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EX-32.1 - CERTIFICATION - COLUMBIA PROPERTY TRUST, INC.cxp2015q1_ex321.htm
EX-31.1 - CERTIFICATION - COLUMBIA PROPERTY TRUST, INC.cxp2015q1_ex311.htm
EX-31.2 - CERTIFICATION - COLUMBIA PROPERTY TRUST, INC.cxp2015q1_ex312.htm
EXCEL - IDEA: XBRL DOCUMENT - COLUMBIA PROPERTY TRUST, INC.Financial_Report.xls

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 __________________________________ 
FORM 10-Q
 __________________________________ 
(Mark One)
x
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended March 31, 2015
OR
o
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
 
20-0068852
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
One Glenlake Parkway, Suite 1200
Atlanta, GA 30328
(Address of principal executive offices)
(Zip Code)
(404) 465-2200
(Registrant's telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report)
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  x    No  o
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  x  No  o
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 definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one).
Large accelerated filer
x 
Accelerated filer
o
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o    No  x

Number of shares outstanding of the registrant's
only class of common stock, as of April 24, 2015: 125,077,771 shares
 
 
 
 
 



FORM 10-Q
COLUMBIA PROPERTY TRUST, INC.
TABLE OF CONTENTS
 
Page No.
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.




Page 2


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q of Columbia Property Trust, Inc. ("Columbia Property Trust," "the Company," "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. Therefore, such statements are not intended to be a guarantee of our performance in future periods. 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 make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual conditions, our ability to accurately anticipate results expressed in such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in Columbia Property Trust's Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of some of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements. The risk factors described in our Annual Report are not the only ones we face, but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also harm our business.


Page 3


PART I.
FINANCIAL INFORMATION
ITEM 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The information furnished in the accompanying consolidated balance sheets, and related consolidated statements of operations, comprehensive income, equity, and cash flows, reflects all normal and recurring adjustments that are, in management's opinion, necessary for a fair and consistent presentation of the aforementioned financial statements. The accompanying consolidated financial statements should be read in conjunction with the condensed notes to Columbia Property Trust's financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q, and with Columbia Property Trust's Annual Report on Form 10-K filed for the year ended December 31, 2014. Columbia Property Trust's results of operations for the three months ended March 31, 2015 are not necessarily indicative of the operating results expected for the full year.



Page 4


COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per-share amounts) 
 
(Unaudited)
 
March 31,
2015
 
December 31,
2014
Assets:
 
 
 
Real estate assets, at cost:
 
 
 
Land
$
912,035

 
$
785,101

Buildings and improvements, less accumulated depreciation of $693,780 and $660,098, as of March 31, 2015 and December 31, 2014, respectively
3,389,402

 
3,026,431

Intangible lease assets, less accumulated amortization of $316,720 and $313,822, as of
March 31, 2015 and December 31, 2014, respectively
291,969

 
247,068

Construction in progress
27,201

 
17,962

Total real estate assets
4,620,607

 
4,076,562

Cash and cash equivalents
31,236

 
149,790

Tenant receivables, net of allowance for doubtful accounts of $3 as of December 31, 2014
10,859

 
6,945

Straight-line rent receivable
121,098

 
116,489

Prepaid expenses and other assets
29,728

 
52,143

Deferred financing costs, less accumulated amortization of $15,909 and $15,205, as of
March 31, 2015 and December 31, 2014, respectively
10,653

 
8,426

Intangible lease origination costs, less accumulated amortization of $220,596 and $219,626, as of March 31, 2015 and December 31, 2014, respectively
105,759

 
105,528

Deferred lease costs, less accumulated amortization of $39,338 and $36,589, as of
March 31, 2015 and December 31, 2014, respectively
107,668

 
102,995

Investment in development authority bonds
120,000

 
120,000

Total assets
$
5,157,608

 
$
4,738,878

Liabilities:
 
 
 
Line of credit and notes payable
$
1,535,015

 
$
1,430,884

Bonds payable, net of discounts of $1,246 and $818, as of March 31, 2015 and
December 31, 2014, respectively
598,754

 
249,182

Accounts payable, accrued expenses, and accrued capital expenditures
97,973

 
106,276

Deferred income
25,688

 
24,753

Intangible lease liabilities, less accumulated amortization of $86,922 and $84,935, as of
March 31, 2015 and December 31, 2014, respectively
78,072

 
74,305

Obligations under capital leases
120,000

 
120,000

Total liabilities
2,455,502

 
2,005,400

Commitments and Contingencies (Note 6)

 

Equity:
 
 
 
Common stock, $0.01 par value, 225,000,000 shares authorized, 125,076,869 and 124,973,304 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively
1,250

 
1,249

Additional paid-in capital
4,602,201

 
4,601,808

Cumulative distributions in excess of earnings
(1,899,536
)
 
(1,867,611
)
Cumulative other comprehensive loss
(1,809
)
 
(1,968
)
Total equity
2,702,106

 
2,733,478

Total liabilities and equity
$
5,157,608

 
$
4,738,878

See accompanying notes.


Page 5


COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
 
(Unaudited)
 
Three Months Ended
March 31,
 
2015
 
2014
Revenues:
 
 
 
Rental income
$
112,809

 
$
100,567

Tenant reimbursements
28,249

 
23,733

Hotel income
4,993

 
4,061

Other property income
1,492

 
807

 
147,543

 
129,168

Expenses:
 
 
 
Property operating costs
49,754

 
38,980

Hotel operating costs
4,591

 
4,141

Asset and property management fees
397

 
289

Depreciation
34,007

 
27,304

Amortization
23,219

 
18,521

Impairment loss on real estate assets

 
13,550

General and administrative
8,044

 
6,946

Acquisition expenses
1,995

 

 
122,007

 
109,731

Real estate operating income
25,536

 
19,437

Other income (expense):
 
 
 
Interest expense
(21,484
)
 
(17,910
)
Interest and other income
1,833

 
1,810

Loss on interest rate swaps
(6
)
 
(230
)
Loss on early extinguishment of debt
(477
)
 

 
(20,134
)
 
(16,330
)
Income before income tax benefit
5,402

 
3,107

Income tax benefit
196

 
344

Income from continuing operations
5,598

 
3,451

Discontinued operations:
 
 
 
Operating income from discontinued operations

 
277

Loss on disposition of discontinued operations

 
(328
)
Loss from discontinued operations

 
(51
)
Net income
$
5,598

 
$
3,400

Per-share information – basic:

 

Income from continuing operations
$
0.04

 
$
0.03

Loss from discontinued operations
$
0.00

 
$
0.00

Net income
$
0.04

 
$
0.03

Weighted-average common shares outstanding – basic
124,903

 
124,851

Per-share information – diluted:
 
 
 
Income from continuing operations
$
0.04

 
$
0.03

Loss from discontinued operations
$
0.00

 
$
0.00

Net income
$
0.04

 
$
0.03

Weighted-average common shares outstanding – diluted
124,935

 
124,887

Dividends per share
$
0.300

 
$
0.300


See accompanying notes.


Page 6


COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

 
(Unaudited)
 
Three Months Ended
March 31,
 
2015
 
2014
Net income
$
5,598

 
$
3,400

Market value adjustment to interest rate swap
159

 
254

Comprehensive income
$
5,757

 
$
3,654


See accompanying notes.




Page 7


COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 (UNAUDITED)
(in thousands, except per-share amounts)

 
Stockholders' Equity
 
Common Stock
 
Additional
Paid-In
Capital
 
Cumulative
Distributions
in Excess of
Earnings
 
Cumulative
Other
Comprehensive
Income (Loss)
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
Balance, December 31, 2014
124,973

 
$
1,249

 
$
4,601,808

 
$
(1,867,611
)
 
$
(1,968
)
 
$
2,733,478

Common stock issued to employees and directors, and amortized (net of amounts withheld for income taxes)
104

 
1

 
393

 

 

 
394

Distributions to common stockholders ($0.30 per share)

 

 

 
(37,523
)
 

 
(37,523
)
Net income

 

 

 
5,598

 

 
5,598

Market value adjustment to interest rate swap

 

 

 

 
159

 
159

Balance, March 31, 2015
125,077

 
$
1,250

 
$
4,602,201

 
$
(1,899,536
)
 
$
(1,809
)
 
$
2,702,106

 
Stockholders' Equity
 
Common Stock
 
Additional
Paid-In
Capital
 
Cumulative
Distributions
in Excess of
Earnings
 
Cumulative
Other
Comprehensive
Income (Loss)
 
Total
 Equity
 
Shares
 
Amount
 
 
 
 
Balance, December 31, 2013
124,830

 
$
1,248

 
$
4,600,166

 
$
(1,810,284
)
 
$
(3,307
)
 
$
2,787,823

Common stock issued to employees and directors, and amortized
(net of amounts withheld for income taxes)
134

 
1

 
189

 

 

 
190

Distributions to common stockholders ($0.30 per share)

 

 

 
(37,489
)
 

 
(37,489
)
Net income

 

 

 
3,400

 

 
3,400

Market value adjustment to interest rate swap

 

 

 

 
254

 
254

Balance, March 31, 2014
124,964

 
$
1,249

 
$
4,600,355

 
$
(1,844,373
)
 
$
(3,053
)
 
$
2,754,178


See accompanying notes.


Page 8


COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
(Unaudited)
 
Three Months Ended
March 31,
 
2015
 
2014
Cash Flows from Operating Activities:
 
 
 
Net income
$
5,598

 
$
3,400

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Straight-line rental income
(5,064
)
 
(2,356
)
Depreciation
34,007

 
27,304

Amortization
20,477

 
18,245

Impairment loss on real estate assets

 
13,550

Noncash interest expense
1,069

 
736

Loss on early extinguishment of debt
477

 

Gain on interest rate swaps
(1,315
)
 
(1,097
)
Loss on sale of real estate

 
328

Stock-based compensation expense
1,014

 
507

Changes in assets and liabilities, net of acquisitions:
 
 
 
Increase in tenant receivables, net
(3,935
)
 
(1,594
)
Decrease (increase) in prepaid expenses and other assets
(1,295
)
 
2,426

Decrease in accounts payable and accrued expenses
(7,436
)
 
(6,348
)
Increase in deferred income
935

 
2,690

Net cash provided by operating activities
44,532

 
57,791

Cash Flows from Investing Activities:
 
 
 
Real estate acquisitions
(551,277
)
 

Earnest money paid

 
(10,000
)
Capital improvements
(17,256
)
 
(12,773
)
Deferred lease costs paid
(6,804
)
 
(10,495
)
Net cash used in investing activities
(575,337
)
 
(33,268
)
Cash Flows from Financing Activities:
 
 
 
Financing costs paid
(3,429
)
 

Proceeds from lines of credit and notes payable
463,000

 

Repayments of lines of credit and notes payable
(358,684
)
 
(646
)
Proceeds from issuance of bonds payable
349,507

 

Distributions paid to stockholders
(37,523
)
 
(37,489
)
Shares redeemed to fund income tax withholdings on stock compensation
(620
)
 

Net cash provided by (used in) financing activities
412,251

 
(38,135
)
Net decrease in cash and cash equivalents
(118,554
)
 
(13,612
)
Cash and cash equivalents, beginning of period
149,790

 
99,855

Cash and cash equivalents, end of period
$
31,236

 
$
86,243

See accompanying notes.


Page 9


COLUMBIA PROPERTY TRUST, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(unaudited)
1.
Organization
Columbia Property Trust, Inc. ("Columbia Property Trust") (NYSE: CXP) is a Maryland corporation that operates as a real estate investment trust ("REIT") for federal income tax purposes and owns and operates commercial real estate properties. Columbia Property Trust was incorporated in 2003, commenced operations in 2004, and conducts business primarily through Columbia Property Trust Operating Partnership, L.P. ("Columbia Property Trust OP"), a Delaware limited partnership. Columbia Property Trust is the general partner and sole owner of Columbia Property Trust OP and possesses full legal control and authority over its operations. Columbia Property Trust OP acquires, develops, owns, leases, and operates real properties directly, through wholly owned subsidiaries, or through joint ventures. References to Columbia Property Trust, "we," "us," or "our" herein shall include Columbia Property Trust and all subsidiaries of Columbia Property Trust, direct and indirect, and consolidated joint ventures.
Columbia Property Trust typically invests in high-quality, income-generating office properties. As of March 31, 2015, Columbia Property Trust owned 38 office properties and one hotel, which includes 55 operational buildings comprising approximately 16.6 million square feet of commercial space, located in 12 states and the District of Columbia. All of the office properties are wholly owned except for one property, which is owned through a consolidated subsidiary. As of March 31, 2015, the office properties were approximately 92.3% leased.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of Columbia Property Trust have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, the statements for these unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Results for these interim periods are not necessarily indicative of a full year's results. Columbia Property Trust's consolidated financial statements include the accounts of Columbia Property Trust, Columbia Property Trust OP, and any variable interest entity in which Columbia Property Trust or Columbia Property Trust OP was deemed the primary beneficiary. With respect to entities that are not variable interest entities, Columbia Property Trust's consolidated financial statements also include the accounts of any entity in which Columbia Property Trust, Columbia Property Trust OP, or their subsidiaries own a controlling financial interest and any limited partnership in which Columbia Property Trust, Columbia Property Trust OP, or their subsidiaries own a controlling general partnership interest. All intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the financial statements and footnotes included in Columbia Property Trust's Annual Report on Form 10-K for the year ended December 31, 2014 (the "2014 Form 10-K").
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 ("ASC") 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.


Page 10


Real Estate Assets
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
  
40 years
Building and site improvements
  
5-25 years
Tenant improvements
  
Shorter of economic life or lease term
Intangible lease assets
  
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 and liabilities may not be recoverable, Columbia Property Trust assesses the recoverability of these assets and liabilities 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 and liabilities to the estimated fair values, pursuant to the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, in order of preference, depending upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated salvage value. Certain of Columbia Property Trust's assets may be carried at more than an amount that could be realized in a current disposition transaction. Columbia Property Trust has determined that there is no additional impairment in the carrying values of our real estate assets and related intangible assets for the three months ended March 31, 2015.
Projections of expected future operating cash flows require that Columbia Property Trust 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 Columbia Property Trust's real estate assets and related intangible assets and liabilities and net income.
In the first quarter of 2014, Columbia Property Trust revised its investment strategy for the 160 Park Avenue Building in Florham Park, New Jersey, to sell the property to a user in the near term. As a result, management reduced its intended holding period for the building and reevaluated the property's carrying value as of March 31, 2014, pursuant to the accounting policy outlined above. Columbia Property Trust concluded that the 160 Park Avenue Building was not recoverable and reduced its carrying value to reflect its fair value, estimated based on recently quoted market prices (Level 2), by recording an impairment loss of approximately $13.6 million in the first quarter of 2014. The sale of the160 Park Avenue Building closed on June 4, 2014, for $10.2 million, exclusive of transaction costs.
Assets Held for Sale
Columbia Property Trust classifies assets as held for sale according to ASC 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.


Page 11


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 March 31, 2015, none of Columbia Property Trust's properties met the criteria to be classified as held for sale in the accompanying balance sheet.
Intangible Assets and Liabilities Arising from In-Place Leases where Columbia Property Trust Is the Lessor
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 detail). As of March 31, 2015 and December 31, 2014, Columbia Property Trust had the following gross intangible in-place lease assets and liabilities (in thousands):
 
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Intangible
Below-Market
In-Place Lease
Liabilities
 
Above-Market
In-Place
Lease Assets
 
Absorption
Period Costs
 
March 31, 2015
Gross
$
77,271

 
$
390,502

 
$
326,355

 
$
164,994

 
Accumulated Amortization
(59,645
)
 
(241,319
)
 
(220,596
)
 
(86,922
)
 
Net
$
17,626

 
$
149,183

 
$
105,759

 
$
78,072

December 31, 2014
Gross
$
79,805

 
$
370,412

 
$
325,154

 
$
159,240

 
Accumulated Amortization
(61,619
)
 
(237,084
)
 
(219,626
)
 
(84,935
)
 
Net
$
18,186

 
$
133,328

 
$
105,528

 
$
74,305

Columbia Property Trust recognized the following amortization of intangible lease assets and liabilities (in thousands):
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Intangible
Below-Market
In-Place Lease
Liabilities
Above-Market
In-Place
Lease Assets
 
Absorption
Period Costs
 
For the three months ended March 31, 2015
$
1,367

 
$
12,362

 
$
8,157

 
$
5,411

For the three months ended March 31, 2014
$
1,356

 
$
8,073

 
$
8,432

 
$
3,081

The remaining net intangible assets and liabilities as of March 31, 2015, will be amortized as follows (in thousands):
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Intangible
Below-Market
In-Place Lease
Liabilities
Above-Market
In-Place
Lease Assets
 
Absorption
Period Costs
 
For the nine months ending December 31, 2015
$
3,573

 
$
34,139

 
$
22,371

 
$
14,366

For the years ending December 31:
 
 
 
 
 
 
 
2016
4,039

 
32,656

 
23,508

 
14,624

2017
1,920

 
19,958

 
15,972

 
9,559

2018
1,081

 
13,497

 
11,052

 
7,442

2019
1,035

 
12,041

 
9,944

 
6,738

2020
996

 
10,126

 
8,434

 
5,543

Thereafter
4,982

 
26,766

 
14,478

 
19,800

 
$
17,626

 
$
149,183

 
$
105,759

 
$
78,072



Page 12


Intangible Assets and Liabilities Arising from In-Place Leases where Columbia Property Trust Is the Lessee
In-place ground leases where Columbia Property Trust is the lessee may have value associated with effective contractual rental rates that are above or below market rates at the time of execution or assumption. Such values are calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place lease and (ii) management's estimate of fair market lease rates for the corresponding in-place lease at the time of execution or assumption, measured over a period equal to the remaining terms of the leases. The capitalized above-market and below-market in-place lease values are recorded as intangible lease liabilities and assets, respectively, and are amortized as an adjustment to property operating cost over the remaining term of the respective leases. Columbia Property Trust had gross below-market lease assets of approximately $140.9 million and $110.7 million as of March 31, 2015 and December 31, 2014, respectively, and recognized amortization of these assets of approximately $0.6 million and $0.5 million for the three months ended March 31, 2015 and 2014, respectively.
As of March 31, 2015, the remaining net below-market lease assets will be amortized as follows (in thousands):
For the nine months ending December 31, 2015
$
1,912

For the years ending December 31:
 
2016
2,549

2017
2,549

2018
2,549

2019
2,549

2020
2,549

Thereafter
110,502

 
$
125,159

Prepaid Expenses and Other Assets
Prepaid expenses and other assets primarily include earnest money deposits, escrow accounts held by lenders to pay future real estate taxes, insurance and tenant improvements, notes receivable, non-tenant receivables, prepaid taxes, insurance and operating costs, certain corporate assets, hotel inventory, and deferred tax assets. Prepaid expenses and other assets will be expensed as incurred. As of December 31, 2014, prepaid expenses and other assets included $27.0 million of earnest money deposits paid in 2014 for the January 2015 property acquisitions described in Note 3, Real Estate Transactions. These deposits were applied to the purchase prices at closing.
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 swap 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 gain (loss) on interest rate swaps for contracts that do not qualify for hedge accounting treatment.


Page 13


The following tables provide additional information related to Columbia Property Trust's interest rate swaps (in thousands):
 
 
 
 
Estimated Fair Value as of
Instrument Type
 
Balance Sheet Classification
 
March 31,
2015
 
December 31,
2014
Derivatives designated as hedging instruments:
 
 
 
 
 
 
Interest rate contracts
 
Accounts payable
 
$
(1,809
)
 
$
(1,968
)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Interest rate contracts
 
Accounts payable
 
$
(1,318
)
 
$
(2,633
)

Columbia Property Trust applied the provisions of ASC 820 in recording its interest rate swaps at fair value. The fair values of the interest rate swaps, classified under Level 2, were determined using a third-party proprietary model that is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate ("LIBOR") information, and reasonable estimates about relevant future market conditions. Columbia Property Trust has determined that the fair value, as determined by the third party, is reasonable. The fair value of Columbia Property Trust's interest rate swaps was $(3.1) million and $(4.6) million at March 31, 2015 and December 31, 2014, respectively.
 
Three Months Ended
March 31,
 
2015
 
2014
Market value adjustment to interest rate swaps designated as hedging instruments and included in other comprehensive income
$
159

 
$
254

Loss on interest rate swap recognized through earnings
$
(6
)
 
$
(230
)
During the periods presented, there was no hedge ineffectiveness required to be recognized into earnings on the interest rate swaps that qualified for hedge accounting treatment.
Income Taxes
Columbia Property Trust has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), and has operated as such beginning with its taxable year ended December 31, 2003. To qualify as a REIT, Columbia Property Trust must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income, as defined by the Code, to its stockholders. As a REIT, Columbia Property Trust generally is not subject to income tax on income it distributes to stockholders. Columbia Property Trust's stockholder distributions typically exceed its taxable income due to the inclusion of noncash expenses, such as depreciation, in taxable income. As a result, Columbia Property Trust typically does not incur federal income taxes other than as described in the following paragraph. Columbia Property Trust is, however, subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in the accompanying consolidated financial statements.
Columbia Property Trust TRS, LLC ("Columbia 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.
Recent Accounting Pronouncements
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


Page 14


all contracts with customers except those that are within the scope of other topics in the FASB's Accounting Standards Codification such as real estate leases. ASU 2014-09 will require companies to perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 will be effective retrospectively for Columbia Property Trust beginning on January 1, 2018, and early adoption is not permitted. Columbia Property Trust is currently in the process of evaluating the potential impact, if any, ASU 2014-09 will have on its financial statements and disclosures.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements – Going Concern ("ASU 2014-15"), which provides guidance about the responsibility of management to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures if necessary. ASU 2014-15 will be effective 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 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, variable interest entities ("VIEs"), and reporting entities that are involved with VIEs. ASU 2015-02 will be effective retrospectively for Columbia Property Trust beginning on January 1, 2017, 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 April 2015, the FASB issued Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires that deferred financing costs be presented on the balance sheet as a direct deduction of the carrying amount of the related debt. ASU 2015-03 will be effective retrospectively for Columbia Property Trust beginning on January 1, 2016, and early adoption is permitted. Columbia Property Trust is currently in the process of evaluating additional potential impacts of ASU 2015-03 will have on its financial statements and disclosures.
3.
Real Estate Transactions
Acquisitions
During the three months ended March 31, 2015, Columbia Property Trust acquired the following properties (in thousands):
 
 
315 Park Avenue
South Building
 
1881 Campus Commons Building
 
116 Huntington
Avenue Building
Location
 
New York, NY

 
Reston, VA

 
Boston, MA

Date Acquired
 
January 7, 2015

 
January 7, 2015

 
January 8, 2015

Purchase price:
 
 
 
 
 
 
Land
 
$
119,746

 
$
7,186

 
$

Building and improvements
 
232,547

 
49,186

 
108,383

Intangible lease assets
 
16,916

 
4,645

 
7,907

Intangible below market ground lease assets
 

 

 
30,244

Intangible lease origination costs
 
4,163

 
1,607

 
2,669

Intangible below market lease liability
 
(7,494
)
 
(97
)
 
(1,878
)
Total purchase price
 
$
365,878

 
$
62,527

 
$
147,325

The purchase price for these acquisitions includes allocations based upon preliminary estimates of the fair value of the assets and liabilities acquired. These allocations may be adjusted in the future upon finalization of these preliminary estimates. Note 2, Summary of Significant Accounting Policies, provides a discussion of the estimated useful life for each asset class. Columbia Property Trust did not acquire any properties during the three months ended March 31, 2014.
Columbia Property Trust acquired these three properties in January 2015, in two separate transactions, as described below. The total purchase price of these two transactions of $588.0 million, exclusive of closing costs, was funded with a $300 million bridge loan; $140.0 million of borrowings on the JPMorgan Chase Credit Facility, as described in Note 4, Line of Credit, Term Loan, and Notes Payable; and cash on hand.
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 341,000-square-foot office building in New York, New York (the "315 Park Avenue South Building") and 1881 Campus Commons, a


Page 15


245,000-square-foot office building in Reston, Virginia (the "1881 Campus Commons Building"). This portfolio was acquired for $436.0 million, exclusive of transaction costs and purchase price adjustments.
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 March 31, 2015, Columbia Property Trust recognized revenues of $6.2 million and a net loss of $1.3 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 March 31, 2015, Columbia Property Trust recognized revenues of $1.5 million and a net loss of $0.6 million from the 1881 Campus Commons Building. The net loss includes acquisition expenses of $0.5 million.
116 Huntington Avenue Building
On January 8, 2015, Columbia Property Trust acquired a 274,000-square-foot office building in Boston, Massachusetts (the "116 Huntington Avenue Building"), for $152.0 million, inclusive of capital credits. 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 March 31, 2015, Columbia Property Trust recognized revenues of $2.9 million and a net loss of $0.2 million from the 116 Huntington Avenue Building. The net loss includes acquisition expenses of $0.3 million.
Pro Forma Financial Information
The following unaudited pro forma statements of operations presented for the three months ended March 31, 2015 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, and the 116 Huntington Avenue Building as if the acquisitions occurred on January 1, 2014. 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, 2014 (in thousands).
 
Three Months Ended
March 31,
 
2015
 
2014
Revenues
$
148,258

 
$
170,025

Net income (loss)
$
7,495

 
$
(4,563
)
Net income (loss) per share - basic
$
0.06

 
$
(0.04
)
Net income (loss) per share - diluted
$
0.06

 
$
(0.04
)
Dispositions
Columbia Property Trust did not dispose of any properties during the three months ended March 31, 2015 or 2014.


Page 16


4.
Line of Credit, Term Loan, and Notes Payable
As of March 31, 2015 and December 31, 2014, Columbia Property Trust had the following line of credit, term loan, and notes payable indebtedness (excluding bonds payable; see Note 5, Bonds Payable) in thousands:
Facility
 
March 31,
2015
 
December 31,
2014
$450 Million Term Loan
 
$
450,000

 
$
450,000

Market Square Buildings mortgage note
 
325,000

 
325,000

333 Market Street Building mortgage note
 
206,625

 
206,810

650 California Street Building mortgage note
 
130,000

 
130,000

JPMorgan Chase Credit Facility
 
105,000

 

100 East Pratt Street Building mortgage note
 
105,000

 
105,000

221 Main Street Building mortgage note
 
73,000

 
73,000

263 Shuman Boulevard Building mortgage note
 
49,000

 
49,000

SanTan Corporate Center mortgage notes
 
39,000

 
39,000

One Glenlake Building mortgage note
 
31,390

 
32,074

215 Diehl Road Building mortgage note
 
21,000

 
21,000

Total indebtedness
 
$
1,535,015

 
$
1,430,884

Bridge Loan
On January 6, 2015, Columbia Property Trust entered into a $300.0 million, six-month, unsecured loan with a syndicate of banks led by JPMorgan Chase Bank (the "Bridge Loan") to finance a portion of the real estate assets purchased in January 2015 (see Note 3, Real Estate Transactions). The Bridge Loan was originally set to mature on July 6, 2015; however, Columbia Property Trust fully repaid the Bridge Loan on March 12, 2015, without premium or penalty, using the proceeds from the 2025 Bonds Payable, as described in Note 5, Bonds Payable. 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 relating to the Bridge Loan.
Fair Value of Debt
The estimated fair value of Columbia Property Trust's line of credit and notes payable as of March 31, 2015 and December 31, 2014, was approximately $1,569.8 million and $1,465.2 million, respectively. Columbia Property Trust estimated the fair value of its JPMorgan Chase Credit Facility (the "JPMorgan Chase Credit Facility") by obtaining estimates for similar facilities from multiple market participants as of the respective reporting dates. Therefore, the fair values determined are considered to be based on observable market data for similar instruments (Level 2). The fair values of all other debt instruments were estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowing arrangements as of the respective reporting dates. The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized.
Interest Paid and Capitalized and Debt Covenants
During the three months ended March 31, 2015 and 2014, Columbia Property Trust made interest payments totaling approximately $15.5 million and $13.0 million, respectively, of which approximately $0.1 million was capitalized during the three months ended March 31, 2015, and no interest was capitalized during the three months ended March 31, 2014. As of March 31, 2015, Columbia Property Trust believes it was in compliance with the restrictive financial covenants on its $450 Million Term Loan (the "$450 Million Term Loan"), JPMorgan Chase Credit Facility, and notes payable obligations.


Page 17


5.    Bonds Payable
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"), 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 OP issued $250.0 million of seven-year, unsecured 5.875% senior notes at 99.295% of their face value (the "2018 Bonds Payable"), which are guaranteed by Columbia Property Trust. Columbia Property Trust OP 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. 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.
No interest payments were made on the 2025 Bonds Payable or the 2018 Bonds Payable during the three months ended March 31, 2015 and 2014. Columbia Property Trust is subject to substantially similar covenants under the 2025 Bonds Payable and the 2018 Bonds Payable. As of March 31, 2015, Columbia Property Trust believes it was in compliance with the restrictive covenants on the 2025 Bonds Payable and the 2018 Bonds Payable.
The estimated fair value of the 2025 Bonds Payable and the 2018 Bonds Payable as of March 31, 2015 was approximately $602.6 million, and the estimated fair value of the 2018 Bonds Payable as of December 31, 2014 was $250.6 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 borrowings 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.
6.
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 March 31, 2015, no such options have been exercised that have not been materially satisfied.
Litigation
Columbia Property Trust is subject to various legal proceedings, claims, and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any reasonably possible loss relating to these matters using the latest information available. Columbia Property Trust records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, Columbia Property Trust accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, Columbia Property Trust accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, Columbia Property Trust discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, Columbia Property Trust discloses the nature and estimate of the possible loss of the litigation. Columbia Property Trust does not disclose information with respect to litigation where the possibility of an unfavorable outcome is considered to be remote. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business, or financial condition of Columbia Property Trust. Columbia Property Trust 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, liquidity, or financial condition of Columbia Property Trust.


Page 18


7.
Stockholders' Equity
Long-Term Incentive Plan
Columbia Property Trust maintains a long-term incentive plan that provides for grants of stock to be made to certain employees and independent directors of Columbia Property Trust (the "Long-Term Incentive Plan"). Columbia Property Trust's shareholders approved the The Long-Term Incentive Plan in July 2013, and a total of 2,000,000 shares are authorized and reserved for issuance under the Long-Term Incentive Plan.
On January 21, 2015, Columbia Property Trust granted 123,187 shares of common stock to employees, net of 11,368 shares withheld to settle the related tax liability, under the Long-Term Incentive Plan (the "2014 LTIP Employee Grant"), of which 25% vested upon grant, and the remaining shares will vest ratably, with the passage of time, on January 31, 2016, 2017, and 2018. Employees will receive quarterly dividends related to their entire grant, including the unvested shares, on each dividend payment date. A summary of the activity for the employee stock grants under the Long-Term Incentive Plan for the three months ended March 31, 2015 and 2014, follows:
 
 
For the Three Months Ended
March 31, 2015
 
 
Shares
(in thousands)
 
Weighted-Average
Grant-Date
Fair Value(1)
Unvested shares - beginning of period
 
104

 
$
24.82

Granted
 
123

 
$
24.40

Vested
 
(65
)
 
$
24.62

Forfeited
 

 
$

Unvested shares - end of period(2)
 
162

 
$
24.58

(1) 
Columbia Property Trust determined the weighted-average grant-date fair value using the market closing price on the date of the respective grants.
(2) 
As of March 31, 2015, we expect approximately 154,000 of the 162,000 unvested shares to ultimately vest, assuming a forfeiture rate of 5.0%, which was determined based on peer company data, adjusted for the specifics of the Long-Term Incentive Plan.
During the three months ended March 31, 2015 and 2014, Columbia Property Trust paid quarterly installments of the independent directors' annual equity retainers by granting shares to the independent directors, which vested at the time of grant. A summary of these grants, made under the Long-Term Incentive Plan, follows:
Date of Grant
 
Shares
 
Grant-Date Fair Value
2015 Director Grants:
 
 
 
 
January 2, 2015
 
5,850

 
$
25.75

April 1, 2015
 
4,995

 
$
27.16

2014 Director Grants:
 
 
 
 
January 21, 2014
 
3,344

 
$
24.82

April 1, 2014
 
2,968

 
$
27.22

For the three months ended March 31, 2015 and 2014, Columbia Property Trust incurred $1.0 million and $0.5 million, respectively, in stock-based compensation expense, of which $0.1 million and $0.1 million, respectively, related to the issuance of shares to independent directors as described above; $0.6 million and $0.2 million, respectively, related to the amortization of unvested awards under the Long-Term Incentive Plan; and $0.3 million and $0.2 million, respectively, related to future employee awards to be granted for service during this period. These future awards have been authorized, and employee service related to these awards began on January 1, 2015. Columbia Property Trust anticipates granting these awards in January 2016, with 25% of the grant vesting on the grant date and the remaining shares vesting ratably, with the passage of time, on January 31, 2017, 2018, and 2019 (the "2015 LTIP Employee Grant"). These expenses are included in general and administrative expenses in the accompanying consolidated statement of operations. As of March 31, 2015, there was $3.2 million of unrecognized compensation costs related to unvested awards under the Long-Term Incentive Plan. This amount will be amortized over the respective vesting period, ranging from one to three years at the time of grant.


Page 19


8.     Supplemental Disclosures of Noncash Investing and Financing Activities
Outlined below are significant noncash investing and financing activities for the three months ended March 31, 2015 and 2014 (in thousands): 
 
Three Months Ended
March 31,
 
2015
 
2014
Investments in real estate funded with other assets
$
27,000

 
$

Other assets assumed at acquisition
$
6,119

 
$

Other liabilities assumed at acquisition
$
2,917

 
$

Discount on issuance of bonds payable
$
494

 
$

Amortization of net (premiums) discounts on debt
$
(119
)
 
$
(88
)
Market value adjustment to interest rate swaps that qualify for hedge accounting treatment
$
159

 
$
254

Accrued capital expenditures and deferred lease costs
$
10,153

 
$
6,669

Accrued deferred financing costs
$
461

 
$
24

Common stock issued to employees and directors, and amortized (net of amounts withheld for income taxes)
$
393

 
$
189

 
9.
Discontinued Operations
As a result of implementing Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components on an Entity ("ASU 2014-08") effective April 1, 2014, beginning in the second quarter of 2014, the operating results for properties sold will generally be included in continuing operations. Properties sold prior to implementing ASU 2014-08 are, therefore, included in discontinued operations in the accompanying consolidated statements of operations for all periods presented.
Columbia Property Trust sold 18 properties for $521.5 million in November 2013, resulting in a net loss of $0.4 million (the "18 Property Sale"). The activity reflected in 2014 relates to post-closing adjustments and true ups related to the 18 Property Sale, and no activity has been reclassified to discontinued operations during the three months ended March 31, 2015.
 
For the
Three Months Ended
March 31, 2014
Revenues:
 
Rental income
$
3

Tenant reimbursements
(51
)
 
(48
)
Expenses:
 
Property operating costs
(347
)
Asset and property management fees
7

General and administrative
18

Total expenses
(322
)
Operating income
274

Other income (expense):
 
Interest and other income
3

Income from discontinued operations
277

Loss on disposition of discontinued operations
(328
)
Loss from discontinued operations
$
(51
)


Page 20


10.    Earnings Per Share
For the three months ended March 31, 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 unvested awards under the Long-Term Incentive Plan and the 2015 LTIP Employee Grant. The following table reconciles the numerator for the basic and diluted earnings per share computations shown on the consolidated statements of income for the three months ended March 31, 2015 and 2014, respectively (in thousands):
 
 
Three Months Ended
March 31,
 
 
2015
 
2014
Net income
 
$
5,598

 
$
3,400

Distributions paid on unvested shares
 
(49
)
 
(32
)
Net income used to calculate basic and diluted earnings per share
 
$
5,549

 
$
3,368

The following table reconciles the denominator for the basic and diluted earnings per-share computations shown on the consolidated statements of income for the three months ended March 31, 2015 and 2014, respectively (in thousands):
 
 
Three Months Ended
March 31,
 
 
2015
 
2014
Weighted-average common shares - basic
 
124,903

 
124,851

Plus incremental weighted-average shares from time-vested conversions less assumed share repurchases:
 
 
 
 
Unvested awards under the Long-Term Incentive Plan
 
17

 
23

2015 LTIP Employee Grant
 
15

 
13

Weighted-average common shares - diluted
 
124,935

 
124,887

11.     Financial Information for Parent Guarantor, Issuer Subsidiary, 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 guarantee is 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 March 31, 2015, and December 31, 2014 (in thousands), as well as its condensed consolidating statements of operations and its condensed consolidating statements of comprehensive income for the three months ended March 31, 2015 and 2014 (in thousands); and its condensed consolidating statements of cash flows for the three months ended March 31, 2015 and 2014 (in thousands).


Page 21


Condensed Consolidating Balance Sheets (in thousands)
 
As of March 31, 2015
 
Columbia Property Trust
(Parent)
(Guarantor)
 
Columbia
 Property
Trust OP 
(the Issuer)
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Assets:
 
 
 
 
 
 
 
 
 
Real estate assets, at cost:
 
 
 
 
 
 
 
 
 
Land
$

 
$
6,241

 
$
905,794

 
$

 
$
912,035

Buildings and improvements, net

 
30,132

 
3,359,270

 

 
3,389,402

Intangible lease assets, net

 

 
291,969

 

 
291,969

Construction in progress

 
308

 
26,893

 

 
27,201

Total real estate assets

 
36,681

 
4,583,926

 

 
4,620,607

Cash and cash equivalents
3,521

 
7,580

 
20,135

 

 
31,236

Investment in subsidiaries
2,521,532

 
2,166,615

 

 
(4,688,147
)
 

Tenant receivables, net of allowance

 
205

 
10,654

 

 
10,859

Straight-line rent receivable

 
1,079

 
120,019

 

 
121,098

Prepaid expenses and other assets
177,062

 
147,788

 
24,236

 
(319,358
)
 
29,728

Deferred financing costs, net

 
8,417

 
2,236

 

 
10,653

Intangible lease origination costs, net

 

 
105,759

 

 
105,759

Deferred lease costs, net

 
1,558

 
106,110

 

 
107,668

Investment in development authority bonds

 

 
120,000

 

 
120,000

Total assets
$
2,702,115

 
$
2,369,923

 
$
5,093,075

 
$
(5,007,505
)
 
$
5,157,608

Liabilities:
 
 
 
 
 
 
 
 
 
Line of credit and notes payable
$

 
$
555,000

 
$
1,297,829

 
$
(317,814
)
 
$
1,535,015

Bonds payable, net

 
598,754

 

 

 
598,754

Accounts payable, accrued expenses, and accrued capital expenditures
9

 
14,179

 
83,785

 

 
97,973

Due to affiliates

 
26

 
1,518

 
(1,544
)
 

Deferred income

 
341

 
25,347

 

 
25,688

Intangible lease liabilities, net

 

 
78,072

 

 
78,072

Obligations under capital leases

 

 
120,000

 

 
120,000

Total liabilities
9

 
1,168,300

 
1,606,551

 
(319,358
)
 
2,455,502

Equity:
 
 
 
 
 
 
 
 
 
Total equity
2,702,106

 
1,201,623

 
3,486,524

 
(4,688,147
)
 
2,702,106

Total liabilities and equity
$
2,702,115

 
$
2,369,923

 
$
5,093,075

 
$
(5,007,505
)
 
$
5,157,608






Page 22


Condensed Consolidating Balance Sheets (in thousands)
 
As of December 31, 2014
 
Columbia Property Trust
(Parent)
(Guarantor)
 
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

 
$

 
$
785,101

Building and improvements, net

 
29,899

 
2,996,532

 

 
3,026,431

Intangible lease assets, net

 

 
247,068

 

 
247,068

Construction in progress

 
433

 
17,529

 

 
17,962

Total real estate assets

 
36,573

 
4,039,989

 

 
4,076,562

Cash and cash equivalents
119,488

 
10,504

 
19,798

 

 
149,790

Investment in subsidiaries
2,409,941

 
2,120,018

 

 
(4,529,959
)
 

Tenant receivables, net of allowance

 
246

 
6,699

 

 
6,945

Straight-line rent receivable

 
781

 
115,708

 

 
116,489

Prepaid expenses and other assets
204,079

 
148,226

 
19,734

 
(319,896
)
 
52,143

Deferred financing costs, net

 
6,020

 
2,406

 

 
8,426

Intangible lease origination costs, net

 

 
105,528

 

 
105,528

Deferred lease costs, net

 
1,658

 
101,337

 

 
102,995

Investment in development authority bonds

 

 
120,000

 

 
120,000

Total assets
$
2,733,508

 
$
2,324,026

 
$
4,531,199

 
$
(4,849,855
)
 
$
4,738,878

Liabilities:
 
 
 
 
 
 
 
 
 
Lines of credit and notes payable
$

 
$
450,000

 
$
1,299,232

 
$
(318,348
)
 
$
1,430,884

Bonds payable, net

 
249,182

 

 

 
249,182

Accounts payable, accrued expenses, and accrued capital expenditures
30

 
9,749

 
96,497

 

 
106,276

Due to affiliates

 
24

 
1,524

 
(1,548
)
 

Deferred income

 
171

 
24,582

 

 
24,753

Intangible lease liabilities, net

 

 
74,305

 

 
74,305

Obligations under capital leases

 

 
120,000

 

 
120,000

Total liabilities
30

 
709,126

 
1,616,140

 
(319,896
)
 
2,005,400

Equity:
 
 
 
 
 
 
 
 
 
Total equity
2,733,478

 
1,614,900

 
2,915,059

 
(4,529,959
)
 
2,733,478

Total liabilities and equity
$
2,733,508

 
$
2,324,026

 
$
4,531,199

 
$
(4,849,855
)
 
$
4,738,878






Page 23


Consolidating Statements of Operations (in thousands)
 
For the Three Months Ended March 31, 2015
 
Columbia Property Trust
(Parent)
(Guarantor)
 
Columbia
 Property
Trust OP 
(the Issuer)
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Revenues:
 
 
 
 
 
 
 
 
 
Rental income
$

 
$
544

 
$
112,359

 
$
(94
)
 
$
112,809

Tenant reimbursements

 
228

 
28,021

 

 
28,249

Hotel income

 

 
4,993

 

 
4,993

Other property income

 

 
1,563

 
(71
)
 
1,492

 

 
772

 
146,936

 
(165
)
 
147,543

Expenses:
 
 
 
 
 
 
 
 
 
Property operating costs

 
739

 
49,109

 
(94
)
 
49,754

Hotel operating costs

 

 
4,591

 

 
4,591

Asset and property management fees:
 
 
 
 
 
 
 
 
 
Related-party

 
14

 

 
(14
)
 

Other

 

 
397

 

 
397

Depreciation

 
623

 
33,384

 

 
34,007

Amortization

 
56

 
23,163

 

 
23,219

General and administrative
38

 
1,956

 
6,107

 
(57
)
 
8,044

Acquisition expenses

 

 
1,995

 

 
1,995

 
38

 
3,388

 
118,746

 
(165
)
 
122,007

Real estate operating income (loss)
(38
)
 
(2,616
)
 
28,190

 

 
25,536

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense

 
(9,225
)
 
(16,899
)
 
4,640

 
(21,484
)
Interest and other income
1,991

 
2,657

 
1,825

 
(4,640
)
 
1,833

Loss on interest rate swaps

 

 
(6
)
 

 
(6
)
Loss on early extinguishment of debt

 
(477
)
 

 

 
(477
)
Income from equity investment
3,645

 
12,794

 

 
(16,439
)
 

 
5,636

 
5,749

 
(15,080
)
 
(16,439
)
 
(20,134
)
Income before income tax benefit (expense)
5,598

 
3,133

 
13,110

 
(16,439
)
 
5,402

Income tax benefit (expense)

 
(5
)
 
201

 

 
196

Net income
$
5,598

 
$
3,128

 
$
13,311

 
$
(16,439
)
 
$
5,598



Page 24


Consolidating Statements of Operations (in thousands)
 
For the Three Months Ended March 31, 2014
 
Columbia Property Trust
(Parent)
(Guarantor)
 
Columbia
 Property
Trust OP 
(the Issuer)
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Revenues:
 
 
 
 
 
 
 
 
 
Rental income
$

 
$
109

 
$
100,547

 
$
(89
)
 
$
100,567

Tenant reimbursements

 
46

 
23,687

 

 
23,733

Hotel income

 

 
4,061

 

 
4,061

Other property income

 

 
844

 
(37
)
 
807

 

 
155

 
129,139

 
(126
)
 
129,168

Expenses:
 
 
 
 
 
 
 
 
 
Property operating costs

 
610

 
38,459

 
(89
)
 
38,980

Hotel operating costs

 

 
4,141

 

 
4,141

Asset and property management fees:
 
 
 
 
 
 
 
 
 
Related-party

 
4

 

 
(4
)
 

Other

 

 
575

 
(286
)
 
289

Depreciation

 
381

 
26,923

 

 
27,304

Amortization

 
9

 
18,512

 

 
18,521

Impairment loss on real estate assets

 

 
13,550

 

 
13,550

General and administrative
29

 
2,617

 
4,333

 
(33
)
 
6,946

 
29

 
3,621

 
106,493

 
(412
)
 
109,731

Real estate operating income (loss)
(29
)
 
(3,466
)
 
22,646

 
286

 
19,437

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense

 
(7,434
)
 
(15,158
)
 
4,682

 
(17,910
)
Interest and other income
1,988

 
2,695

 
1,809

 
(4,682
)
 
1,810

Loss on interest rate swaps

 

 
(230
)
 

 
(230
)
Income from equity investment
1,441

 
8,617