FOCUSED
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GROSS
REAL ESTATE ASSETS
OFFICE RENTABLE1
SQUARE FEET
COMPANY OVERVIEW
$5.3 billion
13.7 million
48%
78% / 68%
93.2%
35.6%
LEVERAGE
LEASED
MULTI-TENANT /CBD2
REVENUES FROM
HIGH-BARRIER MARKETS2
229 W. 43rd Street
Acquired 8/4/2015
NEW YORK CITY
Unless otherwise noted, all data contained herein is as of December 31, 2015,
and includes Columbia’s 51% pro rata interest in Market Square.
1 Represents 100% of Market Square.
2 Based on annualized lease revenue.
FOCUSED ON HIGH-BARRIER MARKETS
In 2015, we expanded in New York’s Midtown and Boston’s Back
Bay, continuing our strategic focus on high-barrier-to-entry markets.
Today, our largest portfolio concentrations are in San Francisco, New
York City and Washington, D.C.—markets that we believe will continue
to outperform in the years ahead and will provide us with growth in
funds from operations over time.
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PORTFOLIO TRANSFORMATION
PORTFOLIO
THEN
(12/31/2011)
DISPOSITIONS
completed
ACQUISITIONS
completed
PORTFOLIO
TODAY
(12/31/2015)
Properties1
Markets
% CBD
% High-Barrier
67
31
31
38%
25%
25%
-47
$2.1 billion
in proceeds2
-17
+7
$2.0 billion
invested
+1
+1
27
15
68%
48%
1 Does not include the Marriott Hotel at Key Center.
2(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:23)(cid:28)(cid:8)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:89)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:54)(cid:84)(cid:88)(cid:68)(cid:85)(cid:72)(cid:17)
2 TO OUR STOCKHOLDERS
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As we enter 2016,
Columbia Property Trust has
one of the best portfolios
in the office REIT sector.
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complete a remarkable transformation since the
end of 2011 that has taken discipline, skill and
vision. Many of you have invested with us during this
transition, and we are grateful for your continued
confidence in our team and platform.
We have a portfolio of investments today that aligns
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POSITIONED IN THE PATH OF GROWTH
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and why that matters for future growth in net asset
value and increasing cash flows.
Dispositions
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dispositions, substantially reducing our exposure to
non-core suburban and single tenant assets. We also
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D.C., to Blackstone Property Partners for total
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Acquisitions
We used these proceeds to purchase three assets
in our target markets, assets that we expect to grow
significantly in value and cash flow in the relative near
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(cid:7)(cid:20)(cid:3)(cid:69)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:29)(cid:3)
(cid:81) Concentration in high-barrier markets,
(cid:81) Primarily central business district and urban
(cid:81)(cid:3) (cid:22)(cid:20)(cid:24)(cid:3)(cid:51)(cid:68)(cid:85)(cid:78)(cid:3)(cid:36)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:3)(cid:49)(cid:72)(cid:90)(cid:3)(cid:60)(cid:82)(cid:85)(cid:78)(cid:1163)(cid:86)(cid:3)(cid:48)(cid:76)(cid:71)(cid:87)(cid:82)(cid:90)(cid:81)(cid:3)
infill submarket locations,
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(cid:81) Predominantly multi-tenant properties, and
(cid:81) A blend of stable-cash-flow core assets and
assets with opportunities for value creation.
(cid:81) 116 Huntington Avenue in Boston’s Back Bay
submarket, and
(cid:81)(cid:3) (cid:21)(cid:21)(cid:28)(cid:3)(cid:58)(cid:72)(cid:86)(cid:87)(cid:3)(cid:23)(cid:22)(cid:85)(cid:71)(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:55)(cid:76)(cid:80)(cid:72)(cid:86)(cid:3)(cid:54)(cid:84)(cid:88)(cid:68)(cid:85)(cid:72)(cid:15)(cid:3)(cid:48)(cid:68)(cid:81)(cid:75)(cid:68)(cid:87)(cid:87)(cid:68)(cid:81)(cid:17)
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WE HAVE A PORTFOLIO
OF INVESTMENTS TODAY
THAT ALIGNS WITH THE
OBJECTIVES WE ESTABLISHED
FOUR YEARS AGO
ADDING VALUE THROUGH
CAPITAL IMPROVEMENTS
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Marketing Center, 24th Floor
222 E. 41st Street, New York City
Marketing Center, 2nd Floor
650 California Street, San Francisco
315 Park Avenue South
Renovated Lobby
Market Square, Washington, D.C.
222 E. 41st Street
NEW YORK CITY
WE’VE MADE SIGNIFICANT
STRIDES IN CREATING VALUE
THROUGH LEASING
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Leasing
Beyond improving the portfolio through the
transactions above, we’ve made significant strides
in creating value through leasing. We completed
1.26 million square feet of leasing in 2015, most
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in Denver, and Equinox in New York City, addressing
some of our larger near-term expirations.
These and other accomplishments led to a credit
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(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:48)(cid:82)(cid:82)(cid:71)(cid:92)(cid:1163)(cid:86)(cid:3)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:37)(cid:68)(cid:68)(cid:21)(cid:17)(cid:3)(cid:44)(cid:87)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:72)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:71)(cid:3)(cid:88)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)
(cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:3)(cid:7)(cid:22)(cid:24)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:19)(cid:16)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:86)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:88)(cid:81)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:86)(cid:3)
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program, which has resulted in our acquisition of
(cid:20)(cid:17)(cid:27)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:68)(cid:3)(cid:90)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:71)(cid:16)(cid:68)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:7)(cid:21)(cid:21)(cid:17)(cid:25)(cid:19)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:17)(cid:3)
We also completed substantial capital improvements
(cid:68)(cid:87)(cid:3)(cid:21)(cid:21)(cid:21)(cid:3)(cid:40)(cid:68)(cid:86)(cid:87)(cid:3)(cid:23)(cid:20)st(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:15)(cid:3)(cid:25)(cid:24)(cid:19)(cid:3)(cid:38)(cid:68)(cid:79)(cid:76)(cid:73)(cid:82)(cid:85)(cid:81)(cid:76)(cid:68)(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:54)(cid:84)(cid:88)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:79)(cid:85)(cid:72)(cid:68)(cid:71)(cid:92)(cid:3)(cid:69)(cid:72)(cid:74)(cid:88)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:85)(cid:76)(cid:89)(cid:72)(cid:3)
tenant demand.
Capital Markets
Completing this significant portfolio transition in
such a short time was possible because of the
strength of our balance sheet, which we continued
to improve in 2015. Most significantly, we reduced
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(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:7)(cid:24)(cid:19)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:88)(cid:81)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:7)(cid:23)(cid:24)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:79)(cid:82)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)
reducing overall borrowing costs and extending
maturities.
Leadership
Finally, we sought out several highly-experienced
industry veterans to complement our senior
leadership team and enhance the Board. These
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(cid:81) Mike Robb(cid:15)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:79)(cid:72)(cid:71)(cid:3)(cid:51)(cid:68)(cid:70)(cid:76)(cid:73)(cid:76)(cid:70)(cid:3)(cid:47)(cid:76)(cid:73)(cid:72)(cid:1163)(cid:86)(cid:3)(cid:85)(cid:72)(cid:68)(cid:79)(cid:3)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)
division for nearly three decades;
(cid:81) Dave Henry(cid:15)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:77)(cid:88)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:82)(cid:79)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)
vice chairman and chief executive officer of Kimco
Realty Corporation; and
(cid:81) Carmen Bowser(cid:15)(cid:3)(cid:68)(cid:3)(cid:22)(cid:19)(cid:16)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:85)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:68)(cid:79)(cid:3)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)
veteran who most recently served as managing vice
president at Capital One.
Additionally, we recently welcomed Adam Popper as
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our investment activity and asset management efforts
in New York City, Washington, D.C. and Boston.
CONTINUED FOCUS ON EXECUTION
We’ve assembled an attractive portfolio that is
geared for long-term growth and have put a strong
team in place to manage it. We continue to focus
on execution and have high expectations for what
we can achieve in 2016. This includes completing
several key dispositions, capitalizing on milestone
leasing opportunities, and continuing to improve our
balance sheet. We’ll also seek to identify and execute
new investments in our key markets that meet our
(cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:49)(cid:36)(cid:57)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:17)
We are in the midst of a volatile and uncertain market
environment and will, therefore, remain conservative
in our underwriting for new acquisitions. We will be
very selective and patient as we diligently pursue
investments within our defined strategy and markets.
We’ll also continue to consider other capital allocation
alternatives, such as share repurchases and debt
repayments.
HIGH-BARRIER MARKET FOCUS
We are convinced that our strategy to concentrate
in high-barrier markets is paying off. Recently there
has been increased speculation about volatility in
certain real estate markets, along with questions
about where each might be in the cycle—most
(cid:81)(cid:82)(cid:87)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:87)(cid:75)(cid:85)(cid:72)(cid:72)(cid:3)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86)(cid:87)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:29)(cid:3)
(cid:54)(cid:68)(cid:81)(cid:3)(cid:41)(cid:85)(cid:68)(cid:81)(cid:70)(cid:76)(cid:86)(cid:70)(cid:82)(cid:15)(cid:3)(cid:49)(cid:72)(cid:90)(cid:3)(cid:60)(cid:82)(cid:85)(cid:78)(cid:3)(cid:38)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:58)(cid:68)(cid:86)(cid:75)(cid:76)(cid:81)(cid:74)(cid:87)(cid:82)(cid:81)(cid:15)(cid:3)(cid:39)(cid:17)(cid:38)(cid:17)(cid:3)
Cycles come and go, but we have chosen to allocate
our investments to these and other high-barrier
markets because we believe they will continue
to outperform suburban and secondary markets
over time, through both thriving and challenging
economic periods.
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650 California Street
SAN FRANCISCO
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OUR STRATEGY TO
CONCENTRATE IN HIGH-BARRIER
MARKETS IS PAYING OFF
(cid:44)(cid:81)(cid:3)(cid:54)(cid:68)(cid:81)(cid:3)(cid:41)(cid:85)(cid:68)(cid:81)(cid:70)(cid:76)(cid:86)(cid:70)(cid:82)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:83)(cid:82)(cid:85)(cid:87)(cid:73)(cid:82)(cid:79)(cid:76)(cid:82)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:28)(cid:26)(cid:8)(cid:3)
leased at year end and is characterized by a healthy
blend of tenants and locations. Our investments
there are anchored by a long-term Wells Fargo lease
(cid:68)(cid:87)(cid:3)(cid:22)(cid:22)(cid:22)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:3)(cid:87)(cid:72)(cid:81)(cid:68)(cid:81)(cid:87)(cid:3)(cid:85)(cid:82)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3)
(cid:68)(cid:87)(cid:3)(cid:56)(cid:81)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:87)(cid:92)(cid:3)(cid:38)(cid:76)(cid:85)(cid:70)(cid:79)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:79)(cid:82)(cid:3)(cid:36)(cid:79)(cid:87)(cid:82)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:81)(cid:3)
opportunity to lease over 100,000 square feet at 650
(cid:38)(cid:68)(cid:79)(cid:76)(cid:73)(cid:82)(cid:85)(cid:81)(cid:76)(cid:68)(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:76)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:68)(cid:85)(cid:79)(cid:92)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3)(cid:68)(cid:87)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)
well below market.
(cid:44)(cid:81)(cid:3)(cid:49)(cid:72)(cid:90)(cid:3)(cid:60)(cid:82)(cid:85)(cid:78)(cid:3)(cid:38)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:79)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:3)
market in the country, we have our largest leasing
(cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76)(cid:87)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:68)(cid:87)(cid:3)(cid:21)(cid:21)(cid:21)(cid:3)(cid:40)(cid:68)(cid:86)(cid:87)(cid:3)(cid:23)(cid:20)st(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)
(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:16)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:22)(cid:24)(cid:22)(cid:15)(cid:19)(cid:19)(cid:19)(cid:3)(cid:86)(cid:84)(cid:88)(cid:68)(cid:85)(cid:72)(cid:3)(cid:73)(cid:72)(cid:72)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)
will be vacated by Jones Day at their expiration in
(cid:50)(cid:70)(cid:87)(cid:82)(cid:69)(cid:72)(cid:85)(cid:17)(cid:3)(cid:36)(cid:87)(cid:3)(cid:22)(cid:20)(cid:24)(cid:3)(cid:51)(cid:68)(cid:85)(cid:78)(cid:3)(cid:36)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)
continue leasing up near-term roll at substantial
(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:75)(cid:85)(cid:76)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:48)(cid:76)(cid:71)(cid:87)(cid:82)(cid:90)(cid:81)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:17)(cid:3)
(cid:36)(cid:81)(cid:71)(cid:3)(cid:90)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:21)(cid:21)(cid:28)(cid:3)(cid:58)(cid:72)(cid:86)(cid:87)(cid:3)(cid:23)(cid:22)rd(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:15)(cid:3)(cid:68)(cid:3)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:83)(cid:76)(cid:72)(cid:71)(cid:3)
and long-term-leased property that we acquired in
August 2015 to balance these value-add assets.
Blackstone Property Partners. Nonetheless, with
vacancy being steadily absorbed, we are bullish
on this market long term and will continue to look
for other opportunities there. Moreover, we are
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spurred by our substantial renovations and
accelerated marketing efforts.
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track record of successful execution. Our strategy
is working, and the challenge of creating our core
portfolio and strong balance sheet is largely behind
us. Yet we are, and will always remain, focused
on what more we can do to improve our company
and its financial performance, and to create value
for our shareholders.
(cid:54)(cid:76)(cid:81)(cid:70)(cid:72)(cid:85)(cid:72)(cid:79)(cid:92)(cid:15)
(cid:47)(cid:72)(cid:68)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:72)(cid:80)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:3)
Washington, D.C., so we took advantage of an
opportunity to reduce our exposure there and unlock
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(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:54)(cid:84)(cid:88)(cid:68)(cid:85)(cid:72)(cid:15)(cid:3)(cid:70)(cid:85)(cid:72)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:70)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)
E. NELSON MILLS
President, Chief Executive
Officer, and Director
March 2, 2016
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WE WILL CONTINUE TO BUILD
UPON OUR TRACK RECORD OF
SUCCESSFUL EXECUTION
116 Huntington Avenue
Acquired 1/8/2015
BOSTON
FORM
10-K
315 Park Avenue South
Acquired 1/7/2015
NEW YORK CITY
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, 2015
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 001-36113
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, 2015, the aggregate market value of the common stock of Columbia Property Trust, Inc. held by non-affiliates was
$2,717,276,000 based on the closing price as reported by the New York Stock Exchange.
As of January 31, 2016, 123,475,470 shares of common stock were outstanding.
Registrant incorporates by reference portions of the Columbia Property Trust, Inc. Definitive Proxy Statement for the 2016 Annual Meeting of
Stockholders (Items 10, 11, 12, 13, and 14 of Part III) to be filed prior to April 30, 2016.
FORM 10-K
COLUMBIA PROPERTY TRUST, INC.
TABLE OF CONTENTS
PART I.
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments(cid:3)
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(cid:3)
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(cid:3)
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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Page 18
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Page 2
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 any unconsolidated joint ventures.
Columbia Property Trust typically invests in high-quality, income-generating office properties. As of December 31, 2015, Columbia
Property Trust owned 27 office properties and one hotel, which contain approximately 14.0 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 an unconsolidated joint venture, as described in Note 4, Unconsolidated Joint Venture. As of December 31,
2015, the office properties were approximately 93.2% leased.
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 consists of a combination of multi- and single-tenant office properties located in Central Business District ("CBD")
and suburban areas. We focus 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 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 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 pursue meeting those needs
through new and renewal leases, as well as lease restructures that further our long-term goals. We 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.
Page 4
Transaction Activity
In connection with furthering our real estate investment objectives, we have executed the following real estate transactions in 2015
and 2014:
Acquisitions
2015
Property
Location
Rentable
Square
Footage
Acquisition Date
Purchase Price
229 West 43rd Street Building
New York, NY
116 Huntington Avenue Building
Boston, MA
315 Park Avenue South Building
New York, NY
1881 Campus Commons Building
Reston, VA
481,000
271,000
327,000
244,000
August 4, 2015
January 8, 2015
January 7, 2015
January 7, 2015
2014
650 California Street Building
San Francisco, CA
477,000
September 9, 2014
221 Main Street Building
San Francisco, CA
375,000
April 22, 2014
$
$
$
$
$
$
516,000
152,000
372,000
64,000
310,200
228,800
Dispositions
2015
Property
Location
Rentable
Square
Footage
Disposition Date
Purchase Price
$
$
65,000
433,250
1881 Campus Commons Building
Reston, VA
244,000 December 10, 2015
July 1, 2015
11 Property Sale:
170 Park Avenue Building
180 Park Avenue Building
Northern NJ
Northern NJ
1580 West Nursery Road Buildings
Baltimore, MD
Acxiom Buildings
Highland Landmark III Building
The Corridors III Building
215 Diehl Road Building
544 Lakeview Building
Bannockburn Lake III Building
Robbins Road Buildings
550 King Street Buildings
2014
Chicago, IL
Chicago, IL
Chicago, IL
Chicago, IL
Chicago, IL
Chicago, IL
Boston, MA
Boston, MA
2,856,000
145,000
224,000
315,000
322,000
273,000
222,000
162,000
139,000
106,000
458,000
490,000
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
Joint Venture
Property Contributed to Joint
Venture
Location
% Sold /
Retained
Rentable
Square
Footage
Closing Date
Contributed
Value
2015
Market Square Buildings
Washington, D.C.
49%/51%
687,000 October 28, 2015
$
595,000
Page 5
Employees
As of December 31, 2015, 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 2015 annualized lease revenue, no single tenant accounts for more than 10% of our portfolio.
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 been relatively stable during 2015, several economic factors have adversely affected
the financial condition and liquidity of many businesses, as well as the demand for office space generally. Should economic
conditions worsen, 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 93.2% leased at December 31, 2015, 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 2015 annualized lease revenue,
Page 6
approximately 13% of leases expire in 2016, 10% of leases expire in 2017, and 8% of leases expire in 2018 (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; New York City, New York; Houston, Texas; the greater Washington, D.C. area; and Atlanta,
Georgia, 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
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, may require renovation costs exceeding our estimates
or expose us to unknown liabilities, 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. The properties we acquire may be subject to liabilities
for which we have no recourse, or only limited recourse, against the prior owners or other third parties with respect to unknown
liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay
substantial sums to settle or contest it, which could adversely affect our results of operations and cash flow. Unknown liabilities
with respect to acquired properties might include:
•
•
•
•
liabilities for clean-up of undisclosed environmental contamination;
claims by tenants, vendors, or other persons against the former owners of the properties;
liabilities incurred in the ordinary course of business; and
claims for indemnification by general partners, directors, officers, and others indemnified by the former owners of the
properties.
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
Page 7
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, acts of terrorism, fire, floods, tornadoes, hurricanes, pollution, wars, 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 22% of our 2015 Annualized Lease Revenue, as described in Item 2, Properties. 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 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.
For example, we plan to undertake a project to make significant repairs to our property located in suburban Pittsburgh, Pennsylvania.
The project relates to the initial construction of the property and involves repairing the outer building walls. Repairs are expected
to commence in 2016, to take two to three years to complete, and to cost between $30 million to $35 million. While we continue
to evaluate insurance coverage and other potential sources of recovery for the repairs, no assurances can be made that any amounts
will be recovered.
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.
We have incurred and are likely to continue to incur mortgage and other indebtedness, which may increase our business risks.
As of January 31, 2016, our total indebtedness was approximately $1.8 billion, which includes a $150.0 million term loan,
$599.0 million of bonds, and $318.6 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 a $300.0 million term loan, a $119.0 million balance
Page 8
on a bridge loan, and $307.0 million outstanding 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.
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 (the "Revolving Credit Facility"), our two unsecured term loan facilities
with an aggregate value of $450 million, and our bridge loan (the "$300 Million Bridge Loan"), 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 stable 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.
Page 9
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.
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.
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.
Property ownership through joint ventures may limit our ability to act exclusively in our interest.
We recently entered into a joint venture arrangement for one of our properties and in the future may acquire properties in or
contribute properties to joint ventures with other persons or entities when we believe circumstances warrant the use of such
Page 10
structures. We could become engaged in a dispute with one or more of our joint venture partners, which might affect our ability
to operate a jointly-owned property. Moreover, joint venture partners may have business, economic, or other objectives that are
inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of
a property. In some instances, joint venture partners may have competing interests in our markets that could create conflicts of
interest. Also, our joint venture partners might refuse to make capital contributions when due and we may be responsible to our
partners for indemnifiable losses. We and our partners may each have the right to trigger a buy-sell arrangement, which could
cause us to sell our interest, or acquire our partners' interest, at a time when we otherwise would not have initiated such a transaction
and may result in the valuation of our interest in the joint venture (if we are the seller) or of the other partner's interest in the joint
venture (if we are the buyer) at levels which may not be representative of the valuation that would result from an arm's length
marketing process. We are also subject to risk in cases where an institutional owner is our joint venture partner, including (i) a
deadlock if we and our joint venture partner are unable to agree upon certain major and other decisions, (ii) the limitation of our
ability to liquidate our position in the joint venture without the consent of the other joint venture partner, and (iii) the requirement
to provide guarantees in favor of lenders with respect to the indebtedness of the joint venture.
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 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.
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.
If our disclosure controls or internal control over financial reporting are 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.
Page 11
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 average daily trading volume per month has been as low as 441,000 shares. If
our stock continues 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.
Page 12
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
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
Page 13
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.
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.
Page 14
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, 2015, we owned interests in 27 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 an unconsolidated joint venture. As of December 31,
2015, our office properties were approximately 93.2% leased.
Property Statistics
The tables below include statistics for properties that we own directly and our pro-rata share (51%) of the Market Square Buildings,
which are owned through an unconsolidated joint venture. 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.
The following table shows lease expirations of our office properties as of December 31, 2015, during each of the next 10 years
and thereafter. This table assumes no exercise of renewal options or termination rights.
Year of Lease Expiration
2015 Annualized
Lease Revenue
(in thousands)
Rentable
Square Feet
(in thousands)
Percentage of
2015 Annualized
Lease Revenue
Vacant
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Thereafter
$
$
—
64,150
48,386
37,191
16,671
32,934
58,135
32,671
26,291
11,868
35,725
123,014
487,036
908
1,321
1,188
786
300
844
1,763
786
673
225
1,160
3,406
13,360
—%
13%
10%
8%
3%
7%
12%
7%
5%
2%
7%
26%
100%
Page 15
The following table shows the geographic locations of our office properties as of December 31, 2015.
Location
San Francisco
New York
Houston
Washington, D.C.
Atlanta
Cleveland
Baltimore
Northern New Jersey
Other(1)
2015 Annualized
Lease Revenue
(in thousands)
$
105,012
82,822
45,163
37,020
36,286
35,386
25,835
24,030
95,482
Leased
Square Feet
(in thousands)
Percentage of
2015 Annualized
Lease Revenue
1,901
1,114
1,062
548
1,562
1,101
643
617
3,904
22%
17%
9%
8%
7%
7%
5%
5%
20%
100%
(1) No more than 4% is attributable to any individual geographic location.
The following table shows the industry breakdown of our office tenants as of December 31, 2015.
$
487,036
12,452
Industry
Legal Services
Business Services
Depository Institutions
Security & Commodity Brokers
Electric, Gas, & Sanitary Services
Communication
Engineering & Management Services
Industrial Machinery & Equipment
Miscellaneous Retail
Nondepository Institutions
Other(1)
(1) No more than 3% is attributable to any individual industry.
2015 Annualized
Lease Revenue
(in thousands)
Leased
Square Feet
(in thousands)
Percentage of
2015 Annualized
Lease Revenue
$
$
79,100
69,870
60,967
48,952
39,953
30,509
28,689
13,823
13,338
13,328
88,507
487,036
1,490
1,199
1,673
954
1,690
1,124
897
533
587
366
1,939
12,452
16%
14%
13%
10%
8%
6%
6%
3%
3%
3%
18%
100%
Page 16
The following table shows the major tenants of our office properties as of December 31, 2015.
Tenant
Wells Fargo
Jones Day
AT&T
PSEG Services
Credit Suisse
Pershing
Westinghouse
T. Rowe Price
Yahoo!
Keybank
Foster Wheeler
Other(1)
2015 Annualized
Lease Revenue
(in thousands)
Percentage of
2015 Annualized
Lease Revenue
$
$
28,538
28,124
22,003
21,849
19,675
18,278
15,565
15,411
13,616
13,248
12,850
277,879
487,036
6%
6%
5%
4%
4%
4%
3%
3%
3%
3%
3%
56%
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, 2015.
Property &
Location
Number
of
Buildings
Leased
Square Feet
(in thousands)
Total Real
Estate, Net
(in thousands)
% of
Total
Assets
2015 Annualized
Lease Revenue
(in thousands)
Average
Annualized
Lease
Revenue per
Square Foot % Leased
229 West 43rd
Street, New York
1
470
$
493,664
12.1% $
32,385
$
68.9
97.7%
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, 2016, we had approximately 123.5 million shares of common stock
outstanding held by a total of 80,031 stockholders of record.
The closing high and low prices for our stock and dividends declared during 2015 and 2014 were as follows:
2015 Quarters:
First
Second
Third
Fourth
2014 Quarters:
First
Second
Third
Fourth
Distributions
High
Low
Dividends
$
$
$
$
$
$
$
$
27.67
27.45
25.30
25.97
27.73
29.13
26.09
25.79
$
$
$
$
$
$
$
$
24.08
24.55
21.16
23.21
23.12
26.01
23.85
23.80
$
$
$
$
$
$
$
$
0.30
0.30
0.30
0.30
0.30
0.30
0.30
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 S&P 500, Morgan Stanley REIT Index,
and the FTSE NAREIT US Real Estate Index for the period beginning on October 10, 2013 (the date of our initial listing on the
NYSE) through December 31, 2015. The graph assumes a $100 investment in each of the indices on October 10, 2013, and the
reinvestment of all dividends.
Index
October 10, 2013
December 31, 2013
December 31, 2014
December 31, 2015
Columbia Property Trust
S&P 500 Index
Morgan Stanley REIT Index
FTSE NAREIT US Real
Estate Index
$
$
$
$
100.00
100.00
100.00
100.00
$
$
$
$
112.10
109.70
97.70
97.68
$
$
$
$
119.00
124.70
127.38
127.40
$
$
$
$
115.70
126.40
130.60
131.30
Page 19
Share Repurchases
On September 4, 2015, our board of directors approved a stock repurchase program, which authorizes us to buy up to $200 million
of our common stock over a two-year period, ending on September 4, 2017 (the "Stock Repurchase Program"). During the quarter
ended December 31, 2015, we purchased and retired the following shares in accordance with the Stock Repurchase Program:
Period
October 2015
November 2015
December 2015(1)
Total Number
of Shares
Purchased
Average
Price Paid
per Share
— $
— $
$
151,727
—
—
23.228
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plan
Maximum
Approximate Dollar
Value Available for
Future Purchase(2)
—
— $
— $
$
151,727
—
183,683,000
(1) All activity for December 2015 relates to the Stock Repurchase Program, as described above.
(2) Amounts available for future purchase relate only to our Stock Repurchase Program and represent the remainder of the $200 million
authorized by our board of directors for share repurchases.
Unregistered Issuance of Securities
During the years 2013, 2014, and 2015, we did not issue any securities that were not registered under the Securities Act of 1933.
Securities Authorized for Issuance under Equity Compensation Plans
We have reserved 2,000,000 shares of common stock for issuance under our long term incentive plan (the "LTIP") and 25,000
shares of common stock under the a director stock option plan (the "Independent Director Stock Option Plan"). See Note 8,
Stockholders' Equity, to the accompanying consolidated financial statements, for more information about these plans. The LTIP
was approved by our stockholders 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, 2015:
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
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
LTIP
Number of securities
remaining available for
future issuance under
equity compensation
plans(1)
1,875
$
—
1,875
$
48.00
—
48.00
307,595
—
307,595
1,710,030
—
1,710,030
(1)
Includes 1,692,405 shares reserved for issuance under the LTIP 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 2015, 2014, 2013, 2012, and 2011 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(1)
Total stockholders' equity
Outstanding debt
Outstanding long-term debt
Obligations under capital leases
Total revenues(2)
Loss from unconsolidated joint venture
Net income
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(3)
Net debt proceeds (repayments)(3)
Acquisitions, earnest money paid, and
investments in real estate(3)
Per weighted-average common share data:
Net income – basic(4)
Net income – diluted(4)
Distributions declared(4)
Weighted-average common shares
outstanding – basic(4)
Weighted-average common shares
outstanding – diluted(4)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
As of December 31,
2015
2014
2013
2012
2011
4,678,118
2,614,194
1,735,063
1,577,063
120,000
$
$
$
$
$
4,734,240
2,733,478
1,680,066
1,469,245
120,000
$
$
$
$
$
4,587,301
2,787,823
1,489,179
1,477,563
120,000
$
$
$
$
$
5,724,652
3,163,980
1,650,296
1,621,541
586,000
$
$
$
$
$
5,773,090
3,346,655
1,469,486
1,433,295
646,000
Years Ended December 31,
2015
2014
2013
2012
2011
566,065
$
540,797
$
526,578
$
494,271
$
492,887
(1,142) $
— $
— $
— $
44,619
223,080
$
$
92,635
236,906
$
$
15,720
218,329
(576,699) $
(23,788) $
495,389
$
$
$
48,039
252,839
31,047
$
$
$
236,474
112,570
$
$
(163,183) $
(667,417) $
(269,729) $
149,962
$
191,473
— $
— $
46,402
29,488
$
(11,739) $
(160,940) $
(28,191) $
$
$
256,020
118,388
$
$
—
56,642
279,158
(666,090)
387,610
270,720
130,289
375,222
(1,145,402) $
(416,991) $
(44,856) $
(233,798) $
(638,783)
0.36
0.36
1.20
$
$
$
0.74
0.74
1.20
$
$
$
0.12
0.12
1.44
$
$
$
0.35
0.35
1.88
$
$
$
0.42
0.42
2.00
124,757
124,860
134,085
136,672
135,680
124,847
124,918
134,085
136,672
135,680
(1) The amounts for 2014 through 2011 have been adjusted to conform with current period presentation by reclassifying debt issuance
costs on the accompanying consolidated balance sheets, other than those related to our revolving credit facility, from a deferred financing
costs asset to an offset to line of credit, term loans, and notes payable liability and bonds payable.
(2) The amounts for 2012 and 2011 have been adjusted to conform with current-period presentation, including classifying revenues
generated by sold properties as discontinued operations (see Note 13, Discontinued Operations, to the accompanying consolidated
financial statements).
(3) Activity is presented on a cash basis. Please refer to our accompanying consolidated statements of cash flows.
(4) 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 8, Stockholders' Equity, to the accompanying consolidated financial
statements).
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
Executive Summary
We continue to focus on generating long-term shareholder returns through growth in net asset value with an emphasis on high-
barrier to entry markets. Capital recycling initiatives are enabling us to improve our concentration in key markets and central
business districts, as well as to reduce our exposure to single-tenant assets. During 2015, we invested $1.0 billion in New York
and Boston acquisitions, and sold a total of 12 properties situated in outlying markets for $0.5 billion. In September, we announced
a plan to further reduce our exposure to non-target markets by selling three additional assets totaling 2.9 million square feet in
Cleveland, Baltimore, and Newark. We will continue to seek opportunities to increase our portfolio allocation to central business
district properties, multi-tenant buildings, and primary, high barrier markets and, at the same time, optimize the allocation between
our traditional, stabilized core investments, and growth-oriented, value-add investments. While transitioning the portfolio to more
growth-oriented, 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.
We are continuing to actively manage our debt capital, with a particular focus on our allocation to unsecured borrowings. During
2015, we refinanced approximately $1.0 billion of unsecured debt and repaid $332.5 million of mortgage loans. As a result, during
the second half of the year, we extended our weighted average debt maturity from 4.1 years to 4.8 years; decreased our weighted-
average cost of borrowing from 3.75% per annum to 3.45% per annum; and increased our unencumbered pool of assets as a
percentage of gross real estate assets from 72.7% to 81.2%.
Further, in September of 2015, we launched a stock repurchase program, which authorizes us to purchase up to $200.0 million of
our common stock through September of 2017. We believe a stock repurchase program will enable us to benefit from market
downturns, which may cause our stock to be undervalued from time to time. As of December 31, 2015, we had purchased $16.3
million of common stock at an average price of $22.62 per share.
Page 22
Key Performance Indicators
Our operating results depend primarily upon the level of income generated by the leases at our properties. Occupancy and rental
rates are critical drivers of our lease income. Historically, we have maintained portfolio occupancy above 90% and within a fairly
narrow range. During 2014 and 2015, our average portfolio percentage leased ranged from 92.1% to 93.5%. The following table
sets forth details related to recent leasing activities, which drive changes in our rental revenues.
Total number of leases
Weighted-average lease term (months)
Square feet of leasing - renewal
Square feet of leasing - new
Total square feet of leasing
Rent leasing spread - renewal(3)
Rent leasing spread - new(4)
Rent leasing spread - all leases(3)(4)
Tenant improvements, per square foot - renewal
Tenant improvements, per square foot - new
Tenant improvements, per square foot - all leases
Leasing commissions, per square foot - renewal
Leasing commissions, per square foot - new
Leasing commissions, per square foot - all leases
Years Ended December 31,
2015
75
163
757,283
486,572
1,243,855
(1)
(2)
2014
61
143
740,583
359,239
1,099,822
13.3 %
49.9 %
27.4%
27.91
76.20
49.70
12.46
40.06
24.91
$
$
$
$
$
$
$
$
$
$
$
$
3.9 %
37.0 %
7.3%
55.81
50.01
54.18
23.74
21.93
23.23
(1)
(2)
Includes our pro-rata share (51%) of total leased at Market Square (6,000 square feet of renewal leasing) from October 28, 2015 through December
31, 2015.
Includes our pro-rata share (51%) of total leased at Market Square (22,000 square feet of new leasing) from October 28, 2015 through December 31,
2015.
(3) Rent leasing spreads for renewal leases are calculated based on the change in base rental income measured on a straight-line basis.
(4) Rent leasing spreads for new leases are calculated only for properties that have been vacant less than one year, and are measured on a straight-line
basis.
In 2015, rent leasing spreads were positive primarily due to a lease with Docusign, Inc. at 221 Main Street and a lease with Equinox
at 315 Park Avenue South, partially offset by the impact of a lease with CH2M at South Jamaica Street. In February 2015, we
executed an expansion and extension with Docusign, Inc., the anchor tenant at our 221 Main Street Building in San Francisco,
which will triple Docusign Inc.'s presence at the property and extend the term of their lease through March 2024. In December
2015, we executed a new lease with Equinox for 45,000 square feet at 315 Park Avenue South through December 2035. In October
2015, we executed an extension and contraction with CH2M, the sole tenant at our South Jamaica Street Property in Denver,
Colorado, which will reduce CH2M's occupancy to three of the four buildings at the property and extend the term of their lease
through September 2032.
Over the next twelve months, approximately 1,321,000 square feet of our leases (approximately 13% of our office portfolio based
on annualized lease revenue) are scheduled to expire. Approximately 393,000 of this total relates to one tenant at our 800 North
Fredrick Building, which is currently being marketed for sale. The remainder of the near-term expirations primarily relate to our
properties in San Francisco, New York, and Washington, D.C. Overall, we expect to replace these leases with rates above those
currently in place at the properties.
Liquidity and Capital Resources
Overview
Cash flows generated from the operation of our properties are primarily used to fund recurring expenditures and stockholder
dividends. Our board of directors elected to maintain the quarterly stockholder distribution rate of $0.30 per share for the fourth
quarter of 2015. 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
Page 23
acquisitions and first-generation capital improvements are generally funded with capital proceeds from property sales, debt, or
cash on hand.
During 2015, we generated net cash flows from operating activities of $223.1 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 $112.6 million.
During 2015, we acquired four properties for an aggregate gross purchase price of $1,104.0 million with a combination of cash
and unsecured borrowings, which included bonds payable, bridge loans, and draws on our Revolving Credit Facility, as described
below. We also sold 12 properties for a total of $498.3 million, and sold a portion of our Market Square Buildings to a joint venture
(the "Market Square Joint Venture") for $120 million in net proceeds. We used the sale proceeds to repay two mortgage notes and
to reduce the outstanding balance of our Revolving Credit Facility and $300 Million Bridge Loan, as described below. Additionally,
in September, we launched a stock repurchase program which allows the company to repurchase up to $200.0 million of its common
stock over the next two years. During 2015, we repurchased $16.3 million of our common stock using borrowings under our
Revolving Credit Facility.
Over the short-term, we expect our primary sources of capital to be operating cash flows, select property dispositions, and future
debt financings. We expect that our principal demands for funds will be operating expenses, distributions to stockholders, capital
improvements to our existing assets, stock repurchases, property acquisitions, and interest and principal payments on current and
maturing debt. We believe that we have adequate liquidity and capital resources to meet our current obligations as they come due.
As of January 31, 2016, we had access to $193 million of the borrowing capacity under the Revolving Credit Facility. We expect
to repay the $119.0 million balance remaining on the $300 Million Bridge Loan, which matures in August of 2016, with proceeds
from properties currently being marketed for sale.
$300 Million Bridge Loan
Our $300 Million Bridge Loan matures on August 4, 2016, after the exercise of a six-month extension option in December 2015,
and may be prepaid at any time without premium or penalty. As of December 31, 2015, the outstanding balance on the $300 Million
Bridge Loan is $119.0 million. At our option, borrowings under the $300 Million Bridge Loan bear interest at either (i) an alternate
base rate, plus an applicable margin based on five stated pricing levels ranging from 0.00% to 0.75% or (ii) the London Interbank
Offered Rate ("LIBOR"), plus an applicable margin based on five stated pricing levels ranging from 0.90% to 1.75%, in each case
based on our credit rating.
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. We expect that our primary uses of capital will 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 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, 2015, our debt-to-real-estate-asset ratio, including our pro-rata share (51%) of the
Market Square Joint Venture, was approximately 35.6%.
Page 24
Contractual Commitments and Contingencies
As of December 31, 2015, our contractual obligations will become payable in the following periods (in thousands):
Contractual Obligations
Debt obligations(1)
Interest obligations on debt(1)(2)
Capital lease obligations(3)
Operating lease obligations
$
Total
1,900,813
344,286
120,000
213,518
2016
2017-2018
2019-2020
$
$
163,460
68,335
$
403,587
111,374
—
2,557
—
5,433
668,016
73,477
—
5,462
$
Thereafter
665,750
91,100
120,000
200,066
Total
$
2,578,617
$
234,352
$
520,394
$
746,955
$
1,076,916
(1) Reflects debt and interest obligations on debt, including our pro-rata share (51%) of the Market Square Buildings note
payable. We guarantee $25.0 million of the Market Square Buildings note payable (see Footnote 7, Commitments &
Contingencies, to the accompanying financial statements).
(2)
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.
(3) Amounts include principal obligations only. We made interest payments on these obligations of $7.2 million during 2015,
all of which was funded with interest income earned on the corresponding investments in development authority bonds.
Revolving Credit Facility
Our Revolving Credit Facility has a capacity of $500.0 million and matures in July 2019, with two, six-month extension options.
As of December 31, 2015, we had an outstanding balance of $247.0 million on the Revolving Credit Facility. Amounts outstanding
under the Revolving Credit Facility bear interest at LIBOR, plus an applicable margin ranging from 0.875% to 1.55% for LIBOR
borrowings, or an alternate base rate, plus an applicable margin ranging from 0.00% to 0.55% 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
0.125% to 0.30%, also based on our applicable credit rating. Additionally, we have the ability to increase the capacity of the
Revolving Credit Facility, along with the $300 Million Term Loan, which provides for four accordion options for an aggregate
amount of up to $400 million, subject to certain limitations.
The Revolving Credit Facility contains the following restrictive covenants:
•
•
•
•
•
•
limits the ratio of secured debt to total asset value, as defined therein, to 40% or less;
requires the fixed charge coverage ratio, as defined therein, to be at least 1.50:1.00;
limits the ratio of debt to total asset value, as defined therein, to 60% or less;
requires the ratio of unencumbered adjusted net operating income, as defined therein, to unsecured interest expense, as
defined therein, to be at least 1.75:1.00;
requires the ratio of unencumbered asset value, as defined therein, to total unsecured debt, as defined therein, to be at
least 1.66:1.00; and
requires maintenance of certain minimum tangible net worth balances.
As of December 31, 2015, we believe we were in compliance with the restrictive covenants on our outstanding debt obligations.
Term Loans
We have a $300.0 million unsecured, single-draw term loan, which matures in July 2020 (the "$300 Million Term Loan"), and,
along with the Revolving Credit Facility, provides for four accordion options for an aggregate amount of up to $400 million,
subject to certain conditions. The $300 Million Term Loan bears interest, at our option, at either (i) LIBOR plus an applicable
margin ranging from 0.90% to 1.75% for LIBOR loans, or (ii) an alternate base rate, plus an applicable margin ranging from 0.00%
to 0.75% for base rate loans, based on our applicable credit rating.
Page 25
We have a $150.0 million unsecured, single-draw term loan, which matures in July 2022 (the "$150 Million Term Loan"). The
$150 Million Term Loan bears interest, at our option, at either (i) LIBOR plus an applicable margin ranging from 1.40% to 2.35%
for LIBOR loans, or (ii) base rate, plus an applicable margin ranging from 0.40% to 1.35% for base rate loans. The interest rate
on the $150 Million Term Loan is 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 $150 Million Term Loan is effectively fixed at 3.52%.
Bonds Payable
In March 2015, we issued $350.0 million of ten-year, unsecured 4.150% senior notes at 99.859% of their face value under our
Universal Shelf Registration Statement (the "2025 Bonds Payable"). We received proceeds from the 2025 Bonds Payable, net of
fees, of $347.2 million, a portion of which was used to repay a bridge loan, which was originated in January. The 2025 Bonds
Payable require semi-annual interest payments in April and October based on a contractual annual interest rate of 4.150%. The
principal amount of the 2025 Bonds Payable is due and payable on the maturity date, April 1, 2025.
Also, in 2011, we issued $250.0 million of seven-year, unsecured 5.875% senior notes at 99.295% of their face value (the "2018
Bonds Payable"). We received proceeds from the 2018 Bonds Payable, net of fees, of $246.7 million. The 2018 Bonds Payable
require semi-annual 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.
The restrictive covenants on the 2025 Bonds Payable and the 2018 Bonds Payable as defined pursuant to an indenture include:
•
•
•
•
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, 2015, we believe we were in compliance with the restrictive covenants on the 2025 Bonds Payable and the
2018 Bonds Payable.
Debt Repayments, Maturities, and Interest Payments
On January 6, 2015, we entered into a $300.0 million, six-month, unsecured loan to finance a portion of the real estate assets
purchased in January 2015. On March 12, 2015, we fully repaid the loan with proceeds from the 2025 Bonds Payable, at which
time we recognized a loss on early extinguishment of debt of $0.5 million as a result of writing off the unamortized deferred
financing costs. The loan was set to mature on July 6, 2015.
On June 1, 2015, we repaid the mortgage note for the 333 Market Street Building for $206.5 million and the related interest rate
swap agreement expired. The maturity date for the 333 Market Street Building mortgage note was July 1, 2015.
On July 1, 2015, in connection with the 11 Property Sale, as described in Note 3, Real Estate and Other Transactions, to the
accompanying financial statements, we repaid the mortgage note for the 215 Diehl Road Building, one of the properties included
in the 11 Property Sale, for $21.0 million. As a result, we recognized a loss on early extinguishment of debt of $2.1 million,
primarily as a result of a prepayment premium. The maturity date for the 215 Diehl Road Building mortgage note was July 1,
2017.
On July 13, 2015, we repaid the $105.0 million mortgage note on the 100 East Pratt Street Building at par. The maturity date for
the 100 East Pratt Street Building mortgage note was June 11, 2017.
On October 8, 2014, we 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.
During 2015 and 2014, we made interest payments of approximately $54.0 million and $56.1 million, respectively, related to our
line of credit and notes payable. Interest payments on the 2025 Bonds Payable began in October 2015. Interest payments of $22.7
million were made on the 2025 Bonds Payable and the 2018 Bonds Payable during 2015, and interest payments of $14.7 million
were made on the 2018 Bonds Payable during 2014.
Page 26
Universal Shelf Registration Statement
We have on file 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 in September 2014. The Universal
Shelf Registration Statement provides us with 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.
Results of Operations
Overview
As of December 31, 2015, we owned 27 office properties, which were approximately 93.2% leased, including our share of the
Market Square Joint Venture, and one hotel. All of our properties are wholly owned except the Market Square Buildings, which
are owned through an unconsolidated joint venture. Our operating results are impacted by recent acquisition and disposition
activity, as set forth in the Transaction Activity section of Item 1, Business, and the partial disposition of the Market Square
Buildings in October 2015. In the near term, we expect real estate operating income to fluctuate primarily based on acquisitions,
dispositions, and leasing activity.
Comparison of the year ended December 31, 2015 versus the year ended December 31, 2014
Continuing Operations
Rental income was $436.0 million for 2015, which represents an increase from $414.5 million for 2014. The increase includes
$74.3 million of additional rental income from properties acquired in 2014 and 2015, partially offset by a reduction of $51.1
million due to selling properties during the same periods, and transferring the Market Square Buildings to a joint venture on
October 28, 2015. Rental income related to our joint venture interest in the Market Square Buildings (51%) is included in loss
from unconsolidated joint venture on the accompanying consolidated statement of operations. We expect future rental income to
fluctuate primarily based on leasing, acquisition, and disposition activity.
Tenant reimbursements were relatively stable at $99.7 million and $95.4 million for 2015 and 2014, respectively. Property operating
costs were $188.1 million for 2015, which represents an increase as compared with $163.7 million for 2014, primarily due to an
increase of $32.2 million from properties acquired during 2014 and 2015, partially offset by a decrease of $14.0 million due to
selling properties during the same periods, and transferring the Market Square Buildings to a joint venture on October 28, 2015.
Tenant reimbursements and property operating costs related to our joint venture interest in the Market Square Buildings (51%)
are included in loss from unconsolidated joint venture on the accompanying consolidated statement of operations. Tenant
reimbursements did not increase at the same pace as property operating costs primarily due to a lease contraction at one of our
properties, and a prior year property tax refund received in the current year. Tenant reimbursements and property operating costs
are expected to fluctuate with acquisitions, dispositions and leasing activity.
Hotel income, net of hotel operating costs, was $4.7 million for 2015, which represents an increase as compared with $4.1 million
for 2014, due to additional group bookings and meetings at the hotel. 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 $6.1 million for 2015, which represents a decrease as compared with $8.0 million for 2014, primarily
due to fluctuations in lease termination activity. Future other property income is expected to fluctuate primarily as a result of lease
restructuring and termination activities.
Asset and property management fees were $1.8 million for 2015, which represents a decrease as compared with $2.3 million for
2014, primarily as a result of bringing asset and property management services in house during 2015 for properties in San Francisco
($1.1 million reduction), partially offset by incurring additional property management and asset management fees for properties
acquired in 2015 ($0.7 million increase). Future asset and property management fees are expected to fluctuate with future
acquisition, disposition, and joint venture activity.
Depreciation was $131.5 million for 2015, which represents an increase as compared with $117.8 million for 2014, primarily due
to the $25.8 million impact of recent acquisitions, partially offset by the $15.4 million impact of recent dispositions and transferring
the Market Square Buildings to a joint venture on October 28, 2015. Depreciation related to our joint venture interest in the Market
Square Buildings (51%) is included in loss from unconsolidated joint venture on the accompanying consolidated statement of
operations. Excluding the impact of changes in our portfolio, depreciation is expected to increase in future periods due to ongoing
capital improvements at our existing properties.
Page 27
Amortization was $87.1 million for 2015, which represents an increase as compared with $78.8 million for 2014, primarily due
to the $25.5 million impact of recent acquisitions, partially offset by the $13.8 million impact of properties sold and transferring
the Market Square Buildings to a joint venture on October 28, 2015, and the $2.4 million impact of prior-period write offs at our
existing properties. Amortization related to our joint venture interest in the Market Square Buildings (51%) is included in loss
from unconsolidated joint venture on the accompanying consolidated statement of operations.We expect future amortization to
fluctuate primarily as a result of future leasing activity, 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 (sold in July 2015). In 2015, we did not recognize any impairment losses. We have recently begun to market for sale
several properties, which are located in Baltimore, Cleveland and Newark. Future impairment losses will depend primarily on the
disposition strategies evaluated and, ultimately, pursued for these assets, and our holding period intentions for our other assets.
General and administrative expenses were $29.7 million for 2015, which represents a decrease from $31.3 million for 2014. The
decrease is primarily due to the full period impact of savings related to changing transfer agents in the third quarter of 2014 ($1.5
million). In addition, reductions related to non-recurring professional fees incurred in 2014 ($2.6 million) are largely offset by
costs incurred in 2015 to develop our regional investment platform ($1.5 million) and for vesting under our stock-based incentive
compensation plan ($1.0 million). 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 acquisition expenses of $3.7 million for 2015, in connection with acquiring three properties in January 2015 and the
229 West 43rd Street Building, in New York, in August 2015. We incurred acquisition expenses of $14.1 million for 2014, in
connection with acquiring the 221 Main Street Building and the 650 California Street Building in San Francisco, in 2014. See
Note 3, Real Estate and Other Transactions, to the accompanying financial statements for additional details. We expect future
acquisition expenses to fluctuate with acquisition activity.
Interest expense was $85.3 million for 2015, which represents an increase as compared with $75.7 million for 2014, primarily
due to $11.6 million of additional interest incurred on the 2025 Bonds Payable issued in March 2015 and $4.1 million related to
the full year impact of the notes payable assumed with the properties acquired in 2014, partially offset by a $5.6 million reduction
related to the mortgages settled during 2015. See Note 5, Line of Credit, Term Loans, and Notes Payable, to the accompanying
financial statements for additional details. Interest expense is expected to remain at similar levels in the near-term until we execute
our near-term plans to sell properties and repay short-term debt.
Interest and other income was stable at $7.3 million for 2015 and 2014. Interest income is expected to remain at comparable levels
in future periods, as the majority of this income is earned on investments in development authority bonds with a remaining term
of approximately six years as of December 31, 2015. 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 $1.1 million for
2015, as compared with $0.4 million for 2014. The $1.1 million loss in 2015 is primarily due to the settlement of the swap related
to the $450 Million Term Loan, which was replaced with other unsecured borrowings in July 2015. 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 $3.1 million in 2015, primarily due to prepayment fees incurred to settle
the 215 Diehl Building mortgage note in connection with selling the property as part of the 11 Property Sale, and writing off
deferred financing costs in association with repaying a bridge loan in March 2015, 4.3 months prior to its original maturity date.
We recognized a loss 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 expect future gains or losses
on early extinguishments of debt to fluctuate with financing activities.
We recognized a loss from unconsolidated joint venture of $1.1 million for 2015, as income from operations at the Market Square
Buildings is offset by interest expense related to the $325 million mortgage note on the property. Future income or loss from
unconsolidated joint venture will fluctuate with operating activity at the Market Square Buildings.
We recognized gains on sales of real estate assets of $23.9 million in 2015. In July 2015, we sold 11 Properties for $433.3 million,
exclusive of transaction costs, yielding a gain on sale of real estate assets of $20.2 million; in October 2015, we sold a 49% interest
in the Market Square Buildings for a gross sales price of $120.0 million, resulting in a gain on sale of real estate assets of $3.1
Page 28
million; and in December 2015, we sold the 1881 Campus Commons Building for $65.0 million, exclusive of transaction costs,
yielding a gain on sale of real estate assets of $0.5 million. We recognized a gain on sale 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. We
expect future gains on sales of real estate assets will fluctuate with disposition activity.
Discontinued Operations
Loss from discontinued operations was $2.0 million for 2014. Effective April 1, 2014, we adopted Accounting Standards Update
2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components on an Entity ("ASU 2014-08"), which
requires only dispositions representing a strategic shift in our operations to be reclassified to discontinued operations. Therefore,
the operating results of properties disposed subsequent to our adoption date have not been reclassified to discontinued operations.
As further explained in Note 13, 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.
Net Income
Net income was $44.6 million, or $0.36 per basic and diluted share, for 2015, which represents a decrease from $92.6 million, or
$0.74 per share, for 2014, primarily due to recognizing a $56.5 million gain on the sale of the Lenox Park Property in October
2014. This decrease is partially offset by $15.6 million of additional real estate operating income from the $0.5 billion of net real
estate acquisitions made in 2015 and leasing activity, reduced by $9.6 million of additional interest expense to fund such acquisitions.
We expect future earnings to fluctuate as a result of leasing activity at our existing properties and acquisition and disposition
activity.
Comparison of the year ended December 31, 2014 versus the year ended December 31, 2013
Rental income was $414.5 million for 2014, which represents an increase from $406.9 million for 2013, due to the $19.3 million
impact of 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 $13.6 million impact of 2014 dispositions.
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 $7.4 million impact of recently
acquired properties and the $3.3 million impact of increased property taxes resulting from annual assessments were partially offset
by the $2.6 million impact of the disposition of properties in late 2013 and 2014.
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.
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.
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 11, Related-Party Transactions and Agreements,
to the accompanying consolidated financial statements, for additional information.
Depreciation was $117.8 million for 2014, which represents an increase from $108.1 million for 2013, due to the $9.4 million
impact of 2014 and 2013 acquisitions, partially offset by the $3.4 million impact of 2014 and 2013 dispositions, and the $3.0
million impact of the completion of capital improvements at certain of our existing properties.
Amortization was 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.
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 (sold in July 2015).
Page 29
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 11, Related-Party Transactions and Agreements, to the accompanying financial statements for details.
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, to the accompanying financial
statements for additional details.
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 and other income was $7.3 million for 2014, which represents a decrease from $34.0 million for 2014, 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 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 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 on 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 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, were not reclassified to discontinued operations. As further explained in Note 13, 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.
Page 30
Supplemental Performance Measures
In addition to net income, we measure the performance of the company using certain non-GAAP supplemental performance
measures, including: (i) Funds From Operations ("FFO"), (ii) Net Operating Income ("NOI"), and (iii) Same Store Net Operating
Income ("Same Store NOI"). These non-GAAP metrics are commonly used by industry analysts and investors as supplemental
operation performance measures of REITs and are viewed by management to be useful indicators of operating performance.
Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets
diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many
industry analysts and investors have considered presentation of operating results for real estate companies using historical cost
accounting alone to be insufficient. Management believes that the use of FFO, NOI, and Same Store NOI, combined with net
income, improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT
operating results more meaningful.
Net income is the most comparable GAAP measure to FFO, NOI, and Same Store NOI. Each of these supplemental performance
measures exclude expenses that materially impact our overall results of operations and, therefore, should not be considered as a
substitute for net income, income from continuing operations before income taxes, or any other measures derived in accordance
with GAAP. Furthermore, these metrics may not be comparable to other similarly titled measures used by other companies.
Funds From Operations
FFO is a non-GAAP measure 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):
Reconciliation of Net Income to Funds From Operations:
Net income
Adjustments:
Years Ended December 31,
2014
2013
2015
$
44,619
$
92,635
$
15,720
Depreciation of real estate assets
Amortization of lease-related costs
Depreciation and amortization included in loss from unconsolidated
joint venture(1)
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
131,490
87,128
1,606
—
(23,860)
—
196,364
117,766
78,843
—
25,130
(75,275)
1,627
148,091
119,835
86,300
—
29,737
—
(11,225)
224,647
Funds From Operations
$
240,983
$
240,726
$
240,367
(1) Reflects our pro-rata share (51%) of depreciation and amortization for the Market Square Joint Venture, which was created on October 28, 2015.
Page 31
Net Operating Income
As set forth below, NOI is calculated by deducting property operating costs from rental and other property revenues for continuing
operations. As a performance metric consisting of only revenues and expenses directly related to ongoing real estate rental
operations, which have been or will be settled in cash, NOI is narrower in scope than FFO.
NOI, as we calculate it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs.
We believe that NOI is another useful supplemental performance measure, as it is an input in many REIT valuation models and
it provides a means by which to evaluate the performance of the properties.
The major factors influencing our NOI are property acquisitions and dispositions, occupancy levels, rental rate increases or
decreases, and the recoverability of operating expenses.
Same Store Net Operating Income
We also evaluate the performance of our properties, on a "same store" basis, using a metric referred to as Same Store NOI. We
view Same Store NOI as a useful supplemental performance measure because it improves comparability between periods by
eliminating the effects of changes in the composition of our portfolio.
Same Store NOI is computed in a consistent manner as NOI on an individual property basis. For the periods presented, our same
store portfolio includes all properties that have been owned and operated from January 1, 2014 through December 31, 2015,
including the operating revenues and expenses related to our current share of the Market Square Buildings (51%). On October 28,
2015, we sold a 49% interest in the Market Square Buildings by transferring the property to a joint venture. NOI and Same Store
NOI are calculated as follows for 2015 and 2014 (in thousands):
Revenues:
Rental income
Tenant reimbursements
Hotel income
Other property income
Total revenues
Operating expenses:
Property operating costs
Hotel operating costs
Total operating expenses
Same Store NOI
NOI from acquisitions(1)
NOI from dispositions(2)
Net operating income total
Years Ended December 31,
2015
2014
$
$
309,755
76,319
24,309
1,686
412,069
(133,939)
(19,615)
(153,554)
258,515
62,461
33,358
354,334
$
$
312,763
75,744
22,885
1,431
412,823
(129,891)
(18,792)
(148,683)
264,140
12,239
74,035
350,414
(1) Reflects activity for the following properties acquired since January 1, 2014, for all periods presented: 229 West 43rd Street, 315 Park Avenue South,
116 Huntington Avenue, 650 California Street, and 221 Main Street.
(2) Reflects activity for the following properties sold since January 1, 2014, for all periods presented: 1881 Campus Commons, 49% of the Market Square
Buildings, 170 Park Avenue, 180 Park Avenue, 1580 West Nursery Road, Acxiom, Highland Landmark III, The Corridors III, 215 Diehl Road, 544
Lakeview, Bannockburn Lake III, 550 King Street, Robbins Road, Lenox Park Buildings, 9 Technology Drive, 7031 Columbia Gateway Drive, 200
South Orange, and 160 Park Avenue.
Page 32
A reconciliation of Net Income to NOI and Same Store NOI is presented below (in thousands):
Net income
Net interest expense
Interest income from development authority bonds
Income tax expense
Depreciation
Amortization
Real estate acquisition costs
Gain on sale of real estate assets
Impairment loss
Loss on disposition of discontinued operations
Loss on early extinguishment of debt
General and administrative
Interest rate swap valuation adjustment
Interest expense associated with interest rate swaps
Settlement of interest rate swap
Lease termination income(1)
Operating loss from discontinued operations
Less: Net Operating Income
NOI from Acquisitions(2)
NOI from Dispositions(3)
Same Store NOI
Years Ended December 31,
2015
2014
$
44,619
$
86,738
(7,200)
378
132,625
87,599
3,675
(23,860)
—
—
3,149
29,738
(2,634)
2,642
1,102
(4,237)
—
354,334
$
(62,461)
(33,358)
258,515
$
$
$
92,635
75,681
(7,200)
662
117,766
78,843
14,142
(75,275)
25,130
1,627
23
31,275
(4,946)
5,317
—
(6,291)
1,025
350,414
(12,239)
(74,035)
264,140
(1)
Lease termination income includes adjustments for straight-line rent related to lease terminations.
(2) Reflects activity for the following properties acquired since January 1, 2014, for all periods presented: 229 West 43rd Street, 315 Park Avenue South,
116 Huntington Avenue, 650 California Street, and 221 Main Street.
(3) Reflects activity for the following properties sold since January 1, 2014, for all periods presented: 1881 Campus Commons, 49% of the Market Square
Buildings, 170 Park Avenue, 180 Park Avenue, 1580 West Nursery Road, Acxiom, Highland Landmark III, The Corridors III, 215 Diehl Road, 544
Lakeview, Bannockburn Lake III, 550 King Street, Robbins Road, Lenox Park Buildings, 9 Technology Drive, 7031 Columbia Gateway Drive, 200
South Orange, and 160 Park Avenue.
Page 33
Portfolio Information
As of December 31, 2015, we owned 27 office properties and one hotel. These properties contain approximately 14.0 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 an unconsolidated joint venture. As of December 31, 2015, including our 51% interest in
the Market Square Joint Venture, the office properties were approximately 93.2% leased. Annualized Lease Revenue is defined
in Item 2, Properties.
As of December 31, 2015, our five highest geographic concentrations were as follows:
Location
San Francisco
New York
Houston
Washington, D.C.
Atlanta
2015 Annualized
Lease Revenue
(in thousands)
Leased
Square Feet
(in thousands)
Percentage of
2015 Annualized
Lease Revenue
$
$
105,012
82,822
45,163
37,020
36,286
306,303
1,901
1,114
1,062
548
1,562
6,187
22%
17%
9%
8%
7%
63%
As of December 31, 2015, our five highest tenant industry concentrations were as follows:
Industry
Legal Services
Business Services
Depository Institutions
Security & Commodity Brokers
Electric, Gas, & Sanitary Services
2015 Annualized
Lease Revenue
(in thousands)
Leased
Square Feet
(in thousands)
Percentage of
2015 Annualized
Lease Revenue
$
$
79,100
69,870
60,967
48,952
39,953
298,842
1,490
1,199
1,673
954
1,690
7,006
16%
14%
13%
10%
8%
61%
As of December 31, 2015, our five highest tenant concentrations were as follows:
Tenant
Wells Fargo
Jones Day
AT&T
PSEG Services
Credit Suisse
2015 Annualized
Lease Revenue
(in thousands)
Percentage of
2015 Annualized
Lease Revenue
$
$
28,538
28,124
22,003
21,849
19,675
120,189
6%
6%
5%
4%
4%
25%
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
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.
Page 34
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, office properties that we do not intend to
hold long term and 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 the TRS Entities, 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
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: (Level 1) recently quoted market prices; (Level
Page 35
2) market prices for comparable properties; or (Level 3) 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. We have
determined that there is no impairment in the carrying values of our real estate assets and related intangible assets for the year
ended December 31, 2015.
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.
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 (Level 3) 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 (Level 1) 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 fell outside of our
targeted investment strategy. In connection with initiating the sales process for these assets, 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, was 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 (Level 3), 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, using Level 3 inputs.
Property
2014
Bannockburn Lake III
2013
120 Eagle Rock
333 & 777 Republic Drive
Net Book
Value
Impairment Loss
Recognized
Fair Value
$
$
$
15,148
23,808
13,359
$
$
$
(10,148) $
5,000
(11,708) $
(5,159) $
12,100
8,200
Page 36
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. This calculation includes significantly below-
market renewal options for which exercise of the renewal option appears to be reasonably assured. These intangible assets
or liabilities are measured over the actual or assumed (in the case of renewal options) remaining lease terms. 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.
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
Page 37
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.
This calculation includes significantly below market renewal options for which exercise of the renewal option appears to be
reasonably assured. These intangible assets and liabilities are measured over the actual or assumed (in the case of renewal options)
remaining lease terms. 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.
Related-Party Transactions and Agreements
During 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 11, Related-Party Transactions and Agreements, to 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 7, Commitments and
Contingencies, to the accompanying consolidated financial statements for further explanation. Examples of such commitments
and contingencies include:
•
•
•
•
•
•
structural repairs at one of our properties ranging from $30.0 million to $35.0 million;
guaranty of debt of an unconsolidated joint venture of $25 million;
obligations under operating leases;
obligations under capital leases;
commitments under existing lease agreements; and
litigation.
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:
Dividends
On January 6, 2016, we paid the dividends for the fourth quarter of 2015 for an aggregate amount of $37.4 million to shareholders
of record on December 1, 2015.
On February 10, 2016, our board of directors declared dividends for the first quarter of 2016 in the amount of $0.30 per share,
payable on March 15, 2016, to stockholders of record on March 1, 2016.
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 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, 2015 and 2014, the estimated fair value of our line of credit and
notes payable and bonds was $1.7 million, respectively.
Page 38
Our financial instruments, including bonds payable, consist of both fixed- and variable-rate debt. As of December 31, 2015, our
debt, including our pro-rata share (51%) of the debt of the Market Square Joint Venture, consisted of the following, in thousands:
2016
2017
2018
2019
2020
Thereafter
Total
Maturing debt:
Effectively variable-rate debt
$ 119,000
$
— $
— $ 247,000
$ 300,000
$
— $
666,000
Effectively fixed-rate debt
$
44,460
$ 127,728
$ 275,860
$ 121,015
$
— $ 665,750
$ 1,234,813
Average interest rate:
Effectively variable-rate debt
Effectively fixed-rate debt
1.50%
5.70%
—%
4.60%
—%
5.85%
1.40%
3.60%
1.37%
—%
—%
4.24%
1.40%
4.62%
Our variable-rate borrowings consist of the Revolving Credit Facility, the $300 Million Bridge Loan, the $300 Million Term Loan,
and the $150 Million Term Loan. However, only the Revolving Credit Facility, the $300 Million Bridge Loan, and the $300 Million
Term Loan bear interest at effectively variable rates, as the variable rate on the $150 Million Term Loan has been effectively fixed
through the interest rate swap agreement described herein.
As of December 31, 2015, we had $247.0 million of outstanding borrowings under the Revolving Credit Facility; $150.0 million
outstanding on the $150 Million Term Loan; $300.0 million outstanding on the $300 Million Term Loan; $119.0 million outstanding
under the $300 Million Bridge Loan; $249.4 million in 2018 Bonds Payable outstanding; $349.5 million in 2025 Bonds Payable
outstanding; $319.1 million outstanding on fixed-rate, term mortgage loans. The weighted-average interest rate of all of our
consolidated debt instruments was 3.35% as of December 31, 2015.
Approximately $1,068.0 million of our consolidated debt outstanding as of December 31, 2015, is subject to fixed rates, either
directly or when coupled with an interest rate swap agreement. As of December 31, 2015, these balances incurred interest expense
at an average interest rate of 4.56% and have expirations ranging from 2016 through 2025. 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. A one percent change in interest rates would have a $7.0 million annual impact on our interest payments. 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.
Our Market Square Joint Venture holds a $325 million mortgage note, which bears interest at 5.07%. Adjusting for our pro-rata
share (51%) of the Market Square Buildings mortgage note, our weighted average interest rate is 4.62%.
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, 2015, 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.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with our independent registered public accountants during 2015, 2014, or 2013.
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,
Page 39
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, 2015. 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, 2015.
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, 2015, that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Page 40
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, 2015, 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, 2015, 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, 2015 of the Company
and our report dated February 11, 2016 expressed an unqualified opinion on those consolidated financial statements and financial
statement schedule.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 11, 2016
Page 41
ITEM 9B. OTHER INFORMATION
During the fourth quarter of 2015, 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 42
PART III
We will file a definitive Proxy Statement for our 2016 Annual Meeting of Stockholders (the "2016 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 2016 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 2016 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from our 2016 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 2016 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference from our 2016 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference from our 2016 Proxy Statement.
Page 43
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 44
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 11, 2016
By:
/s/ JAMES A. FLEMING
JAMES A. FLEMING
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Dated: February 11, 2016
/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/ Carmen M. Bowser
Carmen M. Bowser
/s/ Charles R. Brown
Charles R. Brown
/s/ Richard W. Carpenter
Richard W. Carpenter
/s/ John L. Dixon
John L. Dixon
/s/ David B. Henry
David B. Henry
/s/ Murray J. McCabe
Murray J. McCabe
/s/ E. Nelson Mills
E. Nelson Mills
/s/ Michael S. Robb
Michael S. Robb
/s/ George W. Sands
George W. Sands
/s/ Thomas G. Wattles
Thomas G. Wattles
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
President, Chief Executive Officer and Director
(Principal Executive Officer)
Independent Director
Independent Director
Independent Director
Page 45
February 11, 2016
February 11, 2016
February 11, 2016
February 11, 2016
February 11, 2016
February 11, 2016
February 11, 2016
February 11, 2016
February 11, 2016
February 11, 2016
EXHIBIT INDEX
TO
2015 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
3.6
4.1
4.2
4.3
4.4
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
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).
Fourth 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 July 1, 2014).
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).
Indenture, dated March 12, 2015 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the
Commission on March 12, 2015).
Supplement Indenture, dated March 12, 2015 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed
with the Commission on March 12, 2015).
Form of 4.150% Senior Notes due 2025 (included in Exhibit 4.3).
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.
Page 46
Ex.
10.13
10.14
10.15
21.1*
23.1*
31.1*
31.2*
32.1*
Description
Amended and Restated Revolving Credit and Term Loan Agreement, dated July 30, 2015, 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, MUFG Union Bank, N.A. and Wells Fargo Bank, N.A., as documentation agents, and each of the financial institutions
a signatory thereto, as lenders (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the
Commission on October 29, 2015).
Term Loan Agreement, dated July 30, 2015, by and among Columbia Property Trust Operating Partnership, L.P., as borrower, the financial
institutions party thereto, as lenders, Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC, Regions
Capital Markets and U.S. Bank National Association, as joint lead arrangers and joint bookrunners and Regions Bank and U.S. National
Association, as syndication agents, and PNC Bank, National Association, as documentation agent (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q filed with the Commission on October 29, 2015).
Term Loan Agreement, dated August 4, 2015, by and among the Columbia Property Trust Operating Partnership, L.P., as borrower, J.P.
Morgan Securities LLC, as joint lead arranger and sole bookrunner, JPMorgan Chase Bank, N.A., as administrative agent, PNC Bank,
National Association, Capital One, National Association, and Wells Fargo Bank, N.A. as joint lead arrangers and co-syndication agents, and
each of the financial institutions a signatory thereto, as lenders (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q filed with the Commission on October 29, 2015).
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
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document.
XBRL Taxonomy Extension Schema.
XBRL Taxonomy Extension Calculation Linkbase.
XBRL Taxonomy Extension Definition Linkbase.
XBRL Taxonomy Extension Label Linkbase.
XBRL Taxonomy Extension Presentation Linkbase.
* Filed herewith.
Page 47
[This page intentionally left blank]
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014, and 2013
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014, and 2013
Consolidated Statements of Equity for the Years Ended December 31, 2015, 2014, and 2013
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and 2013
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, 2015 and 2014, 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, 2015. 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, 2015 and 2014, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2015, 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, 2015, 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 11, 2016 expressed an unqualified opinion on the Company's internal control over financial reporting.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
February 11, 2016
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,
2015
2014
$
896,467
$
785,101
Buildings and improvements, less accumulated depreciation of $613,639 and $660,098, as
of December 31, 2015 and 2014, respectively
2,897,431
3,026,431
Intangible lease assets, less accumulated amortization of $250,085 and $313,822, as of
December 31, 2015 and 2014, respectively
Construction in progress
Total real estate assets
Investment in unconsolidated joint venture
Cash and cash equivalents
Tenant receivables, net of allowance for doubtful accounts of $8 and $3, as of December 31,
2015 and 2014, respectively
Straight-line rent receivable
Prepaid expenses and other assets
Intangible lease origination costs, less accumulated amortization of $181,482 and $219,626, as
of December 31, 2015 and 2014, respectively
Deferred lease costs, less accumulated amortization of $40,817 and $36,589, as of
December 31, 2015 and 2014, respectively
Investment in development authority bonds
Total assets
Liabilities:
Line of credit, term loans, and notes payable, net of deferred financing costs of $4,492 and
$3,438, as of December 31, 2015 and 2014, respectively
Bonds payable, net of discount of $1,020 and $818 and deferred financing costs of $3,721 and
$1,200, as of December 31, 2015 and 2014, respectively
Accounts payable, accrued expenses, and accrued capital expenditures
Dividends payable
Deferred income
Intangible lease liabilities, less accumulated amortization of $81,496 and $84,935, as of
December 31, 2015 and 2014, respectively
Obligations under capital leases
Total liabilities
Commitments and Contingencies (Note 7)
Equity:
Common stock, $0.01 par value, 225,000,000 shares authorized, 124,363,073 and 124,973,304
shares issued and outstanding as of December 31, 2015 and 2014, respectively
Additional paid-in capital
Cumulative distributions in excess of earnings
Accumulated other comprehensive loss
Total equity
Total liabilities and equity
259,136
31,847
4,084,881
118,695
32,645
11,670
109,062
35,848
247,068
17,962
4,076,562
—
149,790
6,945
116,489
55,931
77,190
105,528
88,127
120,000
102,995
120,000
4,678,118
$
4,734,240
1,130,571
$
1,427,446
$
$
595,259
98,759
37,354
24,814
57,167
120,000
2,063,924
—
1,243
4,588,303
(1,972,916)
(2,436)
2,614,194
$
4,678,118
$
247,982
106,276
—
24,753
74,305
120,000
2,000,762
—
1,249
4,601,808
(1,867,611)
(1,968)
2,733,478
4,734,240
See accompanying notes.
F-3
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
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 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
Income before income tax expenses, unconsolidated joint ventures, and gains on sale of
real estate
Income tax expense
Loss from unconsolidated joint venture
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
Gain (loss) on disposition of discontinued operations
Loss from discontinued operations
Net income
Per-share information – basic:
Income from continuing operations
Loss from discontinued operations
Net income
Weighted-average common shares outstanding – basic
Per-share information – diluted:
Income from continuing operations
Loss from discontinued operations
Net income
Years ended December 31,
2015
2014
2013
$
436,048
$
414,541
$
406,907
99,655
24,309
6,053
566,065
188,078
19,615
—
1,816
131,490
87,128
—
29,683
—
3,675
461,485
104,580
(85,296)
7,254
(1,110)
(3,149)
(82,301)
22,279
(378)
(1,142)
20,759
23,860
44,619
—
—
—
44,619
0.36
0.00
0.36
124,757
0.36
0.00
0.36
$
$
$
$
$
$
$
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)
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)
—
(68,830)
(68,254)
20,039
(662)
—
19,377
75,275
94,652
(390)
(1,627)
(2,017)
92,635
0.76
$
$
(0.02) $
0.74
$
26,320
(500)
—
25,820
—
25,820
(21,325)
11,225
(10,100)
15,720
0.19
(0.08)
0.12
124,860
134,085
0.76
$
(0.02) $
0.74
$
0.19
(0.08)
0.12
$
$
$
$
$
$
$
Weighted-average common shares outstanding – diluted
124,847
124,918
134,085
See accompanying notes.
F-4
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Market value adjustment to interest rate swap
Settlement of interest rate swap
Foreign currency translation adjustment
Comprehensive income
Years ended December 31,
2015
2014
2013
$
$
44,619
$
92,635
$
(1,570)
1,102
—
1,339
—
—
15,720
1,997
—
(83)
44,151
$
93,974
$
17,634
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 early extinguishment of debt
Gain on interest rate swaps
Gain on sale of real estate
Loss from unconsolidated joint venture
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,
2015
2014
2013
$
44,619
$
92,635
$
15,720
(16,632)
131,490
78,000
—
4,335
3,149
(1,532)
(23,860)
1,142
3,548
(4,414)
(2,155)
3,330
—
2,060
(9,916)
117,766
74,212
25,130
3,055
23
(4,945)
(73,648)
—
1,975
(227)
5,442
2,589
—
2,815
(22,793)
119,835
84,630
29,737
3,602
4,709
(5,530)
(11,225)
—
1,055
6,249
(4,097)
4,207
(1,801)
(5,969)
Net cash provided by operating activities
223,080
236,906
218,329
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
Investment in unconsolidated joint venture
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Financing costs paid
Prepayments to settle debt and interest rate swap
Proceeds from lines of credit and notes payable
Proceeds from issuance of bonds payable
Repayments of lines of credit and notes payable
Issuance of common stock
Distributions paid to stockholders
Distributions paid to stockholders and reinvested in shares of our common stock
Redemptions of common stock
Tender offer redemptions of common stock
Tender offer and offering costs paid
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
Cash and cash equivalents, end of period
596,734
(1,062,031)
—
(83,371)
(22,531)
(5,500)
(576,699)
(9,729)
(3,165)
1,884,000
349,507
418,207
(335,986)
(27,000)
(54,005)
(25,004)
—
(23,788)
(1,482)
—
283,000
—
(1,854,512)
(294,739)
—
—
(112,570)
(149,962)
—
(17,057)
—
—
236,474
(117,145)
—
149,790
—
—
—
—
(163,183)
49,935
—
99,855
$
32,645
$
149,790
$
565,945
—
—
(44,856)
(25,700)
—
495,389
(3,721)
(4,709)
301,000
—
(461,940)
46,402
(145,071)
(46,402)
(115,781)
(234,062)
(3,133)
(667,417)
46,301
(103)
53,657
99,855
See accompanying notes.
F-7
COLUMBIA PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014, AND 2013
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 any unconsolidated joint ventures.
Columbia Property Trust typically invests in high-quality, income-generating office properties. As of December 31, 2015, Columbia
Property Trust owned 27 office properties and one hotel, which contain approximately 14.0 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 an unconsolidated joint venture, as described in Note 4, Unconsolidated Joint Venture. As of December 31,
2015, the office properties, including Columbia Property Trust's share of the unconsolidated joint venture, were approximately
93.2% leased.
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. During the year ended December 31, 2015, $0.6
million of interest was capitalized, and for the year ended December 31, 2014, no interest was capitalized.
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: (Level 1) recently quoted market prices, (Level 2) market prices for comparable
properties, or (Level 3) 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. Columbia Property
Trust has determined that there is no impairment in the carrying values of our real estate assets and related intangible assets for
the year ended December 31, 2015.
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 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 (Level 3) 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 carrying value of the assets therein to fair value, as estimated based on the approximate contract price (Level 1) 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
F-9
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
fell outside of its targeted investment strategy. In connection with initiating the sales process for these assets, 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, was 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 (Level 3), 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 2015, 2014, and 2013 (in thousands) using
Level 3 inputs.
Property
2014
Bannockburn Lake III
2013
120 Eagle Rock
333 & 777 Republic Drive
Assets Held for Sale
Net Book
Value
Impairment Loss
Recognized
Fair Value
$
$
$
15,148
23,808
13,359
$
$
$
(10,148) $
5,000
(11,708) $
(5,159) $
12,100
8,200
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.
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, 2015, none of
Columbia Property Trust's properties met the criteria to be classified as held for sale in the accompanying consolidated balance
sheet.
F-10
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. This calculation includes significantly below-
market renewal options for which exercise of the renewal option appears to be reasonably assured. These intangible assets
or liabilities are measured over the actual or assumed (in the case of renewal options) remaining lease terms. 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, 2015 and 2014, Columbia Property Trust had the following gross intangible in-place lease assets and liabilities
(in thousands):
December 31, 2015
Gross
Accumulated Amortization
December 31, 2014
Net
Gross
Accumulated Amortization
Net
Intangible Lease Assets
Above-Market
In-Place
Lease Assets
$
$
$
$
50,463
(37,971)
12,492
79,805
(61,619)
18,186
$
$
$
$
Absorption
Period Costs
317,841
(194,446)
123,395
370,412
(237,084)
133,328
$
$
$
$
Intangible
Lease
Origination
Costs
Intangible
Below-Market
In-Place Lease
Liabilities
258,672
(181,482)
77,190
325,154
(219,626)
105,528
$
$
$
$
138,663
(81,496)
57,167
159,240
(84,935)
74,305
During 2015, 2014, and 2013, Columbia Property Trust recognized the following amortization of intangible lease assets and
liabilities (in thousands):
For the years ended December 31,
2015
2014
2013
Intangible Lease Assets
Above-Market
In-Place
Lease Assets
Absorption
Period Costs
Intangible
Lease
Origination
Costs
Intangible
Below-Market
In-Place Lease
Liabilities
$
$
$
4,412
5,368
6,077
$
$
$
45,972
36,474
38,879
$
$
$
28,530
33,037
38,978
$
$
$
19,345
15,507
14,411
The remaining net intangible assets and liabilities as of December 31, 2015, will be amortized as follows (in thousands):
For the years ending December 31,
2016
2017
2018
2019
2020
Thereafter
Weighted-Average Amortization Period
Intangible Lease Assets
Above-Market
In-Place
Lease Assets
Absorption
Period Costs
Intangible
Lease
Origination
Costs
Intangible
Below-Market
In-Place Lease
Liabilities
$
$
$
$
2,565
1,383
1,041
1,041
1,039
5,423
12,492
4 years
$
$
30,806
19,850
15,576
13,706
11,734
31,723
123,395
4 years
$
$
19,070
13,387
10,564
9,583
8,516
16,070
77,190
4 years
14,172
9,218
7,234
6,557
5,363
14,623
57,167
5 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. This calculation includes significantly below market renewal options for
which exercise of the renewal option appears to be reasonably assured. These intangible assets and liabilities are measured over
the actual or assumed (in the case of renewal options) remaining lease terms. 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
F-12
approximately $140.9 million and $110.7 million as of December 31, 2015 and 2014, respectively, net of accumulated amortization
of $17.7 million and $15.1 million as of December 31, 2015 and 2014, respectively. Columbia Property Trust recognized
amortization expense related to these assets of approximately $2.5 million for 2015 and $2.1 million for 2014 and 2013.
As of December 31, 2015, the remaining net below-market lease asset will be amortized as follows (in thousands):
For the years ending December 31:
2016
2017
2018
2019
2020
Thereafter
Weighted-Average Amortization Period
Cash and Cash Equivalents
$
$
2,549
2,549
2,549
2,549
2,549
110,504
123,249
49 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, 2015 and 2014.
Tenant Receivables, net
Tenant receivables consist of rental and reimbursement billings due from tenants. 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
$26,000 and $518,000 for 2015 and 2014, respectively.
Straight Line Rent Receivable
Straight line rent receivable reflects the amount of cumulative adjustments necessary to present rental income on a straight-line
basis. Columbia Property Trust recognizes revenues on a straight-line basis, ratably over the term of each lease; however, leases
often provide for payment terms that differ from the revenue recognized. When the amount of cash received is less than the amount
of revenue recognized, typically early in the lease, straight line rent receivable is recorded for the difference. The receivable is
depleted during periods later in the lease when the amount of cash paid by the tenant is greater than the amount of revenue
recognized.
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, unamortized deferred financing costs related to the line of credit (the "Revolving Credit Facility"), 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 include costs incurred to secure debt from third-party lenders. Columbia Property Trust has elected to
adopt Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03") and
Accounting Standards Update 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-
of-Credit Arrangements ("ASU 2015-15") effective December 31, 2015. These standards require deferred financing costs, except
for costs related to revolving credit facilities, to be presented as a direct reduction to the carrying amount of the related debt for
all periods presented. As a result, as of December 31, 2014, $8.4 million of deferred financing costs have been reclassified as
F-13
follows: $3.8 million is included in prepaid expenses and other assets; $3.4 million is presented as a reduction to line of credit,
term loan, and notes payable; and the remaining $1.2 million is presented as a reduction to bonds payable. Columbia Property
Trust recognized amortization of deferred financing costs for the years ended December 31, 2015, 2014, and 2013, of approximately
$4.4 million, $3.5 million, and $3.8 million, respectively, which is included in interest expense in the accompanying consolidated
statements of operations.
Deferred Lease Costs
Deferred lease costs consist of 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 $12.6 million, $12.2 million, and
$13.1 million for 2015, 2014, and 2013, 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.
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.
Line of Credit, Term Loans, 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.
As described in the Deferred Financing Costs section above, line of credit, term loans, and notes payable are presented on the
accompanying consolidated balance sheet net of deferred financing costs related to term loans and notes payable of $4.5 million
and $3.4 million as of December 31, 2015 and December 31, 2014, respectively.
Bonds Payable
In March 2015, Columbia Property Trust issued $350.0 million of its ten-year unsecured 4.150% senior notes at 99.859% of their
face value (the "2025 Bonds Payable"). In April 2011, Columbia Property Trust issued $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 the 2025 Bonds Payable and the
2018 Bonds Payable is amortized to interest expense over the term of the bonds using the effective-interest method.
As described in the Deferred Financing Costs section above, bonds payable are presented on the accompanying consolidated
balance sheet net of deferred financing costs related to bonds payable of $3.7 million and $1.2 million as of December 31, 2015
and December 31, 2014, respectively.
F-14
Common Stock Repurchase Program
Columbia Property Trust's board of directors has authorized the repurchase of up to an aggregate of $200 million of its common
stock, par value $0.01, through September 4, 2017 (the "Stock Repurchase Program"). Columbia Property Trust expects to acquire
shares primarily through open market transactions, subject to market conditions and other factors. As of December 31, 2015,
$183.7 million remains available for repurchases under the Stock Repurchase Program. Common stock repurchases are charged
against equity as incurred, and the repurchased shares are retired. See Note 8, Stockholders' Equity, for additional details.
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.
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.
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.
F-15
The following tables provide additional information related to Columbia Property Trust's interest rate swaps as of December 31,
2015 and 2014 (in thousands):
Instrument Type
Derivatives designated as hedging instruments:
Interest rate contracts
Derivatives not designated as hedging instruments:
Interest rate contracts
Fair value of interest rate swaps
Balance Sheet Classification
2015
2014
Estimated Fair Value as of
December 31,
Accounts payable
Accounts payable
$
$
$
(2,436) $
(1,968)
— $
(2,436) $
(2,633)
(4,601)
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.
Years ended December 31,
2014
2015
2013
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
$
$
(1,570) $
(1,110) $
1,339
$
(371) $
1,997
(342)
In July 2015, Columbia Property Trust paid $1.1 million to settle the interest rate swap on the $450 Million Term Loan, which is
reflected in earnings. See Note 5, Line of Credit, Term Loans, and Notes Payable, for additional details. During the periods presented,
there was no other 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
consolidated balance sheets. Lease termination fees are recorded as other property income and recognized on a straight-line basis
from when we receive notification of termination through the date 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 2015, 2014, or 2013.
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.
F-16
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 Property Trust 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, office properties
that Columbia Property Trust does not intend to hold long term and 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 property level, and none of its operating segments meet the
quantitative or qualitative thresholds to be considered an individual reportable segment.
Reclassification
Certain prior period amounts may be reclassified to conform with the current-period financial statement presentation, including
deferred financing costs (as described above), discontinued operations (see Note 13, Discontinued Operations), and equity accounts
impacted by the Reverse Stock Split (see Note 8, Stockholders' Equity).
Recent Accounting Pronouncements
In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2015-16, Simplifying
the Accounting for Measurement – Prior Period Adjustments ("ASU 2015-16"), which eliminates the requirement to retrospectively
account for adjustments made to provisional amounts recognized in a real estate acquisition at the acquisition date, rather the
cumulative impact of any adjustment should be recognized in the reporting period in which the adjustment is identified. ASU
2015-16 is effective for Columbia Property Trust beginning on January 1, 2016. Columbia Property Trust does not expect the
adoption of ASU 2015-16 to have a material impact on its financial statements and disclosures.
In April 2015, the FASB issued ASU 2015-03, which requires deferred financing costs to be presented on the balance sheet as a
direct deduction of the carrying amount of the related debt. In August 2015, the FASB issued ASU 2015-15, which allows for
deferred financing costs associated with line of credit agreements, which may not have an outstanding balance, to continue to be
presented as an asset. ASU 2015-03 and ASU 2015-15 will be effective retrospectively for Columbia Property Trust beginning on
January 1, 2016, and early adoption is permitted. Columbia Property Trust has elected to early adopt ASU 2015-03 and 2015-15
as of December 31, 2015.
In February 2015, the FASB issued Accounting Standards Update 2015-02, Amendments to the Consolidation Analysis ("ASU
2015-02"), which requires the reevaluation of certain legal entities for consolidation, including limited partnerships, VIEs, and
reporting entities that are involved with VIEs. ASU 2015-02 is effective retrospectively for Columbia Property Trust beginning
on January 1, 2016, and early adoption is permitted. Columbia Property Trust does not expect the adoption of ASU 2015-02 to
have a material impact 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 prospectively 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.
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
F-17
all contracts with customers except those that are within the scope of other topics in the FASB's Accounting Standards Codification,
including 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 retrospectively for Columbia Property Trust beginning on January
1, 2018, and early adoption is permitted beginning January 1, 2017. We do not believe that ASU 2014-09 will have a material
impact on our financial statements and disclosures.
3.
Real Estate and Other Transactions
Acquisitions
During 2015 and 2014, Columbia Property Trust acquired the following properties (in thousands). Columbia Property Trust did
not acquire any properties during 2013.
315 Park
Avenue
South Building
1881 Campus
Commons
Building
116
Huntington
Avenue
Building
229 West 43rd
Street Building
221 Main Street
Building
650 California
Street Building
New York, NY
Reston, VA
Boston, MA
New York, NY San Francisco, CA San Francisco, CA
January 7, 2015
January 7, 2015
January 8, 2015
August 4, 2015
April 22, 2014
September 9, 2014
Location
Date Acquired
Purchase price:
Land
Building and improvements
Intangible lease assets
Intangible below market
ground lease assets
Intangible lease origination
costs
Intangible below market
lease liability
$
119,633
$
7,179
$
— $
207,233
$
60,509
$
232,598
16,912
—
4,148
49,273
4,643
—
1,603
108,383
7,907
30,244
2,669
265,952
27,039
—
10,059
161,853
12,776
—
3,475
(7,487)
(97)
(1,878)
—
(10,323)
75,384
221,135
19,306
—
4,290
(9,908)
310,207
Total purchase price
$
365,804
$
62,601
$
147,325
$
510,283
$
228,290
$
Note 2, Summary of Significant Accounting Policies, provides a discussion of the estimated useful life for each asset class.
Portfolio Acquisition - 315 Park Avenue South Building & 1881 Campus Commons Building
On January 7, 2015, Columbia Property Trust acquired a portfolio of two assets, which included 315 Park Avenue South, a 328,000-
square-foot office building in New York, New York (the "315 Park Avenue South Building") and 1881 Campus Commons, a
244,000-square-foot office building in Reston, Virginia (the "1881 Campus Commons Building"). This portfolio was acquired for
$436.0 million, exclusive of transaction costs and purchase price adjustments, using proceeds from the issuance of $350.0 million
in bonds payable due in 2025, proceeds from the Revolving Credit Facility, and cash on hand.
As of the acquisition date, the 315 Park Avenue South Building was 94.9% leased to nine tenants, including Credit Suisse (74%).
For the period from January 7, 2015 to December 31, 2015, Columbia Property Trust recognized revenues of $25.1 million and
a net loss of $6.6 million from the 315 Park Avenue South Building. The net loss includes acquisition expenses of $1.2 million.
As of the acquisition date, the 1881 Campus Commons Building was 78.0% leased to 15 tenants, including SOS International
(15%) and Siemens (12%). For the period from January 7, 2015 to December 31, 2015, Columbia Property Trust recognized
revenues of $5.8 million and a net loss of $1.3 million from the 1881 Campus Commons Building. The net loss includes acquisition
expenses of $0.5 million. Columbia Property Trust sold 1881 Campus Commons on December 10, 2015, as described in the
Dispositions section below.
116 Huntington Avenue Building
On January 8, 2015, Columbia Property Trust acquired a 271,000-square-foot office building in Boston, Massachusetts (the
"116 Huntington Avenue Building"), for $152.0 million, inclusive of capital credits, using proceeds from the issuance of $350.0
million in bonds payable due in 2025, proceeds from the Revolving Credit Facility, and cash on hand. As of the acquisition date,
the 116 Huntington Avenue Building was 78.0% leased to 17 tenants, including American Tower (21%), GE Healthcare (13%),
and Brigham and Women's (12%). For the period from January 8, 2015 to December 31, 2015, Columbia Property Trust recognized
revenues of $11.3 million and a net loss of $0.7 million from the 116 Huntington Avenue Building. The net loss includes acquisition
expenses of $0.3 million.
F-18
229 West 43rd Street Building
On August 4, 2015, Columbia Property Trust acquired the 481,000-square-foot office portion of the 229 West 43rd Street building,
a 16-story, 732,000-square-foot building located in the Times Square sub-market of Manhattan in New York, New York (the "229
West 43rd Street Building"), for $516.0 million, exclusive of transaction costs and purchase price adjustments. This acquisition
was funded with the $300 Million Bridge Loan and borrowings on the Revolving Credit Facility, as described in Note 5, Line of
Credit, Term Loans, and Notes Payable. As of the acquisition date, the 229 West 43rd Street Building was 98.0% leased to nine
tenants, including Yahoo! (40%), Snapchat (13%), Collective, Inc. (12%), and MongoDB (10%). For the period from August 4,
2015 to December 31, 2015, Columbia Property Trust recognized revenues of $15.3 million and net income of $2.2 million from
the 229 West 43rd Street Building. The net income includes acquisition expenses of $1.7 million.
221 Main Street Building
On April 22, 2014, Columbia Property Trust acquired the 221 Main Street Building, a 378,000-square-foot office building in San
Francisco, California, for $228.8 million, exclusive of closing costs. The acquisition was funded with a $73.0 million assumed
mortgage note, $116.0 million of borrowings on the Revolving Credit Facility, and cash on hand. As of the acquisition date, the
221 Main Street Building was 82.8% leased to 40 tenants, including DocuSign, Inc. (16%). 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 expenses of $6.1 million.
650 California Street Building
On September 9, 2014, Columbia Property Trust acquired the 650 California Street Building, a 477,000-square-foot office building
in San Francisco, California, 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 Revolving Credit Facility, and cash on hand. 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%). 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 expenses of $8.0 million.
Pro Forma Financial Information
The following unaudited pro forma statements of operations presented for 2015, 2014, and 2013, have been prepared for Columbia
Property Trust to give effect to the acquisitions of the 315 Park Avenue South Building, the 1881 Campus Commons Building,
the 116 Huntington Avenue Building, the 229 West 43rd Street Building, the 221 Main Street Building, and the 650 California
Street Building as if the acquisitions occurred on January 1, 2013. 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 these acquisitions been consummated as of January 1, 2013 (in thousands).
Revenues
Net income (loss)
Net income (loss) per share – basic
Net income (loss) per share – diluted
Dispositions
2015
2014
2013
$
$
$
$
582,699
46,363
0.37
0.37
$
$
$
$
605,494
66,814
0.53
0.53
$
$
$
$
604,205
(58,043)
(0.43)
(0.43)
As a result of adopting Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals
of Components on an Entity ("ASU 2014-08") effective April 1, 2014, for all periods presented in the accompanying consolidated
statements of operations, the revenues and expenses associated with the 2015 and 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. During 2015, 2014 and 2013, Columbia Property Trust closed on the following transactions:
Market Square Buildings - Partial Sale
On October 28, 2015, Columbia Property Trust transferred the Market Square Buildings and the related $325.0 million mortgage
note to a joint venture (the "Market Square Joint Venture") and sold a 49% interest in the Market Square Joint Venture to Blackstone
Property Partners ("Blackstone") for approximately $120.0 million of net proceeds, which were used to repay a portion of the
$300 Million Bridge Loan. As a result of this transaction, Columbia Property Trust recognized a gain on real estate assets of $3.1
million and retains a 51% interest in the Market Square Joint Venture. The Market Square Joint Venture owns and operates the
F-19
Market Square Buildings through a REIT ("Market Square East & West, LLC"). See Note 4, Unconsolidated Joint Venture, for
additional information.
11 Property Sale
On July 1, 2015, Columbia Property Trust sold 11 properties to an unaffiliated third party for $433.3 million, exclusive of purchase
price adjustments and closing costs (the "11 Property Sale"), which resulted in a gain of $20.2 million. The proceeds for 10 of the
properties were available on July 1, 2015, and the remaining proceeds were available on August 3, 2015. For the period from
January 1, 2015 through July 1, 2015, the aggregate net income, excluding the gain on sale, for the properties included in the 11
Property Sale was $6.5 million; and for the years ended December 31, 2014 and 2013, the net income for the properties included
in the 11 Property Sale was $3.0 million and $15.1 million, respectively. The 11 Property Sale including the following properties:
170 Park Avenue
180 Park Avenue
Robbins Road
550 King Street
1881 Campus Commons
Bannockburn Lake III
544 Lakeview
Highland Landmark III
The Corridors III
Acxiom
215 Diehl Road
1580 West Nursery
On December 10, 2015, Columbia Property Trust closed on the sale of the 1881 Campus Commons Building in Reston, Virginia
for $65.0 million, exclusive of purchase price adjustments and closing costs, yielding a gain of $0.5 million. The proceeds from
the sale of the 1881 Campus Commons Building were used to reduce the outstanding balance of the $300 Million Bridge Loan,
as described in Note 5, Line of Credit, Term Loans, and Notes Payable.
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.
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 Lenox Park Property, containing five buildings, 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.
F-20
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 11, 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,
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, 2013. 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, 2013 (in thousands).
Revenues
Net income attributable to common shareholders
As of December 31,
2014
*
*
$
$
2015
*
*
2013
526,966
18,475
*
Columbia Property Trust owned Columbia Property Trust Advisory Services and Columbia Property Trust Services for all of 2015
and 2014.
4.
Unconsolidated Joint Venture
Columbia Property Trust owns a majority interest of 51% in the Market Square Joint Venture, and Blackstone owns the remaining
49% interest in the joint venture. The Market Square Joint Venture owns and operates the Market Square Buildings through Market
Square East & West, LLC, which operates as a REIT. The Market Square Buildings are two, 13-story office buildings containing
687,000 square feet of office space in Washington, D.C. Columbia Property Trust shares substantive participation rights with
Blackstone, including management selection and termination, and the approval of material operating and capital decisions and,
as such, uses the equity method of accounting to record its investment. Under the equity method, the investment in the joint venture
is recorded at cost and adjusted for equity in earnings and cash contributions and distributions. Income or loss and cash distributions
are allocated according to the provisions of the joint venture agreement, which are consistent with the ownership percentages for
the Market Square Joint Venture.
Columbia Property Trust evaluates the recoverability of its investment in unconsolidated joint venture in accordance with
accounting standards for equity investments by first reviewing the investment for any indicators of impairment. If indicators are
present, Columbia Property Trust estimates the fair value of the investment. If the carrying value of the investment is greater than
the estimated fair value, management makes an assessment of whether the impairment is "temporary" or "other-than-temporary."
In making this assessment, management considers the following: (1) the length of time and the extent to which fair value has been
less than cost, (2) Columbia Property Trust's intent and ability to retain its interest long enough for a recovery in market value.
As of December 31, 2015, the outstanding balance on the interest-only Market Square mortgage note is $325.0 million, bearing
interest at 5.07%. The Market Square mortgage note matures on July 1, 2023. On October 28, 2015, Columbia Property Trust
entered into a guaranty of a $25.0 million portion of the Market Square mortgage note, the amount of which will be reduced as
space is leased.
F-21
Condensed balance sheet information for the Market Square Joint Venture is as follows (in thousands):
Total assets
Total debt
Total equity
Columbia Property Trust's investment
December 31, 2015
$
$
$
$
573,073
324,603
230,060
118,695
Condensed income statement information for the Market Square Joint Venture is as follows (in thousands):
Total Revenues
Net loss
Columbia Property Trust's share
From inception
through
December 31, 2015
$
$
$
7,962
(2,239)
(1,142)
Columbia Property Trust provides property and asset management services to the Market Square Joint Venture. Under these
agreements, Columbia Property Trust oversees the day-to-day operations of the Market Square Joint Venture and the Market Square
Buildings, including property management, property accounting, and other property services. Columbia Property Trust receives
property management fees equal to 3% of the gross revenue of the Market Square Buildings, payable monthly, and asset management
fees of $1.0 million annually, in equal quarterly installments. During 2015, Columbia Property Trust earned $0.2 million in fees
related to these asset and property management services, which are included in other property income on the accompanying
consolidated statement of operations. As of December 31, 2015, $0.1 million in property management fees was payable to Columbia
Property Trust, and included in prepaid expenses and other assets on the accompanying consolidated balance sheet.
F-22
5.
Line of Credit, Term Loans, and Notes Payable
As of December 31, 2015 and 2014, Columbia Property Trust had the following line of credit, term loan, and notes payable
indebtedness outstanding (excluding bonds payable; see Note 6, Bonds Payable) in thousands:
Term Debt or
Interest Only
Outstanding Balance as of
December 31,
Maturity
2015
2014
Interest only
7/31/2020
$
Facility
$300 Million Term Loan
Revolving Credit Facility
$150 Million Term Loan
Rate as of
December 31, 2015
LIBOR + 110 bp (1)
LIBOR + 100 bp (2)
LIBOR + 155 bp (3)
Interest only
Interest only
650 California Street Building mortgage note
3.60%
Term debt
LIBOR + 110 bp (4)
Interest only
7/31/2019
7/29/2022
7/1/2019
8/4/2016
$300 Million Bridge Loan
221 Main Building mortgage note
263 Shuman Boulevard Building mortgage note
SanTan Corporate Center mortgage notes
One Glenlake Building mortgage note
3.95%
5.55%
5.83%
5.80%
Interest only
5/10/2017
Interest only
7/1/2017
Interest only
10/11/2016
Term debt
12/10/2018
$450 Million Term Loan
LIBOR + 130 bp
Interest only
Market Square Buildings mortgage note
5.07%
Interest only
333 Market Street Building mortgage note
LIBOR + 202 bp
Interest only
2/3/2016
7/1/2023
7/1/2015
100 East Pratt Street Building mortgage note
215 Diehl Road Building mortgage note
Less: Deferred financing costs related to term loans
and notes payable
Total indebtedness
5.08%
5.55%
Interest only
6/11/2017
Interest only
7/1/2017
$
300,000
247,000
150,000
128,785
119,000
73,000
49,000
39,000
29,278
—
— (5)
—
—
—
—
—
—
130,000
—
73,000
49,000
39,000
32,074
450,000
325,000
206,810
105,000
21,000
(4,492)
(3,438)
$
1,130,571
$
1,427,446
(1) The $300 Million Term Loan, as further described below, bears interest, at Columbia Property Trust's option, at LIBOR, plus an
applicable margin ranging from 0.90% to 1.75% for LIBOR loans, or an alternate base rate, plus an applicable margin ranging from
0.00% to 0.75% for base-rate loans, based on Columbia Property Trust's applicable credit rating.
(2) Borrowings under the Revolving Credit Facility, as described below, bear interest at the option of Columbia Property Trust at LIBOR,
plus an applicable margin ranging from 0.875% to 1.55% for LIBOR-based borrowings, or an alternate base rate, plus an applicable
margin ranging from 0.00% to 0.55% for base-rate borrowings, based on Columbia Property Trust's applicable credit rating.
(3) Columbia Property Trust is party to an interest rate swap agreement, which effectively fixes its interest rate on the $150 Million Term
Loan, as further described below, at 3.52% and terminates on July 29, 2022. This interest rate swap agreement qualifies for hedge
accounting treatment; therefore, changes in the fair value are recorded as a market value adjustment to interest rate swap in the
accompanying consolidated statement of other comprehensive income.
(4) The $300 Million Bridge Loan, as further described below, bears interest, at Columbia Property Trust's option, at either LIBOR, plus
an applicable margin ranging from 0.90% to 1.75% for LIBOR loans, or an alternate base rate, plus an applicable margin ranging from
0.00% to 0.75% based on Columbia Property Trust's applicable credit rating.
(5) The Market Square Buildings mortgage note was transferred to the Market Square Joint Venture, effective October 28, 2015. See Note
4, Unconsolidated Joint Venture, for details.
Term Loans
On July 30, 2015, Columbia Property Trust replaced its $450 Million Term Loan, which had a maturity date of February 3, 2016,
with two separate term loans. Columbia Property Trust entered into a $300.0 million unsecured, single-draw term loan (the "$300
Million Term Loan") with a syndicate of banks with J.P. Morgan Securities LLC and PNC Capital Markets LLC serving as joint
lead arrangers and joint book runners. The $300 Million Term Loan matures on July 31, 2020. Columbia Property Trust also
entered into a $150.0 million unsecured, single-draw term loan (the "$150 Million Term Loan") with a syndicate of banks with
Wells Fargo Securities, LLC, U.S. Bank National Association, and Regions Capital Markets serving as joint lead arrangers and
joint bookrunners. The $150 Million Term Loan matures on July 29, 2022.
The $300 Million Term Loan bears interest, at Columbia Property Trust's option, at LIBOR, plus an applicable margin ranging
from 0.90% to 1.75% for LIBOR Loans, or an alternate base rate, plus an applicable margin ranging from 0.00% to 0.75% for
base rate loans, based on Columbia Property Trust's applicable credit rating. The $300 Million Term Loan and the Revolving
Credit Facility, as described below, provide for four accordion options for an aggregate amount of up to $400.0 million, subject
to certain conditions. The $150 Million Term Loan bears interest, at Columbia Property Trust's option, at LIBOR, plus an applicable
F-23
margin ranging from 1.40% to 2.35% for LIBOR loans, or a base rate, plus an applicable margin ranging from 0.40% to 1.35%
for base-rate loans, based on Columbia Property Trust's applicable credit rating. The interest rate on the $150 Million Term Loan
has been effectively fixed at 3.52% with an interest rate swap agreement, which was designated as a cash flow hedge. The $150
Million Term Loan provides for four accordion options for an aggregate amount of $300.0 million, subject to certain conditions.
The $450 Million Term Loan bore interest at LIBOR, plus an applicable margin ranging from 1.15% to 1.95% for LIBOR loans,
or an alternate base rate, plus an applicable margin ranging from 0.15% to 0.95% for base-rate loans, based on Columbia Property
Trust's applicable credit rating. The interest rate on the $450 Million Term Loan was effectively fixed at 2.07% with an interest
rate swap agreement, which was designated as a cash flow hedge. At the time the $450 Million Term Loan was replaced, the related
interest rate swap was settled, resulting in a loss on interest rate swap of $1.1 million.
Revolving Credit Facility
On July 30, 2015, Columbia Property Trust amended the Revolving Credit Facility, with a total capacity of $500.0 million (the
"Revolving Credit Facility") with J.P. Morgan Securities LLC and PNC Capital Markets LLC serving as joint lead arrangers and
joint book runners, to, among other things: (i) change the margins on the interest rate under the facility, as described below; (ii)
extend the maturity date from August 2017 to July 2019 with two, six-month extension options; (iii) enable Columbia Property
Trust to increase the Revolving Credit Facility and the $300 Million Term Loan, as described above, by an aggregate amount of
up to $400.0 million on four occasions; and (iv) revise certain covenants under the facility.
The Revolving Credit Facility, as entered into on July 30, 2015, bears interest, at Columbia Property Trust's option, at LIBOR,
plus an applicable margin ranging from 0.875% to 1.55% for LIBOR-based borrowings, or an alternate base rate, plus an applicable
margin ranging from 0.00% to 0.55% for base-rate borrowings, based on Columbia Property Trust's applicable credit rating.
Previously, the applicable margin was a range from 1.00% to 1.70% for LIBOR-based borrowings or a range from 0.00% to 0.70%
for base-rate borrowings. Additionally, the per annum facility fee on the aggregate revolving commitment (used or unused) now
ranges from 0.125% to 0.30%, also based on Columbia Property Trust's applicable credit rating. Prior to amendment, the per
annum facility fee ranged from 0.15% to 0.35%.
$300 Million Bridge Loan
On August 4, 2015, Columbia Property Trust entered into a $300.0 million, six-month, unsecured loan with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the "$300 Million Bridge Loan") to finance a portion of the 229 West 43rd Street Building
acquisition. At Columbia Property Trust's option, borrowings under the $300 Million Bridge Loan bear interest at either (i) an
alternate base rate, plus an applicable margin based on five stated pricing levels ranging from 0.00% to 0.75% or (ii) LIBOR, plus
an applicable margin based on five stated pricing levels ranging from 0.90% to 1.75%, in each case based on Columbia Property
Trust's credit rating.
On December 21, 2015, Columbia Property Trust exercised its option to extend the $300 Million Bridge Loan's maturity date by
six months from February 4, 2016 to August 4, 2016. Columbia Property Trust may prepay the $300 Million Bridge Loan at any
time without premium or penalty. In addition, amounts under the $300 Million 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.
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
F-24
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. In July 2015,
Columbia Property Trust began making $591,000 monthly payments, or $7.1 million annually, consisting of principal and interest.
Debt Covenants
The $300 Million Term Loan, the $150 Million Term Loan, the Revolving Credit Facility, and the $300 Million Bridge Loan
(collectively, the "Debt Facilities") contain representations and warranties, financial and other affirmative and negative covenants,
events of defaults, and remedies typical for these types of facilities. The financial covenants in the Debt Facilities:
(a) limit the ratio of secured debt to total asset value, as defined therein, to 40% or less;
(b) require the fixed charge coverage ratio, as defined therein, to be at least 1.50:1.00;
(c) limit the ratio of debt to total asset value, as defined therein, to 60% or less;
(d) require the ratio of unencumbered adjusted net operating income, as defined therein, to unsecured interest expense, as
defined therein, to be at least 1.75:1.00;
(e) require the ratio of unencumbered asset value, as defined therein, to total unsecured debt, as defined therein, to be at
least 1.66:1.00; and
(f) require maintenance of certain minimum tangible net worth balances.
The $300 Million Bridge Loan also contains customary negative covenants applicable to Columbia Property Trust, Columbia
Property Trust OP, and certain subsidiaries, including, among other things, restrictions on indebtedness, liens, restricted payments,
sales of assets and transactions with affiliates' and customary events of default, including but not limited to, the nonpayment of
principal or interest, material inaccuracy of representations and warranties, violations of covenants, cross-default to material
indebtedness, bankruptcy and insolvency, and material adverse judgments. As of December 31, 2015, Columbia Property Trust
believes it was in compliance with the restrictive financial covenants on its Debt Facilities and notes payable obligations.
Fair Value of Debt
The estimated fair value of Columbia Property Trust's consolidated line of credit, term loan, and notes payable as of December 31,
2015 and 2014, was approximately $1,140.1 million and $1,465.2 million, respectively. The related carrying value of the line of
credit, term loan, and notes payable as of December 31, 2015 and 2014, was $1,135.1 million and $1,430.9 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 (Level 3).
Interest Paid and Capitalized
As of December 31, 2015 and 2014, Columbia Property Trust's weighted-average interest rate on its consolidated line of credit
and notes payable, was approximately 2.54% and 3.95%, respectively. Columbia Property Trust made interest payments of
approximately $54.0 million, $56.1 million, and $59.6 million during 2015, 2014, and 2013, respectively, of which approximately
$0.6 million was capitalized during 2015, and no interest was capitalized during 2014 or 2013.
Debt Repayments and Maturities
On January 6, 2015, Columbia Property Trust entered into a $300.0 million, six-month, unsecured loan to finance a portion of the
real estate assets purchased in January 2015. On March 12, 2015, Columbia Property Trust fully repaid the loan with proceeds
from the 2025 Bonds Payable, as described in Note 5, Bonds Payable, at which time Columbia Property Trust recognized a loss
on early extinguishment of debt of $0.5 million as a result of writing off the unamortized deferred financing costs. The loan was
set to mature on July 6, 2015.
On June 1, 2015, Columbia Property Trust repaid the mortgage note for the 333 Market Street Building for $206.5 million and
the related interest rate swap agreement expired. The maturity date for the 333 Market Street Building mortgage note was July 1,
2015.
On July 1, 2015, in connection with the 11 Property Sale, Columbia Property Trust repaid the mortgage note for the 215 Diehl
Road Building, one of the properties included in the 11 Property Sale, for $21.0 million. As a result, Columbia Property Trust
F-25
recognized a loss on early extinguishment of debt of $2.1 million, primarily as a result of a prepayment premium. The maturity
date for the 215 Diehl Road Building mortgage note was July 1, 2017.
On July 13, 2015, Columbia Property Trust repaid the $105.0 million mortgage note on the 100 East Pratt Street Building at par.
The maturity date for the 100 East Pratt Street Building mortgage note was June 11, 2017.
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.
The following table summarizes the aggregate maturities of Columbia Property Trust's line of credit, term loan, and notes payable
as of December 31, 2015 (in thousands):
2016
2017
2018
2019
2020
Thereafter
Total
6.
Bonds Payable
$
163,460
127,728
25,859
368,016
300,000
150,000
$
1,135,063
In March 2015, Columbia Property Trust OP issued $350.0 million of ten-year, unsecured 4.150% senior notes at 99.859% of their
face value (the "2025 Bonds Payable"), pursuant to a shelf registration statement, which are guaranteed by Columbia Property
Trust. Columbia Property Trust OP received proceeds from the 2025 Bonds Payable, net of fees, of $347.2 million. The 2025
Bonds Payable require semi-annual interest payments in April and October based on a contractual annual interest rate of 4.150%.
In the accompanying consolidated balance sheets, the 2025 Bonds Payable are shown net of the initial issuance discount of
approximately $0.5 million, which will be amortized to interest expense over the term of the 2025 Bonds Payable using the effective
interest method. The principal amount of the 2025 Bonds Payable is due and payable on the maturity date, April 1, 2025.
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 on the 2025 Bonds Payable began in October 2015. Interest payments of $22.7 million were made on the 2025
Bonds Payable and the 2018 Bonds Payable during 2015, and interest payments of $14.7 million were made on the 2018 Bonds
Payable during 2014.
The restrictive covenants on the 2025 Bonds Payable and the 2018 Bonds Payable, as defined, pursuant to an indenture include:
•
•
•
•
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, 2015, Columbia Property Trust believes it was in compliance with the restrictive financial covenants on its
2025 Bonds Payable and 2018 Bonds Payable. The 2018 Bonds Payable were originally issued through a private offering and
subsequently registered.
The estimated fair value of the 2025 Bonds Payable and the 2018 Bonds Payable as of December 31, 2015, was approximately
$602.3 million and the fair value of the 2018 Bonds Payable as of December 31, 2014, was $250.6 million. The related carrying
F-26
value of the bonds payable, net of discounts, as of December 31, 2015 and 2014 was $595.3 million and $248.0 million, respectively.
The fair value of the 2025 Bonds Payable and 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 2025 Bonds Payable and 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.
7.
Commitments and Contingencies
Commitments Under Existing Lease Agreements
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, 2015, no
tenants have exercised such options that had not been materially satisfied.
Obligations Under Operating Leases
Columbia Property Trust owns four properties that are subject to ground leases with expiration dates of December 31, 2058;
February 28, 2062; December 14, 2077, and July 31, 2099. We incurred $2.6 million in rent expense related to such ground leases
in 2015, 2014, and 2013. The lease expiring on December 14, 2077 has been fully prepaid. As of December 31, 2015, the required
payments under the terms of the remaining three ground leases are as follows (in thousands):
2016
2017
2018
2019
2020
Thereafter
Total
$
$
2,557
2,702
2,731
2,731
2,731
200,066
213,518
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, 2015 (in thousands):
2016
2017
2018
2019
2020
Thereafter
Amounts representing interest
Total
Guaranty of Debt of Unconsolidated Joint Venture
$
$
7,200
7,200
7,200
7,200
7,200
127,200
163,200
(43,200)
120,000
Columbia Property Trust entered into a guaranty of a $25.0 million portion of the Market Square mortgage note, the amount of
which will be reduced as space is leased. As of December 31, 2015, Columbia Property Trust believes that the likelihood of making
a payment under this guaranty is remote; therefore, no liability has been recorded related to this guaranty.
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
F-27
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
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.
8.
Stockholders' Equity
Common Stock Repurchase Program
Columbia Property Trust's board of directors has authorized the repurchase of up to an aggregate of $200 million of its common
stock, par value $0.01, through September 4, 2017 (the "Stock Repurchase Program"). Columbia Property Trust intends to continue
to acquire shares primarily through open market transactions, subject to market conditions and other factors. Under the Stock
Repurchase Program, during 2015, Columbia Property Trust acquired approximately 721,000 shares at an average price of $22.62,
for aggregate purchases of $16.3 million. As of December 31, 2015, $183.7 million remains available for repurchases under the
Stock Repurchase Program. Common stock repurchases are charged against equity as incurred, and the repurchased shares are
retired.
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 "LTIP"). In July 2013, Columbia Property Trust's shareholders approved
the LTIP, and 2,000,000 shares were authorized and reserved for issuance under the LTIP.
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 LTIP (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. 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 LTIP 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 LTIP follows:
Unvested shares as of January 1, 2014
Granted
Vested
Forfeited
Unvested shares as of December 31, 2014
Granted
Vested
Forfeited
Unvested shares as of December 31, 2015
Shares
(in thousands)
—
144
(39)
(1)
104
Weighted-Average,
Grant-Date Fair Value(1)
—
$
24.82
$
24.82
$
24.82
$
24.82
$
$
123
(74)
(2)
$
$
151 (2) $
24.40
24.60
24.56
24.59
(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, 2015, we expect approximately 143,450 of the 151,000 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 LTIP.
F-28
On January 21, 2016, Columbia Property Trust granted 231,015 shares of common stock to employees, net of 20,842 shares
withheld to settle the related tax liability, under the LTIP, of which 25% vested upon grant, and the remaining shares will vest
ratably, with the passage of time, on January 31, 2017, 2018, and 2019.
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 September 2013, Columbia Property
Trust paid the annual equity retainer for 2013. A summary of these grants, made under the LTIP, follows:
Date of Grant
Shares
Weighted-Average
Grant-Date Fair Value
2015 Director Grants:
January 2, 2015
April 1, 2015
July 1, 2015
October 1, 2015
2014 Director Grants:
January 21, 2014
April 1, 2014
July 1, 2014
October 1, 2014
2013 Director Grant:
September 13, 2013
5,850
4,995
4,144
4,571
3,344
2,968
3,016
4,960
6,820
$
$
$
$
$
$
$
$
$
Stock-Based Compensation Expense
Columbia Property Trust incurred stock-based compensation expense related to the following events (in thousands):
Amortization of unvested LTIP awards
Future employee awards(1)
Issuance of shares to independent directors
Total stock-based compensation expense
2015
2014
2013
$
$
1,699
1,353
496
3,548
$
$
749
866
360
1,975
$
$
25.75
27.16
24.84
23.40
24.82
27.22
25.78
23.89
29.32
—
855
200
1,055
(1)
These future employee awards relate to service during the period, to be granted in January of the subsequent year, with 25% vesting on the date of
grant, and the remaining 75% vesting ratably on January 31st of each of the following three years.
These expenses are included in general and administrative expenses in the accompanying consolidated statements of operations.
There was $2.2 million and $1.7 million of unrecognized compensation costs related to unvested awards under the LTIP as of
December 31, 2015 and December 31, 2014, respectively. This amount will be amortized over the respective vesting period,
ranging from one year to three years at the time of grant.
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 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,
F-29
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.
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.
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
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 2015, 2014, and 2013, follows:
Outstanding as of December 31, 2012
Granted
Expired
Outstanding as of December 31, 2013
Granted
Expired
Outstanding as of December 31, 2014
Granted
Expired
Outstanding as of December 31, 2015
Number
7,375
—
—
7,375
—
(3,500)
3,875
—
(2,000)
1,875
Exercise
Price
$48
Exercisable
7,375
$48
$48
$48
7,375
3,875
1,875
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, 2015, was approximately 1.3 years.
F-30
9.
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 2015 Annualized Lease Revenue, as defined, none of our tenants represent more than 6% of Columbia Property Trust's
portfolio. Tenants in the legal services, business services, and banking industries each represent 16%, 14%, and 13%, respectively,
of Columbia Property Trust's annualized lease revenue. Columbia Property Trust's properties are located in 12 states and the
District of Columbia.
As of December 31, 2015, approximately 22% and 17% of Columbia Property Trust's office properties are located in San Francisco
and New York, respectively, based on annualized lease revenue.
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, 2015, is as follows (in thousands):
2016
2017
2018
2019
2020
Thereafter
Total
$
$
372,172
333,328
315,690
295,537
275,081
1,191,990
2,783,798
F-31
10.
Supplemental Disclosures of Noncash Investing and Financing Activities
Outlined below are significant noncash investing and financing activities for the years ended December 31, 2015, 2014, and 2013
(in thousands):
Years ended December 31,
2014
2015
2013
$
$
$
27,000
7,785
4,765
$ 531,696
$ 325,000
37,987
20,595
$
$
$
$
$
$
3,807
2,493
2,004
$
$
$
— $
— $
— $
— $
— $
$
— $
— $ 203,000
— $
494
$
(18) $
— $
— $
$
396
$
—
741
741
—
—
—
—
872
—
186
—
(363)
(1,570) $
19,324
$
37,354
$
— $
1,339
17,283
$
1,997
$
15,997
— $
—
— $ 466,000
3,548
$
— $
1,642
$
— $
1,055
(99,526)
$
$
$
$
$
$
$
$
$
$
$
$
$
Investment in real estate funded with other assets
Other assets assumed upon acquisition
Other liabilities assumed upon acquisition
Real estate assets transferred to unconsolidated joint venture
Mortgage note transferred to unconsolidated joint venture
Other assets transferred to unconsolidated joint venture
Other liabilities transferred to unconsolidated joint venture
Other liabilities settled at disposition
Notes payable assumed at acquisition
Interest accruing into notes payable
Discount on issuance of bonds 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 dividends payable
Transfer of development authority bonds
Common stock issued to employees and directors, and amortized (net of amounts
withheld for taxes)
Decrease in redeemable common stock
F-32
11.
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
Columbia Property Trust did not incur any related party costs in 2015 or 2014. In 2013, pursuant to the terms of the agreements
described above, Columbia Property Trust incurred the following related-party costs (in thousands):
Consulting services
Transition services
Asset management fees
Administrative reimbursements, net(1)
Investor services
Property management fees
Construction fees(2)
Other
Total
Year ended
December 31, 2013
$
$
25,417
5,750
5,083
1,939
829
523
139
69
39,749
(1) Administrative reimbursements are presented net of reimbursements from tenants of approximately $0.7 million for the year ended
December 31, 2013.
(2) Construction fees were capitalized to real estate assets as incurred.
There were no amounts due to affiliates as of December 31, 2015 or December 31, 2014.
F-33
12.
Income Taxes
Columbia Property Trust's income tax basis net income during 2015, 2014, and 2013 (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
2015
2014
2013
$
44,619
$
92,635
$
15,720
81,559
69,832
72,554
(13,409)
(8,437)
(26,565)
(6,626)
(9,394)
(8,186)
(2,633)
(4,945)
(5,530)
5
(1)
(65)
(117,857)
(47,159)
(78,559)
14,342
31,991
124,522
$
9,710
(20,921)
Income tax basis net income (loss), prior to dividends-paid deduction
$
— $
As of December 31, 2015, the tax basis carrying value of Columbia Property Trust's total assets was approximately $5.0 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
2015
2014
2013
—%
—%
100%
100%
83.1%
—%
16.9%
100%
—%
—%
100%
100%
As of December 31, 2015, returns for the calendar years 2011 through 2015 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 the TRS Entities, 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,
2015, 2014, and 2013, are as follows:
Years ended December 31,
2014
2013
2015
Federal income tax
State income tax
Total income tax
$
$
17
25
42
$
$
318
35
353
$
$
307
2
309
As of December 31, 2015 and 2014, Columbia Property Trust had no deferred tax liabilities. As of December 31, 2015 and 2014,
Columbia Property Trust had a deferred tax asset of $0.2 million and $0.3 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 $0.2 million as of December 31, 2015,
is realizable.
F-34
13.
Discontinued Operations
As a result of implementing ASU 2014-08 effective April 1, 2014, beginning in the second quarter of 2014, the operating results
for properties sold are included in continuing operations. Properties sold prior to implementing ASU 2014-08 are included in
discontinued operations in the accompanying consolidated statements of operations for all periods presented. 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 following table shows the revenues and expenses of the above-described discontinued operations (in thousands). No activity
has been reclassified to discontinued operations in 2015. Amounts reclassified in 2014 reflect post closing adjustments and true
ups related to the 18 Property Sale, which closed prior to our adoption of ASU 2014-08.
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 loss
Other income (expense):
Interest expense
Interest and other income
Loss on early extinguishment of debt
Loss from discontinued operations before income tax expense
Income tax expense
Loss from discontinued operations
Gain (loss) on disposition of discontinued operations
Loss from discontinued operations
Years ended December 31,
2014
2013
$
4
115
—
119
(250)
7
—
—
—
755
512
(393)
3
—
—
(390)
—
(390)
(1,627)
(2,017) $
48,550
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)
$
$
F-35
14.
Earnings Per Share
For 2015 and 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 LTIP grants, as described in Note 8, Stockholders'
Equity. The following table reconciles the numerator for the basic and diluted earnings per share computations shown on the
consolidated statements of income for 2015, 2014, and 2013 (in thousands):
Net income
Distributions paid on unvested shares
Net income used to calculate basic and diluted earnings per share
2015
2014
2013
$
$
44,619
(185)
44,434
$
$
92,635
(128)
92,507
$
$
15,720
—
15,720
The following table reconciles the denominator for the basic and diluted earnings-per-share computations shown on the consolidated
statements of income for 2015, 2014, and 2013 (in thousands):
Weighted-average common shares – basic
Plus incremental weighted-average shares from time-vested
conversions less assumed share repurchases:
Previously granted LTIP awards, unvested
Future LTIP awards
2015
2014
2013
124,757
124,860
134,085
33
57
29
29
—
—
Weighted-average common shares – diluted
124,847
124,918
134,085
15.
Quarterly Results (unaudited)
Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2015 and 2014
(in thousands, except per-share data):
Revenues
Net income
Net income per share - basic
Net income per share - diluted
Dividends declared per share
2015
First
Quarter
Second
Quarter
$
$
$
$
$
147,543
5,598
0.04
0.04
0.30
$
$
$
$
$
148,124
8,709
0.07
0.07
0.30
Third
Quarter
$ 137,719
$ 20,143 (1)
0.16
$
0.16
$
0.30
$
$
$
$
$
$
Fourth
Quarter
132,679
10,169
0.08
0.08
0.30
(1) Net income for the third quarter of 2015 includes gains on sales of real estate assets of $20.2 million related to the 11 Property Sale,
partially offset by losses on early extinguishment of debt of $2.7 million.
Revenues
Net income
Net income per share - basic
Net income per share - diluted
Dividends declared per share
2014
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
$
$
129,168
3,400
0.03
0.03
0.30
$
$
$
$
$
136,757
8,021
0.06
0.06
0.30
$
$
$
$
$
136,981
24,988
0.20
$ 137,891
$ 56,226 (1)
0.45
$
0.20
0.30
$
$
0.45
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.
F-36
16.
Financial Information for Parent Guarantor, Other Guarantor Subsidiaries, and Non-Guarantor Subsidiaries
The 2025 Bonds Payable and the 2018 Bonds Payable (see Note 5, Bonds Payable) were issued by Columbia Property Trust OP,
and are guaranteed by Columbia Property Trust. 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), as defined in the bond indentures, 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) no other subsidiary of the parent company guarantor (Columbia Property Trust) guarantees the 2025 Bonds Payable or
the 2018 Bonds Payable.
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,
2015 and 2014 (in thousands), as well as its condensed consolidating statements of operations and its condensed consolidating
statements of comprehensive income for 2015, 2014, and 2013 (in thousands); and its condensed consolidating statements of cash
flows for 2015, 2014, and 2013 (in thousands).
F-37
Prepaid expenses and other assets
317,151
265,615
Condensed Consolidating Balance Sheets (in thousands)
As of December 31, 2015
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
$
890,226
$
— $
Buildings and improvements, net
Intangible lease assets, net
Construction in progress
Total real estate assets
Investment in unconsolidated joint
venture
Cash and cash equivalents
Investment in subsidiaries
Tenant receivables, net of allowance
Straight-line rent receivable
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, net
Bonds payable, net
Accounts payable, accrued expenses, and
accrued capital expenditures
$
$
Dividends payable
Due to affiliates
Deferred income
Intangible lease liabilities, net
Obligations under capital leases
28,913
2,868,518
—
917
259,136
30,930
36,071
4,048,810
2,333,408
1,901,581
—
—
52
1,311
118,695
14,969
—
2,055
—
16,687
—
11,618
107,751
26,153
77,190
86,072
—
—
—
—
—
989
—
—
—
—
—
—
—
—
—
(4,234,989)
—
—
(573,071)
—
—
—
896,467
2,897,431
259,136
31,847
4,084,881
118,695
32,645
—
11,670
109,062
35,848
77,190
88,127
120,000
—
120,000
2,651,548
$
2,340,349
$
4,494,281
$
(4,808,060) $
4,678,118
— $
812,836
$
888,340
$
(570,605) $
1,130,571
—
—
37,354
—
—
—
—
595,259
13,313
—
21
200
—
—
—
85,446
—
2,445
24,614
57,167
120,000
1,178,012
—
—
—
(2,466)
—
—
—
(573,071)
595,259
98,759
37,354
—
24,814
57,167
120,000
2,063,924
Total liabilities
37,354
1,421,629
Equity:
Total equity
Total liabilities, redeemable
common stock, and equity
2,614,194
918,720
3,316,269
(4,234,989)
2,614,194
$
2,651,548
$
2,340,349
$
4,494,281
$
(4,808,060) $
4,678,118
F-38
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
$
— $
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
—
—
—
—
119,488
2,409,941
—
—
Prepaid expenses and other assets
204,079
152,014
29,899
2,996,532
—
433
36,573
10,504
2,120,018
246
781
—
1,658
247,068
17,529
4,039,989
19,798
—
6,699
115,708
19,734
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
55,931
105,528
102,995
120,000
$
$
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:
—
120,000
2,733,508
$
2,321,794
$
4,528,793
$
(4,849,855) $
4,734,240
— $
448,968
$
1,296,826
$
(318,348) $
1,427,446
—
30
—
—
—
—
30
247,982
9,749
24
171
—
—
706,894
—
96,497
1,524
24,582
74,305
120,000
1,613,734
—
—
(1,548)
—
—
—
(319,896)
247,982
106,276
—
24,753
74,305
120,000
2,000,762
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
$
2,321,794
$
4,528,793
$
(4,849,855) $
4,734,240
F-39
Consolidating Statements of Operations (in thousands)
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 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 before income tax expense and
unconsolidated joint venture
Income tax expense
Income (loss) from unconsolidated
entities
Income before gain (loss) on sale of real
estate assets
Gain (loss) on sale of real estate assets
For the Year Ended December 31, 2015
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
$
— $
2,662
$
433,763
$
(377) $
436,048
—
—
171
171
—
—
—
—
—
—
152
—
152
19
—
14,141
—
—
14,141
14,160
—
30,459
44,619
—
1,316
—
—
3,978
3,065
—
100
—
2,571
237
8,754
11
14,738
(10,760)
(44,919)
12,565
(1,101)
(1,050)
(34,505)
(45,265)
(25)
59,165
13,875
(19)
98,339
24,309
6,215
562,626
185,390
19,615
—
1,816
128,919
86,891
21,010
3,664
447,305
115,321
(67,076)
7,247
(9)
(2,099)
(61,937)
53,384
(353)
—
—
(333)
(710)
(377)
—
(100)
—
—
—
(233)
—
(710)
—
26,699
(26,699)
—
—
—
—
—
—
(90,766)
53,031
23,879
(90,766)
—
99,655
24,309
6,053
566,065
188,078
19,615
—
1,816
131,490
87,128
29,683
3,675
461,485
104,580
(85,296)
7,254
(1,110)
(3,149)
(82,301)
22,279
(378)
(1,142)
20,759
23,860
44,619
Net income
$
44,619
$
13,856
$
76,910
$
(90,766) $
F-40
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
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 and
gain on sale of real estate assets
Income tax expense
Income before gain on sale of real estate
assets
Gain on sale of real estate assets
Discontinued operations:
Operating loss from discontinued
operations
Loss on disposition of discontinued
operations
Loss from discontinued operations
—
—
—
—
—
—
—
—
—
—
—
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
Net income
$
92,635
$
81,447
$
117,344
$
(198,791) $
F-41
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)
$
406,791
$
(287) $
406,907
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
$
— $
—
—
—
—
—
—
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
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
Net income
$
15,720
$
14,986
$
83,578
$
(98,564) $
F-42
Consolidating Statements of Comprehensive Income (in thousands)
For the Year Ended December 31, 2015
Columbia
Property Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Net income
Market value adjustment to interest
rate swap
Settlement of interest rate swap
Comprehensive income
$
$
44,619
$
13,856
$
76,910
$
(90,766) $
44,619
(1,570)
1,102
(1,570)
1,102
—
—
1,570
(1,102)
44,151
$
13,388
$
76,910
$
(90,298) $
(1,570)
1,102
44,151
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
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
Market value adjustment to interest
rate swap
Foreign currency translation
adjustment
Comprehensive income
$
$
15,720
$
14,986
$
83,578
$
(98,564) $
15,720
(1,997)
1,997
83
(83)
17,634
1,997
(83)
1,997
—
—
(83)
17,634
$
16,983
$
83,495
$
(100,478) $
F-43
Consolidating Statements of Cash Flows (in thousands)
For the Year Ended December 31, 2015
Columbia
Property
Trust
(Parent)
Columbia
Property
Trust OP
(the Issuer)
Non-
Guarantors
Consolidating
Adjustments
Columbia
Property Trust
(Consolidated)
Cash flows from operating activities
$
26
$
(50,601) $
273,655
$
— $
223,080
Cash flows from investing activities:
Net proceeds from sale of real estate
72,353
524,381
—
Investment in real estate and related
assets
Investment in unconsolidated joint
venture
Investments in subsidiaries
Net cash used in investing activities
Cash flows from financing activities:
Borrowings, net of fees
Repayments
Prepayments to settle debt and interest
rate swap
Redemptions of common stock
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
(57,198)
(1,007,511)
(103,224)
—
(1,065,695)
(1,050,540)
(5,500)
—
—
—
(488,630)
(103,224)
—
—
—
(17,057)
(112,570)
1,061,642
2,223,778
(1,518,000)
—
(336,512)
(1,102)
(2,063)
—
—
—
—
—
—
—
1,065,695
1,065,695
—
—
—
—
—
596,734
(1,167,933)
(5,500)
—
(576,699)
2,223,778
(1,854,512)
(3,165)
(17,057)
(112,570)
—
(160,980)
165,033
(1,065,695)
932,015
543,696
(173,542)
(1,065,695)
236,474
(118,499)
4,465
119,488
10,504
(3,111)
19,798
—
—
(117,145)
149,790
$
989
$
14,969
$
16,687
$
— $
32,645
F-44
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
Repayments
Distributions
Intercompany transfers
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)
—
(23,220)
(1,289)
(11,739)
—
(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
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, net of issuances
Distributions
Intercompany transfers
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
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
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
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
Cash and cash equivalents, end of period
$
53,322
$
20,708
$
25,825
$
F-45
17.
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:
Dividends
On January 6, 2016, Columbia Property Trust paid the dividends for the fourth quarter of 2015 for an aggregate amount of $37.4
million to shareholders of record on December 1, 2015.
On February 10, 2016, the board of directors declared dividends for the first quarter of 2016 in the amount of $0.30 per share,
payable on March 15, 2016, to stockholders of record on March 1, 2016.
F-46
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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(2)
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(2)
Write-offs of fully depreciated assets
Balance at end of year
For the Years Ended December 31,
2015
2014
2013
$
5,050,482
$
4,875,866
$
5,507,769
1,162,068
(1,188,083) (1)
—
(1,552)
(12,614)
(61,696)
4,948,605
973,920
183,492
(221,481) (1)
(948)
(9,563)
(61,696)
863,724
$
$
$
$
$
$
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
(1)
Includes the transfer of 100% of the Market Square Buildings to an unconsolidated joint venture, in which Columbia Property Trust
currently owns a 51% interest.
(2) Consists of write-offs of intangible lease assets related to lease restructurings, amendments, and terminations.
S-2
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 11, 2016, 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, 2015.
/S/ Deloitte & Touche LLP
Atlanta, Georgia
February 11, 2016
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, 2015;
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.
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
b.
c.
d.
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
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.
b.
Dated: February 11, 2016
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, 2015;
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.
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
b.
c.
d.
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
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.
b.
Dated: February 11, 2016
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, 2015, 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 11, 2016
/s/ JAMES A. FLEMING
James A. Fleming
Principal Financial Officer
February 11, 2016
[This page intentionally left blank]
[This page intentionally left blank]
BOARD OF DIRECTORS
E. Nelson Mills
President and Chief
(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)(cid:3)
John L. Dixon
Chairman of the Board;
Former President and Director,
(cid:51)(cid:68)(cid:70)(cid:76)(cid:192)(cid:70)(cid:3)(cid:54)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:15)(cid:3)(cid:47)(cid:47)(cid:38)
SENIOR MANAGEMENT
David B. Henry
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)
Kimco Realty Corporation
E. Nelson Mills
President and Chief
(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)(cid:3)
Murray J. McCabe
Managing Partner,
(cid:37)(cid:79)(cid:88)(cid:80)(cid:3)(cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:47)(cid:17)(cid:51)(cid:17)
James A. Fleming
Executive Vice President and
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)(cid:3)
Carmen M. Bowser
Former Managing Vice President,
Capital One Bank, New York
Michael S. Robb
Former Executive Vice President,
Real Estate Division
(cid:51)(cid:68)(cid:70)(cid:76)(cid:192)(cid:70)(cid:3)(cid:47)(cid:76)(cid:73)(cid:72)(cid:3)(cid:44)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)
David S. Dowdney
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)
Western Region
Charles R. Brown
Chairman,
CRB Realty Associates
George W. Sands
Former Partner,
(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)(cid:47)(cid:47)(cid:51)
Richard W. Carpenter
Chairman of the Board,
MidCountry Financial Corp.
Thomas G. Wattles
Executive Chairman,
(cid:39)(cid:38)(cid:55)(cid:3)(cid:44)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:55)(cid:85)(cid:88)(cid:86)(cid:87)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)
Wendy W. Gill
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
Corporate Operations and
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
Kevin A. Hoover
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
Portfolio Management
Adam I. Popper
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
Eastern Region
CORPORATE AND SHAREHOLDER INFORMATION
Shareholder Services &
Transfer Agent/Registrar
(cid:36)(cid:80)(cid:72)(cid:85)(cid:76)(cid:70)(cid:68)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:73)(cid:72)(cid:85)(cid:3)(cid:9)(cid:3)(cid:55)(cid:85)(cid:88)(cid:86)(cid:87)(cid:3)
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:15)(cid:3)(cid:47)(cid:47)(cid:38)
6201 15th Avenue
(cid:37)(cid:85)(cid:82)(cid:82)(cid:78)(cid:79)(cid:92)(cid:81)(cid:15)(cid:3)(cid:49)(cid:60)(cid:3)(cid:20)(cid:20)(cid:21)(cid:20)(cid:28)
(cid:27)(cid:24)(cid:24)(cid:17)(cid:22)(cid:23)(cid:26)(cid:17)(cid:19)(cid:19)(cid:23)(cid:21)
Shares Listed
(cid:49)(cid:72)(cid:90)(cid:3)(cid:60)(cid:82)(cid:85)(cid:78)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)
(cid:54)(cid:92)(cid:80)(cid:69)(cid:82)(cid:79)(cid:29)(cid:3)(cid:38)(cid:59)(cid:51)
Investor Relations
(cid:36)(cid:71)(cid:71)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:76)(cid:81)(cid:84)(cid:88)(cid:76)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:3)
Relations at the Company’s
corporate headquarters or by email
to ir@columbiapropertytrust.com.
Internet Access to SEC Filings
A copy of the Company’s Annual
Report on Form 10-K for the year
(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)
(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:192)(cid:79)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)
(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)
(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:54)(cid:40)(cid:38)(cid:12)(cid:15)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)
of this annual report. All reports
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(cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:3)(cid:55)(cid:85)(cid:88)(cid:86)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:40)(cid:38)(cid:15)(cid:3)
including the Annual Report on
Form 10-K, Quarterly Reports on
Form 10-Q, and Current Reports
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www.columbiapropertytrust.com.
Corporate Headquarters
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(cid:27)(cid:19)(cid:19)(cid:17)(cid:27)(cid:28)(cid:28)(cid:17)(cid:27)(cid:23)(cid:20)(cid:20)
www.columbiapropertytrust.com
Independent Accountants
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(cid:36)(cid:87)(cid:79)(cid:68)(cid:81)(cid:87)(cid:68)(cid:15)(cid:3)(cid:42)(cid:72)(cid:82)(cid:85)(cid:74)(cid:76)(cid:68)
Corporate Counsel
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(cid:36)(cid:87)(cid:79)(cid:68)(cid:81)(cid:87)(cid:68)(cid:15)(cid:3)(cid:42)(cid:72)(cid:82)(cid:85)(cid:74)(cid:76)(cid:68)
Annual Meeting
The Annual Meeting of
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(cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:3)(cid:55)(cid:85)(cid:88)(cid:86)(cid:87)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:15)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:69)(cid:72)(cid:3)(cid:75)(cid:72)(cid:79)(cid:71)(cid:3)
at The Westin Atlanta Perimeter
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(cid:76)(cid:81)(cid:3)(cid:36)(cid:87)(cid:79)(cid:68)(cid:81)(cid:87)(cid:68)(cid:15)(cid:3)(cid:42)(cid:72)(cid:82)(cid:85)(cid:74)(cid:76)(cid:68)(cid:15)(cid:3)(cid:68)(cid:87)(cid:3)(cid:28)(cid:29)(cid:22)(cid:19)(cid:3)(cid:68)(cid:17)(cid:80)(cid:17)(cid:3)(cid:40)(cid:55)(cid:15)(cid:3)
on May 2, 2016.
005-CXPRPRT1601
COLUMBIAPROPERT Y TRUST.COM