, and the "as-if-vacant" value is then allocated to land and building based on our determination of the
relative fair value of these assets. We determine the as-if-vacant fair value of a property using methods similar to those used by
independent appraisers. Factors we consider in performing these analyses include an estimate of carrying costs during the expected
lease-up periods considering current market conditions and costs to execute similar leases, including leasing commissions and
other related costs. In estimating carrying costs, we include real estate taxes, insurance, and other operating expenses during the
expected lease-up periods based on current market demand.
Intangible Assets and Liabilities Arising from In-Place Leases Where We Are the Lessor
As further described below, in-place leases where we are the lessor may have values related to direct costs associated with obtaining
a new tenant, opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease, tenant relationships,
and effective contractual rental rates that are above or below market rates:
• Direct costs associated with obtaining a new tenant, including commissions, tenant improvements, and other direct costs,
are estimated based on management's consideration of current market costs to execute a similar lease. Such direct costs
are included in intangible lease origination costs in the accompanying consolidated balance sheets and are amortized to
expense over the remaining terms of the respective leases.
• The value of opportunity costs associated with lost rentals avoided by acquiring an in-place lease is calculated based on
the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease.
Such opportunity costs are included in intangible lease assets in the accompanying consolidated balance sheets and are
amortized to expense over the remaining terms of the respective leases.
• The value of tenant relationships is calculated based on expected renewal of a lease or the likelihood of obtaining a
particular tenant for other locations. Values associated with tenant relationships are included in intangible lease assets in
the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective
leases.
• The value of effective rental rates of in-place leases that are above or below the market rates of comparable leases is
calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of
the difference between (i) the contractual amounts to be received pursuant to the in-place leases and (ii) management's
estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining
terms of the leases. The capitalized above-market and below-market lease values are recorded as intangible lease assets
or liabilities and amortized as an adjustment to rental income over the remaining terms of the respective leases.
Evaluating the Recoverability of Intangible Assets and Liabilities
The values of intangible lease assets and liabilities are determined based on assumptions made at the time of acquisition and have
defined useful lives, which correspond with the lease terms. There may be instances in which intangible lease assets and liabilities
become impaired, and we are required to write off the remaining asset or liability immediately or over a shorter period of time.
Lease restructurings, including lease terminations and lease extensions, may impact the value and useful life of in-place leases.
Page 32
In-place leases that are terminated, partially terminated, or modified will be evaluated for impairment if the original in-place
lease terms have been modified. In the event that the discounted cash flows of the original in-place lease stream do not exceed
the discounted modified in-place lease stream, we adjust the carrying value of the intangible lease assets to the discounted cash
flows and recognize an impairment loss. For in-place lease extensions that are executed more than one year prior to the original in-
place lease expiration date, the useful life of the in-place lease will be extended over the new lease term with the exception of
those in-place lease components, such as lease commissions and tenant allowances, which have been renegotiated for the extended
term. Renegotiated in-place lease components, such as lease commissions and tenant allowances, will be amortized over the shorter
of the useful life of the asset or the new lease term.
Intangible Assets and Liabilities Arising from In-Place Leases Where We Are the Lessee
In-place ground leases where we are the lessee may have value associated with effective contractual rental rates that are above or
below market rates. Such values are calculated based on the present value (using a discount rate that reflects the risks associated
with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place lease and
(ii) management's estimate of fair market lease rates for the corresponding in-place lease, measured over a period equal to the
remaining terms of the leases. The capitalized above-market and below-market in-place lease values are recorded as intangible
lease liabilities or assets and amortized as an adjustment to property operating cost over the remaining term of the respective leases.
Related-Party Transactions and Agreements
During 2012 and 2013, we were party to agreements with our former advisor and its affiliates, whereby we incurred and paid fees
and reimbursements for certain advisory services and property management services. On February 28, 2013, we terminated the
related agreements and acquired Columbia Property Trust Advisory Services and Columbia Property Trust Services, including the
employees necessary to perform the corporate and property management functions previously performed by our former advisor
and property manager. See Note 10, Related-Party Transactions and Agreements, of our accompanying consolidated financial
statements for details of our related-party transactions, agreements, and fees.
Commitments and Contingencies
We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 6, Commitments and
Contingencies, of our accompanying consolidated financial statements for further explanation. Examples of such commitments
and contingencies include:
•
•
•
•
obligations under operating leases;
obligations under capital leases;
commitments under existing lease agreements; and
litigation.
Other Regulatory Matters
The SEC is conducting a formal, nonpublic investigation regarding Wells Investment Securities, Inc. ("WIS"), the former dealer-
manager for our previous nonlisted public offerings. The investigation also relates to our company and another entity that also
conducted public offerings through WIS. The investigation relates to whether there have been violations of certain provisions of
the federal securities laws in connection with public offerings in which WIS served as dealer-manager, including a public offering
of our shares that concluded in August 2010. In February 2013, we received a subpoena for documents and information, and we
have been cooperating fully with the SEC. We are not in a position to estimate the timing of a conclusion of the investigation or
whether the SEC may accuse us of any wrongdoing. To date, the costs related to our response to this subpoena have been covered
by our insurance company, subject to a deductible, and we expect that any additional costs will be covered by insurance. However
we may incur uninsured losses related to our response to the subpoena in the future.
Subsequent Events
We have evaluated subsequent events in connection with the preparation of our consolidated financial statements and notes thereto
included in this report on Form 10-K and noted the following items in addition to those disclosed elsewhere in this report:
Property Acquisitions and Financing
During January 2015, we closed on the acquisitions of three properties. These acquisitions and the related financing transaction
are described in Note 3, Real Estate and Other Transactions, and Note 4, Line of Credit, Term Loan, and Notes Payable, of the
accompanying consolidated financial statements.
Page 33
Dividend Declaration
On February 11, 2015, our board of directors declared dividends for the first quarter of 2015 in the amount of $0.30 per share,
payable on March 17, 2015 to stockholders of record on March 2, 2015.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a result of our debt facilities, we are exposed to interest rate changes. Our interest rate risk management objectives are to limit
the impact of interest rate changes on earnings and cash flow, primarily through a low to moderate level of overall borrowings.
However, we currently have a substantial amount of debt outstanding. The majority of our borrowings are in the form of effectively
fixed-rate financings, which helps to insulate our portfolio from interest rate risk. We closely monitor interest rates and will continue
to consider the sources and terms of our borrowing facilities to determine whether we have appropriately guarded ourselves against
the fluctuation of interest rates in future periods.
Additionally, we have entered into interest rate swaps, and may enter into other interest rate swaps, caps, or other arrangements
to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for
speculative purposes; however, certain of our derivatives may not qualify for hedge accounting treatment. All of our debt was
entered into for other-than-trading purposes. As of December 31, 2014 and 2013, the estimated fair value of our line of credit and
notes payable and bonds was $1.7 billion and $1.5 billion, respectively.
Our financial instruments consist of both fixed- and variable-rate debt. As of December 31, 2014, our consolidated debt consisted
of the following, in thousands:
2015
2016
2017
2018
2019
Thereafter
Total
Maturing debt:
Effectively variable-rate debt
$
— $
— $
— $
— $
— $
— $
—
Effectively fixed-rate debt
$ 210,821
$ 494,460
$ 253,728
$ 275,041
$ 121,016
$ 325,000
$ 1,680,066
Average interest rate:
Effectively variable-rate debt
Effectively fixed-rate debt
—%
4.76%
—%
2.40%
—%
4.88%
—%
5.85%
—%
3.60%
—%
5.07%
—%
4.24%
Our variable-rate borrowings consist of the JPMorgan Chase Credit Facility, the $450 Million Term Loan, and the 333 Market
Street Building mortgage note. However, only the JPMorgan Chase Credit Facility bears interest at an effectively variable rate,
as the variable rate on the $450 Million Term Loan and the 333 Market Street Building mortgage note have been effectively fixed
through the interest rate swap agreements described herein.
As of December 31, 2014, we had no outstanding balance under the JPMorgan Chase Credit Facility; $450.0 million outstanding
on the $450 Million Term Loan; $206.8 million outstanding on the 333 Market Street Building mortgage note; $249.2 million in
5.875% bonds outstanding; and $774.1 million outstanding on fixed-rate, term mortgage loans. The weighted-average interest
rate of all our debt instruments was 4.24% as of December 31, 2014.
Approximately $1,680.1 million of our total debt outstanding as of December 31, 2014, is subject to fixed rates, either directly or
when coupled with an interest rate swap agreement. As of December 31, 2014, these balances incurred interest expense at an
average interest rate of 4.24% and have expirations ranging from 2015 through 2023. A change in the market interest rate impacts
the net financial instrument position of our fixed-rate debt portfolio; however, it has no impact on interest incurred or cash flows.
The amounts outstanding on our variable-rate debt facilities in the future will largely depend upon future acquisition and disposition
activity and other financing activities.
We do not believe there is any exposure to increases in interest rates related to the capital lease obligations of $120.0 million at
December 31, 2014, as the obligations are at fixed interest rates.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data filed as part of this report are set forth beginning on page F-1 of this report.
Page 34
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with our independent registered public accountants during 2014, 2013, or 2012.
ITEM 9A. CONTROLS AND PROCEDURES
Management's Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive
Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures
pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based
upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this report in providing a reasonable level of assurance that
information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of
assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management,
including our Principal Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.
Report of Management on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as a process designed by, or under the supervision of,
the Principal Executive Officer and Principal Financial Officer and effected by our management and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with GAAP and includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition
of our assets;
provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements
in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations
of management and/or members of the board of directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of our assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of human error and the
circumvention or overriding of controls, material misstatements may not be prevented or detected on a timely basis. In addition,
projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because
of changes and conditions or that the degree of compliance with policies or procedures may deteriorate. Accordingly, even internal
controls determined to be effective can provide only reasonable assurance that the information required to be disclosed in reports
filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and represented within the time periods
required.
Our management has assessed the effectiveness of our internal control over financial reporting at December 31, 2014. To make
this assessment, we used the criteria for effective internal control over financial reporting described in the Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, our management believes that our system of internal control over financial reporting met those criteria, and therefore
our management has concluded that we maintained effective internal control over financial reporting as of December 31, 2014.
The report of the Company's independent registered public accounting firm on internal control over financial reporting for the
Company is included in Part IV, Item 15, of this annual report on Form 10-K and is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2014, that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Page 35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Columbia Property Trust, Inc.:
We have audited the internal control over financial reporting of Columbia Property Trust, Inc. and subsidiaries (the "Company")
as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject
to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2014 of the Company
and our report dated February 12, 2015 expressed an unqualified opinion on those consolidated financial statements and financial
statement schedule and included an explanatory paragraph regarding the Company’s change in method of accounting for and
disclosure of discontinued operations.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 12, 2015
Page 36
ITEM 9B. OTHER INFORMATION
During the fourth quarter of 2014, there was no information that was required to be disclosed in a report on Form 8-K that was
not disclosed in a report on Form 8-K.
Page 37
PART III
We will file a definitive Proxy Statement for our 2015 Annual Meeting of Stockholders (the "2015 Proxy Statement") with the
SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required
by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the 2015 Proxy Statement that
specifically address the items required to be set forth herein are incorporated by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
We have adopted a Code of Ethics that applies to all of our executive officers and directors, including but not limited to, our
found at http://
principal executive officer and principal
www.columbiapropertytrust.com. Any amendments to, or waivers of, the Code of Ethics for our principal executive officer, principal
financial officer, principal accounting officer, or controller or persons performing similar functions will be disclosed on our website
promptly following the date of such amendment or waiver.
financial officer. Our Code of Ethics may be
The other information required by this Item is incorporated by reference from our 2015 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from our 2015 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
The information required by this Item is incorporated by reference from our 2015 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference from our 2015 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference from our 2015 Proxy Statement.
Page 38
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. A list of the financial statements contained herein is set forth on page F-1 hereof.
(a) 2.
Schedule III – Real Estate Assets and Accumulated Depreciation
Information with respect to this item begins on page S-1 hereof. Other schedules are omitted because of the absence of
conditions under which they are required or because the required information is given in the financial statements or notes
thereto.
(a) 3.
The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.
(b)
(c)
See (a) 3 above.
See (a) 2 above.
Page 39
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SIGNATURES
COLUMBIA PROPERTY TRUST, INC.
(Registrant)
Dated: February 12, 2015
By:
/s/ JAMES A. FLEMING
JAMES A. FLEMING
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Dated: February 12, 2015
/s/ WENDY W. GILL
WENDY W. GILL
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacity as and on the date indicated.
Signature
Title
Date
/s/ Charles R. Brown
Independent Director
Charles R. Brown
/s/ Richard W. Carpenter
Independent Director
Richard W. Carpenter
/s/ Bud Carter
Bud Carter
/s/ John L. Dixon
John L. Dixon
/s/ Murray J. McCabe
Murray J. McCabe
/s/ E. Nelson Mills
E. Nelson Mills
Independent Director
Independent Director
Independent Director
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Michael S. Robb
Independent Director
Michael S. Robb
/s/ Glenn J. Rufrano
Independent Director
Glenn J. Rufrano
/s/ George W. Sands
Independent Director
George W. Sands
/s/ Neil H. Strickland
Neil H. Strickland
Independent Director
/s/ Thomas G. Wattles
Independent Director
Thomas G. Wattles
Page 40
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
February 12, 2015
EXHIBIT INDEX
TO
2014 FORM 10-K OF
COLUMBIA PROPERTY TRUST, INC.
The following documents are filed as exhibits to this report. Exhibits that are not required for this report are omitted.
Ex.
3.1
3.2
3.3
3.4
3.5
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12*
21.1*
23.1*
31.1*
31.2*
32.1*
Description
Second Amended and Restated Articles of Incorporation as Amended by the First Articles of Amendment (incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K filed with the Commission on March 1, 2013).
Second Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Company's current Report on Form 8-K filed with the
Commission on August 15, 2013).
Third Articles of Amendment (incorporated by reference to Exhibit 3.2 to the Company's current Report on Form 8-K filed with the
Commission on August 15, 2013).
Articles Supplementary (incorporated by reference to Exhibit 3.1 to the Company's current Report on Form 8-K filed with the Commission
on September 4, 2013).
Third Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company's current Report on Form 8-K filed with the
Commission on September 4, 2013).
Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and
without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.1 to the Company's Annual Report
on Form 10-K filed with the Commission on March 1, 2013).
Amended and Restated Term Loan Agreement dated as of August 21, 2013, by and among Columbia Property Trust Operating Partnership,
L.P., as Borrower; J.P. Morgan Securities LLC and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Bookrunners; JPMorgan
Chase Bank, N.A., as Administrative Agent; PNC Bank, National Association, as Syndication Agent; and Regions Bank, U.S. Bank National
Association, and Union Bank, N.A., as Documentation Agents (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q filed with the Commission on November 5, 2013).
Supplemental Indenture dated as of February 3, 2012, among Wells Operating Partnership II, L.P., the Guarantors Party Hereto, and U.S.
Bank National Association, as Trustee (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed
with the Commission on May 4, 2012).
Columbia Property Trust, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit A to the Company's Proxy Statement for its
2013 Annual Meeting of Stockholders filed with the Commission on April 25, 2013).
Form of Restricted Stock Award Agreement under the Columbia Property Trust, Inc. Long-Term Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Company's current Report on Form 8-K filed with the Commission on January 24, 2014).
Executive Employment Agreement by and between Columbia Property Trust, Inc. and E. Nelson Mills (incorporated by reference to
Exhibit 10.1 to the Company's current Report on Form 8-K filed with the Commission on September 4, 2013).
Executive Employment Agreement by and between Columbia Property Trust, Inc. and James A. Fleming (incorporated by reference to
Exhibit 10.1 to the Company's current Report on Form 8-K filed with the Commission on September 4, 2013).
Amended and Restated Credit Agreement dated as of August 21, 2013, by and among Columbia Property Trust Operating Partnership, L.P.,
as Borrower; J.P. Morgan Securities LLC and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Bookrunners; JPMorgan Chase
Bank, N.A., as Administrative Agent; PNC Bank, National Association, as Syndication Agent and Regions Bank; U.S. Bank National
Association; and BMO Capital Market Financing, Inc., as Documentation Agents (incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q filed with the Commission on November 5, 2013).
Investor Services Agreement between the Company and Wells Real Estate Funds, Inc. dated February 28, 2013, and effective as of March 1,
2013 (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Commission on May 8,
2013).
Consulting Services Agreement between the Company and Wells Real Estate Funds, Inc. dated February 28, 2013, and effective as of
March 1, 2013 (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed with the Commission on
May 8, 2013).
Assignment and Assumption Agreement between Wells Real Estate Funds, Inc. to Wells Operating Partnership II, L.P., dated as of
February 28, 2013 (related to Wells Real Estate Advisory Services II, LLC) (incorporated by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q filed with the Commission on May 8, 2013).
Assignment and Assumption Agreement between Wells Real Estate Funds, Inc. to Wells Operating Partnership II, L.P. dated as of
February 28, 2013 (related to Wells Real Estate Services, LLC) (incorporated by reference to Exhibit 10.6 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on May 8, 2013).
Term Loan Agreement dated as of January 6, 2015, by and among the Columbia Property Trust Operating Partnership, L.P., J.P. Morgan
Securities LLC, as sole lead arranger and sole bookrunner, JPMorgan Chase Bank, N.A., as administrative agent, PNC Bank, National
Association, as syndication agent, Morgan Stanley Bank, N.A., U.S. Bank National Association and Wells Fargo Bank, National Association,
as documentation agents, and each of the financial institutions a signatory thereto, as lenders
Subsidiaries of Columbia Property Trust, Inc.
Consent of Deloitte & Touche LLP.
Certification of the Principal Executive Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Principal Financial Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Principal Executive Officer and Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**
XBRL Instance Document.
101.SCH**
XBRL Taxonomy Extension Schema.
Page 41
Ex.
Description
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase.
101.DEF**
XBRL Taxonomy Extension Definition Linkbase.
101.LAB**
XBRL Taxonomy Extension Label Linkbase.
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase.
* Filed herewith.
** Furnished with this Form 10-K.
Page 42
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2014 and 2013
Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and 2012
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013, and 2012
Consolidated Statements of Equity for the Years Ended December 31, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Columbia Property Trust, Inc.:
We have audited the accompanying consolidated balance sheets of Columbia Property Trust, Inc. and subsidiaries (the "Company")
as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, equity, and
cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement
schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Columbia
Property Trust, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for and
disclosure of discontinued operations during the year ended December 31, 2014 due to the adoption of Accounting Standards
Update 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Component of an Entity”.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company's internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated February 12, 2015 expressed an unqualified opinion on the Company's internal control over financial reporting.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
February 12, 2015
F-2
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per-share amounts)
Assets:
Real estate assets, at cost:
Land
December 31,
2014
2013
$
785,101
$
706,938
Buildings and improvements, less accumulated depreciation of $660,098 and $604,497, as
of December 31, 2014 and 2013, respectively
3,026,431
2,976,287
Intangible lease assets, less accumulated amortization of $313,822 and $298,975, as of
December 31, 2014 and 2013, respectively
Construction in progress
Total real estate assets
Cash and cash equivalents
Tenant receivables, net of allowance for doubtful accounts of $3 and $52, as of December 31,
2014 and 2013, respectively
Straight-line rent receivable
Prepaid expenses and other assets
Deferred financing costs, less accumulated amortization of $15,205 and $11,938, as of
December 31, 2014 and 2013, respectively
Intangible lease origination costs, less accumulated amortization of $219,626 and $216,598, as
of December 31, 2014 and 2013, respectively
Deferred lease costs, less accumulated amortization of $36,589 and $27,375, as of
December 31, 2014 and 2013, respectively
Investment in development authority bonds
Total assets
Liabilities:
Line of credit, term loan, and notes payable
Bonds payable, net of discount of $818 and $1,070, as of December 31, 2014 and 2013,
respectively
Accounts payable, accrued expenses, and accrued capital expenditures
Deferred income
Intangible lease liabilities, less accumulated amortization of $84,935 and $76,500, as of
December 31, 2014 and 2013, respectively
Obligations under capital leases
Total liabilities
Commitments and Contingencies (Note 6)
Equity:
Common stock, $0.01 par value, 225,000,000 and 900,000,000 shares authorized, 124,973,304
and 124,830,122 shares issued and outstanding as of December 31, 2014 and 2013,
respectively
Additional paid-in capital
Cumulative distributions in excess of earnings
Accumulated other comprehensive loss
Total equity
Total liabilities and equity
247,068
17,962
4,076,562
149,790
6,945
116,489
52,143
281,220
7,949
3,972,394
99,855
7,414
113,592
32,423
8,426
10,388
105,528
148,889
$
$
$
$
102,995
120,000
4,738,878
1,430,884
249,182
106,276
24,753
74,305
120,000
2,005,400
—
1,249
4,601,808
(1,867,611)
(1,968)
2,733,478
$
4,738,878
$
87,527
120,000
4,592,482
1,240,249
248,930
99,678
21,938
73,864
120,000
1,804,659
—
1,248
4,600,166
(1,810,284)
(3,307)
2,787,823
4,592,482
See accompanying notes.
F-3
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
Years ended December 31,
2014
2013
2012
$
414,541
$
406,907
$
381,796
Revenues:
Rental income
Tenant reimbursements
Hotel income
Other property income
Expenses:
Property operating costs
Hotel operating costs
Asset and property management fees:
Related-party
Other
Depreciation
Amortization
Impairment loss on real estate assets
General and administrative
Listing costs
Acquisition fees and expenses
Real estate operating income
Other income (expense):
Interest expense
Interest and other income
Loss on interest rate swaps
Loss on the early extinguishment of debt
95,375
22,885
7,996
540,797
163,722
18,792
—
2,258
117,766
78,843
25,130
31,275
—
14,142
451,928
88,869
(75,711)
7,275
(371)
(23)
(68,830)
20,039
(662)
19,377
75,275
94,652
(390)
(1,627)
(2,017)
92,635
—
92,635
0.76
$
$
90,875
23,756
5,040
526,578
154,559
18,340
4,693
1,671
108,105
78,710
—
61,866
4,060
—
432,004
94,574
(101,941)
34,029
(342)
—
(68,254)
26,320
(500)
25,820
—
25,820
(21,325)
11,225
(10,100)
15,720
—
15,720
0.19
$
$
(0.02) $
0.74
$
(0.08) $
0.12
$
88,402
23,049
1,024
494,271
147,202
18,362
29,372
2,421
98,698
86,458
—
24,613
—
1,876
409,002
85,269
(101,886)
39,856
(1,225)
—
(63,255)
22,014
(572)
21,442
—
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6,484
20,117
26,601
48,043
(4)
48,039
0.16
0.19
0.35
124,860
134,085
136,672
0.76
$
(0.02) $
0.74
$
0.19
$
(0.08) $
0.12
$
0.16
0.19
0.35
Income before income tax expense and gains on sale of real estate
Income tax expense
Income before gains of sale of real estate assets
Gains on sale of real estate assets
Income from continuing operations
Discontinued operations:
Operating income (loss) from discontinued operations
Gain (loss) on disposition of discontinued operations
Income (loss) from discontinued operations
Net income
Less: net income attributable to nonredeemable noncontrolling interests
Net income attributable to the common stockholders of Columbia Property Trust, Inc.
Per-share information – basic:
Income from continuing operations
Income (loss) from discontinued operations
Net income attributable to the common stockholders of Columbia Property Trust, Inc.
Weighted-average common shares outstanding – basic
Per-share information – diluted:
Income from continuing operations
Income (loss) from discontinued operations
Net income attributable to the common stockholders of Columbia Property Trust, Inc.
$
$
$
$
$
$
$
Weighted-average common shares outstanding – diluted
124,918
134,085
136,672
See accompanying notes.
F-4
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income attributable to the common stockholders of
Columbia Property Trust, Inc.
Foreign currency translation adjustment
Market value adjustment to interest rate swap
Comprehensive income attributable to the common stockholders of
Columbia Property Trust, Inc.
Comprehensive income attributable to noncontrolling interests
Comprehensive income
Years ended December 31,
2014
2013
2012
$
$
92,635
$
15,720
$
—
1,339
93,974
—
(83)
1,997
17,634
—
93,974
$
17,634
$
48,039
—
(5,305)
42,734
4
42,738
See accompanying notes.
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(
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Straight-line rental income
Depreciation
Amortization
Impairment losses on real estate assets
Noncash interest expense
Loss on interest rate swaps
Gain on sale of real estate
Loss on early extinguishment of debt
Stock-based compensation expense
Changes in assets and liabilities, net of acquisitions and dispositions:
Decrease (increase) in tenant receivables, net
Decrease (increase) in prepaid expenses and other assets
Increase in accounts payable and accrued expenses
Decrease in due to affiliates
Increase (decrease) in deferred income
Years ended December 31,
2014
2013
2012
$
92,635
$
15,720
$
48,043
(9,916)
117,766
74,212
25,130
3,055
(4,945)
(73,648)
23
1,975
(227)
5,442
2,589
—
2,815
(22,793)
119,835
84,630
29,737
3,602
(5,530)
(11,225)
4,709
1,055
6,249
(4,097)
4,207
(1,801)
(5,969)
(11,033)
120,307
100,482
18,467
3,881
(173)
(20,117)
—
—
(4,767)
2,344
4,270
(1,411)
(7,454)
Net cash provided by operating activities
236,906
218,329
252,839
Cash Flows from Investing Activities:
Net proceeds from the sale of real estate
Real estate acquisitions
Earnest money paid
Capital improvements
Deferred lease costs paid
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Financing costs paid
Proceeds from lines of credit and notes payable
Repayments of lines of credit and notes payable
Prepayment penalty on early extinguishment of debt
Issuance of common stock
Redemptions of common stock
Tender offer redemptions of common stock
Distributions paid to stockholders
Distributions paid to stockholders and reinvested in shares of our common stock
Redemption of noncontrolling interests
Tender offer and offering costs paid
Distributions paid to nonredeemable noncontrolling interests
418,207
(335,986)
(27,000)
(54,005)
(25,004)
(23,788)
(1,482)
283,000
(294,739)
—
—
—
—
(149,962)
—
—
—
—
565,945
—
—
(44,856)
(25,700)
495,389
(3,721)
301,000
(461,940)
(4,709)
46,402
(115,781)
(234,062)
(145,071)
(46,402)
—
(3,133)
—
304,264
(188,750)
—
(45,048)
(39,419)
31,047
(4,198)
599,000
(627,191)
—
118,388
(99,381)
—
(137,632)
(118,388)
(301)
(11)
(15)
Net cash used in financing activities
(163,183)
(667,417)
(269,729)
Net increase in cash and cash equivalents
Effect of foreign exchange rate on cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
49,935
—
99,855
46,301
(103)
53,657
$
149,790
$
99,855
$
14,157
32
39,468
53,657
See accompanying notes.
F-7
COLUMBIA PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014, 2013, AND 2012
1.
Organization
Columbia Property Trust, Inc. ("Columbia Property Trust") (NYSE: CXP) is a Maryland corporation that operates as a real estate
investment trust ("REIT") for federal income tax purposes and owns and operates commercial real estate properties. Columbia
Property Trust was incorporated in 2003, commenced operations in 2004, and conducts business primarily through Columbia
Property Trust Operating Partnership, L.P. ("Columbia Property Trust OP"), a Delaware limited partnership. Columbia Property
Trust is the general partner and sole owner of Columbia Property Trust OP and possesses full legal control and authority over its
operations. Columbia Property Trust OP acquires, develops, owns, leases, and operates real properties directly, through wholly
owned subsidiaries, or through joint ventures. References to Columbia Property Trust, "we," "us," or "our" herein shall include
Columbia Property Trust and all subsidiaries of Columbia Property Trust, direct and indirect, and consolidated joint ventures.
Columbia Property Trust typically invests in high-quality, income-generating office properties. As of December 31, 2014, Columbia
Property Trust owned 35 office properties and one hotel, which included 52 operational buildings comprising approximately
15.7 million square feet of commercial space, located in 12 states and the District of Columbia. All of the office properties are
wholly owned except for one property, which is owned through a consolidated subsidiary. As of December 31, 2014, the office
properties were approximately 93.3% leased. In January 2015, Columbia Property Trust acquired three additional office properties
comprising 0.9 million square feet. See Note 3, Real Estate and Other Transactions, for additional information.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of Columbia Property Trust have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") and include the accounts of Columbia Property Trust, Columbia Property Trust OP, and any
variable interest entity ("VIE") in which Columbia Property Trust or Columbia Property Trust OP was deemed the primary
beneficiary. With respect to entities that are not VIEs, Columbia Property Trust's consolidated financial statements shall also include
the accounts of any entity in which Columbia Property Trust, Columbia Property Trust OP, or its subsidiaries own a controlling
financial interest and any limited partnership in which Columbia Property Trust, Columbia Property Trust OP, or its subsidiaries
own a controlling general partnership interest. In determining whether Columbia Property Trust or Columbia Property Trust OP
has a controlling interest, the following factors are considered, among other things: the ownership of voting interests, protective
rights, and participatory rights of the investors.
All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the accompanying consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
Fair Value Measurements
Columbia Property Trust estimates the fair value of its assets and liabilities (where currently required under GAAP) consistent
with the provisions of Accounting Standard Codification 820, Fair Value Measurements ("ASC 820"). Under this standard, fair
value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction
between market participants at the measurement date. While various techniques and assumptions can be used to estimate fair value
depending on the nature of the asset or liability, the accounting standard for fair value measurements and disclosures provides the
following fair value technique parameters and hierarchy, depending upon availability:
Level 1 – Assets or liabilities for which the identical term is traded on an active exchange, such as publicly traded instruments
or futures contracts.
Level 2 – Assets and liabilities valued based on observable market data for similar instruments.
Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market. Such
assets or liabilities are valued based on the best available data, some of which may be internally developed. Significant
assumptions may include risk premiums that a market participant would consider.
F-8
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets
consist of the cost of acquisition or construction, and any tenant improvements or major improvements and betterments that extend
the useful life of the related asset. All repairs and maintenance are expensed as incurred. Additionally, Columbia Property Trust
capitalizes interest while the development of a real estate asset is in progress. No interest was capitalized during 2014 or 2013.
Columbia Property Trust is required to make subjective assessments as to the useful lives of its depreciable assets. Columbia
Property Trust considers the period of future benefit of the asset to determine the appropriate useful lives. These assessments have
a direct impact on net income. The estimated useful lives of its assets by class are as follows:
Buildings
Building and site improvements
40 years
5-25 years
Tenant improvements
Intangible lease assets
Shorter of economic life or lease term
Lease term
Evaluating the Recoverability of Real Estate Assets
Columbia Property Trust continually monitors events and changes in circumstances that could indicate that the carrying amounts
of its real estate and related intangible assets, of both operating properties and properties under construction, in which Columbia
Property Trust has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When
indicators of potential impairment are present that suggest that the carrying amounts of real estate assets and related intangible
assets (liabilities) may not be recoverable, Columbia Property Trust assesses the recoverability of these assets by determining
whether the respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected
from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not
exceed the carrying values, Columbia Property Trust adjusts the carrying value of the real estate assets and related intangible assets
to the estimated fair values, pursuant to the property, plant, and equipment accounting standard for the impairment or disposal of
long-lived assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, in
order of preference, depending upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties,
or (iii) the present value of future cash flows, including estimated salvage value. Certain of Columbia Property Trust's assets may
be carried at more than an amount that could be realized in a current disposition transaction.
Projections of expected future operating cash flows require that Columbia Property Trust estimates future market rental income
amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to
re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of
assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the property's
fair value and could result in the misstatement of the carrying value of Columbia Property Trust's real estate assets and related
intangible assets and net income.
In the third quarter of 2012, Columbia Property Trust focused on refining the portfolio by marketing and negotiating the sale of a
collection of nine assets in outlying markets (the "Nine Property Sale"). Columbia Property Trust evaluated the recoverability of
the carrying values of these assets pursuant to the accounting policy outlined above and determined that the carrying value of the
180 E 100 South property in Salt Lake City, Utah, one of the properties in the Nine Property Sale, was no longer recoverable due
to the change in disposition strategy and the shortening of the expected hold period for this asset in the third quarter of 2012. As
a result, Columbia Property Trust reduced the carrying value of the 180 E 100 South property to reflect fair value and recorded a
corresponding property impairment loss of $18.5 million in the third quarter of 2012, which is included in operating income (loss)
from discontinued operations in the accompanying statement of operations.
In connection with furthering its portfolio repositioning efforts, in the first quarter of 2013, Columbia Property Trust initiated a
process to market 18 properties for sale. Pursuant to the accounting policy outlined above, Columbia Property Trust evaluated the
recoverability of the carrying values of each of these properties and determined that the 120 Eagle Rock property in East Hanover,
New Jersey, and the 333 & 777 Republic Drive property in Allen Park, Michigan, were no longer recoverable due to shortening
the respective expected property holding periods in connection with these repositioning efforts. As a result, Columbia Property
Trust reduced the carrying value of the 120 Eagle Rock property and the 333 & 777 Republic Drive property to reflect their
respective fair values estimated, based on projected discounted future cash flows and recorded corresponding property impairment
losses of $11.7 million and $5.2 million, respectively, in the first quarter of 2013, which are included in operating income (loss)
from discontinued operations in the accompanying statement of operations. In connection with finalizing the terms of the sale
agreement for these 18 properties (the "18 Property Sale") in November 2013, Columbia Property Trust reduced the aggregate
F-9
carrying value of the assets therein to fair value, as estimated based on the approximate contract price of $500 million, by recognizing
an additional impairment loss of $12.9 million in the third quarter of 2013, which is included in operating income (loss) from
discontinued operations in the accompanying statement of operations.
In the first quarter of 2014, Columbia Property Trust revised its investment strategy for the 160 Park Avenue Building (formerly
known as the 180 Park Avenue, #103 Building) in Florham Park, New Jersey, to sell the property to a user in the near-term. As a
result, management reduced its intended holding period for the building and reevaluated the property's carrying value as of
March 31, 2014, pursuant to the accounting policy outlined above. Columbia Property Trust concluded that the 160 Park Avenue
Building was not recoverable and reduced its carrying value to reflect its fair value, estimated based on recently quoted market
prices (Level 2), by recording an impairment loss of approximately $13.6 million in the first quarter of 2014. The sale of the160
Park Avenue Building closed on June 4, 2014, for $10.2 million, exclusive of transaction costs.
In the second quarter of 2014, Columbia Property Trust decided to pursue a near-term sale of the 200 South Orange Building
(formerly known as the SunTrust Building) in Orlando, Florida. As a result, management reduced its intended holding period for
the building and reevaluated the property's carrying value in the second quarter of 2014. In connection with negotiating the terms
of the sale, Columbia Property Trust reduced the carrying value of the 200 South Orange Building to reflect fair value, estimated
based on an approximate net contract price of $18.4 million (Level 1), by recording an impairment loss of $1.4 million in the
second quarter. The sale of the 200 South Orange Building closed on June 30, 2014, for $18.4 million, net of transaction costs.
In the fourth quarter of 2014, Columbia Property Trust identified $500 million to $600 million of properties in its portfolio that
fall outside of its targeted investment strategy, which are candidates for near-term disposition. Columbia Property Trust is in the
process of developing our marketing strategy for these assets. Columbia Property Trust plans to carefully evaluate the disposition
options revealed through our marketing efforts, and to pursue those which provide the best opportunity to optimize shareholder
value. In connection with initiating this process, Columbia Property Trust evaluated the recoverability of the carrying values of
each of these properties and determined that the carrying value of the Bannockburn Lake III property, a vacant property located
in Bannockburn, Illinois, is no longer recoverable due to reducing its expected property holding period to less than one year. As
a result, in the fourth quarter of 2014, Columbia Property Trust reduced the carrying value of the Bannockburn Lake III property
to $5.0 million, estimated based on current projected discounted future cash flows, by recording an impairment loss of
$10.1 million.
The fair value measurements used in this evaluation of nonfinancial assets are considered to be Level 3 valuations within the fair
value hierarchy outlined above, as there are significant unobservable inputs. Examples of inputs that were utilized in the fair value
calculations include estimated holding periods, discount rates, market capitalization rates, expected lease rental rates, and potential
sales prices. The table below represents the detail of the adjustments recognized for 2014, 2013 and 2012 (in thousands) using
Level 3 inputs.
Property
2014
Bannockburn Lake III
2013
120 Eagle Rock
333 & 777 Republic Drive
2012
180 E 100 South
Assets Held for Sale
Net Book
Value
Impairment Loss
Recognized
Fair Value
$
$
$
$
15,148
23,808
13,359
30,847
$
$
$
$
(10,148) $
5,000
(11,708) $
(5,159) $
12,100
8,200
(18,467) $
12,380
Columbia Property Trust classifies assets as held for sale according to Accounting Standard Codification 360, Accounting for the
Impairment or Disposal of Long-Lived Assets ("ASC 360"). According to ASC 360, assets are considered held for sale when the
following criteria are met:
• Management, having the authority to approve the action, commits to a plan to sell the property.
• The property is available for immediate sale in its present condition subject only to terms that are usual and customary
for sales of such property.
• An active program to locate a buyer and other actions required to complete the plan to sell the property have been initiated.
F-10
• The sale of the property is probable, and transfer of the property is expected to qualify for recognition as a completed
sale, within one year.
• The property is being actively marketed for sale at a price that is reasonable in relation to its current fair value.
• Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that
the plan will be withdrawn.
At such time that a property is determined to be held for sale, its carrying amount is reduced to the lower of its depreciated book
value or its estimated fair value, less costs to sell, and depreciation is no longer recognized. As of December 31, 2014, none of
Columbia Property Trust's properties met the criteria to be classified as held for sale in the accompanying balance sheet.
Allocation of Purchase Price of Acquired Assets
Upon the acquisition of real properties, Columbia Property Trust allocates the purchase price of properties to tangible assets,
consisting of land, building, site improvements, and identified intangible assets and liabilities, including the value of in-place
leases, based in each case on Columbia Property Trust's estimate of their fair values in accordance with ASC 820 (see Fair Value
Measurements section above for additional details).
The fair values of the tangible assets of an acquired property (which includes land, building, and site improvements) are determined
by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building, and site improvements
based on management's determination of the relative fair value of these assets. Management determines the as-if-vacant fair value
of a property using methods similar to those used by independent appraisers. Factors considered by management in performing
these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions
and costs to execute similar leases, including leasing commissions and other related costs. In estimating carrying costs, management
includes real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market
demand.
Intangible Assets and Liabilities Arising from In-Place Leases Where Columbia Property Trust is the Lessor
As further described below, in-place leases with Columbia Property Trust as the lessor may have values related to: direct costs
associated with obtaining a new tenant, opportunity costs associated with lost rentals that are avoided by acquiring an in-place
lease, tenant relationships, and effective contractual rental rates that are above or below market rates:
• Direct costs associated with obtaining a new tenant, including commissions, tenant improvements, and other direct costs,
are estimated based on management's consideration of current market costs to execute a similar lease. Such direct costs
are included in intangible lease origination costs in the accompanying consolidated balance sheets and are amortized to
expense over the remaining terms of the respective leases.
• The value of opportunity costs associated with lost rentals avoided by acquiring an in-place lease is calculated based on
contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Such
opportunity costs ("Absorption Period Costs") are included in intangible lease assets in the accompanying consolidated
balance sheets and are amortized to expense over the remaining terms of the respective leases.
• The value of tenant relationships is calculated based on expected renewal of a lease or the likelihood of obtaining a
particular tenant for other locations. Values associated with tenant relationships are included in intangible lease assets in
the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective
leases.
• The value of effective rental rates of in-place leases that are above or below the market rates of comparable leases is
calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of
the difference between (i) the contractual amounts to be received pursuant to the in-place leases and (ii) management's
estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining
terms of the leases. The capitalized above-market and below-market lease values are recorded as intangible lease assets
or liabilities and amortized as an adjustment to rental income over the remaining terms of the respective leases.
F-11
As of December 31, 2014 and 2013, Columbia Property Trust had the following gross intangible in-place lease assets and liabilities
(in thousands):
December 31, 2014
Gross
Accumulated Amortization
December 31, 2013
Net
Gross
Accumulated Amortization
Net
Intangible Lease Assets
Above-Market
In-Place
Lease Assets
$
$
$
$
79,805
(61,619)
18,186
80,836
(56,859)
23,977
$
$
$
$
Absorption
Period Costs
370,412
(237,084)
133,328
388,686
(229,065)
159,621
$
$
$
$
Intangible
Lease
Origination
Costs
Intangible
Below-Market
In-Place Lease
Liabilities
325,154
(219,626)
105,528
365,487
(216,598)
148,889
$
$
$
$
159,240
(84,935)
74,305
150,364
(76,500)
73,864
During 2014, 2013, and 2012, Columbia Property Trust recognized the following amortization of intangible lease assets and
liabilities (in thousands):
For the years ended December 31,
2014
2013
2012
Intangible Lease Assets
Above-Market
In-Place
Lease Assets
Absorption
Period Costs
Intangible
Lease
Origination
Costs
Intangible
Below-Market
In-Place Lease
Liabilities
$
$
$
5,368
6,077
8,901
$
$
$
36,474
38,879
48,997
$
$
$
33,037
38,978
42,866
$
$
$
15,507
14,411
15,324
The remaining net intangible assets and liabilities as of December 31, 2014, will be amortized as follows (in thousands):
Intangible Lease Assets
Above-Market
In-Place
Lease Assets
Absorption
Period Costs
Intangible
Lease
Origination
Costs
Intangible
Below-Market
In-Place Lease
Liabilities
For the years ending December 31,
2015
2016
2017
2018
2019
Thereafter
$
4,480
$
35,284
$
28,483
$
3,748
1,879
1,075
1,035
5,969
24,942
16,687
12,297
10,969
33,149
21,587
14,777
10,269
9,198
21,214
Weighted-Average Amortization Period
3 years
4 years
4 years
$
18,186
$
133,328
$
105,528
$
17,198
11,895
8,073
6,596
5,893
24,650
74,305
6 years
Intangible Assets and Liabilities Arising from In-Place Leases Where Columbia Property Trust is the Lessee
In-place ground leases where Columbia Property Trust is the lessee may have value associated with effective contractual rental
rates that are above or below market rates at the time of execution or assumption. Such values are calculated based on the present
value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual
amounts to be paid pursuant to the in-place lease and (ii) management's estimate of fair market lease rates for the corresponding
in-place lease at the time of execution or assumption, measured over a period equal to the remaining terms of the leases. The
capitalized above-market and below-market in-place lease values are recorded as intangible lease liabilities and assets, respectively,
and are amortized as an adjustment to property operating cost over the remaining term of the respective leases. Columbia Property
Trust had gross below-market lease assets of approximately $110.7 million as of December 31, 2014 and 2013, net of accumulated
amortization of $15.1 million and $13.1 million as of December 31, 2014 and 2013, respectively. Columbia Property Trust
F-12
recognized amortization expense related to these assets of approximately $2.1 million for each of the years ended 2014, 2013, and
2012.
As of December 31, 2014, the remaining net below-market lease asset will be amortized as follows (in thousands):
For the years ending December 31:
2015
2016
2017
2018
2019
Thereafter
Weighted-Average Amortization Period
Cash and Cash Equivalents
$
$
2,069
2,069
2,069
2,069
2,069
85,209
95,554
47 years
Columbia Property Trust considers all highly liquid investments purchased with an original maturity of three months or less to be
cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which
approximates fair value as of December 31, 2014 and 2013.
Tenant Receivables, net
Tenant receivables comprise rental and reimbursement billings due from tenants and the cumulative amount of future adjustments
necessary to present rental income on a straight-line basis. Tenant receivables are recorded at the original amount earned, less an
allowance for any doubtful accounts, which approximates fair value. Management assesses the realizability of tenant receivables
on an ongoing basis and provides for allowances as such balances, or portions thereof, become uncollectible.
Columbia Property Trust adjusted the allowance for doubtful accounts by recording a provision for doubtful accounts, net of
recoveries, in general and administrative expenses in the accompanying consolidated statements of operations of approximately
$0.5 million and $(0.1) million for 2014 and 2013, respectively.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets primarily include earnest money deposits, escrow accounts held by lenders to pay future real
estate taxes, insurance and tenant improvements, notes receivable, non-tenant receivables, prepaid taxes, insurance and operating
costs, certain corporate assets, hotel inventory, and deferred tax assets. Prepaid expenses and other assets will be expensed as
incurred. As of December 31, 2014, prepaid expenses and other assets included $27.0 million of earnest money deposits paid in
2014 for the January 2015 property acquisitions described in Note 3, Real Estate and Other Transactions. These deposits were
applied to the purchase prices at closing.
Deferred Financing Costs
Deferred financing costs comprise costs incurred in connection with securing financing from third-party lenders and are capitalized
and amortized over the term of the related financing arrangements. Columbia Property Trust recognized amortization of deferred
financing costs for the years ended December 31, 2014, 2013, and 2012, of approximately $3.5 million, $3.8 million, and
$3.2 million, respectively, which is included in interest expense in the accompanying consolidated statements of operations.
Deferred Lease Costs
Deferred lease costs comprise costs incurred to procure leases, which are capitalized and recognized as amortization expense on
a straight-line basis over the terms of the lease. Such costs are capitalized and recognized as operating expenses over the lease
term. Columbia Property Trust recognized amortization of deferred lease costs of approximately $12.2 million, $13.1 million, and
$10.9 million for 2014, 2013, and 2012, respectively, the majority of which is recorded as amortization expense. Upon receiving
notification of a tenant's intention to terminate a lease, unamortized deferred lease costs are amortized over the shortened lease
period.
F-13
Investments in Development Authority Bonds and Obligations Under Capital Leases
In connection with the acquisition of certain real estate assets, Columbia Property Trust has assumed investments in development
authority bonds and corresponding obligations under capital leases of land or buildings. The county development authority issued
bonds to developers to finance the initial development of these projects, a portion of which was then leased back to the developer
under a capital lease. This structure enabled the developer to receive property tax abatements over the concurrent terms of the
development authority bonds and capital leases. The remaining property tax abatement benefits transferred to Columbia Property
Trust upon assumption of the bonds and corresponding capital leases at acquisition. The development authority bonds and the
obligations under the capital leases are both recorded at their net present values, which Columbia Property Trust believes
approximates fair value. The related amounts of interest income and expense are recognized as earned in equal amounts and,
accordingly, do not impact net income. In December 2013, upon maturity, Columbia Property Trust settled the $216.0 million and
$250.0 million development authority bonds and the corresponding obligations under capital leases related to the Lenox Park
Buildings and Lindbergh Center, respectively. In December 2012, upon maturity, Columbia Property Trust settled the $60.0 million
development authority bond and the corresponding obligation under capital lease related to the One Glenlake Parkway Building.
Line of Credit and Notes Payable
Certain mortgage notes included in line of credit, term loan, and notes payable in the accompanying consolidated balance sheets
were assumed upon the acquisition of real properties. When debt is assumed, Columbia Property Trust records the loan at fair
value. The fair value adjustment is amortized to interest expense over the term of the loan using the effective interest method.
Bonds Payable
On April 4, 2011, Columbia Property Trust sold $250.0 million of its seven-year unsecured 5.875% senior notes at 99.295% of
their face value (the "2018 Bonds Payable"). The discount on bonds payable is amortized to interest expense over the term of the
bonds using the effective-interest method.
Noncontrolling Interests
Noncontrolling interests represent the equity interests of consolidated subsidiaries that are not owned by Columbia Property Trust.
Noncontrolling interests are adjusted for contributions, distributions, and earnings attributable to the noncontrolling interest holders
of the consolidated joint ventures. Pursuant to the terms of the consolidated joint venture agreements, all earnings and distributions
are allocated to joint ventures in accordance with the terms of the respective joint venture agreements. Earnings allocated to such
noncontrolling interest holders are recorded as net loss (income) attributable to noncontrolling interests in the accompanying
consolidated statements of operations.
In April 2012, Columbia Property Trust purchased the remaining 0.7% interest in the Robbins Road Property for $0.3 million from
an unaffiliated party. The purchase price approximated the book value of the noncontrolling interest at the time of purchase.
Redeemable Common Stock
In preparation for listing, Columbia Property Trust terminated its former share redemption program (the "SRP") effective July 31,
2013. Previously, under the SRP, the decision to honor redemptions, subject to certain plan requirements and limitations, fell
outside the control of Columbia Property Trust. As a result, until the termination of the SRP, Columbia Property Trust recorded
redeemable common stock in the temporary equity section of its consolidated balance sheet.
Preferred Stock
Columbia Property Trust is authorized to issue up to 100.0 million shares of one or more classes or series of preferred stock with
a par value of $0.01 per share. Columbia Property Trust's board of directors may determine the relative rights, preferences, and
privileges of each class or series of preferred stock issued, which may be more beneficial than the rights, preferences, and privileges
attributable to Columbia Property Trust's common stock. To date, Columbia Property Trust has not issued any shares of preferred
stock.
Common Stock
The par value of Columbia Property Trust's issued and outstanding shares of common stock is classified as common stock, with
the remainder allocated to additional paid-in capital.
F-14
Distributions
To maintain its status as a REIT, Columbia Property Trust is required by the Internal Revenue Code of 1986, as amended (the
"Code"), to make distributions to stockholders each taxable year equal to at least 90% of its REIT taxable income, computed
without regard to the dividends-paid deduction and by excluding net capital gains attributable to stockholders ("REIT taxable
income"). Distributions to the stockholders are determined by the board of directors of Columbia Property Trust and are dependent
upon a number of factors relating to Columbia Property Trust, including funds available for payment of distributions, financial
condition, the timing of property acquisitions, capital expenditure requirements, and annual distribution requirements in order to
maintain Columbia Property Trust's status as a REIT under the Code.
Interest Rate Swap Agreements
Columbia Property Trust enters into interest rate swap contracts to mitigate its interest rate risk on the related financial instruments.
Columbia Property Trust does not enter into derivative or interest rate transactions for speculative purposes; however, certain of
its derivatives may not qualify for hedge accounting treatment. Columbia Property Trust records the fair value of its interest rate
swaps either as prepaid expenses and other assets or as accounts payable, accrued expenses, and accrued capital expenditures.
Changes in the fair value of the effective portion of interest rate swaps that are designated as cash flow hedges are recorded as
other comprehensive income, while changes in the fair value of the ineffective portion of a hedge, if any, is recognized currently
in earnings. Changes in the fair value of interest rate swaps that do not qualify for hedge accounting treatment are recorded as gain
(loss) on interest rate swaps. Amounts received or paid under interest rate swap agreements are recorded as interest expense for
contracts that qualify for hedge accounting treatment and as loss on interest rate swaps for contracts that do not qualify for hedge
accounting treatment.
The following tables provide additional information related to Columbia Property Trust's interest rate swaps as of December 31,
2014 and 2013 (in thousands):
Instrument Type
Derivatives designated as hedging instruments:
Interest rate contracts
Derivatives not designated as hedging instruments:
Interest rate contracts
Balance Sheet Classification
2014
2013
Estimated Fair Value as of
December 31,
Accounts payable
Accounts payable
$
$
(1,968) $
(3,307)
(2,633) $
(7,579)
Columbia Property Trust applied the provisions of ASC 820 in recording its interest rate swaps at fair value. The fair values of the
interest rate swaps, classified under Level 2, were determined using a third-party proprietary model that is based on prevailing
market data for contracts with matching durations, current and anticipated London Interbank Offered Rate ("LIBOR") information,
and reasonable estimates about relevant future market conditions. Columbia Property Trust has determined that the fair value, as
determined by the third party, is reasonable. The fair value of Columbia Property Trust's interest rate swaps were $(4.6) million
and $(10.9) million at December 31, 2014 and 2013, respectively.
Years ended December 31,
2014
2013
2012
Market value adjustment to interest rate swaps designated as hedging
instruments and included in other comprehensive income
Loss on interest rate swap recognized through earnings
$
$
1,339
$
(371) $
1,997
$
(342) $
(5,305)
(1,225)
During the periods presented, there was no hedge ineffectiveness required to be recognized into earnings on the interest rate swaps
that qualified for hedge accounting treatment.
Revenue Recognition
All leases on real estate assets held by Columbia Property Trust are classified as operating leases, and the related base rental income
is generally recognized on a straight-line basis over the terms of the respective leases. Tenant reimbursements are recognized as
revenue in the period that the related operating cost is incurred and are billed to tenants pursuant to the terms of the underlying
leases. Rental income and tenant reimbursements collected in advance are recorded as deferred income in the accompanying
F-15
consolidated balance sheets. Lease termination fees are recorded as other property income and recognized once the tenant has lost
the right to lease the space and Columbia Property Trust has satisfied all obligations under the related lease or lease termination
agreement.
In conjunction with certain acquisitions, Columbia Property Trust has entered into master lease agreements with various sellers,
whereby the sellers are obligated to pay rent pertaining to certain nonrevenue-producing spaces either at the time of, or subsequent
to, the property acquisition. These master leases were established at the time of acquisition to mitigate the potential negative effects
of lost rental revenues and expense reimbursement income. Columbia Property Trust records payments received under master
lease agreements as a reduction of the basis of the underlying property rather than rental income. There were no proceeds received
from master leases during 2014, 2013, or 2012.
Columbia Property Trust owns a full-service hotel through a taxable REIT subsidiary. Revenues derived from the operations of
the hotel include, but are not limited to, revenues from rental of rooms, food and beverage sales, telephone usage, and other service
revenues. Revenue is recognized when rooms are occupied, when services have been performed, and when products are delivered.
Income Taxes
Columbia Property Trust has elected to be taxed as a REIT under the Code, and has operated as such beginning with its taxable
year ended December 31, 2003. To qualify as a REIT, Columbia Property Trust must meet certain organizational and operational
requirements, including a requirement to distribute at least 90% of its REIT taxable income, as defined by the Code, to its
stockholders. As a REIT, Columbia Property Trust generally is not subject to income tax on income it distributes to stockholders.
Columbia Property Trust's stockholder distributions typically exceed its taxable income due to the inclusion of noncash expenses,
such as depreciation, in taxable income. As a result, Columbia Property Trust typically does not incur federal income taxes other
than as described in the following paragraph. Columbia Property Trust is, however, subject to certain state and local taxes related
to the operations of properties in certain locations, which have been provided for in the accompanying consolidated financial
statements.
Columbia Property Trust TRS, LLC ("Columbia TRS"), Columbia KCP TRS, LLC ("Columbia KCP TRS"), and Columbia Energy
TRS, LLC ("Columbia Energy TRS") (collectively, the "TRS Entities") are wholly owned subsidiaries of Columbia Property Trust,
are organized as Delaware limited liability companies, and operate, among other things, a full-service hotel. Columbia Property
Trust has elected to treat the TRS Entities as taxable REIT subsidiaries. Columbia Property Trust may perform certain additional,
noncustomary services for tenants of its buildings through the TRS Entities; however, any earnings related to such services are
subject to federal and state income taxes. In addition, for Columbia Property Trust to continue to qualify as a REIT, Columbia
Property Trust must limit its investments in taxable REIT subsidiaries to 25% of the value of the total assets. The TRS Entities'
deferred tax assets and liabilities represent temporary differences between the financial reporting basis and the tax basis of assets
and liabilities based on the enacted rates expected to be in effect when the temporary differences reverse. If applicable, Columbia
Property Trust records interest and penalties related to uncertain tax positions as general and administrative expense in the
accompanying consolidated statements of operations.
Operating Segments
Columbia Property Trust establishes its operating segments at the building level, and none of its operating segments meet the
quantitative or qualitative thresholds to be considered an individual reportable segment. Therefore, Columbia Property Trust
aggregates all of its operating segments into one reporting segment.
Reclassification
Certain prior period amounts may be reclassified to conform with the current-period financial statement presentation, including
discontinued operations (see Note 12, Discontinued Operations) and equity accounts impacted by the Reverse Stock Split (see
Note 7, Stockholders' Equity).
Recent Accounting Pronouncements
In April 2014, Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update 2014-08, Reporting
Discontinued Operations and Disclosures of Disposals of Components on an Entity ("ASU 2014-08"), which raises the threshold
used to determine whether revenues and expenses associated with dispositions are reclassified to discontinued operations in the
statement of operations. Under the new standard, typical asset sales will remain in continuing operations, whereas, asset sales that
represent a strategic shift in operations (for example, exiting a major geographical area) would be reclassified to discontinued
operations. ASU 2014-08 is required beginning with the first quarter of 2015; however, Columbia Property Trust elected to adopt
the new standard effective April 1, 2014.
F-16
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"),
which establishes a comprehensive model to account for revenue arising from contracts with customers. ASU 2014-09 applies to
all contracts with customers except those that are within the scope of other topics in the FASB's Accounting Standards Codification
such as real estate leases. ASU 2014-09 will require companies to perform a five-step analysis of transactions to determine when
and how revenue is recognized. ASU 2014-09 will be effective for Columbia Property Trust beginning on January 1, 2017, and
early adoption is not permitted. Columbia Property Trust is currently in the process of evaluating the potential impact, if any,
ASU 2014-09 will have on its financial statements and disclosures.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements – Going Concern
("ASU 2014-15"), which provides guidance about the responsibility of management to evaluate whether there is substantial doubt
about an entity's ability to continue as a going concern and to provide related footnote disclosures if necessary. ASU 2014-15 will
be effective for Columbia Property Trust beginning on January 1, 2017, and early adoption is permitted. Columbia Property Trust
does not expect the adoption of ASU 2014-15 to have a material impact on its financial statements and disclosures.
3.
Real Estate and Other Transactions
Acquisitions
During 2014, Columbia Property Trust acquired interests in the following properties (in thousands). Columbia Property Trust
did not acquire any real estate assets during 2013.
Location
Date acquired
Purchase price:
Land
Building and improvements
Intangible lease assets
Intangible lease origination costs
Intangible below market lease liability
Total purchase price
2014
221 Main
Street Building
650 California
Street Building
San Francisco, CA
San Francisco, CA
April 22, 2014
September 9, 2014
$
$
60,509
$
161,853
12,776
3,475
(10,323)
228,290
$
75,384
221,135
19,306
4,290
(9,908)
310,207
Note 2, Summary of Significant Accounting Policies, provides a discussion of the estimated useful life for each asset class.
221 Main Street Building
On April 22, 2014, Columbia Property Trust acquired the 221 Main Street Building, a 388,000-square-foot office building in San
Francisco, California (the "221 Main Street Building"), for $228.8 million, exclusive of transaction costs. The acquisition was
funded with a $73.0 million assumed mortgage note, $116.0 million of borrowings on the JPMorgan Chase Credit Facility (the
"JPMorgan Chase Credit Facility"), and cash on hand. Columbia Property Trust recognized revenues of $12.7 million and a net
loss of $10.9 million from the 221 Main Street Building acquisition for the period from April 22, 2014 to December 31, 2014.
The net loss includes acquisition-related expenses of $6.1 million.
As of the acquisition date, the 221 Main Street Building was 82.8% leased to 40 tenants, including DocuSign, Inc. (16%), and no
other tenant leases more than 10% of the building based on annualized lease revenue.
650 California Street Building
On September 9, 2014, Columbia Property Trust acquired the 650 California Street Building, a 478,000-square-foot office building
in San Francisco, California (the "650 California Street Building"), for $310.2 million, exclusive of transaction costs. The acquisition
was funded with a $130.0 million assumed mortgage note, $118.0 million of borrowings on the JPMorgan Chase Credit Facility,
and cash on hand. Columbia Property Trust recognized revenues of $8.0 million and a net loss of $9.7 million from the 650 California
Street Building acquisition for the period from September 9, 2014 to December 31, 2014. The net loss includes acquisition-related
expenses of $8.0 million.
F-17
As of the acquisition date, the 650 California Street Building was 88.1% leased to 18 tenants, including Littler Mendelson (24%),
Credit Suisse (13%), and Goodby Silverstein (11%).
2015 Acquisitions
On January 7, 2015, Columbia Property Trust acquired a portfolio of two assets, which includes 315 Park Avenue South, a 341,000-
square-foot office building in New York, New York (the "315 Park Avenue South Building") and 1881 Campus Commons, a
245,000-square-foot office building in Reston, Virginia (the "1881 Campus Commons Building"). This portfolio was acquired for
$436.0 million, exclusive of transaction costs. An earnest money deposit of $17.0 million was prepaid for this transaction in
December 2014, and is included in prepaid expenses and other assets in the accompanying consolidated balance sheet.
On January 8, 2015, Columbia Property Trust acquired a 274,000-square-foot office building in Boston, Massachusetts (the
"116 Huntington Avenue Building"), for $152.0 million, inclusive of capital credits. An earnest money deposit of $10.0 million
was prepaid for this transaction in December 2014, and is included in prepaid expenses and other assets in the accompanying
consolidated balance sheet.
These acquisitions were funded with $300.0 million in proceeds from the the Bridge Loan (as described in Note 4, Line of Credit,
Term Loan, and Notes Payable), $140.0 million of borrowings on the JPMorgan Chase Credit Facility (as described in Note 4,
Line of Credit, Term Loan, and Notes Payable), and cash on hand.
Pro Forma Financial Information
The following unaudited pro forma statements of operations presented for 2014, 2013, and 2012 have been prepared for Columbia
Property Trust to give effect to the acquisition of both the 650 California Street Building and the 221 Main Street Building as if
the acquisitions occurred on January 1, 2012. The following unaudited pro forma financial results for Columbia Property Trust
have been prepared for informational purposes only and are not necessarily indicative of future results or of actual results that
would have been achieved had the acquisitions of the 650 California Street Building and the 221 Main Street Building been
consummated as of January 1, 2012 (in thousands).
Revenues
Net income (loss)
Net income (loss) per share – basic
Net income (loss) per share – diluted
Dispositions
2014
2013
2012
$
$
$
$
555,472
90,999
0.73
0.73
$
$
$
$
550,675
$
(17,969) $
(0.13) $
(0.13) $
517,958
(665)
—
—
As a result of adopting ASU 2014-08 effective April 1, 2014 (see Note 2, Significant Accounting Policies), for all periods presented
in the accompanying consolidated statements of operations, the revenues and expenses associated with the second and third quarter
2014 property sales described below are included in continuing operations, while the revenues and expenses associated with sales
executed before April 1, 2014, are classified as discontinued operations.
160 Park Avenue Building
On June 4, 2014, Columbia Property Trust closed on the sale of the 160 Park Avenue Building (formerly known as the 180 Park
Avenue, #103 Building) in Florham Park, New Jersey, for $10.2 million, exclusive of transaction costs. Columbia Property Trust
recognized an impairment loss of $13.6 million related to this building in the first quarter of 2014, as further described in Note 2,
Significant Accounting Policies.
200 South Orange Building
On June 30, 2014, Columbia Property Trust closed on the sale of the 200 South Orange Building in Orlando, Florida, for
$18.8 million, exclusive of transaction costs. This transaction resulted in a $1.4 million impairment loss in the second quarter of
2014, as further described in Note 2, Significant Accounting Policies.
7031 Columbia Gateway Drive Building
On July 1, 2014, Columbia Property Trust closed on the sale of the 7031 Columbia Gateway Drive Building in Columbia, Maryland,
for $59.5 million, exclusive of transaction costs, yielding a gain on sale of real estate assets of $7.7 million.
F-18
9 Technology Drive Building
On August 22, 2014, Columbia Property Trust closed on the sale of the 9 Technology Drive Building in Westborough, Massachusetts,
for $47.0 million, exclusive of purchase price adjustments and transaction costs, yielding a gain on sale of real estate assets of
$11.1 million.
Lenox Park Property
On October 3, 2014, Columbia Property Trust closed on the sale of the five buildings comprising the Lenox Park Property in
Atlanta, Georgia, for $290.0 million, exclusive of transaction costs, yielding a gain on sale of real estate assets of $56.5 million
in the fourth quarter of 2014.
18 Property Sale
On November 5, 2013, Columbia Property Trust closed on the 18 Property Sale to an unaffiliated third party for $521.5 million,
exclusive of closing costs. In connection with marketing these assets for sale and finalizing the terms of the sale agreement,
Columbia Property Trust recognized aggregate impairment losses of $29.7 million. After considering the impact of these impairment
losses, upon closing in the fourth quarter of 2013, the 18 Property Sale yielded a loss of $0.4 million, which is included in gain
(loss) on disposition of discontinued operations in the accompanying consolidated statement of operations.
The following properties make up the 18 Property Sale:
2500 Windy Ridge Parkway
Sterling Commerce Center
11200 West Parkland Avenue
4100-4300 Wildwood Parkway
4300 Centreway Place
4200 Wildwood Parkway
919 Hidden Ridge
4241 Irwin Simpson
8990 Duke Road
Chase Center Building
333 & 777 Republic Drive
120 Eagle Rock
College Park Plaza
One Century Place
1200 Morris Drive
15815 25th Avenue West
16201 25th Avenue West
13655 Riverport Drive
Dvintsev Business Center – Tower B
On March 21, 2013, Columbia Property Trust closed on the sale of the Dvintsev Business Center – Tower B building in Moscow,
Russia, and its holding entity, Landlink Ltd., which was 100% owned by Columbia Property Trust, for $67.5 million, exclusive
of transaction costs, resulting in a gain on disposition of discontinued operations in the accompanying consolidated statement of
operations of $10.0 million.
Other Transactions
As described in Note 10, Related-Party Transactions and Agreements, Columbia Property Trust acquired Columbia Property Trust
Advisory Services, LLC ("Columbia Property Trust Advisory Services") and Columbia Property Trust Services, LLC ("Columbia
Property Trust Services") on February 28, 2013. The following unaudited pro forma statements of operations presented for 2013
and 2012, have been prepared for Columbia Property Trust to give effect to the acquisitions of Columbia Property Trust Advisory
Services and Columbia Property Trust Services as if the acquisitions occurred on January 1, 2012. The following unaudited pro
forma financial results for Columbia Property Trust have been prepared for informational purposes only and are not necessarily
indicative of future results or of actual results that would have been achieved had the acquisitions of Columbia Property Trust
Advisory Services and Columbia Property Trust Services been consummated as of January 1, 2012 (in thousands).
Revenues
Net income attributable to common shareholders
As of December 31,
2014
*
*
2013
2012
$
$
526,966
47,661
$
$
479,056
47,591
* Columbia Property Trust owned Columbia Property Trust Advisory Services and Columbia Property Trust Services for all of 2014.
F-19
4.
Line of Credit, Term Loan, and Notes Payable
As of December 31, 2014 and 2013, Columbia Property Trust had the following line of credit, term loan, and notes payable
indebtedness outstanding (excluding bonds payable; see Note 5, Bonds Payable) in thousands:
Facility
$450 Million Term Loan
Market Square Buildings mortgage note
333 Market Street Building mortgage note
650 California Street Building mortgage note
100 East Pratt Street Building mortgage note
221 Main Building mortgage note
263 Shuman Boulevard Building mortgage note
SanTan Corporate Center mortgage notes
One Glenlake Building mortgage note
215 Diehl Road Building mortgage note
544 Lakeview Building mortgage note
JPMorgan Chase Credit Facility
Total indebtedness
Rate as of
December 31, 2014
LIBOR + 130 bp (1)
Term Debt or
Interest Only
Outstanding Balance as of
December 31,
Maturity
2014
2013
Interest only
2/3/2016
$
450,000
$
5.07%
Interest only
LIBOR + 202 bp (2)
Interest only
3.60%
5.08%
3.95%
5.55%
5.83%
5.80%
5.55%
5.54%
Interest only
Interest only
Interest only
Interest only
Interest only
Interest only
Interest only
10/11/2016
Term debt
12/10/2018
7/1/2023
7/1/2015
7/1/2019
6/11/2017
5/10/2017
7/1/2017
7/1/2017
12/1/2014
8/21/2017
LIBOR + 110 bp (3)
Interest only
325,000
206,810
130,000
105,000
73,000
49,000
39,000
32,074
21,000
—
—
450,000
325,000
207,559
—
105,000
—
49,000
39,000
34,713
21,000
8,977
—
$
1,430,884
$
1,240,249
(1) Columbia Property Trust is party to an interest rate swap agreement, which effectively fixes its interest rate on the $450 Million Term
Loan (the "450 Million Term Loan") at 2.07% per annum and terminates on February 3, 2016. This interest rate swap agreement
qualifies for hedge accounting treatment; therefore, changes in fair value are recorded as a market value adjustment to interest rate
swap in the accompanying consolidated statements of other comprehensive income.
(2) Columbia Property Trust is party to an interest rate swap agreement, which effectively fixes its interest rate on the 333 Market Street
Building mortgage note at 4.75% per annum and terminates on July 1, 2015. This interest rate swap agreement does not qualify for
hedge accounting treatment; therefore, changes in fair value are recorded as loss on interest rate swaps in the accompanying consolidated
statements of operations.
(3)
JPMorgan Chase Credit Facility debt bears interest at a rate based on, at the option of Columbia Property Trust, LIBOR for seven-day
or one-, two-, three-, or six-month periods, plus an applicable margin ranging from 1.00% to 1.70%, or the alternate base rate for any
day is the greatest of the rate of interest publicly announced by JPMorgan Chase Bank ("JPMorgan Chase Bank") as its prime rate in
effect in its principal office in New York City for such day plus an applicable margin ranging from 0.00% to 0.70%.
221 Main Street Building Mortgage Note
In April 2014, in connection with acquiring the 221 Main Street Building in San Francisco, California, Columbia Property Trust
assumed a $73.0 million mortgage note payable (the "221 Main Street Building Mortgage Note"), which is secured by the property.
At the time of acquisition, Columbia Property Trust evaluated the 221 Main Street Building Mortgage Note and determined that
the face value of the note approximates its fair value. The fair value of the 221 Main Street Building Mortgage Note was estimated
by obtaining estimates for similar facilities from multiple market participants as of the respective reporting dates (Level 2). The
221 Main Street Building Mortgage Note is due on May 10, 2017, and requires monthly interest-only payments at an interest rate
of 3.95% per annum.
650 California Street Building Mortgage Note
In September 2014, in connection with acquiring the 650 California Street Building in San Francisco, California, Columbia Property
Trust assumed a $130.0 million mortgage note payable (the "650 California Street Building Mortgage Note"), which is secured
by the property. At the time of acquisition, Columbia Property Trust evaluated the 650 California Street Building Mortgage Note
and determined that the face value of the note approximates its fair value. The fair value of the 650 California Street Building
Mortgage Note was estimated by obtaining estimates for similar facilities from multiple market participants as of the respective
reporting dates (Level 2). The 650 California Building Mortgage Note is due on July 1, 2019. Through June 2015, the 650 California
Street Building Mortgage Note requires monthly, interest-only payments at an interest rate of 3.60% per annum. Beginning in July
2015, monthly payments will be $591,000 monthly ($7.1 million annually), consisting of principal and interest.
F-20
Bridge Loan
On January 6, 2015, Columbia Property Trust entered into a $300 million, six-month, unsecured loan with a syndicate of banks
led by JPMorgan Chase Bank (the "Bridge Loan") to finance a portion of the the real estate assets purchased in January 2015. At
the Columbia Property Trust's option, borrowings under the Bridge Loan bear interest at either (i) an alternate base rate plus an
applicable margin ranging from 0.00% to 0.80% or (ii) LIBOR plus an applicable margin based on four stated pricing levels
ranging from 1.00% to 1.80%, in each case based on Columbia Property Trust's credit rating. Subject to customary conditions,
Columbia Property Trust may increase the borrowings under the Bridge Loan up to two times up to an aggregate amount of
$150 million. Each increase must be in an increment of $25 million.
The Bridge Loan matures on July 6, 2015, with a six-month extension at the option of Columbia Property Trust, and may be
prepaid by Columbia Property Trust at any time without premium or penalty. In addition, amounts under the Bridge Loan must
be repaid by Columbia Property Trust with the net cash proceeds of certain financing activities and asset sales, including (i) the
issuance of common or preferred equity securities, (ii) the incurrence of mortgage indebtedness on any property, (iii) the incurrence
of unsecured indebtedness, or (iv) the sale of certain real estate assets or any equity interests.
Debt Covenants
Columbia Property Trust is subject to a $25.0 million limitation on letters of credit that may be issued under the JPMorgan Chase
Credit Facility. The JPMorgan Chase Credit Facility, and the Bridge Loan contain the following restrictive covenants:
•
•
•
•
•
•
•
limits the ratio of debt to total asset value, as defined, to 50% or less during the term of the facility;
limits the ratio of secured debt to total asset value, as defined, to 40% or less during the term of the facility;
requires the ratio of unencumbered asset value, as defined, to total unsecured debt to be at least 2:1 at all times;
requires maintenance of certain interest and fixed-charge coverage ratios;
limits the ratio of secured recourse debt to total asset value, as defined, to 10% or less at all times;
requires maintenance of certain minimum tangible net worth balances; and
limits investments that fall outside Columbia Property Trust's core investments of improved office properties located in
the United States.
As of December 31, 2014, Columbia Property Trust believes it was in compliance with the restrictive covenants on its outstanding
debt obligations.
Fair Value of Debt
The estimated fair value of Columbia Property Trust's line of credit, term loan, and notes payable as of December 31, 2014 and
2013, was approximately $1,465.2 million and $1,245.3 million, respectively. Columbia Property Trust estimated the fair value
of its line of credit by obtaining estimates for similar facilities from multiple market participants as of the respective reporting
dates. Therefore, the fair values determined are considered to be based on observable market data for similar instruments (Level 2).
The fair values of all other debt instruments were estimated based on discounted cash flow analyses using the current incremental
borrowing rates for similar types of borrowing arrangements as of the respective reporting dates. The discounted cash flow method
of assessing fair value results in a general approximation of value, and such value may never actually be realized.
Interest Paid
As of December 31, 2014 and 2013, Columbia Property Trust's weighted-average interest rate on its line of credit and notes payable
was approximately 3.95% and 4.08%, respectively. Columbia Property Trust made interest payments of approximately
$56.1 million, $59.6 million, and $50.1 million during 2014, 2013, and 2012, respectively, none of which was capitalized.
Debt Maturities and Extinguishment
On October 8, 2014, Columbia Property Trust repaid the mortgage note for the 544 Lakeview Building for $9.1 million, resulting
in a loss on early extinguishment of debt of $23,000. The original maturity date for the 544 Lakeview Building mortgage note
was December 1, 2014. There were no other debt maturities during 2014.
F-21
The following table summarizes the aggregate maturities of Columbia Property Trust's line of credit, term loan, and notes payable
as of December 31, 2014 (in thousands):
2015
2016
2017
2018
2019
Thereafter
Total
5.
Bonds Payable
$
210,821
494,460
253,728
25,860
121,015
325,000
$
1,430,884
In 2011, Columbia Property Trust issued $250.0 million of its seven-year, unsecured 5.875% senior notes at 99.295% of their face
value. Columbia Property Trust received proceeds from the 2018 Bonds Payable, net of fees, of $246.7 million. The 2018 Bonds
Payable require semiannual interest payments in April and October based on a contractual annual interest rate of 5.875%, which
is subject to adjustment in certain circumstances. In the accompanying consolidated balance sheets, the 2018 Bonds Payable are
shown net of the initial issuance discount of approximately $1.8 million, which is amortized to interest expense over the term of
the 2018 Bonds Payable using the effective interest method. The principal amount of the 2018 Bonds Payable is due and payable
on the maturity date, April 1, 2018. Interest payments of $14.7 million were made on the 2018 Bonds Payable during 2014 and
2013.
The restrictive covenants on the 2018 Bonds Payable as defined pursuant to an indenture include:
•
•
•
•
•
limits to Columbia Property Trust's ability to merge or consolidate with another entity or transfer all or substantially all
of Columbia Property Trust's property and assets, subject to important exceptions and qualifications;
a limitation on the ratio of debt to total assets, as defined, to 60%;
limits to Columbia Property Trust's ability to incur debt if the consolidated income available for debt service to annual
debt service charge, as defined, for four previous consecutive fiscal quarters is less than 1.5:1 on a pro forma basis;
limits to Columbia Property Trust's ability to incur liens if, on an aggregate basis for Columbia Property Trust, the secured
debt amount would exceed 40% of the value of the total assets; and
a requirement that the ratio of unencumbered asset value, as defined, to total unsecured debt be at least 150% at all times.
As of December 31, 2014, Columbia Property Trust believes it was in compliance with the restrictive covenants on its 2018 Bonds
Payable. The 2018 Bonds Payable were originally issued through a private offering and subsequently registered.
The estimated fair value of the 2018 Bonds Payable as of December 31, 2014 and 2013 was approximately $250.6 million and
$250.8 million, respectively. The fair value of the 2018 Bonds Payable was estimated based on discounted cash flow analyses
using the current incremental borrowing rates for similar types of borrowing as the 2018 Bonds Payable arrangements, as of the
respective reporting dates (Level 2). The discounted cash flow method of assessing fair value results in a general approximation
of value, and such value may never actually be realized.
F-22
6.
Commitments and Contingencies
Obligations Under Operating Leases
Columbia Property Trust owns three properties that are subject to ground leases with expiration dates of December 31, 2058;
February 28, 2062; and July 31, 2099. We incurred $2.1 million in rent expense related to such ground leases in 2014, 2013, and
2012. As of December 31, 2014, the remaining required payments under the terms of these ground leases are as follows (in
thousands):
2015
2016
2017
2018
2019
Thereafter
Total
$
$
2,557
2,557
2,702
2,731
2,731
202,798
216,076
Obligations Under Capital Leases
The Three Glenlake Building is subject to a capital lease of land. This obligation requires payments equal to the amounts of
principal and interest receivable from related investments in development authority bonds, which matures in 2021. The required
payments under the terms of the leases are as follows as of December 31, 2014 (in thousands):
2015
2016
2017
2018
2019
Thereafter
Amounts representing interest
Total
Commitments Under Existing Lease Agreements
$
$
7,200
7,200
7,200
7,200
7,200
134,400
170,400
(50,400)
120,000
Certain lease agreements include provisions that, at the option of the tenant, may obligate Columbia Property Trust to expend
capital to expand an existing property or provide other expenditures for the benefit of the tenant. As of December 31, 2014, no
tenants have exercised such options that had not been materially satisfied.
Litigation
Columbia Property Trust is subject to various legal proceedings, claims, and administrative proceedings arising in the ordinary
course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates
concerning the likelihood and amount of any reasonably possible loss relating to these matters using the latest information available.
Columbia Property Trust records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range
of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, Columbia
Property Trust accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount,
Columbia Property Trust accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount
of the loss cannot be reasonably estimated, Columbia Property Trust discloses the nature of the litigation and indicates that an
estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is
material, Columbia Property Trust discloses the nature and estimate of the possible loss of the litigation. Columbia Property Trust
does not disclose information with respect to litigation where the possibility of an unfavorable outcome is considered to be remote.
Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse
effect on the liquidity, results of operations, business, or financial condition of Columbia Property Trust. Columbia Property Trust
F-23
is not currently involved in any legal proceedings of which management would consider the outcome to be reasonably likely to
have a material adverse effect on the results of operations or financial condition of Columbia Property Trust.
7.
Stockholders' Equity
Long-Term Incentive Plan
Columbia Property Trust maintains a long-term incentive plan that provides for grants of stock to be made to certain employees
and independent directors of Columbia Property Trust (the "Long-Term Incentive Plan"). In July 2013, Columbia Property Trust's
shareholders approved the Long-Term Incentive Plan, and 2,000,000 shares were authorized and reserved for issuance under the
Long-Term Incentive Plan.
Employee Grants
On January 21, 2014, Columbia Property Trust granted 143,740 shares of common stock to employees, net of 12,752 shares
withheld to settle the related tax liability, under the Long-Term Incentive Plan for 2013 performance (the "2013 LTIP Employee
Grant"), of which 25% vested upon grant, and the remaining shares will vest ratably, with the passage of time, on January 31,
2015, 2016, and 2017. Employees will receive quarterly dividends related to their entire grant, including the unvested shares, on
each dividend payment date. A summary of the activity for the employee stock grants under the Long-Term Incentive Plan for
2014, follows:
Unvested shares as of January 1, 2014
Granted
Vested
Forfeited
Unvested shares as of December 31, 2014
Shares
(in thousands)
Weighted-Average,
Grant-Date Fair Value(1)
—
$
—
$
$
144
(39)
(1)
$
104 (2) $
24.82
24.82
24.82
24.82
(1) Columbia Property Trust determined the weighted-average grant-date fair value using the market closing price on the date of the grant.
(2) As of December 31, 2014, we expect approximately 98,800 of the 104,000 unvested shares to ultimately vest, assuming a forfeiture
rate of 5%, which was determined based on peer company data, adjusted for the specifics of the Long-Term Incentive Plan.
On January 21, 2015, Columbia Property Trust granted 123,187 shares of common stock to employees, net of 11,368 shares
withheld to settle the related tax liability, under the Long-Term Incentive Plan (the "2014 LTIP Employee Grant"), of which 25%
vested upon grant, and the remaining shares will vest ratably, with the passage of time, on January 31, 2016, 2017, and 2018.
Independent Director Grants
Beginning in January 2014, Columbia Property Trust pays quarterly installments of the independent directors' annual equity
retainers by granting shares to the independent directors, which vest at the time of grant. In October 2013, Columbia Property
Trust paid the annual equity retainer for 2013. A summary of these grants, made under the Long-Term Incentive Plan, follows:
Date of Grant
Shares
Weighted-Average
Grant-Date Fair Value
2015 Director Grants:
January 2, 2015
2014 Director Grants:
January 21, 2014
April 1, 2014
July 1, 2014
October 1, 2014
2013 Director Grant:
September 13, 2013
5,850
3,344
2,968
3,016
4,960
6,820
$
$
$
$
$
$
25.75
24.82
27.22
25.78
23.89
29.32
F-24
Stock-Based Compensation Expense
In 2014, Columbia Property Trust incurred $2.0 million in stock-based compensation expense, of which $0.4 million related to
the issuance of shares to independent directors as described above, $0.7 million related to the amortization of unvested awards
under the 2013 LTIP Employee Grant, and $0.9 million related to the 2014 LTIP Employee Grant, which was authorized, and
employee service related to these awards began on January 1, 2014. The 2014 LTIP Employee Grant was granted in January 2015,
with 25% of the grant vesting on the grant date and the remaining shares vesting ratably on January 31, 2016, 2017, and 2018. In
2013, Columbia Property Trust incurred approximately $1.1 million of stock-based compensation expense, of which $0.2 million
related to the issuance of shares to independent directors and $0.9 million related to future employee awards related to service
during 2013, which were granted in January 2014. These expenses are included in general and administrative expenses in the
accompanying consolidated statement of operations. There was $1.7 million and $0.9 million of unrecognized compensation costs
related to unvested awards under the 2013 LTIP Employee Grant as of December 31, 2014 and December 31, 2013, respectively.
This amount will be amortized over the respective vesting period, ranging from one year to three years at the time of grant.
Reverse Stock Split
On August 6, 2013, Columbia Property Trust's board of directors approved a four-for-one reverse stock split (the "Reverse Stock
Split"). The Reverse Stock Split became effective on August 14, 2013 (the "Effective Date"), causing every four shares of common
stock that were issued and outstanding as of the Effective Date to be automatically combined into one issued and outstanding
share of common stock. The share combination affected all shareholders uniformly and did not affect any shareholder's percentage
ownership interest or any shareholder rights. In addition, the par value and number of authorized shares of common stock remained
unchanged. The Reverse Stock Split requires retroactive adjustment; therefore, all share and per-share data for prior periods has
been adjusted to reflect the Reverse Stock Split.
Authorized Shares
On July 1, 2014, Columbia Property Trust reduced the number of common shares authorized from 900,000,000 to 225,000,000,
which is proportionally equal to the reduction in shares outstanding as a result of the Reverse Stock Split.
Listing
On October 10, 2013, Columbia Property Trust listed its shares of common stock on the New York Stock Exchange (the "NYSE")
under the ticker symbol "CXP." Columbia Property Trust has incurred $4.1 million of costs related to the listing during 2013,
primarily related to professional and legal fees associated with the listing. Such fees have been recorded separately as listing costs
in the accompanying statement of operations.
Tender Offer
On October 10, 2013, Columbia Property Trust commenced a modified "Dutch-auction" tender offer to purchase for cash up to
$300.0 million in value of shares of its common stock (the "Tender Offer"). As a result of the Tender Offer, on November 18,
2013, we accepted for purchase 9.4 million shares of common stock at a purchase price of $25.00 per share, for an aggregate cost
to Columbia Property Trust of $234.1 million, exclusive of fees and expenses related to the Tender Offer.
Independent Director Stock Option Plan
Columbia Property Trust maintains an independent director stock option plan that provides for grants of stock to be made to
independent directors of Columbia Property Trust (the "Director Plan"). On April 24, 2008, the Conflicts Committee of the Board
of Directors suspended the Director Plan in connection with the registration of a public offering of shares of its common stock in
certain states. A total of 25,000 shares have been authorized and reserved for issuance under the Director Plan.
Under the Director Plan, options to purchase 625 shares of common stock at $48.00 per share were granted upon initially becoming
an independent director of Columbia Property Trust. Of these options, 20% are exercisable immediately on the date of grant. An
additional 20% of these options become exercisable on each anniversary for four years following the date of grant. Additionally,
effective on the date of each annual stockholder meeting, beginning in 2004, each independent director was granted options to
purchase 250 additional shares of common stock at the greater of (1) $48.00 per share or (2) the fair market value (as defined in
the Director Plan) on the last business day preceding the date of the annual stockholder meeting. These options are 100% exercisable
two years after the date of grant. All options granted under the Director Plan expire no later than the tenth anniversary of the date
of grant and may expire sooner if the independent director dies, is disabled, or ceases to serve as a director. In the event of a
corporate transaction or other recapitalization event, the Conflicts Committee will adjust the number of shares, class of shares,
exercise price, or other terms of the Director Plan to prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Director Plan or with respect to any option as necessary. No stock option may be exercised if such
exercise would jeopardize Columbia Property Trust's status as a REIT under the Code, and no stock option may be granted if the
F-25
grant, when combined with those issuable upon exercise of outstanding options or warrants granted to Columbia Property Trust's
advisor, directors, officers, or any of their affiliates, would exceed 10% of Columbia Property Trust's outstanding shares. No option
may be sold, pledged, assigned, or transferred by an independent director in any manner other than by will or the laws of descent
or distribution.
A summary of stock option activity under the Director Plan during 2014, 2013, and 2012, follows:
Outstanding as of December 31, 2011
Granted
Expired
Number
Exercise
Price
7,375
$48
Exercisable
7,250
—
—
Outstanding as of December 31, 2012
7,375
$48
7,375
Granted
Expired
Outstanding as of December 31, 2013
Granted
Expired
Outstanding as of December 31, 2014
—
—
7,375
—
(3,500)
3,875
$48
$48
7,375
3,875
Columbia Property Trust has evaluated the fair values of options granted under the Director Plan using the Black-Scholes-Merton
model and concluded that such values are insignificant as of the end of the period presented. The weighted-average contractual
remaining life for options that were exercisable as of December 31, 2014, was approximately 1.75 years.
8.
Operating Leases
Columbia Property Trust's real estate assets are leased to tenants under operating leases for which the terms vary, including certain
provisions to extend the lease agreement, options for early terminations, subject to specified penalties, and other terms and
conditions as negotiated. Columbia Property Trust retains substantially all of the risks and benefits of ownership of the real estate
assets leased to tenants. Amounts required as security deposits vary depending upon the terms of the respective leases and the
creditworthiness of the tenant; however, such deposits generally are not significant. Therefore, exposure to credit risk exists to the
extent that the receivables exceed this amount. Security deposits related to tenant leases are included in accounts payable, accrued
expenses, and accrued capital expenditures in the accompanying consolidated balance sheets.
Based on 2014 Annualized Lease Revenue, as defined, none of our tenants comprised more than 6% of Columbia Property Trust's
portfolio. Tenants in the legal services, banking, and business services industries each comprise 18%, 14%, and 8%, respectively,
of Columbia Property Trust's 2014 Annualized Lease Revenue. Columbia Property Trust's properties are located in 12 states and
the District of Columbia.
As of December 31, 2014, approximately 19%, 12%, and 10% of Columbia Property Trust's office properties are located in San
Francisco, metropolitan District of Columbia, and northern New Jersey, respectively.
The future minimum rental income from Columbia Property Trust's investment in real estate assets under noncancelable operating
leases, excluding properties under development, as of December 31, 2014, is as follows (in thousands):
2015
2016
2017
2018
2019
Thereafter
Total
$
$
376,623
361,085
306,788
269,712
248,991
1,070,022
2,633,221
F-26
9.
Supplemental Disclosures of Noncash Investing and Financing Activities
Outlined below are significant noncash investing and financing activities for the years ended December 31, 2014, 2013, and 2012
(in thousands):
Years ended December 31,
2013
2012
2014
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$ 203,000
3,807
2,493
$
$
2,004
$
— $
— $
$
— $
396
$
1,339
$
17,283
$
— $
— $
741
741
872
$
$
$
—
130
—
—
— $
11,560
— $ 208,330
$
186
(363) $
306
364
1,997
15,997
$
$
(5,305)
16,325
— $
1,642
— $
— $
$
— $
— $ 466,000
— $
1,055
$
(99,526) $
— $
$
35
—
3,655
60,000
—
13,621
Investment in real estate funded with other assets
Other assets assumed upon acquisition
Other liabilities assumed upon acquisition
Other liabilities settled at disposition
Interest rate swap assumed upon acquisition of property
Notes payable assumed at acquisition
Interest accruing into notes payable
Amortization of discounts (premiums) on debt
Market value adjustment to interest rate swaps that qualify for hedge accounting
treatment
Accrued capital expenditures and deferred lease costs
Accrued deferred financing costs
Common stock issued to employees and directors, and amortized (net of amounts
withheld for taxes)
Accrued redemptions of common stock
Transfer of development authority bonds
Stock-based compensation expense
Increase (decrease) in redeemable common stock
F-27
10.
Related-Party Transactions and Agreements
During 2013, Columbia Property Trust was party to agreements with various entities of Wells Real Estate Funds ("WREF"), which
served as our Advisor (the "Advisor"). Since January 1, 2014, Columbia Property Trust has had no contractual relationship with
WREF.
•
Transition Services Agreement – Columbia Property Trust exercised the option to acquire Columbia Property Trust
Advisory Services and Columbia Property Trust Services from WREF (the "Assignment Options") on February 13, 2013,
as provided for in the Transition Services Agreement, as amended (the "Transition Services Agreement"). No payment
was associated with the Assignment Options; however, Columbia Property Trust was required to pay WREF a total of
$8.8 million, for the work required to transfer sufficient employees, proprietary systems and processes, and assets to
Columbia Property Trust Advisory Services and Columbia Property Trust Services.
• Consulting Services Agreement – Under the Consulting Services Agreement, WREF provided consulting services with
respect to the same matters that were provided under the Advisory Agreement, described below (the "Consulting Services
Agreement"). The Consulting Services Agreement terminated on December 31, 2013. The fees incurred under the
Consulting Services Agreement are included in general and administrative expense in the accompanying consolidated
statement of operations.
• Advisory Agreement – Under the terms of the advisory agreement in place from January 1, 2013 to February 27, 2013
(the "Advisory Agreement"), Columbia Property Trust incurred fees and reimbursements payable to the Advisor for asset
management and administrative services.
Related-Party Costs
Pursuant to the terms of the agreements described above, Columbia Property Trust incurred the following related-party costs during
2014, 2013, and 2012, respectively (in thousands):
Consulting services
Transition services
Asset management fees
Administrative reimbursements, net(1)
Investor services
Property management fees
Construction fees(2)
Other
Acquisition fees
Disposition fees
Total
Years ended December 31,
2013
2012
2014
— $
—
—
—
—
—
—
—
—
—
— $
25,417
$
5,750
5,083
1,939
829
523
139
69
—
—
39,749
$
—
3,008
32,000
11,099
—
4,462
220
126
1,500
1,311
53,726
$
$
(1) Administrative reimbursements are presented net of reimbursements from tenants of approximately $0.7 million and $4.4 million for
the years ended December 31, 2013 and 2012, respectively.
(2) Construction fees are capitalized to real estate assets as incurred.
There were no amounts due to affiliates as of December 31, 2014 or December 31, 2013.
F-28
11.
Income Taxes
Columbia Property Trust's income tax basis net income during 2014, 2013, and 2012 (in thousands) follows:
GAAP basis financial statement net income attributable to the common
stockholders of Columbia Property Trust, Inc.
Increase (decrease) in net income resulting from:
Depreciation and amortization expense for financial reporting purposes
in excess of amounts for income tax purposes
Rental income accrued for financial reporting purposes in excess of
amounts for income tax purposes
Net amortization of above-/below-market lease intangibles for financial
reporting purposes less than amounts for income tax purposes
Gain on interest rate swaps that do not qualify for hedge accounting
treatment for financial reporting purposes in excess of amounts for
income tax purposes
Bad debt expense for financial reporting purposes less than amounts for
income tax purposes
Gains or losses on disposition of real property for financial reporting
purposes that are more favorable than amounts for income tax purposes
Other expenses for financial reporting purposes in excess of amounts
for income tax purposes
Income tax basis net income (loss), prior to dividends-paid deduction
$
2014
2013
2012
$
92,635
$
15,720
$
48,039
69,832
72,554
81,681
(8,437)
(26,565)
(24,798)
(9,394)
(8,186)
(3,423)
(4,945)
(5,530)
(173)
(1)
(65)
(5,034)
(47,159)
(78,559)
(61,198)
31,991
124,522
$
9,710
(20,921) $
7,349
42,443
As of December 31, 2014, the tax basis carrying value of Columbia Property Trust's total assets was approximately $5.2 billion.
For income tax purposes, distributions to common stockholders are characterized as ordinary income, capital gains, or as a return
of a stockholder's invested capital. Columbia Property Trust's distributions per common share are summarized as follows:
Ordinary income
Capital gains
Return of capital
Total
2014
2013
2012
83.1%
—%
16.9%
100%
—%
—%
100%
100%
16%
—%
84%
100%
As of December 31, 2014, returns for the calendar years 2010 through 2014 remain subject to examination by U.S. or various
state tax jurisdictions.
No provisions for federal income taxes have been made in the accompanying consolidated financial statements, other than the
provisions relating to Columbia TRS, Columbia KCP TRS, and Columbia Energy TRS, as we made distributions in excess of
taxable income for the periods presented. We are subject to certain state and local taxes related to property operations in certain
locations, which have been provided for in our accompanying consolidated financial statements. The income taxes recorded by
the TRS Entities for the years ended December 31, 2014, 2013, and 2012, are as follows:
Years ended December 31,
2013
2012
2014
Federal income tax
State income tax
Total income tax
$
$
318
35
353
$
$
307
2
309
$
$
265
14
279
As of December 31, 2014 and 2013, Columbia Property Trust had no deferred tax liabilities. As of December 31, 2014 and 2013,
Columbia Property Trust had a deferred tax asset of $0.3 million and $0.6 million, respectively, included in prepaid expenses and
other assets in the accompanying consolidated balance sheets. Columbia Property Trust has assessed its ability to realize this
deferred tax asset and determined that it is more likely than not that the deferred tax asset of $0.3 million as of December 31, 2014,
is realizable.
F-29
12.
Discontinued Operations
As a result of implementing ASU 2014-08 effective April 1, 2014 (see Note 2, Significant Accounting Policies), beginning in the
second quarter of 2014, the operating results for properties sold will generally be included in continuing operations. The following
properties were sold prior to implementing ASU 2014-08 and are, therefore, included in discontinued operations in the
accompanying consolidated statements of operations for all periods presented:
•
the properties included in the 18 Property Sale, which closed on November 5, 2013, for $521.5 million and resulted in a
net loss of $0.4 million;
• Dvintsev Business Center – Tower B in Moscow, Russia, which sold on March 21, 2013, along with its holding entity,
Landlink, Ltd., which was 100% owned by Columbia Property Trust, for $67.5 million and resulted in a gain of
$10.0 million;
•
•
the properties included in the Nine Property Sale, which closed in December 2012 for $260.5 million and resulted in a
net gain of $3.2 million;
5995 Opus Parkway and Emerald Point, both of which closed in January 2012 for $60.1 million and resulted in aggregate
gains of $16.9 million.
The following table shows the revenues and expenses of the above-described discontinued operations (in thousands). 2014 amounts
reflect post closing adjustments and true ups related to the 18 Property Sale, which closed prior to our adoption of ASU 2014-08.
Years ended December 31,
2014
2013
2012
$
4
$
48,550
$
115
—
119
(250)
7
—
—
—
755
512
(393)
3
—
—
(390)
—
(390)
(1,627)
(2,017) $
11,205
291
60,046
21,232
1,501
11,730
7,590
29,737
1,360
73,150
(13,104)
(3,804)
293
(4,709)
(21,324)
(1)
(21,325)
11,225
(10,100) $
91,132
18,059
5,471
114,662
36,996
7,974
21,609
15,776
18,467
748
101,570
13,092
(6,610)
16
—
6,498
(14)
6,484
20,117
26,601
Revenues:
Rental income
Tenant reimbursements
Other property income
Expenses:
Property operating costs
Asset and property management fees
Depreciation
Amortization
Impairment loss on real estate assets
General and administrative
Total expenses
Operating income (loss)
Other income (expense):
Interest expense
Interest and other income
Loss on early extinguishment of debt
Income (loss) from discontinued operations before income tax expense
Income tax expense
Income (loss) from discontinued operations
Gain (loss) on disposition of discontinued operations
Income (loss) from discontinued operations
$
F-30
13.
Earnings Per Share
For 2014, the basic and diluted earnings-per-share computations, net income, and income from continuing operations have been
reduced for the dividends paid on unvested shares related to the 2013 LTIP Employee Grant and the 2014 LTIP Employee Grant.
The following table reconciles the numerator for the basic and diluted earnings per share computations shown on the consolidated
statements of income for 2014, 2013, and 2012 (in thousands):
Net income
Distributions paid on unvested shares
Net income used to calculate basic and diluted earnings per share
2014
2013
2012
$
$
92,635
(128)
92,507
$
$
15,720
—
15,720
$
$
48,039
—
48,039
The following table reconciles the denominator for the basic and diluted earnings-per-share computations shown on the consolidated
statements of income for 2014, 2013, and 2012 (in thousands):
Weighted-average common shares – basic
Plus incremental weighted-average shares from time-vested
conversions less assumed share repurchases:
2013 LTIP Employee Grant
2014 LTIP Employee Grant
2014
2013
2012
124,860
134,085
136,672
29
29
—
—
—
—
Weighted-average common shares – diluted
124,918
134,085
136,672
F-31
14.
Quarterly Results (unaudited)
Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2014 and 2013
(in thousands, except per-share data):
Revenues
Net income attributable to common stockholders of Columbia
Property Trust, Inc.
Basic net income attributable to common stockholders of
Columbia Property Trust, Inc. per share
Diluted net income attributable to common stockholders of
Columbia Property Trust, Inc. per share
Distributions declared per share
Revenues(2)
Net income (loss) attributable to common stockholders of
Columbia Property Trust, Inc.
First
Quarter
129,168
3,400
0.03
0.03
0.30
$
$
$
$
$
First
Quarter
$ 128,792
$ (22,608) (3)
Basic net income (loss) attributable to common stockholders
of Columbia Property Trust, Inc. per share(4)
Diluted net income (loss) attributable to common stockholders
of Columbia Property Trust, Inc. per share(4)
Distributions declared per share(4)
$
$
$
(0.17)
(0.17)
0.38
2014
Second
Quarter
136,757
8,021
0.06
0.06
0.30
$
$
$
$
$
Third
Quarter
Fourth
Quarter
136,981
$ 137,891
24,988
$ 56,226 (1)
0.20
0.20
0.30
$
$
$
0.45
0.45
0.30
2013
Second
Quarter
131,897
20,601
0.15
0.15
0.38
$
$
$
$
$
Third
Quarter
132,502
4,800
0.04
0.04
0.38
Fourth
Quarter
133,387
12,927
0.10
0.10
0.30
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Net income for the fourth quarter of 2014 includes gains on sales of real estate of $56.6 million (See Note 3, Real Estate and Other
Transactions), partially offset by impairment losses of $10.1 million.
(2) Prior-period amounts adjusted to conform with current-period presentation, including classifying revenues generated by properties
sold as discontinued operations for all periods presented (see Note 12, Discontinued Operations).
(3) Net income for the first quarter of 2013 reflects the incurrence of nonrecurring fees under the Consulting and Transitions Services
Agreements (See Note 10, Related-Party Transactions and Agreements).
(4) All computations using share amounts have been retroactively adjusted to reflect the August 14, 2013, four-for-one reverse stock split
(See Note 7, Stockholders' Equity).
15.
Financial Information for Parent Guarantor, Other Guarantor Subsidiaries, and Non-Guarantor Subsidiaries
The 2018 Bonds Payable (see Note 5, Bonds Payable) were issued by Columbia Property Trust OP and are guaranteed by Columbia
Property Trust. As a result of amending the $450 Million Term Loan and the JPMorgan Chase Credit Facility in August 2013, all
of the indirect and direct subsidiaries of Columbia Property Trust that previously guaranteed the $450 Million Term Loan, the
JPMorgan Chase Credit Facility, and the 2018 Bonds Payable were released under customary circumstances as guarantors, which
resulted in the reclassification of prior-period amounts from the guarantor to the non-guarantor groupings within the condensed
consolidating financial statements to conform with the current period presentation. In accordance with SEC Rule 3-10(c), Columbia
Property Trust includes herein condensed consolidating financial information in lieu of separate financial statements of the
subsidiary issuer (Columbia Property Trust OP) and Subsidiary Guarantors, as defined in the bond indenture, because all of the
following criteria are met:
(1) the subsidiary issuer (Columbia Property Trust OP) is 100% owned by the parent company guarantor (Columbia Property
Trust);
(2) the guarantees are full and unconditional; and
(3) the guarantees are joint and several.
Columbia Property Trust uses the equity method with respect to its investment in subsidiaries included in its condensed consolidating
financial statements. Set forth below are Columbia Property Trust's condensed consolidating balance sheets as of December 31,
F-32
2014 and 2013 (in thousands), as well as its condensed consolidating statements of operations and its condensed consolidating
statements of comprehensive income for 2014, 2013, and 2012 (in thousands); and its condensed consolidating statements of cash
flows for 2014, 2013, and 2012 (in thousands).
Condensed Consolidating Balance Sheets (in thousands)
As of December 31, 2014
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Assets:
Real estate assets, at cost:
Land
$
— $
6,241
$
778,860
$
— $
Buildings and improvements, net
Intangible lease assets, net
Construction in progress
Total real estate assets
Cash and cash equivalents
Investment in subsidiaries
Tenant receivables, net of allowance
Straight-line rent receivable
—
—
—
—
119,488
2,409,941
—
—
Prepaid expenses and other assets
204,079
148,226
29,899
2,996,532
—
433
36,573
10,504
2,120,018
246
781
6,020
—
1,658
247,068
17,529
4,039,989
19,798
—
6,699
115,708
19,734
2,406
105,528
101,337
—
—
—
—
—
—
—
—
—
(4,529,959)
—
—
(319,896)
—
—
—
—
785,101
3,026,431
247,068
17,962
4,076,562
149,790
—
6,945
116,489
52,143
8,426
105,528
102,995
120,000
Deferred financing costs, net
Intangible lease origination costs, net
Deferred lease costs, net
Investment in development authority
bonds
Total assets
Liabilities:
Line of credit, term loan, and notes
payable
Bonds payable, net
Accounts payable, accrued expenses, and
accrued capital expenditures
$
$
Due to affiliates
Deferred income
Intangible lease liabilities, net
Obligations under capital leases
Total liabilities
Equity:
—
120,000
2,733,508
$
2,324,026
$
4,531,199
$
(4,849,855) $
4,738,878
— $
450,000
$
1,299,232
$
(318,348) $
1,430,884
—
30
—
—
—
—
30
249,182
9,749
24
171
—
—
709,126
—
96,497
1,524
24,582
74,305
120,000
1,616,140
—
—
(1,548)
—
—
—
(319,896)
249,182
106,276
—
24,753
74,305
120,000
2,005,400
Total equity
2,733,478
1,614,900
2,915,059
(4,529,959)
2,733,478
Total liabilities, redeemable
common stock, and equity
$
2,733,508
$
2,324,026
$
4,531,199
$
(4,849,855) $
4,738,878
F-33
Condensed Consolidating Balance Sheets (in thousands)
As of December 31, 2013
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Assets:
Real estate assets, at cost:
Land
$
— $
6,241
$
700,697
$
— $
Prepaid expenses and other assets
177,185
150,806
2,557,347
2,286,982
—
—
—
22
Building and improvements, net
Intangible lease assets, net
Construction in progress
Total real estate assets
Cash and cash equivalents
Investment in subsidiaries
Tenant receivables, net of allowance
Straight-line rent receivable
$
$
Deferred financing costs, net
Intangible lease origination costs, net
Deferred lease costs, net
Investment in development authority
bonds
Total assets
Liabilities:
Lines of credit, term loan, and notes
payable
Bonds payable, net
Accounts payable, accrued expenses,
and accrued capital expenditures
Due to affiliates
Deferred income
Intangible lease liabilities, net
Obligations under capital leases
Total liabilities
Equity:
—
—
—
—
53,322
—
—
—
—
24,185
2,952,102
—
28
30,454
20,708
8,762
—
1,495
281,220
7,921
3,941,940
25,825
—
7,414
113,570
26,602
1,626
148,889
86,032
—
—
—
—
—
(4,844,329)
—
—
(322,170)
—
—
—
—
706,938
2,976,287
281,220
7,949
3,972,394
99,855
—
7,414
113,592
32,423
10,388
148,889
87,527
120,000
—
120,000
2,787,854
$
2,499,229
$
4,471,898
$
(5,166,499) $
4,592,482
— $
450,000
$
1,110,838
$
(320,589) $
1,240,249
—
31
—
—
—
—
31
248,930
11,816
(925)
146
—
—
709,967
—
87,831
2,506
21,792
73,864
120,000
1,416,831
—
—
(1,581)
—
—
—
(322,170)
248,930
99,678
—
21,938
73,864
120,000
1,804,659
Total equity
2,787,823
1,789,262
3,055,067
(4,844,329)
2,787,823
Total liabilities, redeemable
common stock, and equity
$
2,787,854
$
2,499,229
$
4,471,898
$
(5,166,499) $
4,592,482
F-34
Consolidating Statements of Operations (in thousands)
For the Year Ended December 31, 2014
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
$
— $
1,150
$
413,752
$
(361) $
414,541
—
—
—
—
—
—
—
—
—
—
—
149
—
149
(149)
—
7,969
—
—
84,815
92,784
92,635
—
92,635
—
92,635
—
—
—
222
—
—
1,372
2,716
—
17
—
1,795
121
—
9,701
—
14,350
(12,978)
(30,271)
10,724
—
—
113,976
94,429
81,451
(4)
81,447
—
81,447
—
—
—
95,153
22,885
8,220
540,010
161,367
18,792
—
2,258
115,971
78,722
25,130
21,632
14,142
438,014
101,996
(64,105)
7,247
(371)
(23)
—
(57,252)
44,744
(658)
44,086
75,275
119,361
(390)
(1,627)
(2,017)
—
—
(224)
(585)
(361)
—
(17)
—
—
—
—
(207)
—
(585)
—
18,665
(18,665)
—
—
(198,791)
(198,791)
(198,791)
—
(198,791)
—
(198,791)
—
—
—
95,375
22,885
7,996
540,797
163,722
18,792
—
2,258
117,766
78,843
25,130
31,275
14,142
451,928
88,869
(75,711)
7,275
(371)
(23)
—
(68,830)
20,039
(662)
19,377
75,275
94,652
(390)
(1,627)
(2,017)
$
92,635
$
81,447
$
117,344
$
(198,791) $
92,635
Revenues:
Rental income
Tenant reimbursements
Hotel income
Other property income
Expenses:
Property operating costs
Hotel operating costs
Asset and property management fees:
Related-party
Other
Depreciation
Amortization
Impairment loss on real estate assets
General and administrative
Acquisition expenses
Real estate operating income (loss)
Other income (expense):
Interest expense
Interest and other income
Loss on interest rate swaps
Loss on early extinguishment of debt
Income from equity investment
Income before income tax expense
Income tax expense
Income before gains of sale of real estate
assets
Gains on sale of real estate assets
Income from continuing operations
Discontinued operations:
Operating loss from discontinued
operations
Loss on disposition of discontinued
operations
Loss from discontinued operations
Net income attributable to the common
stockholders of Columbia Property
Trust, Inc.
F-35
Consolidating Statements of Operations (in thousands)
For the Year Ended December 31, 2013
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Revenues:
Rental income
Tenant reimbursements
Hotel income
Other property income
Expenses:
Property operating costs
Hotel operating costs
Asset and property management fees:
Related-party
Other
Depreciation
Amortization
General and administrative
Listing fees
Real estate operating income (loss)
Other income (expense):
Interest expense
Interest and other income
Loss on interest rate swaps
Income from equity investment
Income before income tax expense
Income tax expense
Income from continuing operations
Discontinued operations:
Operating income (loss) from
discontinued operations
Gain on disposition of discontinued
operations
Income (loss) from discontinued
operations
Net income attributable to the common
stockholders of Columbia Property
Trust, Inc.
$
— $
—
—
—
—
—
—
4,397
—
—
—
16
317
4,730
(4,730)
—
7,987
—
12,463
20,450
15,720
—
15,720
—
—
—
403
149
—
17
569
1,966
—
15
—
1,247
28
43,555
3,743
50,554
(49,985)
(32,659)
10,874
—
86,101
64,316
14,331
(3)
14,328
658
—
658
$
406,791
$
(287) $
406,907
90,726
23,756
5,208
526,481
152,880
18,340
313
1,671
106,858
78,682
18,448
—
377,192
149,289
(88,137)
34,023
(342)
—
(54,456)
94,833
(497)
94,336
(21,983)
11,225
(10,758)
—
—
(185)
(472)
(287)
—
(32)
—
—
—
(153)
—
(472)
—
18,855
(18,855)
—
(98,564)
(98,564)
(98,564)
—
(98,564)
—
—
—
90,875
23,756
5,040
526,578
154,559
18,340
4,693
1,671
108,105
78,710
61,866
4,060
432,004
94,574
(101,941)
34,029
(342)
—
(68,254)
26,320
(500)
25,820
(21,325)
11,225
(10,100)
$
15,720
$
14,986
$
83,578
$
(98,564) $
15,720
F-36
Consolidating Statements of Operations (in thousands)
For the Year Ended December 31, 2012
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
$
— $
1,649
$
380,280
$
(133) $
381,796
—
—
—
—
—
—
26,264
—
—
—
49
—
26,313
(26,313)
—
7,988
—
66,364
74,352
48,039
—
48,039
—
—
—
48,039
—
103
—
86
1,838
1,634
—
58
—
710
357
21,436
—
24,195
(22,357)
(32,469)
11,018
—
92,228
70,777
48,420
(14)
48,406
5,942
—
5,942
54,348
—
90,756
23,049
1,024
495,109
148,025
18,495
4,191
2,421
97,988
86,101
3,128
1,876
362,225
132,884
(88,414)
39,847
(1,225)
—
(49,792)
83,092
(558)
82,534
542
20,117
20,659
103,193
(2,457)
—
(86)
(2,676)
(2,457)
(133)
(1,141)
—
—
—
—
—
(3,731)
1,055
18,997
(18,997)
—
(158,592)
(158,592)
(157,537)
—
(157,537)
—
—
—
(157,537)
88,402
23,049
1,024
494,271
147,202
18,362
29,372
2,421
98,698
86,458
24,613
1,876
409,002
85,269
(101,886)
39,856
(1,225)
—
(63,255)
22,014
(572)
21,442
6,484
20,117
26,601
48,043
(4)
—
(4)
$
48,039
$
54,348
$
103,189
$
(157,537) $
48,039
Revenues:
Rental income
Tenant reimbursements
Hotel income
Other property income
Expenses:
Property operating costs
Hotel operating costs
Asset and property management fees:
Related-party
Other
Depreciation
Amortization
General and administrative
Acquisition fees and expenses
Real estate operating income (loss)
Other income (expense):
Interest expense
Interest and other income
Loss on interest rate swaps
Income from equity investment
Income before income tax expense
Income tax expense
Income from continuing operations
Discontinued operations:
Operating income from discontinued
operations
Gain on disposition of discontinued
operations
Income from discontinued operations
Net income
Less: net income attributable to
noncontrolling interests
Net income attributable to the common
stockholders of Columbia Property
Trust, Inc.
F-37
Consolidating Statements of Comprehensive Income (in thousands)
For the Year Ended December 31, 2014
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Net income attributable to the common
stockholders of Columbia Property
Trust, Inc.
Market value adjustment to interest
rate swap
Comprehensive income
$
$
92,635
$
81,447
$
117,344
$
(198,791) $
92,635
1,339
1,339
—
(1,339)
93,974
$
82,786
$
117,344
$
(200,130) $
1,339
93,974
For the Year Ended December 31, 2013
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Net income attributable to the common
stockholders of Columbia Property
Trust, Inc.
Foreign currency translation
adjustment
Market value adjustment to interest
rate swap
Comprehensive income
$
$
15,720
$
14,986
$
83,578
$
(98,564) $
15,720
(83)
1,997
—
1,997
(83)
—
83
(1,997)
17,634
$
16,983
$
83,495
$
(100,478) $
(83)
1,997
17,634
For the Year Ended December 31, 2012
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
$
48,039
$
54,348
$
103,189
$
(157,537) $
48,039
(5,305)
(5,305)
—
5,305
(5,305)
42,734
49,043
103,189
(152,232)
42,734
—
—
4
—
4
Net income attributable to the common
stockholders of Columbia Property
Trust, Inc.
Market value adjustment to interest
rate swap
Comprehensive income attributable to
the common stockholders of Columbia
Property Trust, Inc.
Comprehensive income attributable to
noncontrolling interests
Comprehensive income
$
42,734
$
49,043
$
103,193
$
(152,232) $
42,738
F-38
Consolidating Statements of Cash Flows (in thousands)
For the Year Ended December 31, 2014
Columbia
Property
Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Cash flows from operating activities
$
(122) $
(38,618) $
275,646
$
— $
236,906
Cash flows from investing activities:
Net proceeds from sale of real estate
—
418,207
—
(5,000)
67,403
(366,380)
—
(70,615)
—
—
—
(67,403)
418,207
(441,995)
—
Investment in real estate and related
assets
Investments in subsidiaries
Net cash provided by (used in)
investing activities
Cash flows from financing activities:
Borrowings, net of fees and
prepayment penalty on early
extinguishment of debt
Repayments
Loss on early extinguishment of debt
Redemptions of common stock and
fees, net of issuances
Distributions
Intercompany transfers, net
Net cash provided by (used in)
financing activities
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of
period
62,403
51,827
(70,615)
(67,403)
(23,788)
—
—
—
—
(149,962)
153,847
282,807
(283,000)
(1,289)
(11,739)
—
—
—
—
—
—
(23,220)
(198,030)
3,885
(23,413)
(211,058)
66,166
53,322
(10,204)
20,708
(6,027)
25,825
—
—
—
—
—
67,403
67,403
—
—
281,518
(294,739)
—
—
(149,962)
—
(163,183)
49,935
99,855
$
119,488
$
10,504
$
19,798
$
— $
149,790
F-39
Consolidating Statements of Cash Flows (in thousands)
For the Year Ended December 31, 2013
Columbia
Property
Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Columbia
Property Trust
(Consolidated)
$
(331) $
(84,270) $
302,930
$
218,329
Cash flows from operating activities
Cash flows from investing activities:
Net proceeds from sale of real estate
Investment in real estate and related assets
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Borrowings, net of fees
Repayments
Loss on early extinguishment of debt
Redemptions of common stock and fees, net of issuances
Distributions
Intercompany transfers
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Effect of foreign exchange rate on cash and cash
equivalents
Cash and cash equivalents, beginning of period
14,127
—
14,127
—
—
—
(306,574)
(191,473)
516,659
18,612
32,408
—
20,914
551,818
(5,270)
546,548
297,320
(343,000)
—
—
—
(400,712)
(446,392)
15,886
—
4,822
—
(65,286)
(65,286)
(41)
(118,940)
(4,709)
—
—
(115,947)
(239,637)
(1,993)
(103)
27,921
Cash and cash equivalents, end of period
$
53,322
$
20,708
$
25,825
$
For the Year Ended December 31, 2012
Columbia
Property
Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Columbia
Property Trust
(Consolidated)
$
(49) $
(83,489) $
336,377
$
252,839
Cash flows from operating activities
Cash flows from investing activities:
Net proceeds from sale of real estate
Investment in real estate and related assets
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Borrowings, net of fees
Repayments
Issuance of common stock, net of redemptions and fees
Distributions
Intercompany transfers
Redemptions of noncontrolling interest
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Effect of foreign exchange rate on cash and cash
equivalents
Cash and cash equivalents, beginning of period
30,441
—
30,441
—
—
18,996
(256,020)
216,255
—
(20,769)
9,623
—
11,291
273,823
(193,410)
80,413
595,731
(591,000)
—
—
(7,430)
—
(2,699)
(5,775)
—
10,597
—
(79,807)
(79,807)
(929)
(36,191)
—
(15)
(208,825)
(301)
(246,261)
10,309
32
17,580
Cash and cash equivalents, end of period
$
20,914
$
4,822
$
27,921
$
F-40
565,945
(70,556)
495,389
297,279
(461,940)
(4,709)
(306,574)
(191,473)
—
(667,417)
46,301
(103)
53,657
99,855
304,264
(273,217)
31,047
594,802
(627,191)
18,996
(256,035)
—
(301)
(269,729)
14,157
32
39,468
53,657
16.
Subsequent Events
Columbia Property Trust has evaluated subsequent events in connection with the preparation of its consolidated financial statements
and notes thereto included in this report on Form 10-K and noted the following items in addition to those disclosed elsewhere in
this report:
Property Acquisitions and Financing
During January 2015, Columbia Property Trust closed on the acquisitions of three properties. These acquisitions and the related
financing transaction are described in Note 3, Real Estate and Other Transactions, and Note 4, Line of Credit, Term Loan, and
Notes Payable, of the accompanying consolidated financial statements.
Dividend Declaration
On February 11, 2015, the board of directors declared dividends for the first quarter of 2015 in the amount of $0.30 per share,
payable on March 17, 2015 to stockholders of record on March 2, 2015.
F-41
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S-2
Columbia Property Trust, Inc.
Schedule III – Real Estate Assets and Accumulated Depreciation and Amortization
(in thousands)
Real Estate:
Balance at beginning of year
Additions to/improvements of real estate
Sale/transfer of real estate
Impairment of real estate
Write-offs of building and tenant improvements
Write-offs of intangible assets(1)
Write-offs of fully depreciated assets
Balance at end of year
Accumulated Depreciation and Amortization:
Balance at beginning of year
Depreciation and amortization expense
Sale/transfer of real estate
Write-offs of tenant improvements
Write-offs of intangible assets(1)
Write-offs of fully depreciated assets
Balance at end of year
For the Years Ended December 31,
2014
2013
2012
$
4,875,866
$
5,507,769
$
5,483,193
610,510
(399,499)
(25,130)
(1,230)
(5,251)
(4,784)
5,050,482
903,472
161,133
(80,607)
(690)
(4,604)
(4,784)
973,920
$
$
$
51,422
(614,822)
(29,737)
(492)
(466)
(37,808)
4,875,866
896,174
166,720
(120,981)
(212)
(421)
(37,808)
903,472
$
$
$
453,541
(328,804)
(18,467)
(301)
(1,311)
(80,082)
5,507,769
867,975
181,155
(71,654)
(196)
(1,024)
(80,082)
896,174
$
$
$
(1)
Consists of write-offs of intangible lease assets related to lease restructurings, amendments, and terminations.
S-3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We consent to the incorporation by reference in Registration Statement No. 333-198764 on Form S-3 of our reports dated
February 12, 2015, relating to (1) the consolidated financial statements and financial statement schedule of Columbia Property
Trust, Inc. (which report expresses an unqualified opinion and includes an explanatory paragraph related to the Company’s adoption
of a new accounting standard for reporting of discontinued operations and disposals of components of an entity), and (2) the
effectiveness of Columbia Property Trust, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form
10-K of Columbia Property Trust, Inc. for the year ended December 31, 2014.
/S/ Deloitte & Touche LLP
Atlanta, Georgia
February 12, 2015
EXHIBIT 31.1
PRINCIPAL EXECUTIVE OFFICER
CERTIFICATION
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)
I, E. Nelson Mills, certify that:
1.
2.
3.
4.
5.
I have reviewed this annual report on Form 10-K of Columbia Property Trust, Inc. for the year ended
December 31, 2014;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Dated: February 12, 2015
By:
/s/ E. Nelson Mills
E. Nelson Mills
Principal Executive Officer
EXHIBIT 31.2
PRINCIPAL FINANCIAL OFFICER
CERTIFICATION
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)
I, James A. Fleming, certify that:
1.
2.
3.
4.
5.
I have reviewed this annual report on Form 10-K of Columbia Property Trust, Inc. for the year ended
December 31, 2014;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Dated: February 12, 2015
By:
/s/ James A. Fleming
James A. Fleming
Principal Financial Officer
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)
In connection with the Annual Report of Columbia Property Trust, Inc. (the “Registrant”) on Form 10-K for the year ended
December 31, 2014, as filed with the Securities and Exchange Commission (the “Report”), the undersigned, E. Nelson Mills,
Principal Executive Officer of the Registrant, and James A. Fleming, Principal Financial Officer of the Registrant, hereby
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that, to the best of our knowledge and
belief:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.
/s/ E. NELSON MILLS
E. Nelson Mills
Principal Executive Officer
February 12, 2015
/s/ JAMES A. FLEMING
James A. Fleming
Principal Financial Officer
February 12, 2015
Board of
Directors
E. Nelson Mills
President and Chief
Executive officer
Michael S. Robb
Former Executive vice president,
Real Estate Division
pacific Life insurance company
John L. Dixon
Chairman of the Board;
Former President and Director,
pacific Select Group, LLc
Glenn J. Rufrano
chief Executive officer,
o’connor capital partners
Charles R. Brown
Chairman,
CRB Realty Associates
George W. Sands
Former Partner,
kpMG LLp
Richard W. Carpenter
Chairman of the Board,
Midcountry Financial corp.
Neil H. Strickland
Senior operations Executive,
Strickland General Agency, inc.
Bud Carter
Senior Chairman,
vistage international in Atlanta
Thomas G. Wattles
Executive Chairman,
DCT Industrial Trust, Inc.
Murray J. McCabe
Managing partner,
Blum Capital Partners, L.P.
Senior
Management
E. Nelson Mills
President and Chief
Executive officer
James A. Fleming
Executive vice president and
chief Financial officer
Drew P. Cunningham
Senior vice president,
Real Estate operations
David S. Dowdney
Senior vice president,
Western Region
Wendy W. Gill
Senior vice president,
corporate operations and
chief Accounting officer
Kevin A. Hoover
Senior vice president,
Real Estate Transactions
Corporate and Shareholder Information
Shareholder Services &
Transfer Agent/Registrar
American Stock Transfer & Trust
Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
855.347.0042
Shares Listed
New York Stock Exchange
Symbol: CXP
Investor Relations
Address inquiries to Investor
Relations at the company’s
corporate headquarters.
Internet Access to SEC Filings
A copy of the company’s Annual
Report on Form 10-k for the year
ended December 31, 2014,
which has been filed with the
u.S. Securities and Exchange
commission (SEc), forms part
of this annual report. All reports
filed electronically by columbia
Property Trust with the SEC,
including the Annual Report on
Form 10-k, Quarterly Reports
on Form 10-Q, and current Reports
on Form 8-k, are accessible at
www.columbiapropertytrust.com.
Corporate Headquarters
one Glenlake pkwy., Suite 1200
Atlanta, GA 30328-7267
800.899.8411
www.columbiapropertytrust.com
Independent Accountants
deloitte & Touche LLp
Atlanta, Georgia
Corporate Counsel
king & Spalding LLp
Atlanta, Georgia
Annual Meeting
The Annual Meeting of Stockholders
of Columbia Property Trust, Inc.,
will be held at The Westin Atlanta
Perimeter North at 7 Concourse
parkway, NE in Atlanta, Georgia,
at 1:30 p.m. ET, on May 4, 2015.
®
NYSE: CXP
www.columbiapropertytrust.com
0006-CXPRPRT1501