Table of Contents


 
 
 
 
 
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, 2013
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 000-51262
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)
Wells Real Estate Investment Trust II, Inc., 6200 The Corners Parkway, Norcross, GA 30092
(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
o
Accelerated filer
o
Non-accelerated filer
x  (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 30, 2013 : 542,777,805 shares
 
 
 
 
 

Table of Contents


FORM 10-Q
COLUMBIA PROPERTY TRUST, INC.
TABLE OF CONTENTS
 
 
 
Page No.
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2013 (unaudited) and 2012 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.




Page 2
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q of Columbia Property Trust, Inc. ("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. 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, 2012 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.


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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 (loss) 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, 2012 . Columbia Property Trust's results of operations for the three months ended March 31, 2013 are not necessarily indicative of the operating results expected for the full year.



Page 4
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COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per-share amounts)
 
 
(Unaudited)
 
 
 
March 31,
2013
 
December 31,
2012
Assets:
 
 
 
Real estate assets, at cost:
 
 
 
Land
$
786,336

 
$
789,237

Buildings and improvements, less accumulated depreciation of $604,698 and $580,334, as of March 31, 2013 and December 31, 2012, respectively
3,383,141

 
3,468,218

Intangible lease assets, less accumulated amortization of $324,908 and $315,840, as of March 31, 2013 and December 31, 2012, respectively
329,120

 
341,460

Construction in progress
12,417

 
12,680

Total real estate assets
4,511,014

 
4,611,595

Cash and cash equivalents
68,623

 
53,657

Tenant receivables, net of allowance for doubtful accounts of $896 and $117, as of March 31, 2013 and December 31, 2012, respectively
134,640

 
134,099

Prepaid expenses and other assets
35,125

 
29,373

Deferred financing costs, less accumulated amortization of $9,395 and $8,527, as of
March 31, 2013 and December 31, 2012, respectively
9,624

 
10,490

Intangible lease origination costs, less accumulated amortization of $239,422 and $230,930, as of March 31, 2013 and December 31, 2012, respectively
197,004

 
206,927

Deferred lease costs, less accumulated amortization of $26,916 and $24,222, as of
March 31, 2013 and December 31, 2012, respectively
97,785

 
98,808

Investment in development authority bonds
586,000

 
586,000

Total assets
$
5,639,815

 
$
5,730,949

Liabilities:
 
 
 
Line of credit and notes payable
$
1,383,935

 
$
1,401,618

Bonds payable, net of discount of $1,259 and $1,322, as of March 31, 2013 and December 31, 2012, respectively
248,741

 
248,678

Accounts payable, accrued expenses, and accrued capital expenditures
99,704

 
102,858

Due to affiliates
27,081

 
1,920

Deferred income
26,021

 
28,071

Intangible lease liabilities, less accumulated amortization of $87,253 and $84,326, as of
March 31, 2013 and December 31, 2012, respectively
94,572

 
98,298

Obligations under capital leases
586,000

 
586,000

Total liabilities
2,466,054

 
2,467,443

Commitments and Contingencies (Note 6)
—

 
—

Redeemable Common Stock
159,507

 
99,526

Equity:
 
 
 
Common stock, $0.01 par value, 900,000,000 shares authorized, 544,729,626 and 547,603,642 shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively
5,447

 
5,476

Additional paid-in capital
4,881,854

 
4,897,782

Cumulative distributions in excess of earnings
(1,708,785
)
 
(1,634,531
)
Redeemable common stock
(159,507
)
 
(99,526
)
Other comprehensive loss
(4,755
)
 
(5,221
)
Total equity
3,014,254

 
3,163,980

Total liabilities, redeemable common stock, and equity
$
5,639,815

 
$
5,730,949

See accompanying notes.


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COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
 
 
(Unaudited)
 
Three months ended March 31,
 
2013
 
2012
Revenues:
 
 
 
Rental income
$
115,121

 
$
110,186

Tenant reimbursements
25,432

 
25,080

Hotel income
4,954

 
4,375

Other property income
288

 
1,699

 
145,795

 
141,340

Expenses:
 
 
 
Property operating costs
43,712

 
41,238

Hotel operating costs
4,261

 
4,097

Asset and property management fees:
 
 
 
Related-party
5,541

 
8,820

Other
700

 
701

Depreciation
30,252

 
27,885

Amortization
21,910

 
25,719

Impairment loss on real estate assets
16,867

 
—

General and administrative
36,907

 
4,870

 
160,150

 
113,330

Real estate operating income
(14,355
)
 
28,010

Other income (expense):
 
 
 
Interest expense
(27,260
)
 
(26,281
)
Interest and other income
9,111

 
10,016

Gain (loss) on interest rate swaps
57

 
(76
)
 
(18,092
)
 
(16,341
)
Income (loss) before income tax benefit
(32,447
)
 
11,669

Income tax benefit
97

 
97

Income (loss) from continuing operations
(32,350
)
 
11,766

Discontinued operations:
 
 
 
Operating income (loss) from discontinued operations
(272
)
 
2,484

Gains on disposition of discontinued operations
10,014

 
16,885

Income from discontinued operations
9,742

 
19,369

Net income (loss)
(22,608
)
 
31,135

Less: net income attributable to nonredeemable noncontrolling interests
—

 
(4
)
Net income (loss) attributable to the common stockholders of
Columbia Property Trust, Inc.
$
(22,608
)
 
$
31,131

Per-share information – basic and diluted:

 

Income (loss) from continuing operations
$
(0.06
)
 
$
0.02

Income from discontinued operations
$
0.02

 
$
0.04

Net income (loss) attributable to the common stockholders of
Columbia Property Trust, Inc.
$
(0.04
)
 
$
0.06

Weighted-average common shares outstanding – basic and diluted
546,082

 
545,600

See accompanying notes.


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

 
(Unaudited)
 
Three months ended March 31,
 
2013
 
2012
Net income (loss) attributable to the common stockholders of Columbia Property Trust,   Inc.
$
(22,608
)
 
$
31,131

Foreign currency translation adjustment realized in discontinued operations
(83
)
 
—

Market value adjustment to interest rate swap
549

 
608

Comprehensive income (loss) attributable to the common stockholders of
     Columbia Property Trust, Inc.
(22,142
)
 
31,739

Comprehensive income attributable to noncontrolling interests
—

 
4

Comprehensive income (loss)
$
(22,142
)
 
$
31,743


See accompanying notes.




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COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2013 (UNAUDITED)
(in thousands, except per-share amounts)

 
Stockholders' Equity
 
Common Stock
 
Additional
Paid-In
Capital
 
Cumulative
Distributions
in Excess of
Earnings
 
Redeemable
Common
Stock
 
Other
Comprehensive
Income (Loss)
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
Balance, December 31, 2012
547,604

 
$
5,476

 
$
4,897,782

 
$
(1,634,531
)
 
$
(99,526
)
 
$
(5,221
)
 
$
3,163,980

Issuance of common stock
3,271

 
32

 
22,861

 
—

 
—

 
—

 
22,893

Redemptions of common stock
(6,145
)
 
(61
)
 
(38,692
)
 
—

 
—

 
—

 
(38,753
)
Decrease in redeemable common stock
—

 
—

 
—

 
—

 
(59,981
)
 
—

 
(59,981
)
Distributions to common stockholders
($0.095 per share)
—

 
—

 
—

 
(51,646
)
 
—

 
—

 
(51,646
)
Offering costs
—

 
—

 
(97
)
 
—

 
—

 
—

 
(97
)
Net loss attributable to the common stockholders of
     Columbia Property Trust, Inc.
—

 
—

 
—

 
(22,608
)
 
—

 
—

 
(22,608
)
Foreign currency translation adjustment
—

 
—

 
—

 
—

 
—

 
(83
)
 
(83
)
Market value adjustment to interest rate swap
—

 
—

 
—

 
—

 
—

 
549

 
549

Balance, March 31, 2013
544,730

 
$
5,447

 
$
4,881,854

 
$
(1,708,785
)
 
$
(159,507
)
 
$
(4,755
)
 
$
3,014,254



















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COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2012 (UNAUDITED)
(in thousands, except per-share amounts)
 
Stockholders' Equity
 
 
 
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Cumulative
Distributions
in Excess of
Earnings
 
Redeemable
Common
Stock
 
Other
Comprehensive
Income
 
Total Columbia Property Trust, Inc.
Stockholders'
Equity
 
Nonredeemable
Noncontrolling
Interests
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
 
 
Balance, December 31, 2011
546,198

 
$
5,462

 
$
4,880,806

 
$
(1,426,550
)
 
$
(113,147
)
 
$
84

 
$
3,346,655

 
$
317

 
$
3,346,972

Issuance of common stock
4,356

 
44

 
31,017

 
—

 
—

 
—

 
31,061

 
—

 
31,061

Redemptions of common stock
(3,823
)
 
(39
)
 
(24,979
)
 
—

 
—

 
—

 
(25,018
)
 
—

 
(25,018
)
Decrease in redeemable common stock
—

 
—

 
—

 
—

 
(64,303
)
 
—

 
(64,303
)
 
—

 
(64,303
)
Distributions to common stockholders
($0.125 per share)
—

 
—

 
—

 
(67,954
)
 
—

 
—

 
(67,954
)
 
—

 
(67,954
)
Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(15
)
 
(15
)
Net income attributable to common
stockholders of Columbia Property Trust, Inc.
—

 
—

 
—

 
31,131

 
—

 
—

 
31,131

 
—

 
31,131

Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
4

 
4

Market value adjustment to interest rate swap
—

 
—

 
—

 
—

 
—

 
608

 
608

 
—

 
608

Balance, March 31, 2012
546,731

 
$
5,467

 
$
4,886,844

 
$
(1,463,373
)
 
$
(177,450
)
 
$
692

 
$
3,252,180

 
$
306

 
$
3,252,486

See accompanying notes.




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COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
(Unaudited)
 
Three months ended
March 31,
 
2013
 
2012
Cash Flows from Operating Activities:
 
 
 
Net income (loss)
$
(22,608
)
 
$
31,135

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Straight-line rental income
(6,593
)
 
(809
)
Depreciation
30,627

 
30,125

Amortization
21,329

 
26,792

Impairment losses on real estate assets
16,867

 
—

Noncash interest expense
858

 
909

Gain on interest rate swaps
(1,678
)
 
(231
)
Gain on sale of discontinued operations
(10,014
)
 
(16,885
)
Changes in assets and liabilities, net of acquisitions:
 
 
 
Decrease in tenant receivables, net
3,945

 
4,061

Decrease (increase) in prepaid expenses and other assets
(5,942
)
 
2,271

Decrease in accounts payable and accrued expenses
(1,661
)
 
(2,689
)
Increase (decrease) in due to affiliates
25,280

 
(1,713
)
Increase (decrease) in deferred income
(1,886
)
 
628

Net cash provided by operating activities
48,524

 
73,594

Cash Flows from Investing Activities:
 
 
 
Net proceeds from the sale of real estate
65,928

 
57,685

Investment in real estate
(9,197
)
 
(6,327
)
Deferred lease costs paid
(2,857
)
 
(6,671
)
Net cash provided by investing activities
53,874

 
44,687

Cash Flows from Financing Activities:
 
 
 
Financing costs paid
(41
)
 
(2,721
)
Proceeds from lines of credit and notes payable
69,000

 
409,000

Repayments of lines of credit and notes payable
(86,609
)
 
(452,415
)
Issuance of common stock
22,893

 
31,061

Redemptions of common stock
(40,854
)
 
(25,261
)
Distributions paid to stockholders
(28,753
)
 
(36,893
)
Distributions paid to stockholders and reinvested in shares of our common stock
(22,893
)
 
(31,061
)
Offering costs paid
(72
)
 
—

Distributions paid to nonredeemable noncontrolling interests
—

 
(15
)
Net cash used in financing activities
(87,329
)
 
(108,305
)
Net increase in cash and cash equivalents
15,069

 
9,976

Effect of foreign exchange rate on cash and cash equivalents
(103
)
 
(288
)
Cash and cash equivalents, beginning of period
53,657

 
39,468

Cash and cash equivalents, end of period
$
68,623

 
$
49,156

See accompanying notes.


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COLUMBIA PROPERTY TRUST, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(unaudited)
1.
Organization
Columbia Property Trust, Inc. ("Columbia Property Trust") is a Maryland corporation that operates in a manner as to qualify as a real estate investment trust ("REIT") for federal income tax purposes and engages in the acquisition and ownership of commercial real estate properties, including properties that have operating histories, are newly constructed, or are under construction. 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.
From inception through February 27, 2013, Columbia Property Trust operated as an externally advised REIT pursuant to an advisory agreement under which a subsidiary of Wells Real Estate Funds ("WREF"), Columbia Property Trust Advisory Services, LLC ("Columbia Property Trust Advisory Services"), performed certain key functions on behalf of Columbia Property Trust, including, among others, managing the day-to-day operations, investing capital proceeds, and arranging financings. Also during this period of time, a subsidiary of WREF, Columbia Property Trust Services, LLC ("Columbia Property Trust Services"), provided the personnel necessary to carry out property management services on behalf of Wells Management Company, Inc. ("Wells Management") and its affiliates pursuant to a property management agreement. The advisory agreement and property management agreement are described in Note 8, Related-Party Transactions and Agreements . 
On February 28, 2013, Columbia Property Trust terminated the above-mentioned advisory agreement and property management agreement, and acquired Columbia Property Trust Advisory Services and Columbia Property Trust Services. As a result, the contractual services described above are now performed by employees of Columbia Property Trust (except for certain investor services). Contemporaneous with this transaction, Columbia Property Trust entered into a consulting agreement and an investor services agreement with WREF for the remainder of 2013. While no fees were paid to execute these acquisitions, Columbia Property Trust will pay fees to WREF for consulting and investor services for the remainder of 2013. For additional details about this transaction and the related agreements, please refer to Note 8, Related-Party Transactions and Agreements.
Columbia Property Trust typically invests in high-quality, income-generating office properties leased to creditworthy companies and governmental entities. As of March 31, 2013 , Columbia Property Trust owned controlling interests in 60 office properties and one hotel, which includes 82   operational buildings. These properties are comprised of approximately 20.8  million square feet of commercial space and are located in 19  states and the District of Columbia. As of March 31, 2013 , 59 of the office properties were wholly owned and the remaining property was owned through a consolidated subsidiary; the office properties were approximately 93.3% leased.
From December 2003 through June 2010, Columbia Property Trust raised proceeds through three uninterrupted public offerings of shares of its common stock. Columbia Property Trust is continuing to offer shares of its common stock to its current investors through its distribution reinvestment plan ("DRP") pursuant to a registration statement on Form S-3.
As of March 31, 2013 , Columbia Property Trust had raised gross offering proceeds from the sale of common stock under its public offerings of approximately $6.1 billion . After deductions from such gross offering proceeds for selling commissions and dealer-manager fees of approximately $509.5 million , acquisition fees of approximately $116.8 million , other organization and offering expenses of approximately $76.0 million , and common stock redemptions pursuant to its share redemption program of approximately $716.3 million , Columbia Property Trust had received aggregate net offering proceeds of approximately $4.7 billion . Substantially all of Columbia Property Trust's net offering proceeds have been invested in real estate.
Columbia Property Trust's stock is not listed on a public securities exchange. However, Columbia Property Trust's charter requires that in the event Columbia Property Trust's stock is not listed on a national securities exchange by October 2015, Columbia Property Trust must either seek stockholder approval to extend or amend this listing deadline or seek stockholder approval to begin liquidating investments and distributing the resulting proceeds to the stockholders. If Columbia Property Trust seeks stockholder approval to extend or amend this listing date and does not obtain it, Columbia Property Trust would then be required to seek stockholder approval to liquidate. In this circumstance, if Columbia Property Trust seeks and does not obtain approval to liquidate, Columbia Property Trust would not be required to list or liquidate and could continue to operate indefinitely as an unlisted company.


Page 11


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 its 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, 2012 .
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.
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 improvements
  
5-25 years
 
Site improvements
  
15 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 (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


Page 12


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 our assets may be carried at more than an amount that could be realized in a current disposition transaction.
Projections of expected future operating cash flows require that 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 our real estate assets and related intangible assets and net income (loss).
In connection with furthering its portfolio repositioning efforts, in the first quarter of 2013, Columbia Property Trust initiated a process to market for sale a group of 18 properties. Pursuant to the accounting policy outlined above, Columbia Property Trust evaluated the recoverability of the carrying values of each of the properties in this group and determined that the 120 Eagle Rock property in East Hanover, New Jersey and the 333 & 777 Republic Drive property in Allen Park, Michigan are no longer recoverable due to shortening the respective expected property holding periods in connection with these repositioning efforts. As a result, Columbia Property Trust reduced the carrying value of the 120 Eagle Rock property and the 333 & 777 Republic Drive property to reflect their respective fair values estimated based on projected discounted future cash flows and recorded corresponding property impairment losses of $11.7 million and $5.2 million , respectively, in the first quarter of 2013 .
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 the three months ended March 31, 2013 (in thousands) using Level 3 inputs. There were no adjustments recognized in the three months ended March 31, 2012 .
Property
 
Net Book Value
 
Impairment Loss Recognized
 
Fair Value
120 Eagle Rock

$
23,808

 
$
(11,708
)
 
$
12,100

333 & 777 Republic Drive
 
$
13,359

 
$
(5,159
)
 
$
8,200

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.
•
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, 2013 , 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


Page 13


Measurements section above for additional detail). As of March 31, 2013 and December 31, 2012 , 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, 2013
Gross
$
86,083

 
$
457,272

 
$
436,426

 
$
181,825

 
Accumulated Amortization
$
(57,331
)
 
$
(256,078
)
 
$
(239,422
)
 
$
(87,253
)
 
Net
$
28,752

 
$
201,194

 
$
197,004

 
$
94,572

December 31, 2012
Gross
$
86,696

 
$
459,931

 
$
437,857

 
$
182,624

 
Accumulated Amortization
$
(56,259
)
 
$
(248,600
)
 
$
(230,930
)
 
$
(84,326
)
 
Net
$
30,437

 
$
211,331

 
$
206,927

 
$
98,298

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, 2013
$
1,685

 
$
10,136

 
$
9,923

 
$
3,726

For the three months ended March 31, 2012
$
2,433

 
$
13,372

 
$
10,647

 
$
4,241

The remaining net intangible assets and liabilities as of March 31, 2013 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 ended December 31, 2013
$
4,943

 
$
29,631

 
$
29,459

 
$
11,068

For the years ending December 31:
 
 
 
 
 
 
 
2014
6,224

 
35,771

 
36,425

 
14,362

2015
5,810

 
32,018

 
32,980

 
12,828

2016
5,665

 
25,676

 
26,383

 
10,398

2017
2,514

 
18,635

 
19,495

 
8,306

2018
787

 
13,265

 
13,760

 
7,557

Thereafter
2,809

 
46,198

 
38,502

 
30,053

 
$
28,752

 
$
201,194

 
$
197,004

 
$
94,572

Intangible Assets and Liabilities Arising from In-Place Leases where Columbia Property Trust is the Lessee
In-place ground leases where Columbia Property Trust is the lessee may have value associated with effective contractual rental rates that are above or below market rates at the time of execution or assumption. Such values are calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place lease and (ii) management's estimate of fair market lease rates for the corresponding in-place lease at the time of execution or assumption, measured over a period equal to the remaining terms of the leases. The capitalized above-market and below-market in-place lease values are recorded as intangible lease liabilities and assets, respectively, and are amortized as an adjustment to property operating cost over the remaining term of the respective leases. Columbia Property Trust had gross below-market lease assets of approximately $110.7 million as of March 31, 2013 and December 31, 2012 , and recognized amortization of these assets of approximately $0.5 million for the three months ended March 31, 2013 and 2012 .


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As of March 31, 2013 , the remaining net below-market lease asset will be amortized as follows (in thousands):
For the nine months ended December 31, 2013
$
1,552

For the year ending December 31:
 
2014
2,069

2015
2,069

2016
2,069

2017
2,069

2018
2,069

Thereafter
87,277

 
$
99,174

Prepaid Expenses and Other Assets
Prepaid expenses and other assets primarily are comprised of escrow accounts held by lenders to pay future real estate taxes, insurance and tenant improvements, notes receivable, nontenant 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 or reclassified to other asset accounts upon being put into service in future periods.     
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 (loss) 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.
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,
2013
 
December 31,
2012
Derivatives designated as hedging instruments:
 
 
 
 
 
 
Interest rate contracts
 
Accounts payable
 
$
(4,756
)
 
$
(5,305
)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Interest rate contracts
 
Accounts payable
 
$
(11,431
)
 
$
(13,109
)

Columbia Property Trust applied the provisions of ASC 820 in recording its interest rate swaps at fair value. The fair values of the interest rate swaps, classified under Level 2, were determined using a third-party proprietary model that is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate ("LIBOR") information, and reasonable estimates about relevant future market conditions. Columbia Property Trust has determined that the fair value, as determined by the third party, is reasonable. The fair value of Columbia Property Trust's interest rate swaps were $(16.2) million and $(18.4) million at March 31, 2013 and December 31, 2012 , respectively.


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Three months ended
March 31,
 
2013
 
2012
Market value adjustment to interest rate swaps designated as hedging instruments and included in
  other comprehensive income (loss)
$
549

 
$
608

Gain (loss) on interest rate swap recognized through earnings
$
57

 
$
(76
)
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"), formerly Wells TRS II, LLC; Columbia KCP TRS, LLC ("Columbia KCP TRS"), formerly Wells KCP TRS, LLC; and Wells Energy TRS, LLC ("Wells Energy TRS") (collectively, the "TRS Entities") are wholly owned subsidiaries of Columbia Property Trust, are organized as Delaware limited liability companies, and operate, among other things, a full-service hotel. Columbia Property Trust has elected to treat the TRS Entities as taxable REIT subsidiaries. Columbia Property Trust may perform certain additional, noncustomary services for tenants of its buildings through the TRS Entities; however, any earnings related to such services are subject to federal and state income taxes. In addition, for Columbia Property Trust to continue to qualify as a REIT, Columbia Property Trust must limit its investments in taxable REIT subsidiaries to 25% of the value of the total assets. The TRS Entities' deferred tax assets and liabilities represent temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on the enacted rates expected to be in effect when the temporary differences reverse. If applicable, Columbia Property Trust records interest and penalties related to uncertain tax positions as general and administrative expense in the accompanying consolidated statements of operations.
3.
Real Estate and Other Transactions
Acquisitions
Columbia Property Trust did not acquire any real properties during the three months ended March 31, 2013 .
As described in Note 1, Organization , Columbia Property Trust acquired Columbia Property Trust Advisory Services and Columbia Property Trust Services on February 28, 2013. The following unaudited pro forma statements of operations presented for the three months ended 2013 and 2012 have been prepared for Columbia Property Trust to give effect to the acquisitions of Columbia Property Trust Advisory Services and Columbia Property Trust Services as if the acquisitions occurred on January 1, 2012. The following unaudited pro forma financial results for Columbia Property Trust have been prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisitions of Columbia Property Trust Advisory Services and Columbia Property Trust Services been consummated as of January 1, 2012 (in thousands).
 
Three months ended March 31,
 
2013
 
2012
Revenues
$
147,024

 
$
143,302

Net income attributable to common stockholders
$
11,169

 
$
4,802

Dispositions
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


Page 16


transaction costs, resulting in a gain on disposition of discontinued operations in the accompanying consolidated statement of operations of $10.0 million .
4.
Line of Credit and Notes Payable
As of March 31, 2013 and December 31, 2012 , Columbia Property Trust had the following line of credit and notes payable indebtedness outstanding (excluding bonds payable; s ee Note 5, Bonds Payable ) in thousands:
Facility
 
March 31,
2013
 
December 31,
2012
$450 Million Term Loan
 
$
450,000

 
$
450,000

Market Square Buildings mortgage note
 
325,000

 
325,000

333 Market Street Building mortgage note
 
208,122

 
208,308

100 East Pratt Street Building mortgage note
 
105,000

 
105,000

Wildwood Buildings mortgage note
 
90,000

 
90,000

263 Shuman Boulevard Building mortgage note
 
49,000

 
49,000

SanTan Corporate Center mortgage notes
 
39,000

 
39,000

One Glenlake Building mortgage note
 
36,595

 
37,204

Three Glenlake Building mortgage note
 
26,342

 
26,264

JPMorgan Chase Credit Facility
 
25,000

 
42,000

215 Diehl Road Building mortgage note
 
21,000

 
21,000

544 Lakeview Building mortgage note
 
8,876

 
8,842

Total indebtedness
 
$
1,383,935

 
$
1,401,618

The estimated fair value of Columbia Property Trust's line of credit and notes payable as of March 31, 2013 and December 31, 2012 was approximately $1,412.2 million and $1,433.1 million , respectively. Columbia Property Trust estimated the fair value of its line of credit by obtaining estimates for similar facilities from multiple market participants as of the respective reporting dates. Therefore, the fair values determined are considered to be based on observable market data for similar instruments (Level 2). The fair values of all other debt instruments were estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowing arrangements as of the respective reporting dates. The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized. During the three months ended March 31, 2013 and 2012 , Columbia Property Trust made interest payments of approximately $15.0 million and $11.7 million , respectively. There was no interest capitalized in either period. As of March 31, 2013 , Columbia Property Trust believes it was in compliance with the restrictive covenants on its term loan, outstanding line of credit, and notes payable obligations.
5.
Bonds Payable
In 2011, Columbia Property Trust issued $250.0 million of seven -year, unsecured 5.875% senior notes at 99.295% of their face value (the "2018 Bonds Payable"). Columbia Property Trust 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 2018 Bonds Payable during the three months ended March 31, 2013 . As of March 31, 2013 , Columbia Property Trust believes it was in compliance with the restrictive covenants on the 2018 Bonds Payable.
The estimated fair value of the 2018 Bonds Payable as of March 31, 2013 and December 31, 2012 was approximately $251.0 million and $250.9 million , respectively. The fair value of the 2018 Bonds Payable was estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowing as the 2018 Bonds Payable arrangements as of the respective reporting dates (Level 2). The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized.


Page 17


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, 2013 , no such options have been exercised that had not been materially satisfied.
Litigation
Columbia Property Trust is subject to various legal proceedings, claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any reasonably possible loss relating to these matters using the latest information available. Columbia Property Trust records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, Columbia Property Trust accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, Columbia Property Trust accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, Columbia Property Trust discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, Columbia Property Trust discloses the nature and estimate of the possible loss of the litigation. Columbia Property Trust does not disclose information with respect to litigation where the possibility of an unfavorable outcome is considered to be remote. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of Columbia Property Trust. Columbia Property Trust is not currently involved in any legal proceedings of which management would consider the outcome to be reasonably likely to have a material adverse effect on the results of operations or financial condition of Columbia Property Trust.
7.     Supplemental Disclosures of Noncash Investing and Financing Activities
Outlined below are significant noncash investing and financing activities for the three months ended March 31, 2013 and 2012 (in thousands):  
 
Three months ended
March 31,
 
2013
 
2012
Other assets assumed at acquisition
$
680

 
$
50

Other liabilities assumed at acquisition
$
680

 
$
—

Other liabilities settled at disposition
$
872

 
$
—

Interest accruing to notes payable
$
78

 
$
75

Amortization of discounts (premiums) on debt
$
(89
)
 
$
97

Market value adjustment to interest rate swaps that qualify for hedge accounting treatment
$
549

 
$
608

Accrued capital expenditures and deferred lease costs
$
7,300

 
$
8,660

Accrued deferred financing costs
$
—

 
$
10

Accrued offering costs
$
25

 
$
—

Accrued redemptions of common stock
$
1,554

 
$
1,397

Increase in redeemable common stock
$
59,981

 
$
64,303

 
8.
Related-Party Transactions and Agreements
Advisory Agreement
From December 2003 through February 28, 2013, Columbia Property Trust was party to uninterrupted advisory agreements with affiliates of WREF (the "Advisor"), pursuant to which the Advisor acted as Columbia Property Trust's external advisor and performed certain key functions on behalf of Columbia Property Trust, including, among others, the investment of capital proceeds and management of day-to-day operations (the "Advisory Agreement"). As discussed in detail below, in connection with Columbia Property Trust's transition to a self-managed structure, the most recent advisory agreement was terminated effective February 28, 2013.


Page 18


Under the terms of the Advisory Agreement most recently in place, Columbia Property Trust incurred fees and reimbursements payable to the Advisor for services as described below:
•
Asset management fees were incurred monthly at one-twelfth of 0.625% of the lesser of (i) gross cost, as defined, of all properties of Columbia Property Trust (other than those that failed to meet specified occupancy thresholds) and investments in joint ventures, or (ii) the aggregate value of Columbia Property Trust's interest in the properties and joint ventures as established with the most recent asset-based valuation, until the monthly payment equals $2.5 million (or $30.5 million annualized), as of the last day of each preceding month. Columbia Property Trust paid fees at the cap in January and February 2013. With respect to (ii) above, Columbia Property Trust's published net asset-based valuations did not impact asset management fees incurred due to continued applicability of the cap described above.
•
Reimbursement for all costs and expenses the Advisor incurred in fulfilling its duties as the asset portfolio manager, generally included (i) wages and salaries and other employee-related expenses of the Advisor's employees, who performed a full range of real estate services for Columbia Property Trust, including management, administration, operations, and marketing, and are billed to Columbia Property Trust based on the amount of time spent on Columbia Property Trust by such personnel, provided that such expenses are not reimbursed if incurred in connection with services for which the Advisor received a disposition fee (described below) or an acquisition fee; and (ii) amounts paid for an individual retirement account, or "IRA," custodial service costs allocated to Columbia Property Trust accounts. The Advisory Agreement limited the amount of reimbursements to the Advisor of "portfolio general and administrative expenses" and "personnel expenses," as defined, to the extent they would exceed $18.2 million and $10.0 million , respectively, for the period from January 1, 2013 through December 31, 2013 .
•
Acquisition fees were incurred at 1.0% of property purchase price (excluding acquisition expenses); however, in no event could total acquisition fees for the calendar year exceed 2.0% of total gross offering proceeds. Columbia Property Trust also reimbursed the Advisor for expenses it paid to third parties in connection with acquisitions or potential acquisitions. Per the Transition Services Agreement, as amended, discussed below, acquisition fees payable to the Advisor for 2012 and 2013 had an aggregate cap of $1.5 million . Columbia Property Trust paid acquisition fees of $1.5 million related to the acquisition on the 333 Market Street Building in San Francisco, California, in December 2012. As a result, no acquisition fees will be paid to the Advisor during 2013.
•
The disposition fee payable for the sale of any property for which the Advisor provided substantial services was the lesser of (i) 0.3% or (ii) the broker fee paid to a third-party broker in connection with the sale.
•
Reimbursement of organization and offering costs paid by the Advisor on behalf of Columbia Property Trust, not to exceed 2.0% of gross offering proceeds.
•
For January and February 2013 Columbia Property Trust paid occupancy costs of $42,000 to the Advisor's for use of dedicated office space.
Transition Services Agreement
For the period from July 1, 2012 through December 31, 2013, Columbia Property Trust, Columbia Property Trust Advisory Services, and WREF are parties to an agreement under which WREF provides services to support the transition of Columbia Property Trust from an externally advised management platform to a self-managed structure (the "Transition Services Agreement"). Pursuant to the Transition Services Agreement, (i) WREF was required to transfer the assets and employees necessary to provide the services under the Advisory Agreement (other than investor services and property management) to Columbia Property Trust Advisory Services by January 1, 2013; provided that if WREF was not able to transfer certain assets by then, WREF was required to use its commercially reasonable best efforts to transfer such delayed assets as promptly as possible, but no later than June 30, 2013; and (ii) Columbia Property Trust had the option to acquire Columbia Property Trust Advisory Services from WREF at any time during 2013 (the "Columbia Property Trust Advisory Services Assignment Option"). The Columbia Property Trust Advisory Services Assignment Option closed as of February 28, 2013. No payment was associated with the assignment; however, Columbia Property Trust is required to pay WREF for the work required to transfer sufficient employees, proprietary systems and processes, and assets to Columbia Property Trust Advisory Services to prepare for a successful transition to a self-managed structure a total of $6.0 million payable in 12 monthly installments of $0.5 million commencing on July 31, 2012. In addition, Columbia Property Trust and WREF will each pay half of any out-of-pocket and third-party costs and expenses incurred in connection with providing these services, provided that Columbia Property Trust's obligation to reimburse WREF for such expenses is limited to approximately $250,000 in the aggregate. Pursuant to the Transition Services Agreement, as amended, at the close of the Columbia Property Trust Advisory Services Assignment Option, Columbia Property Trust entered into a consulting services agreement with WREF as described below.


Page 19


On December 28, 2012, the Transition Services Agreement was amended and Wells Management and Columbia Property Trust Services were made parties to the agreement. Pursuant to the amendment, Columbia Property Trust could acquire Columbia Property Trust Services, the entity that provided personnel to carry out property management services on behalf of Wells Management and its affiliates, in connection with exercising the Columbia Property Trust Advisory Services Assignment Option.  Columbia Property Trust exercised this option on February 28, 2013. No payment was associated with this assignment; however, Columbia Property Trust is obligated to pay a fee to WREF of  approximately $2.8 million in monthly installments from July 2013 through December 2013. The fees paid under the Transition Services Agreement, as amended, are included in general and administrative expense in the accompanying consolidated statement of operations.  The Transition Services Agreement, as amended, is terminable if there is a material breach by WREF that is not cured, or if WREF is in an insolvency proceeding. Otherwise, if Columbia Property Trust elects to terminate the agreement early, all remaining payments due under the agreement will be accelerated.
Investor Services Agreement
Columbia Property Trust and WREF entered into an investor services agreement, effective January 1, 2013 through February 28, 2013, that required WREF to provide certain investor and transfer agent support services to Columbia Property Trust, which were previously provided under the advisory agreement dated March 30, 2011 (the "Investor Services Agreement"). As the sole consideration for these services, Columbia Property Trust reimbursed WREF for expenses incurred in connection with carrying out such services, subject to the cap on "portfolio general and administrative expenses" and "personnel expenses" included in the Advisory Agreement and, thus, did not incur a separate fee.
2013 Investor Services Agreement
Effective February 28, 2013, upon the effective date of the Columbia Property Trust Advisory Services Assignment Option, Columbia Property Trust entered into an agreement with WREF, which requires WREF to provide the investor and transfer agent support services to Columbia Property Trust that were previously provided for under the Investor Services Agreement (the "2013 Investor Services Agreement"). The 2013 Investor Services Agreement requires Columbia Property Trust to compensate WREF for these services by reimbursing the related expenses and payroll costs, plus a premium.
Consulting Services Agreement
On February 28, 2013, the Columbia Property Trust Advisory Services Assignment Option and Columbia Property Trust Services Assignment Option closed, and in connection therewith, the Advisory Agreement and Investor Services Agreement terminated and Columbia Property Trust entered into a consulting services agreement with WREF (the "Consulting Services Agreement"). Under the Consulting Services Agreement, WREF will provide consulting services with respect to the same matters that the Advisor provided services under the most recently effective advisory agreement. Payments under the Consulting Services Agreement are monthly fees in the same amount as the asset management fee that would have been paid under the most recently effective advisory agreement, if the most recently effective advisory agreement was not terminated. The Consulting Services Agreement will terminate on December 31, 2013. If Columbia Property Trust elects to terminate the Consulting Services Agreement early for cause, Columbia Property Trust would not be required to make further payments under the agreement other than fees earned by WREF and unpaid at the time of termination. If Columbia Property Trust terminates the Consulting Services Agreement other than for cause, Columbia Property Trust would be required to make a fee acceleration payment, which is calculated as the fees incurred in the last month prior to termination, adjusted for partial months, multiplied by the number of months remaining between the time of termination and December 31, 2013. The fees paid under the Consulting Services Agreement are included in general and administrative expense in the accompanying consolidated statement of operations.
Property Management Agreement
Columbia Property Trust was party to master property management, leasing, and construction agreements (the "Property Management Agreement") with affiliates of WREF (the "Property Manager") until February 28, 2013, on which date Columbia Property Trust terminated the Property Management Agreement contemporaneous with acquiring Columbia Property Trust Services. As a result, property management services are now performed by employees of Columbia Property Trust. While no fee was paid to execute this acquisition, Columbia Property Trust is obligated to pay a fee to WREF totaling $2.8 million from July through December 2013 for the transition of property management services to Columbia Property Trust Services.
During January and February 2013, the Property Manager received the following fees and reimbursements in consideration for supervising the management, leasing, and construction of certain Columbia Property Trust properties:
•
Property management fees in an amount equal to a percentage negotiated for each property managed by the Property Manager of the gross monthly income collected for that property for the preceding month;


Page 20


•
Leasing commissions for new, renewal, or expansion leases entered into with respect to any property for which the Property Manager serves as leasing agent equal to a percentage as negotiated for that property of the total base rental and operating expenses to be paid to Columbia Property Trust during the applicable term of the lease, provided, however, that no commission shall be payable as to any portion of such term beyond ten years;
•
Initial lease-up fees for newly constructed properties under the agreement, generally equal to one month's rent;
•
Fees equal to a specified percentage of up to 5.0% of all construction build-out funded by Columbia Property Trust, given as a leasing concession, and overseen by the Property Manager; and
•
Other fees as negotiated with the addition of each specific property covered under the agreement.
Related-Party Costs
Pursuant to the terms of the agreements described above, Columbia Property Trust incurred the following related-party costs for the three months ended March 31, 2013 and 2012 , respectively (in thousands):
 
Three months ended March 31,
 
2013
 
2012
Consulting fees (1)
$
25,417

 
$
—

Transition services (2)
5,750

 
—

Asset management fees
5,083

 
8,125

Administrative reimbursements, net (3)
1,821

 
2,752

Property management fees
523

 
1,226

Construction fees (4)
139

 
41

Investor services
91

 
—

Other
49

 
—

Total
$
38,873

 
$
12,144

(1)  
$2.5 million of the $25.4 million of consulting fees incurred were paid during the three months ended March 31, 2013. The remaining $22.9 million will be paid ratably over the remainder of 2013.
(2)  
$1.5 million of the $5.8 million of transition services fees incurred were paid during the three months ended March 31, 2013; $1.5 million will be paid in both the second and third quarters of 2013; and the remaining $1.3 million will be paid in the forth quarter of 2013.
(3)  
Administrative reimbursements are presented net of reimbursements from tenants of approximately $0.7 million and $1.1 million for the three months ended March 31, 2013 and 2012 , respectively.
(4)  
Construction fees are capitalized to real estate assets as incurred.
Columbia Property Trust incurred no related-party commissions, dealer-manager fees, offering costs, incentive fees, listing fees, acquisition fees, disposition fees, or leasing commissions during the three months ended March 31, 2013 or the three months ended March 31, 2012 .
Due to Affiliates
The detail of amounts due to WREF and its affiliates as of March 31, 2013 and December 31, 2012 (in thousands) are provided below:  
 
March 31,
2013
 
December 31,
2012
Consulting fees
$
22,875

 
$
—

Transition services
4,250

 
—

Administrative reimbursements
(44
)
 
1,360

Asset and property management fees
—

 
560

Total
$
27,081

 
$
1,920



Page 21


9.
Discontinued Operations
Discontinued Operations
The historical operating results and gains from the disposition of certain assets, including assets "held for sale" and operating properties sold, are required to be reflected in a separate section ("discontinued operations") in the consolidated statements of operations for all periods presented. As a result, the revenues and expenses of Dvintsev Business Center - Tower B (see Note 3, Real Estate and Other Transactions ); the properties included in the portfolio disposition that closed in December 2012 (the "Nine Property Sale"), consisting of the One West Fourth Street, 180 E 100 South, Baldwin Point, Tampa Commons, Lakepointe 5, Lakepointe 3, 11950 Corporate Boulevard, Edgewater Corporate Center, and 2000 Park Lane properties, which closed for $260.5 million , resulting in a net gain of $3.2 million ; and 5995 Opus Parkway and Emerald Point, which closed in January 2012 for $60.1 million , resulting in total gains of $16.9 million , are included in income from discontinued operations in the accompanying consolidated statements of operations for all periods presented.
The following table shows the revenues and expenses of the above-described discontinued operations (in thousands):
 
Three months ended March 31,
 
2013
 
2012
Revenues:
 
 
 
Rental income
$
1,307

 
$
10,389

Tenant reimbursements
177

 
914

 
1,484

 
11,303

Expenses:
 
 
 
Property operating costs
177

 
3,482

Asset and property management fees
223

 
699

Depreciation
375

 
2,240

Amortization
37

 
1,337

General and administrative
947

 
486

Total expenses
1,759

 
8,244

Real estate operating income (loss)
(275
)
 
3,059

Other income (expense):
 
 
 
Interest expense
—

 
(575
)
Interest and other income
3

 
—

Operating income (loss) from discontinued operations
(272
)
 
2,484

Gain on disposition of discontinued operations
10,014

 
16,885

Income from discontinued operations
$
9,742

 
$
19,369

10.     Financial Information for Parent Guarantor, Other Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The 2018 Bonds Payable (see Note 5, Bonds Payable ) are guaranteed by Columbia Property Trust and certain direct and indirect subsidiaries of each of Columbia Property Trust and Columbia Property Trust OP. Columbia Property Trust Advisory Services and Columbia Property Trust Services, were added to the non-guarantor grouping upon acquisition in February 2013. In March 2013, as a result of closing of the Nine Property Sale, Columbia Property Trust added four subsidiaries as guarantors to the $450.0 Million Term Loan, the JPMorgan Chase Credit Facility, and the 2018 Bonds Payable, which resulted in the reclassification of prior-period amounts between the guarantor and non-guarantor groupings within the condensed consolidating financial statements to conform with the current period presentation. In accordance with SEC Rule 3-10(d), Columbia Property Trust includes herein condensed consolidating financial information in lieu of separate financial statements of the subsidiary issuer (Columbia Property Trust OP) and Subsidiary Guarantors, as defined in the bond indenture, because all of the following criteria are met:
(1)
The subsidiary issuer (Columbia Property Trust OP) and all Subsidiary Guarantors are 100% owned by the parent company guarantor (Columbia Property Trust);
(2)
The guarantees are full and unconditional; and
(3)
The guarantees are joint and several.


Page 22


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, 2013 and December 31, 2012 (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, 2013 and 2012 (in thousands); and its condensed consolidating statements of cash flows for the three months ended March 31, 2013 and 2012 (in thousands).
Condensed Consolidating Balance Sheets (in thousands)
 
As of March 31, 2013
 
Columbia Property Trust
(Parent)
 
Columbia Property
Trust OP 
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Assets:
 
 
 
 
 
 
 
 
 
 
 
Real estate assets, at cost:
 
 
 
 
 
 
 
 
 
 
 
Land
$
—

 
$
6,241

 
$
270,261

 
$
509,834

 
$
—

 
$
786,336

Buildings and improvements, net
—

 
23,530

 
1,795,521

 
1,564,090

 
—

 
3,383,141

Intangible lease assets, net
—

 
—

 
140,067

 
189,053

 
—

 
329,120

Construction in progress
—

 
452

 
2,485

 
9,480

 
—

 
12,417

Total real estate assets
—

 
30,223

 
2,208,334

 
2,272,457

 
—

 
4,511,014

Cash and cash equivalents
20,503

 
15,070

 
17,505

 
15,545

 
—

 
68,623

Investment in subsidiaries
2,977,044

 
2,649,742

 
—

 
—

 
(5,626,786
)
 
—

Tenant receivables, net of allowance
—

 
93

 
75,743

 
63,262

 
(4,458
)
 
134,640

Prepaid expenses and other assets
178,148

 
152,380

 
4,143

 
25,028

 
(324,574
)
 
35,125

Deferred financing costs, net
—

 
7,723

 
—

 
1,901

 
—

 
9,624

Intangible lease origination costs, net
—

 
—

 
123,615

 
73,389

 
—

 
197,004

Deferred lease costs, net
—

 
61

 
54,345

 
43,379

 
—

 
97,785

Investment in development authority bonds
—

 
—

 
466,000

 
120,000

 
—

 
586,000

Total assets
$
3,175,695

 
$
2,855,292

 
$
2,949,685

 
$
2,614,961

 
$
(5,955,818
)
 
$
5,639,815

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Line of credit and notes payable
$
—

 
$
475,000

 
$
145,514

 
$
1,086,292

 
$
(322,871
)
 
$
1,383,935

Bonds payable, net
—

 
248,741

 
—

 
—

 
—

 
248,741

Accounts payable, accrued expenses, and accrued capital expenditures
1,934

 
17,044

 
31,978

 
53,206

 
(4,458
)
 
99,704

Due to affiliates
—

 
27,065

 
1,679

 
40

 
(1,703
)
 
27,081

Deferred income
—

 
41

 
13,618

 
12,362

 
—

 
26,021

Intangible lease liabilities, net
—

 
—

 
42,552

 
52,020

 
—

 
94,572

Obligations under capital leases
—

 
—

 
466,000

 
120,000

 
—

 
586,000

Total liabilities
1,934

 
767,891

 
701,341

 
1,323,920

 
(329,032
)
 
2,466,054

Redeemable Common Stock
159,507

 
—

 
—

 
—

 
—

 
159,507

Equity:
 
 
 
 
 
 
 
 
 
 
 
Total equity
3,014,254

 
2,087,401

 
2,248,344

 
1,291,041

 
(5,626,786
)
 
3,014,254

Total liabilities, redeemable common stock, and equity
$
3,175,695

 
$
2,855,292

 
$
2,949,685

 
$
2,614,961

 
$
(5,955,818
)
 
$
5,639,815






Page 23


Condensed Consolidating Balance Sheets (in thousands)
 
As of December 31, 2012
 
Columbia Property Trust
(Parent)
 
Columbia Property
Trust OP 
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Assets:
 
 
 
 
 
 
 
 
 
 
 
Real estate assets, at cost:
 
 
 
 
 
 
 
 
 
 
 
Land
$
—

 
$
6,241

 
$
271,757

 
$
511,239

 
$
—

 
$
789,237

Building and improvements, net
—

 
16,513

 
1,812,882

 
1,638,823

 
—

 
3,468,218

Intangible lease assets, net
—

 
—

 
146,448

 
195,012

 
—

 
341,460

Construction in progress
—

 
5,252

 
2,505

 
4,923

 
—

 
12,680

Total real estate assets
—

 
28,006

 
2,233,592

 
2,349,997

 
—

 
4,611,595

Cash and cash equivalents
20,914

 
4,822

 
13,673

 
14,248

 
—

 
53,657

Investment in subsidiaries
3,068,106

 
2,679,950

 
—

 
—

 
(5,748,056
)
 
—

Tenant receivables, net of allowance
—

 
22

 
72,283

 
66,017

 
(4,223
)
 
134,099

Prepaid expenses and other assets
178,131

 
203,589

 
1,531

 
26,806

 
(380,684
)
 
29,373

Deferred financing costs, net
—

 
8,498

 
—

 
1,992

 
—

 
10,490

Intangible lease origination costs, net
—

 
—

 
129,947

 
76,980

 
—

 
206,927

Deferred lease costs, net
—

 
68

 
54,900

 
43,840

 
—

 
98,808

Investment in development authority bonds
—

 
—

 
466,000

 
120,000

 
—

 
586,000

Total assets
$
3,267,151

 
$
2,924,955

 
$
2,971,926

 
$
2,699,880

 
$
(6,132,963
)
 
$
5,730,949

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Lines of credit and notes payable
$
—

 
$
492,000

 
$
145,974

 
$
1,142,644

 
$
(379,000
)
 
$
1,401,618

Bonds payable, net
—

 
248,678

 
—

 
—

 
—

 
248,678

Accounts payable, accrued expenses, and accrued capital expenditures
3,645

 
12,417

 
39,834

 
51,185

 
(4,223
)
 
102,858

Due to affiliates
—

 
960

 
1,593

 
1,051

 
(1,684
)
 
1,920

Deferred income
—

 
81

 
16,748

 
11,242

 
—

 
28,071

Intangible lease liabilities, net
—

 
—

 
44,201

 
54,097

 
—

 
98,298

Obligations under capital leases
—

 
—

 
466,000

 
120,000

 
—

 
586,000

Total liabilities
3,645

 
754,136

 
714,350

 
1,380,219

 
(384,907
)
 
2,467,443

Redeemable Common Stock
99,526

 
—

 
—

 
—

 
—

 
99,526

Equity:
 
 
 
 
 
 
 
 
 
 
 
Total equity
3,163,980

 
2,170,819

 
2,257,576

 
1,319,661

 
(5,748,056
)
 
3,163,980

Total liabilities, redeemable common stock, and equity
$
3,267,151

 
$
2,924,955

 
$
2,971,926

 
$
2,699,880

 
$
(6,132,963
)
 
$
5,730,949



Page 24


Consolidating Statements of Operations (in thousands)
 
For the three months ended March 31, 2013
 
Columbia Property Trust
(Parent)
 
Columbia Property
Trust OP 
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
101

 
$
64,613

 
$
51,421

 
$
(1,014
)
 
$
115,121

Tenant reimbursements
—

 
103

 
14,961

 
11,046

 
(678
)
 
25,432

Hotel income
—

 
—

 
—

 
4,954

 
—

 
4,954

Other property income
—

 
17

 
—

 
1,681

 
(1,410
)
 
288

 
—

 
221

 
79,574

 
69,102

 
(3,102
)
 
145,795

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Property operating costs
—

 
475

 
22,456

 
21,639

 
(858
)
 
43,712

Hotel operating costs
—

 
—

 
—

 
5,192

 
(931
)
 
4,261

Asset and property management fees:
 
 
 
 
 
 
 
 
 
 
 
Related-party
5,018

 
3

 
823

 
978

 
(1,281
)
 
5,541

Other
—

 
—

 
262

 
438

 
—

 
700

Depreciation
—

 
233

 
16,132

 
13,887

 
—

 
30,252

Amortization
—

 
7

 
12,782

 
9,121

 
—

 
21,910

Impairment loss on real estate assets
—

 
—

 
5,159

 
11,708

 
—

 
16,867

General and administrative
—

 
33,705

 
937

 
2,790

 
(525
)
 
36,907

 
5,018

 
34,423

 
58,551

 
65,753

 
(3,595
)
 
160,150

Real estate operating (loss) income
(5,018
)
 
(34,202
)
 
21,023

 
3,349

 
493

 
(14,355
)
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
—

 
(8,177
)
 
(10,038
)
 
(13,773
)
 
4,728

 
(27,260
)
Interest and other income (expense)
1,997

 
2,732

 
7,307

 
1,803

 
(4,728
)
 
9,111

Gain on interest rate swaps
—

 
—

 
—

 
57

 
—

 
57

Income (loss) from equity investment
(19,587
)
 
18,301

 
—

 
—

 
1,286

 
—

 
(17,590
)
 
12,856

 
(2,731
)
 
(11,913
)
 
1,286

 
(18,092
)
Income (loss) before income tax benefit (expense)
(22,608
)
 
(21,346
)
 
18,292

 
(8,564
)
 
1,779

 
(32,447
)
Income tax benefit (expense)
—

 
(1
)
 
(62
)
 
160

 
—

 
97

Income (loss) from continuing operations
(22,608
)
 
(21,347
)
 
18,230

 
(8,404
)
 
1,779

 
(32,350
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
Operating income from discontinued operations
—

 
658

 
19

 
(949
)
 
—

 
(272
)
Gain on disposition of discontinued operations
—

 
—

 
—

 
10,014

 
—

 
10,014

Income from discontinued operations
—

 
658

 
19

 
9,065

 
—

 
9,742

Net income (loss) attributable to the common stockholders of Columbia Property Trust, Inc.
$
(22,608
)
 
$
(20,689
)
 
$
18,249

 
$
661

 
$
1,779

 
$
(22,608
)








Page 25


Consolidating Statements of Operations (in thousands)

 
For the three months ended March 31, 2012
 
Columbia Property Trust
(Parent)
 
Columbia Property
Trust OP 
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
1,361

 
$
64,682

 
$
44,893

 
$
(750
)
 
$
110,186

Tenant reimbursements
—

 
16

 
14,934

 
10,130

 
—

 
25,080

Hotel income
—

 
—

 
—

 
4,375

 
—

 
4,375

Other property income
—

 
36

 
201

 
1,604

 
(142
)
 
1,699

 
—

 
1,413

 
79,817

 
61,002

 
(892
)
 
141,340

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Property operating costs
—

 
542

 
20,826

 
19,976

 
(106
)
 
41,238

Hotel operating costs
—

 
—

 
—

 
4,847

 
(750
)
 
4,097

Asset and property management fees:
 
 
 
 
 
 
 
 
 
 
 
Related-party
7,557

 
43

 
588

 
668

 
(36
)
 
8,820

Other
—

 
—

 
418

 
283

 
—

 
701

Depreciation
—

 
173

 
15,756

 
11,956

 
—

 
27,885

Amortization
—

 
338

 
15,293

 
10,088

 
—

 
25,719

General and administrative
—

 
4,354

 
205

 
311

 
—

 
4,870

 
7,557

 
5,450

 
53,086

 
48,129

 
(892
)
 
113,330

Real estate operating income (loss)
(7,557
)
 
(4,037
)
 
26,731

 
12,873

 
—

 
28,010

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
—

 
(7,804
)
 
(10,072
)
 
(13,166
)
 
4,761

 
(26,281
)
Interest and other income (expense)
1,997

 
2,767

 
7,307

 
2,706

 
(4,761
)
 
10,016

Loss on interest rate swaps
—

 
—

 
—

 
(76
)
 
—

 
(76
)
Income (loss) from equity investment
36,691

 
43,680

 
—

 
—

 
(80,371
)
 
—

 
38,688

 
38,643

 
(2,765
)
 
(10,536
)
 
(80,371
)
 
(16,341
)
Income (loss) before income tax benefit (expense)
31,131

 
34,606

 
23,966

 
2,337

 
(80,371
)
 
11,669

Income tax benefit (expense)
—

 
(11
)
 
(68
)
 
176

 
—

 
97

Income (loss) from continuing operations
31,131

 
34,595

 
23,898

 
2,513

 
(80,371
)
 
11,766

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
Operating loss from discontinued operations
—

 
1,699

 
664

 
121

 
—

 
2,484

Gain on disposition of discontinued operations
—

 
—

 
—

 
16,885

 
—

 
16,885

Income from discontinued operations
—


1,699

 
664

 
17,006

 
—

 
19,369

Net income (loss)
31,131

 
36,294

 
24,562

 
19,519

 
(80,371
)
 
31,135

Less: net income attributable to noncontrolling interests
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Net income (loss) attributable to the common stockholders of Columbia Property Trust, Inc.
$
31,131

 
$
36,294

 
$
24,562

 
$
19,515

 
$
(80,371
)
 
$
31,131









Page 26


Consolidating Statements of Comprehensive Income (in thousands)
 
For the three months ended March 31, 2013
 
Columbia Property Trust
(Parent)
 
Columbia Property
Trust OP 
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Net income (loss) attributable to the common stockholders of Columbia Property Trust, Inc.
$
(22,608
)
 
$
(20,689
)
 
$
18,249

 
$
661

 
$
1,779

 
$
(22,608
)
Foreign currency translation adjustment
(83
)
 
—

 
—

 
(83
)
 
83

 
(83
)
Market value adjustment to interest rate swap
549

 
549

 
—

 
—

 
(549
)
 
549

Comprehensive income (loss)
$
(22,142
)
 
$
(20,140
)
 
$
18,249

 
$
578

 
$
1,313

 
$
(22,142
)
 
For the three months ended March 31, 2012
 
Columbia Property Trust
(Parent)
 
Columbia Property
Trust OP 
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Consolidating
adjustments
 
Columbia Property Trust
(Consolidated)
Net income (loss) attributable to the common stockholders of Columbia Property Trust, Inc.
$
31,131

 
$
36,294

 
$
24,562

 
$
19,515

 
$
(80,371
)
 
$
31,131

Market value adjustment to interest rate swap
608

 
608

 
—

 
—

 
(608
)
 
608

Comprehensive income (loss) attributable to the common stockholders of Columbia Property Trust, Inc.
31,739

 
36,902

 
24,562

 
19,515

 
(80,979
)
 
31,739

Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
4

 
—

 
4

Comprehensive income (loss)
$
31,739

 
$
36,902

 
$
24,562

 
$
19,519

 
$
(80,979
)
 
$
31,743







Page 27


Consolidating Statements of Cash Flows (in thousands)

 
For the three months ended March 31, 2013
 
Columbia Property Trust
(Parent)
 
Columbia Property Trust OP
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Columbia Property Trust
(Consolidated)
Cash flows from operating activities:
$
—

 
$
(21,051
)
 
$
47,463

 
$
22,112

 
$
48,524

 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Net proceeds from sale of real estate
—

 
65,928

 
—

 
—

 
65,928

Investment in real estate and related assets
—

 
(2,481
)
 
(2,790
)
 
(6,783
)
 
(12,054
)
Net cash provided by (used in) investing activities
—

 
63,447

 
(2,790
)
 
(6,783
)
 
53,874

 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Borrowings, net of fees
—

 
69,000

 
—

 
(41
)
 
68,959

Repayments
—

 
(86,000
)
 
—

 
(609
)
 
(86,609
)
Issuance of common stock, net of redemptions and fees
(18,033
)
 
—

 
—

 
—

 
(18,033
)
Distributions
(51,646
)
 
—

 
—

 
—

 
(51,646
)
Intercompany transfers, net
69,268

 
(15,148
)
 
(40,841
)
 
(13,279
)
 
—

Net cash provided by (used in) financing activities
(411
)
 
(32,148
)
 
(40,841
)
 
(13,929
)
 
(87,329
)
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(411
)
 
10,248

 
3,832

 
1,400

 
15,069

Effect of foreign exchange rate on cash and cash equivalents
—

 
—

 
—

 
(103
)
 
(103
)
Cash and cash equivalents, beginning of period
20,914

 
4,822

 
13,673

 
14,248

 
53,657

Cash and cash equivalents, end of period
$
20,503

 
$
15,070

 
$
17,505

 
$
15,545

 
$
68,623




Page 28


Consolidating Statements of Cash Flows (in thousands)

 
For the three months ended March 31, 2012
 
Columbia Property Trust
(Parent)
 
Columbia Property Trust OP
(the Issuer)
 
Guarantors
 
Non-
Guarantors
 
Columbia Property Trust
(Consolidated)
Cash flows from operating activities:
$
—

 
$
(19,952
)
 
$
59,790

 
$
33,756

 
$
73,594

 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Net proceeds from sale of real estate
—

 
57,685

 
—

 
—

 
57,685

Investment in real estate and related assets
—

 
(291
)
 
(7,260
)
 
(5,447
)
 
(12,998
)
Net cash provided by (used in) investing activities
—

 
57,394

 
(7,260
)
 
(5,447
)
 
44,687

 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Borrowings, net of fees
—

 
406,279

 
—

 
—

 
406,279

Repayments
—

 
(418,000
)
 
—

 
(34,415
)
 
(452,415
)
Issuance of common stock, net of redemptions and fees
5,800

 
—

 
—

 
—

 
5,800

Distributions
(67,954
)
 
—

 
—

 
(15
)
 
(67,969
)
Intercompany transfers
73,442

 
(28,194
)
 
(55,050
)
 
9,802

 
—

Net cash provided by (used in) financing activities
11,288

 
(39,915
)
 
(55,050
)
 
(24,628
)
 
(108,305
)
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
11,288

 
(2,473
)
 
(2,520
)
 
3,681

 
9,976

Effect of foreign exchange rate on cash and cash equivalents
—

 
—

 
—

 
(288
)
 
(288
)
Cash and cash equivalents, beginning of period
11,291

 
10,597

 
9,134

 
8,446

 
39,468

Cash and cash equivalents, end of period
$
22,579

 
$
8,124

 
$
6,614

 
$
11,839

 
$
49,156


11.
Subsequent Event
Columbia Property Trust has evaluated subsequent events in connection with the preparation of the consolidated financial statements and notes thereto included in this report on Form 10-Q and noted the following item in addition to those disclosed elsewhere in this report:
On May 7, 2013, the Board of Directors declared distributions to stockholders for the second quarter of 2013 in the amount of $0.095 (9.5 cents) per share on the outstanding shares of common stock payable to stockholders of record as of June 15, 2013. Such distributions will be paid in June 2013.



Page 29


ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements (and notes thereto) and the "Cautionary Note Regarding Forward-Looking Statements" preceding Part I of this report, as well as our consolidated financial statements (and the notes thereto) and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2012 .
Overview
From 2004 through 2010, we raised approximately $5.8 billion in gross equity proceeds and, along with borrowings, invested those proceeds, net of fees, into commercial real estate consisting of high-quality, income-producing office and industrial properties leased to creditworthy entities located in major metropolitan areas throughout the United States. 
Following our initial growth period, we have concentrated on actively managing our assets and pursuing a variety of strategic opportunities focused on enhancing the composition of our portfolio and the total return potential for the REIT. In early 2012, we consummated a series of favorable debt transactions, which allowed us to improve our secured-to-unsecured debt mix and to lower our total cost of borrowings without disrupting the laddering of our debt maturities or materially altering our aggregate borrowing levels. Later in 2012, we shifted our focus towards repositioning our portfolio to optimize our geographic market concentration. Over the past two quarters, we have made progress on this objective by disposing of nine properties situated in secondary markets for a gross selling price of $260.5 million, and recycling those sale proceeds into the acquisition of the 333 Market Street Building in San Francisco, California for $395.3 million, in December 2012; and, more recently, selling Dvintsev Business Center - Tower B in Moscow, Russia for a gross selling price of $67.5 million in March 2013. We are continuing to advance our portfolio repositioning efforts in 2013. Recently, we initiated a process to market for sale a group of 18 additional properties with an aggregate carrying value of approximately $530 million, the disposition of which would further enhance our concentration in strategic geographical markets and strengthen the underlying real estate fundamentals of our portfolio.
In connection with preparing for various liquidity options, we established and carried out a plan to transition our externally advised management platform to a self-managed structure, which culminated on February 28, 2013, upon terminating the advisory and property management agreements and acquiring Columbia Property Trust Advisory Services and Columbia Property Trust Services, including the employees necessary to perform the requisite corporate and property management functions previously performed by our external advisor and property manager. We will continue to prepare for liquidity options through the remainder of 2013 by, among other things, further refining our portfolio in an effort to enhance the REIT's value potential and, consequently, its attractiveness to future investors. Our goal is to optimize the allocation between our traditional, stabilized core investments, and growth-oriented, core-plus, and value-added investments, which have an expectation for meaningful upside potential in net operating income and value over the intermediate term. We will also continue to focus on our market concentration by building on our economic presence in key markets.
Liquidity and Capital Resources
Overview
In 2012 and 2013, we actively managed our real estate portfolio with an emphasis on leasing and re-leasing space, and pursuing and closing on strategic acquisitions and dispositions to concentrate our market focus. During this period, we also enhanced our capital structure by continuing to raise net equity proceeds through our DRP, improving the composition, maturities and capacity of our debt portfolio while lowering our overall borrowing costs, accessing new sources of capital, and identifying additional sources of future capital.
In determining how and when to allocate cash resources, we initially consider the source of the cash. We reserve a portion of operating cash flows to fund capital expenditures for our existing portfolio. The amount of distributions that we pay to our common stockholders is determined by our board of directors and is dependent upon a number of factors, including the funds available for distribution to common stockholders, our financial condition, our capital expenditure requirements, our expectations of future sources of liquidity, and the annual distribution requirements necessary to maintain our status as a REIT under the Code. When evaluating funds available for stockholder distributions, we consider net cash provided by operating activities, as presented in the accompanying GAAP-basis consolidated statements of cash flows, adjusted to exclude certain costs that were incurred for the purpose of generating future earnings and appreciation in value over the long term, including acquisition fees and expenses. We use DRP proceeds to fund share redemptions (subject to the limitations of our share redemption program), and make residual DRP proceeds available to fund capital improvements for our existing portfolio, additional real estate investments, and other cash needs.


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Short-term Liquidity and Capital Resources
During the three months ended March 31, 2013 , we generated net cash flows from operating activities of $48.5 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 $51.6 million , which includes $22.9 million reinvested in our common stock pursuant to our DRP. In the event that distributions exceed current-period and prior-period accumulated operating cash flow, borrowings are used to pay stockholder distributions. We expect to use the majority of our future net cash flow from operating activities to fund distributions to stockholders and capital improvements to our existing assets.
During the three months ended March 31, 2013 , we sold the Dvintsev Business Center - Tower B for net proceeds of $65.9 million and generated net proceeds from the sale of common stock under our DRP of $22.9 million . We used these proceeds, along with cash on hand, to fund share redemptions of $40.9 million , capital expenditures of $12.1 million , and net debt repayments of $17.6 million .
We believe that we have adequate liquidity and capital resources to meet our current obligations as they come due. As of April 30, 2012, we had access to the borrowing capacity under the JPMorgan Chase Credit Facility of $468.0 million.
Long-term Liquidity and Capital Resources
Over the long term, we expect that our primary sources of capital will include operating cash flows, proceeds from our DRP, proceeds from secured or unsecured borrowings from third-party lenders, and, if and when deemed appropriate, proceeds from strategic property sales. We expect that our primary uses of capital will continue to include stockholder distributions; redemptions of shares of our common stock under our share redemption program; capital expenditures, such as building improvements, tenant improvements, and leasing costs; repaying or refinancing debt; and selective property acquisitions, either directly or through investments in joint ventures.
Consistent with our financing objectives and operational strategy, we continue to maintain low debt levels, historically less than 40% of the cost of our assets. This conservative leverage goal could reduce the amount of current income we can generate for our stockholders, but it also reduces their risk of loss. We believe that preserving investor capital while generating stable current income is in the best interest of our stockholders. Our debt-to-real-estate-asset ratio is calculated using the outstanding debt balance and real estate at cost. As of March 31, 2013 , our debt-to-real-estate-asset ratio was approximately 28.7%.
For the first three quarters of 2012, quarterly stockholder distributions were declared and paid at $0.125 per share, consistent with the rate paid throughout 2011. In the fourth quarter of 2012, our board of directors elected to reduce the quarterly stockholder distribution rate to $0.095 per share. Economic downturns in certain of our geographic markets and in certain industries in which our tenants operate have impacted our recent leasing activities and caused our current and future operating cash flows to experience some deterioration. During 2012, we renewed leases for 9.2% of our portfolio, based on square footage, which resulted in tenant concessions of $49.7 million. Furthermore, in preparing for various liquidity options, our board decided to adjust our distribution payment policy to reserve additional operating cash flow to fund capital expenditures for our existing portfolio and to provide additional financial flexibility as we begin to shape our portfolio through the strategic sale and redeployment of capital proceeds in furtherance of our investment objectives, which include concentrating our market focus. Our board of directors elected to maintain the distribution rate of $0.095 for the first and second quarters of 2 013. We are continuing to monitor our cash flows and market conditions and to assess their impact on our future earnings and future distribution decisions.


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Debt Covenants  
Our portfolio debt instruments, the $450 Million Term Loan, the JPMorgan Chase Credit Facility, and the unsecured senior notes, contain certain covenants and restrictions that require us to meet certain financial ratios, including the following key financial covenants and respective covenant levels as of March 31, 2013 :
 
 
 
Covenant Level
 
Actual Performance
March 31, 2013
JP Morgan Chase Credit Facility and $450 Million Term Loan:
 
 
 
 
Total debt to total asset value ratio
 
Less than 50%
 
34
%
Secured debt to total asset value ratio
 
Less than 40% 
 
19
%
Fixed charge coverage ratio
 
Greater than 1.75x
 
2.27x

Unencumbered interest coverage ratio
 
Greater than 2.0x
 
6.30x

Unencumbered asset coverage ratio
 
Greater than 2.0x
 
3.44x

Unsecured Senior Notes due 2018:
 
 
 
 

Aggregate debt test
 
Less than 60%
 
28
%
Debt service test
 
Greater than 1.5x
 
3.76x

Secured debt test
 
Less than 40%
 
15
%
Maintenance of total unencumbered assets
 
Greater than 150%
 
568
%
We were in compliance with all of our debt covenants as of March 31, 2013 . Currently, we expect to continue to meet the requirements of our debt covenants over the short and long term.
Contractual Commitments and Contingencies
As of March 31, 2013 , our contractual obligations will become payable in the following periods (in thousands):
Contractual Obligations
 
Total
 
2013
 
2014-2015
 
2016-2017
 
Thereafter
Debt obligations
 
$
1,632,535

 
$
28,223

 
$
336,035

 
$
670,102

 
$
598,175

Interest obligations on debt (1)
 
367,865

 
55,356

 
133,614

 
82,651

 
96,244

Capital lease obligations (2)
 
586,000

 
466,000

 
—

 
—

 
120,000

Operating lease obligations
 
221,189

 
2,557

 
5,113

 
5,259

 
208,260

Total
 
$
2,807,589

 
$
552,136

 
$
474,762

 
$
758,012

 
$
1,022,679

(1)  
Interest obligations on variable-rate debt are measured at the rate at which they are effectively fixed with interest rate swap agreements (where applicable), a portion of which is reflected as gain (loss) on interest rate swaps in our accompanying consolidated statements of operations. Interest obligations on all other debt are measured at the contractual rate. See Item 3, Quantitative and Qualitative Disclosure About Market Risk, for more information regarding our interest rate swaps.
(2)  
Amounts include principal obligations only. We made interest payments on these obligations of $9.1 million during the three months ended March 31, 2013 , all of which was funded with interest income earned on the corresponding investments in development authority bonds.
Results of Operations
Overview
As of March 31, 2013 , we owned controlling interests in 60 office properties, which were approximately 93.3% leased, and one hotel. Our real estate operating results have decreased for the three months ended March 31, 2013 , as compared to the same periods in 2012 , primarily due to fees payable to WREF incurred in the first quarter of 2013, included in general and administrative expense in our accompanying statement of operations. In the near term, absent future acquisitions or dispositions, we expect future real estate operating income to fluctuate primarily based on acquisitions, dispositions, and leasing activities for our portfolio.
Comparison of the three months ended March 31, 2013 versus the three months ended March 31, 2012
Rental income was $115.1 million for the three months ended March 31, 2013 , which represents an increase as compared to $110.2 million for the three months ended March 31, 2012 , primarily due to the acquisition of the 333 Market Street Building in


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December 2012, partially offset by the impact of 2012 leasing activities. Absent changes to our portfolio or the leases currently in place at our properties, future rental income is expected to remain at similar levels in future periods.
Tenant reimbursements remained relatively stable at $25.4 million for the three months ended March 31, 2013 , as compared to $25.1 million for the three months ended March 31, 2012 . Property operating costs, however, increased to $43.7 million for the three months ended March 31, 2013 , as compared to $41.2 million for the three months ended March 31, 2012 , primarily due to increases in property taxes, resulting from annual reassessments, and ice and snow removal costs. Tenant reimbursements of the additional 2013 property operating costs were neutralized by the impact of concessions offered with new and modified leases. Absent changes to our portfolio, over the near term, tenant reimbursements and property operating costs are expected to fluctuate in a similar manner based on leasing activities.
Hotel income, net of hotel operating costs, was $0.7 million for the three months ended March 31, 2013 , which represents an increase as compared to $0.3 million for the three months ended March 31, 2012 , due to increased food and beverage sales. 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 $0.3 million for the three months ended March 31, 2013 , which represents a decrease as compared to $1.7 million for the three months ended March 31, 2012 , primarily due to fees earned in connection with additional lease terminations in the first quarter of 2012. Future other property income fluctuations are expected to primarily relate to future lease restructuring and termination activities.
Asset and property management fees were $6.2 million for the three months ended March 31, 2013 , which represents a decrease as compared to $9.5 million for the three months ended March 31, 2012 , due to terminating the Advisory Agreement effective February 28, 2013 as further discussed in Note 8, Related-Party Transactions and Agreements . Thus, going forward, no related-party asset management fees will be incurred, as such services will be performed by employees of Columbia Property Trust.
Depreciation was $30.3 million for the three months ended March 31, 2013 , which represents an increase as compared to $27.9 million for the three months ended March 31, 2012 , primarily due to the acquisition of the 333 Market Street building in December 2012. Excluding the impact of acquisitions, dispositions, and changes to the leases currently in place at our properties, depreciation is expected to continue to increase in future periods, as compared to historical periods, due to ongoing capital improvements to our properties.
Amortization was $21.9 million for the three months ended March 31, 2013 , which represents a decrease as compared to $25.7 million for the three months ended March 31, 2012 , primarily due to the expiration of in-place leases at our properties in 2012 and 2013, partially offset by the acquisition of 333 Market Street in December 2012. Future amortization is expected to fluctuate, primarily based on the expiration of additional in-place leases, offset by amortization of deferred lease costs incurred in connection with recent leasing activity and in-place leases at acquired properties.
We recognized an impairment loss of $16.9 million in the first quarter of 2013 to reduce the carrying values of the 120 Eagle Rock and 333 & 777 Republic Drive properties to their estimated fair values in connection with refining our disposition strategy for these assets as a result of initiating a process to market for sale a group of 18 properties. We expect future impairment losses on real estate assets to be dependent upon the nature and timing of future disposition activities.
General and administrative expenses were $36.9 million for the three months ended March 31, 2013 , which represents an increase as compared to $4.9 million for the three months ended March 31, 2012 , primarily due to the contractual impact of transitioning to a self-managed platform (see Note 8, Related-Party Transactions and Agreements for details). As a result, for the first quarter of 2013, general and administrative expenses include all of the fees payable under the Consulting Service Agreement and the Transition Services Agreement, as amended, during 2013. General and administrative expenses are expected to decrease in the near term as we do not expect to incur additional fees under either agreement going forward.
Interest expense was $27.3 million for the three months ended March 31, 2013 , which represents a slight increase as compared to $26.3 million for the three months ended March 31, 2012 , primarily due to the 333 Market Street Building mortgage note assumed at acquisition in December 2012, partially offset by lowering our weighted-average cost of borrowing upon executing the $450 Million Term Loan and the settlement of the development authority bonds and the related obligation under capital lease related to One Glenlake Parkway Building in December 2012. Absent acquisition activity, interest expense is expected to remain at comparable levels in the near term, and decrease over the longer term, as $466.0 million of our $586.0 million total capital lease obligations mature in December 2013.


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Interest and other income was $9.1 million for the three months ended March 31, 2013 , which represents a slight decrease as compared to $10.0 million for the three months ended March 31, 2012 , due to the settlement of the development authority bonds and the related obligation under capital lease related to One Glenlake Parkway Building in December 2012. Interest income is expected to remain at comparable levels in the near term, as the majority of this activity consists of interest income earned on investments in development authority bonds with a weighted-average remaining term of approximately 2.6 years as of March 31, 2013 , and decrease significantly over the longer term, as $466.0 million of our $586.0 million total development authority bonds mature in December 2013. Interest income earned on investments in development authority bonds is entirely offset by interest expense incurred on the corresponding capital leases.
We recognized a gain (loss) on interest rate swaps that do not qualify for hedge accounting treatment of approximately $57,000 for the three months ended March 31, 2013 , compared to $(76,000) for the three months ended March 31, 2012 . We anticipate 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.
Income from discontinued operations was approximately $9.7 million for the three months ended March 31, 2013 and $19.4 million for the three months ended March 31, 2012 . As further explained in Note 9, Discontinued Operations, to the accompanying consolidated financial statements, properties meeting certain criterion for disposal are classified as "discontinued operations" in the accompanying consolidated statements of operations for all periods presented. For the periods presented, discontinued operations include Dvintsev Business Center - Tower B, which closed in March 2013 for a net gain of $10.0 million; the Nine Property Sale, which closed in December 2012 for a net gain of $3.2 million after recognizing an $18.5 million impairment loss on the 180 E 100 South Building, one of the properties in the Nine Property Sale; and 5995 Opus Parkway and Emerald Point, which both closed in January 2012 for total gains of $16.9 million.
Net income (loss) attributable to Columbia Property Trust was $(22.6) million , or $(0.04) per share, for the three months ended March 31, 2013 , which represents a decrease as compared to $31.1 million , or $0.06 per share, for the three months ended March 31, 2012 . The decrease is primarily due to incurring $28.6 million under the Transition Services Agreement, as amended, and the Consulting Services Agreement, as described in Note 8, Related-Party Transactions and Agreements, of the accompanying consolidated financial statements; and changes in disposition activity between the periods presented. We expect earnings to improve due to the nonrecurring transition services and consulting fees incurred in the first quarter of 2013. Should the U.S. economic recovery remain sluggish, or the U.S. real estate markets remain depressed for a prolonged period of time, the creditworthiness of our tenants and our ability to achieve market rents comparable to the leases currently in place at our properties may suffer and could lead to a decline in net income over the long term.
Funds From Operations and Adjusted Funds From Operations
Funds from Operations ("FFO"), as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), is a non-GAAP financial measure considered by some equity REITs in evaluating operating performance. FFO is computed as GAAP net income (loss) regardless of classification as continuing or discontinuing operations, adjusted to exclude: extraordinary items, gains (or losses) from property sales (including deemed sales and settlements of pre-existing relationships), depreciation and amortization of real estate assets, impairment losses related to sales of real estate assets, and adjustments for earnings allocated to noncontrolling interests in consolidated partnerships. We believe it is useful to consider GAAP net income, adjusted to exclude the above-mentioned items, when assessing our performance because excluding the above-described adjustments highlights the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be readily apparent from GAAP net income alone. We do not, however, believe that FFO is the best measure of the sustainability of our operating performance. Changes in the GAAP accounting and reporting rules that were put into effect after the establishment of NAREIT's definition of FFO in 1999 are resulting in the inclusion of a number of items in FFO that do not correlate with the sustainability of our operating performance (e.g., acquisition expenses, market value adjustments to interest rate swaps, and amortization of certain in-place lease intangible assets and liabilities, among others). Therefore, in addition to FFO, we present Adjusted Funds from Operations (or "AFFO"), a non-GAAP financial measure. AFFO is calculated by adjusting FFO to exclude the income and expenses that we believe are not reflective of the sustainability of our ongoing operating performance, as further explained below:
•
Additional amortization of lease assets (liabilities). GAAP implicitly assumes that the value of intangible lease assets (liabilities) diminishes predictably over time and, thus, requires these charges to be recognized ratably over the respective lease terms. Such intangible lease assets (liabilities) arise from the allocation of acquisition price related to direct costs associated with obtaining a new tenant, the value of opportunity costs associated with lost rentals, the value of tenant relationships, and the value of effective rental rates of in-place leases that are above or below market rates of comparable leases at the time of acquisition. Like real estate values, market lease rates in aggregate have historically risen or fallen


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with local market conditions. As a result, we believe that by excluding these charges, AFFO provides useful supplemental information that is reflective of the performance of our real estate investments, which is useful in assessing the sustainability of our operations.
•
Straight-line rental income. In accordance with GAAP, rental payments are recognized as income on a straight-line basis over the terms of the respective leases. Thus, for any given period, straight-line rental income represents the difference between the contractual rental billings for that period and the average rental billings over the lease term for the same length of time. This application results in income recognition that can differ significantly from the current contract terms. By adjusting for this item, we believe AFFO provides useful supplemental information reflective of the realized economic impact of our leases, which is useful in assessing the sustainability of our operating performance.
•
Loss on interest rate swaps and remeasurement of loss on foreign currency. These items relate to fair value adjustments, which are based on the impact of current market fluctuations, underlying market conditions and the performance of the specific holding, which is not attributable to our current operating performance. By adjusting for this item, we believe that AFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals (rather than anticipated gains or losses that may never be realized), which is useful in assessing the sustainability of our operations.
•
Noncash interest expense. This item represents amortization of financing costs paid in connection with executing our debt instruments, and the accretion of premiums (and amortization of discounts) on certain of our debt instruments.  GAAP requires these items to be recognized over the remaining term of the respective debt instrument, which may not correlate with the ongoing operations of our real estate portfolio. By excluding these items, we believe that AFFO provides supplemental information that allows for better comparability of reporting periods, which is useful in assessing the sustainability of our operations.
•
Real estate acquisition-related costs . Acquisition expenses are incurred for investment purposes (i.e., to promote portfolio appreciation and generation of future earnings over the long term) and, therefore, do not correlate with the ongoing operations of our portfolio. By excluding these items, we believe that AFFO provides supplemental information that allows for better comparability of reporting periods, which is useful in assessing the sustainability of our operations.
Reconciliations of net income to FFO and to AFFO (in thousands):
 
Three months ended March 31,
 
2013
 
2012
Reconciliation of Net Income to Funds From Operations and Adjusted Funds From Operations:
 
 
 
Net income (loss) attributable to the common stockholders of
Columbia Property Trust, Inc.
$
(22,608
)
 
$
31,131

Adjustments:
 
 
 
Depreciation of real estate assets
30,627

 
30,125

Amortization of lease-related costs
21,947

 
27,056

Impairment loss on real estate assets
16,867

 
—

Gain on disposition of discontinued operations
(10,014
)
 
(16,885
)
Total Funds From Operations adjustments
59,427

 
40,296

Funds From Operations
36,819

 
71,427

Other income (expenses) included in net (loss) income, which do not correlate with our operations:
 
 
 
Additional amortization of lease assets (liabilities)
(618
)
 
(264
)
Straight-line rental income
(6,593
)
 
(809
)
Gain on interest rate swaps
(1,678
)
 
(231
)
Noncash interest expense
858

 
909

Subtotal
(8,031
)
 
(395
)
Real estate acquisition-related costs
—

 
—

Adjusted Funds From Operations
$
28,788

 
$
71,032



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The decrease in AFFO is primarily attributable to incurring $28.6 million of nonrecurring fees under the Consulting Agreement and the Transition Services Agreement, as amended, in the first quarter of 2013, and the near-term impact of lease restructuring activities.
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.
Columbia Property Trust TRS, Columbia KCP TRS, and Wells Energy TRS are wholly owned subsidiaries of Columbia Property Trust and are organized as Delaware limited liability companies and include the operations of, among other things, a full-service hotel. We have elected to treat the TRS Entities as taxable REIT subsidiaries. We may perform certain additional, noncustomary services for tenants of our buildings through the the TRS Entities; however, any earnings related to such services are subject to federal and state income taxes. In addition, for us to continue to qualify as a REIT, we must limit our investments in taxable REIT subsidiaries to 25% of the value of our total assets. Deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted rates expected to be in effect when the temporary differences reverse.
No provisions for federal income taxes have been made in our accompanying consolidated financial statements, other than the provisions relating to Columbia Property Trust TRS, Columbia KCP TRS, and Wells Energy TRS, as we made distributions in excess of taxable income for the periods presented. We are subject to certain state and local taxes related to property operations in certain locations, which have been provided for in our accompanying consolidated financial statements.
Inflation
We are exposed to inflation risk, as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per-square-foot basis, or in some cases, annual reimbursement of operating expenses above a certain per-square-foot allowance. However, due to the long-term nature of the leases, the leases may not reset frequently enough to fully cover inflation.
Application of Critical Accounting Policies
Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.


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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
  
40 years
 
Building improvements
  
5-25 years
 
Site improvements
  
15 years
 
Tenant improvements
  
Shorter of economic life or lease term
 
Intangible lease assets
  
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: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated salvage value. Certain of our assets may be carried at more than an amount that could be realized in a current disposition transaction.
Projections of expected future operating cash flows require that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the property's fair value and could result in the misstatement of the carrying value of our real estate assets and related intangible assets and net income (loss).
In connection with furthering our portfolio repositioning efforts, in the first quarter of 2013, we began to market for sale a group of 18 properties. Pursuant to the accounting policy outlined above, we evaluated the recoverability of the carrying values of each of the properties in this group and determined that the 120 Eagle Rock property in East Hanover, New Jersey and the 333 & 777 Republic Drive property in Allen Park, Michigan are no longer recoverable due to shortening the respective expected property holding periods in connection with these repositioning efforts. As a result, we reduced the carrying value of the 120 Eagle Rock property and the 333 & 777 Republic Drive property to reflect their respective fair values estimated based on projected discounted future cash flows and recorded corresponding property impairment losses of $11.7 million and $5.2 million , respectively, in the first quarter of 2013 .
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 the three months ended March 31, 2013 (in thousands) using Level 3 inputs. There were no adjustments recognized in the three months ended March 31, 2012 .
Property
 
Net Book Value
 
Impairment Loss Recognized
 
Fair Value
120 Eagle Rock
 
$
23,808

 
$
(11,708
)
 
$
12,100

333 & 777 Republic Drive
 
$
13,359

 
$
(5,159
)
 
$
8,200



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Assets Held for Sale
We classify 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.
•
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, 2013 , none of our properties met the criteria to be classified as held for sale in the accompanying balance sheet.
Allocation of Purchase Price of Acquired Assets
Upon the acquisition of real properties, we allocate the purchase price of properties to tangible assets, consisting of land and building, site improvements, and identified intangible assets and liabilities, including the value of in-place leases, based in each case on our estimate of their fair values.
The fair values of the tangible assets of an acquired property (which includes land and building) are determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land and building based on our determination of the relative fair value of these assets. We determine the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors we consider in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases, including leasing commissions and other related costs. In estimating carrying costs, we include real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market demand.
Intangible Assets and Liabilities Arising from In-Place Leases where We are the Lessor
As further described below, in-place leases where we are the lessor may have values related to direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease, tenant relationships, and effective contractual rental rates that are above or below market rates:
•
Direct costs associated with obtaining a new tenant, including commissions, tenant improvements, and other direct costs, are estimated based on management's consideration of current market costs to execute a similar lease. Such direct costs are included in intangible lease origination costs in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.
•
The value of opportunity costs associated with lost rentals avoided by acquiring an in-place lease is calculated based on the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Such opportunity costs are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.
•
The value of tenant relationships is calculated based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. Values associated with tenant relationships are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.
•
The value of effective rental rates of in-place leases that are above or below the market rates of comparable leases is calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be received pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining terms of the leases. The capitalized above-market and below-market lease values are recorded as intangible lease assets or liabilities and amortized as an adjustment to rental income over the remaining terms of the respective leases.


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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 with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place lease and (ii) management's estimate of fair market lease rates for the corresponding in-place lease, measured over a period equal to the remaining terms of the leases. The capitalized above-market and below-market in-place lease values are recorded as intangible lease liabilities or assets and amortized as an adjustment to property operating cost over the remaining term of the respective leases.
Related Parties Transactions and Agreements
During the periods presented, we were party to agreements with our advisor, and its affiliates, whereby we incurred and paid fees and reimbursements to our advisor and its affiliates 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 advisor and property manager. See Note 8, Related-Party Transition and Agreements, of our accompanying consolidated financial statements for details of our related-party transactions, agreements, and fees.
Commitments and Contingencies
We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 6, Commitments and Contingencies, of our accompanying consolidated financial statements for further explanation. Examples of such commitments and contingencies include:
•
obligations under operating leases;
•
obligations under capital leases;
•
commitments under existing lease agreements; and
•
litigation.
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-Q and noted the following item in addition to those disclosed elsewhere in this report:
On May 7, 2013, our Board of Directors declared distributions to stockholders for the second quarter of 2013 in the amount of $0.095 (9.5 cents) per share on the outstanding shares of common stock payable to stockholders of record as of June 15, 2013. Such distributions will be paid in June 2013.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a result of our debt facilities, we are exposed to interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flow primarily through a low to moderate level of overall borrowings. However, we currently have a substantial amount of debt outstanding. We manage our ratio of fixed- to floating-rate debt with the objective of achieving a mix that we believe is appropriate in light of anticipated changes in interest rates. 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 risk of increasing interest rates in future periods.


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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.
Our financial instruments consist of both fixed-rate and variable-rate debt. Our variable-rate borrowings consist of the JPMorgan Chase Credit Facility, the $450 Million Term Loan, the 333 Market Street Building mortgage note, and the Three Glenlake Building mortgage note. However, only the JPMorgan Chase Credit Facility bears interest at an effectively variable rate, as the variable rate on the $450.0 Million Term Loan, the 333 Market Street Building mortgage note, and the Three Glenlake Building mortgage note have been effectively fixed through the interest rate swap agreements described below.
As of March 31, 2013 , we had $ 25.0 million outstanding under the JPMorgan Chase Credit Facility; $450.0 million outstanding on the $450 Million Term Loan; $208.1 million outstanding on the 333 Market Street Building mortgage note; $26.3 million outstanding on the Three Glenlake Building mortgage note; $248.7 million in 5.875% bonds outstanding; and $674.5 million outstanding on fixed-rate, term mortgage loans. The weighted-average interest rate of all of our debt instruments was 4.52% as of March 31, 2013 .
Approximately $1,607.7 million of our total debt outstanding as of March 31, 2013 , is subject to fixed rates, either directly or when coupled with an interest rate swap agreement. As of March 31, 2013 , these balances incurred interest expense at an average interest rate of 4.54% and have expirations ranging from 2013 through 2023. A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio; however, it has no impact on interest incurred or cash flows. The amounts outstanding on our variable-rate debt facilities in the future will largely depend upon the level of investor proceeds raised under our DRP and the rate at which we are able to employ such proceeds in acquisitions of real properties.
We do not believe there is any exposure to increases in interest rates related to the capital lease obligations of $586.0 million at March 31, 2013 , as the obligations are at fixed interest rates.
ITEM 4.
CONTROLS AND PROCEDURES
Management's Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in our internal control over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II.
OTHER INFORMATION
ITEM 1.
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 1A.
RISK FACTORS
There have been no material changes from the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2012 .


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ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
All equity securities sold by us in the quarter ended March 31, 2013 were sold in an offering registered under the Securities Act of 1933.
(b)
Not applicable.
(c)
During the quarter ended March 31, 2013 , we redeemed shares as follows (in thousands, except per-share amounts):
Period
 
Total Number
of Shares
Purchased (1)
 
Average Price
Paid per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (2)
 
Approximate Dollar
Value of  Shares
Available That May
Yet Be Redeemed
Under the Program
January 2013
 
2,341

 
$
6.44

 
2,341

 
(3)  
February 2013
 
2,021

 
$
6.40

 
2,021

 
(3)  
March 2013
 
1,993

 
$
6.44

 
1,993

 
(3)  
During the quarter ended March 31, 2013 , we redeemed all of the shares eligible and properly submitted for redemption prior to the redemption payment date in March 2013 . Redemption requests for the period were funded with cash on hand, along with proceeds from the sale of common stock under our DRP.
(1)  
All purchases of our equity securities by us in the three months ended March 31, 2013 were made pursuant to our SRP.
(2)  
We announced the commencement of the program on December 10, 2003, and amendments to the program on April 22, 2004; March 28, 2006; May 11, 2006; August 10, 2006; August 8, 2007; November 13, 2008; March 31, 2009; August 13, 2009; February 18, 2010; July 21, 2010; September 23, 2010; July 19, 2011; August 12, 2011; November 8, 2011; December 12, 2011; and February 28, 2013.
(3)  
We currently limit the dollar value and number of shares that may yet be redeemed under the program. First, we limit requests for redemptions other than those made within two years of a stockholder's death on a pro rata basis so that the aggregate of such redemptions during any calendar year do not exceed 5.0% of the weighted-average number of shares outstanding in the prior calendar year. Requests precluded by this test are not considered in the test below. In addition, if necessary, we limit all redemption requests, including those sought within two years of a stockholder's death, on a pro rata basis so that the aggregate of such redemptions during any calendar year do not exceed the greater of 100% of the net proceeds from our DRP during the calendar year or 5.0% of weighted-average number of shares outstanding in the prior calendar year.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
(a)
There have been no defaults with respect to any of our indebtedness.
(b)
Not applicable.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
(a)
During the first quarter of 2013 , there was no information that was required to be disclosed in a report of Form 8-K that was not disclosed in a report on Form 8-K.
(b)
There are no material changes to the procedures by which stockholders may recommend nominees to our board of directors since the filing of our Schedule 14A.
ITEM 6.
EXHIBITS
The exhibits required to be filed with this report are set forth on the Exhibit Index to this quarterly report attached hereto.


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SIGNATURES
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.
 
 
 
COLUMBIA PROPERTY TRUST, INC.
(Registrant)
 
 
 
 
Dated:
May 8, 2013
By:
/s/ WENDY W. GILL
 
 
 
Wendy W. Gill
Chief Accounting Officer, Treasurer and Principal Financial Officer




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EXHIBIT INDEX TO
FIRST QUARTER 2013 FORM 10-Q 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.
Description
3.1
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).
3.2
Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K filed with the Commission on March 1, 2013).
4.1
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).
4.2
Third Amended and Restated Distribution Reinvestment Plan (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).
10.1
Renewal Advisory Agreement between the Company and Wells Real Estate Advisory Services II, LLC dated December 28, 2012 and effective as of January 1, 2013 (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K filed with the Commission on March 1, 2013).
10.2
Renewal Investor Services Agreement between the Company and Wells Real Estate Funds, Inc. dated as of December 28, 2012 and effective as of January 1, 2013 (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K filed with the Commission on March 1, 2013).
10.3*
Investor Services Agreement between the Company and Wells Real Estate Funds, Inc. dated February 28, 2013 and effective as of March 1, 2013.
10.4*
Consulting Services Agreement between the Company and Wells Real Estate Funds, Inc. dated February 28, 2013 and effective as of March 1, 2013 .
10.5*
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)
10.6*
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)
31.1*
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.
31.2*
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.
32.1*
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.
99.1
Sixth Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.1 to the Company's Annual Report on Form 10-K filed with the Commission on March 1, 2013).
101.INS**
XBRL Instance Document.
101.SCH**
XBRL Taxonomy Extension Schema.
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase.
101.DEF**
XBRL Taxonomy Extension Definition Linkbase.
101.LAB**
XBRL Taxonomy Extension Label Linkbase.
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase.
 
 
*
Filed herewith.
**
Furnished with this Form 10-Q.




Page 43


Exhibit 10.3
INVESTOR SERVICES AGREEMENT

THIS INVESTOR SERVICES AGREEMENT, effective as of March 1, 2013, is between WELLS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation (the “Company”), and WELLS REAL ESTATE FUNDS, INC., a Georgia corporation (“Wells REF”).
W I T N E S S E T H

WHEREAS, the Company desires to avail itself of the experience, sources of information, assistance and certain facilities available to Wells REF with respect to stockholder services and communications and to have Wells REF undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of the Company all as provided herein;
WHEREAS, Wells REF is willing to undertake to render such services, subject to the supervision of the Company, on the terms and conditions hereinafter set forth;
WHEREAS, the Company and Wells REF are currently parties to an investor services agreement that became effective on January 1, 2013, covering the period from January 1, 2013 through December 31, 2013 (the “Renewal Investor Services Agreement”);
WHEREAS, the sole consideration to Wells REF for the stockholder services and communications provided by Wells REF pursuant to the Renewal Investor Services Agreement is the reimbursement of expenses related to the services subject to an overall cap on such expenses;
WHEREAS, the Company and Wells REF now desire to enter a new investor services agreement to provide for the payment of certain fees for the stockholder services and communications provided by Wells REF and to remove the cap on the reimbursement of certain expenses, with the new investor services agreement to be effective upon the expiration of the Renewal Investor Services Agreement, and covering the period from termination of the Renewal Investor Services Agreement through December 31, 2013 (this “Agreement”);
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:
1. Definitions . As used in this Agreement, the following terms have the definitions hereinafter indicated:

Advisor. Wells Real Estate Advisory Services II, LLC, a Georgia limited liability corporation, any successor advisor to the Company, or any Person(s) to which Wells Real Estate Advisory Services II, LLC or any successor advisor subcontracts substantially all of its functions.
Affiliate or Affiliated . An Affiliate of another Person includes only the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity

1


shall not be deemed to control or be under common control with a Wells REF-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board (or equivalent governing body) of such program is comprised of Affiliates of the entity.
Articles of Incorporation . The Articles of Incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.
Bylaws . The bylaws of the Company, as the same are in effect from time to time.
Code . Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
Company . Wells Real Estate Investment Trust II, Inc., a corporation organized under the laws of the State of Maryland.
Distributions . Any distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.
Partnership . Wells Operating Partnership II, L.P., a Delaware limited partnership formed to own and operate properties on behalf of the Company.
Person . An individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
REIT . A “real estate investment trust” under Sections 856 through 860 of the Code.
Shares . The Company's shares of common stock, par value $0.01 per share.
Wells REF. Wells Real Estate Funds, Inc., a Georgia corporation.
2. Appointment . The Company hereby appoints Wells REF to provide stockholder services and communications on the terms and conditions set forth in this Agreement, and Wells REF hereby accepts such appointment.

3. Duties and Authority of Wells REF . Wells REF undertakes to provide the Company's stockholder services and communications, which include, but are not limited to, the following activities:

(a) ensuring that all activities regarding the services of a registered transfer agent are performed, including but not limited to escheatment services, proxy services, quarterly stockholder statements, stockholder confirmations, re-registrations, transfers, distributions, dividend reinvestments and any other stockholder record-keeping and reporting;

(b) the logistics and, in certain cases where required, the production of written materials for all required communications with stockholders, including the annual report, quarterly statements, proxy services, and other required notices to stockholders;

2


(c) the logistics and production of written materials for all other communications deemed necessary, but not required, to stockholders and financial advisors;

(d) maintaining the services of the client services call center in the manner and at a relative level of service consistent in all material respects with that provided to the Company prior to the date of this Agreement;

(e) facilitation of all annual tax reporting requirements to stockholders, including responding to client service calls relating to tax reporting;

(f) all necessary compliance and risk management functions relating to the above activities;

(g) all necessary information technology support and services as related to the above activities; and

(h) any other client services and stockholder communications services that were previously being performed for the Company by the Advisor prior to the date of this Agreement.

To facilitate Wells REF's performance of these services, but subject to the restrictions included in Paragraphs 4 and 6, the Company hereby delegates to Wells REF the authority to, and Wells REF hereby agrees to, either directly or by engaging an Affiliate:
(a) maintain and preserve the books and records of the Company, including a stock ledger reflecting a record of the stockholders and their ownership of the Shares and overseeing and interfacing with the transfer agent for the Shares; and

(b) with respect to the provision of stockholder and communications activities contemplated by this Agreement, investigate, select, and, on behalf of the Company, engage and conduct business with such Persons as Wells REF deems necessary to the proper performance of its obligations hereunder, including but not limited to transfer agents, correspondents, technical advisors, attorneys, escrow agents, depositaries, custodians, and any and all agents for any of the foregoing, including Affiliates of Wells REF, and Persons acting in any other capacity deemed by Wells REF necessary or desirable for the performance of any of the foregoing services, including but not limited to entering into contracts in the name of the Company for which it has the express written consent of the Company with any of the foregoing.
4. Modification or Revocation of Authority of Wells REF . The Company may, at any time upon the giving of notice to Wells REF, modify or revoke the authority or approvals set forth in Paragraph 3, provided however, that such modification or revocation shall be effective upon receipt by Wells REF and shall not be applicable to transactions to which Wells REF has committed the Company prior to the date of receipt by Wells REF of such notification.

5. Records; Access . Wells REF shall maintain appropriate records of all its activities hereunder and make such records available for inspection by the Company and by counsel, auditors and authorized agents of the Company, at any time or from time to time during normal business hours.

6. Limitations on Activities . Notwithstanding anything to the contrary in this Agreement, Wells REF shall refrain from taking any action which, in its sole judgment made in good faith, would violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company or the Articles of Incorporation or Bylaws, except if such action shall be ordered by the Company,

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in which case Wells REF shall notify promptly the Company of Wells REF's judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Company. In such event Wells REF shall have no liability for acting in accordance with the specific instructions of the Company so given.

7. Fees.

(a) Transfer Agent Support Fees . Wells REF shall be paid, as compensation for the transfer agent support services rendered to the Company hereunder, a monthly fee for each investor account (the “Transfer Agent Support Fee”) in an amount equal to one-twelfth of $5.41. The Transfer Agent Support Fee is intended to compensate Wells REF for the services listed on Exhibit A attached hereto.
(b) Client Services Fees. Wells REF shall be paid, as compensation for the client services rendered to the Company hereunder, a monthly fee for each investor account (the “Client Services Fee”) in an amount equal to one-twelfth of $2.52. The Client Services Fee is intended to compensate Wells REF for the services listed on Exhibit A attached hereto.
(c) Investor Communication Fees . Wells REF shall be paid, as compensation for services rendered to the Company in connection with investor communications a per project fee of $100 per hour (the “Investor Communication Fee”). The Investor Communication Fee is intended to compensate Wells REF for the time spent by Wells REF preparing communication materials requested by the Company and will be billed at an hourly rate per each project requested by the Company.
8. Expenses .
(a) Reimbursable Expenses . The Company shall reimburse Wells REF for all of the third party expenses paid or incurred by Wells REF in connection with the services it provides to the Company pursuant to this Agreement, including, but not limited to:
(i) the actual cost of goods and services used by the Company and obtained from entities not affiliated with Wells REF;
(ii) all expenses in connection with meetings of stockholders;
(iii) expenses in connection with payments of Distributions in cash or otherwise made or caused to be made by the Company to the stockholders; and
(iv) expenses related to maintaining communications with stockholders, including the cost of printing, and mailing annual reports and other stockholder reports, proxy statements and other reports required by governmental entities.
Administrative service expenses, including all costs and expenses incurred by Wells REF in fulfilling its duties hereunder, such as reasonable wages and salaries and other employee-related expenses of all employees of Wells REF or its Affiliates, including taxes, insurance and benefits relating to such employees, and legal, travel and other out-of-pocket expenses are not reimbursable expenses under this Agreement.
(b) Other Services . Should the Company request that Wells REF or any director, officer or employee thereof render services for the Company other than set forth in Paragraph 3, such services shall be separately compensated at such rates and in such amounts as are mutually agreed by Wells REF and the Company and shall not be deemed to be services pursuant to the terms of this Agreement.

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(c) Timing of Reimbursements . Expenses incurred by Wells REF on behalf of the Company and payable pursuant to this Paragraph 8 shall be reimbursed to Wells REF on a at least a monthly basis. Wells REF shall prepare a statement documenting the expenses of the Company during each quarter, and shall deliver such statement to the Company within 45 days after the end of each quarter.
9. Other Activities of Wells REF . General . Nothing contained herein shall preclude Wells REF from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by Wells REF or its Affiliates; nor shall this Agreement limit or restrict the right of any director, officer, employee, or stockholder of Wells REF or its Affiliates to engage in any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association. Wells REF shall report to the Company the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or could create a conflict of interest between Wells REF's obligations to the Company pursuant to this Agreement and its obligations to or its interest in any other partnership, corporation, firm, individual, trust or association.
10. Representations and Warranties .
(a) Of the Company . To induce Wells REF to enter into this Agreement, the Company hereby represents and warrants that:
(i) The Company is a corporation, duly organized, validly existing and in good standing under the laws of the State of Maryland with all requisite corporate power and authority and all material licenses, permits and authorizations necessary to carry out the transactions contemplated by this Agreement.
(ii) The Company's execution, delivery and performance of this Agreement have been duly authorized. This Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Company's execution and delivery of this Agreement and its fulfillment of and compliance with the respective terms hereof do not and will not (A) conflict with or result in a breach of the terms, conditions or provisions of, (B) constitute a default under, (C) result in the creation of any lien, security interest, charge or encumbrance upon the assets of the Company pursuant to, (D) give any third party the right to modify, terminate or accelerate any obligation under, (E) result in a violation of or (F) require any authorization, consent, approval, exception or other action by or notice to any court or administrative or governmental body pursuant to, the Articles of Incorporation or Bylaws or any law, statute, rule or regulation to which the Company is subject, or any agreement, instrument, order, judgment or decree by which the Company is bound, in any such case in a manner that would have a material adverse effect on the ability of the Company to perform any of its obligations under this Agreement.
(b) Of Wells REF . To induce Company to enter into this Agreement, Wells REF represents and warrants that:
(i) Wells REF is a corporation, duly organized, validly existing and in good standing under the laws of the State of Georgia with all requisite corporate power and authority and all material licenses, permits and authorizations necessary to carry out the transactions contemplated by this Agreement.
(ii) Wells REF's execution, delivery and performance of this Agreement have been duly authorized. This Agreement constitutes a valid and binding obligation of Wells REF, enforceable

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against Wells REF in accordance with its terms. Wells REF's execution and delivery of this Agreement and its fulfillment of and compliance with the respective terms hereof do not and will not (A) conflict with or result in a breach of the terms, conditions or provisions of, (B) constitute a default under, (C) result in the creation of any lien, security interest, charge or encumbrance upon Wells REF's assets pursuant to, (D) give any third party the right to modify, terminate or accelerate any obligation under, (E) result in a violation of or (F) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to, Wells REF's articles of incorporation or bylaws, or any law, statute, rule or regulation to which Wells REF is subject, or any agreement, instrument, order, judgment or decree by which Wells REF is bound, in any such case in a manner that would have a material adverse effect on the ability of Wells REF to perform any of its obligations under this Agreement.
(iii) Wells REF has received copies of the (A) Articles of Incorporation, (B) Bylaws, and (C)  the Partnership's limited partnership agreement and is familiar with the terms thereof. Wells REF warrants that it will use reasonable care to avoid any act or omission that would conflict with the terms of the foregoing in the absence of the express direction of the Company.
11. Term; Termination of Agreement . This Agreement shall commence on __________, 2013 and continue in force through December 31, 2013. This Agreement may be continued for an unlimited number of successive one-year renewals upon mutual consent of the parties.
12. Termination by Either Party . This Agreement may be terminated upon 60 days written notice without cause or penalty, by either party. The provisions of Paragraphs 1, 5, 6, and 14 through 23 shall survive the termination of this Agreement.
13. Assignment to an Affiliate . This Agreement may be assigned by Wells REF to an Affiliate with the approval of the Company. Wells REF may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Company. This Agreement shall not be assigned by the Company without the consent of Wells REF, except in the case of an assignment by the Company to a corporation or other organization which is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.
14. Payments to and Duties of Wells REF upon Termination .
(a) Upon termination of this Agreement by either party, Wells REF shall not be entitled to reimbursement for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination all unpaid reimbursements of expenses and all accrued but unpaid fees payable to Wells REF prior to termination of this Agreement
(b) Wells REF shall promptly upon termination:
(i) deliver to the Company the book and records of the Company; and
(ii) cooperate with the Company to provide an orderly transition of services provided pursuant to this Agreement.
15. Notices . Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Articles of Incorporation, the Bylaws, or accepted by the party to whom it is given, and

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shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
To the Company:
 
Wells Real Estate Investment Trust II, Inc.
 
 
6200 The Corners Parkway, Suite 250
 
 
Norcross, Georgia 30092
 
 
 
To Wells REF:     
 
Wells Real Estate Funds, Inc.
 
 
6200 The Corners Parkway, Suite 250
 
 
Norcross, Georgia 30092
Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Paragraph 15.
16. Modification . This Agreement shall not be changed, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assignees.
17. Severability . The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
18. Construction . The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Georgia.
19. Entire Agreement . This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
20. Indulgences, Not Waivers . Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
21. Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
22. Titles Not to Affect Interpretation . The titles of paragraphs and subparagraphs contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
23. Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and

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all of which shall together constitute one and the same instrument. This Agreement shall become binding when the counterparts hereof, taken together, bear the signatures of all of the parties reflected hereon as the signatories.
[Signatures appear on next page.]

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IN WITNESS WHEREOF, the parties hereto have executed this Investor Services Agreement as of February 28, 2013.
 
WELLS REAL ESTATE INVESTMENT TRUST II, INC.
 
 
 
By: /s/ E. Nelson Mills
 
Name: E. Nelson Mills
 
Title: President
 
 
 
WELLS REAL ESTATE FUNDS, INC.
 
 
 
By: /s/ Robert M. McCullough
 
Name: Robert M. McCullough
 
Title: Vice President

                    

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Exhibit A

Transfer Agent Support Services
Task Description
Summary
Inbound Investor Escalated Calls - REIT
Work with DST to establish escalation procedures for Inbound Investor Calls. Provide on-going resolution for escalated inquiries and coordinate with the Fund when needed.
Inbound Rep Escalated Calls - REIT
Work with DST to establish escalation procedures for Inbound Rep Calls. Provide on-going resolution for escalated inquiries and coordinate with the Fund when needed.
DST Vision - Support and approvals
Review and process the daily volume of inbound DSS requests related to DST Vision. Follow-up with Financial Representative, BD Employee or third party Financial Institution when necessary.
DST FANMail - Support and approvals
Review and process the daily volume of inbound DSS requests related to DST FANMail. Follow-up with Financial Representative, BD Employee or third party Financial Institution when necessary.
Escalated Service / Historical Research Issues - Call Center
Coordinate and execute historical research for Call Center items that come up for the period before DST began taking front line Investor and Rep calls.
Quality Review / Reporting and Delivering Feedback
Review and provide feedback on a handful of recorded calls from the DST Call Center team on a bi-weekly basis.
Interest Adjustments
Draft, review and approve interest adjustment requests that come in related to share impacting transactions.
Client Services E-mail Inbox
Review and respond to the daily volume of inbound email inquiries from Investors, Reps and Third Party Financial Institutions.
NIGO Resolution - REIT
Coordinate resolution on Not in Good Order items related to Financial transactions through outbound contacts to Investors, Reps and Third Party Financial Institutions.
Written Inquiry Processing
Coordinate the processing of Written Inquiry requests from Investors, Reps and Third Party Financial Institutions. This includes reviewing each request and drafting or communicating the appropriate response within the specified timeframe as well as logging the requests for historical reporting purposes.
Employee Training & Development and Corporate/Department Vision
Coordinate ongoing training for the Wells Client Services team on industry initiatives as well as product announcements.
DST Call Center Training
Coordinate ongoing training for the DST Client Services team on industry initiatives as well as product announcements.
Sales Support - Operational Communications and Initiatives
Coordinate educating the Sales team on Operational initiatives that will impact current and new investors as well as their Reps and BD's.
Broker Dealer Back Office Relationship Management
Maintain and grow existing and new relationships with Key Broker Dealer contacts to facilitate existing business and help resolve day to day issues that come up. Relationships become critical when major product events occur that impact the Rep and BD community.
Custodian Back Office Relationship Management
Maintain and grow existing and new relationships with Key Custodian contacts to facilitate existing business and help resolve day to day issues that come up. Relationships become critical when major product events occur that impact the Financial Institution community.

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Issuer Communications
Provide Business and Compliance review and approval on Operational and Issuer communication that are being sent to Investors and Reps. This also includes communications related to Sponsored IRA programs through State Street and Reliance
Forms and Applications - Updates, Annual Review and Record Keeping
Coordinate the annual review and update process to ensure the forms used by Investors and Reps in the REIT products we support are accurate and as simple as possible. This includes working with Wells Marketing to make the updates and providing Business and Compliance sign-off.
Forms and Applications - Updating Third Party Vendors
Ensure the most current product forms are provided and available on LaserApps, Quikforms, WellsAccess and DST Vision
Statements - Inserts and Marketing Information
Responsible for Business review on all statement inserts. In some cases, also responsible for Compliance sign-off.
WellsAccess - Look and Feel, Content - Updates
Responsible for the content, layout and information that is available to Reps and BD's via WellsAccess. Also, responsible for reviewing and approving all new Registration requests that are submitted for new users.
Proxy - Vendor Relationship Management
Responsible for overseeing the Third Party Vendor that is contracted to help carryout and pass any Annual or Special proxies for the REIT products we support
Proxy - Communication Coordination and Review
Includes coordinating the business and in some cases, Compliance sign-off for the following items:
- Householding Mailing
- Proxy Search Card Mailing
- Proxy Mailing ( Typically includes Annual Report)
- Catch-up Mailing
- Reminder Mailings
Proxy - Call Center Scripting and Training
Working with the Vendor to put together and get Business and Compliance sign-off on the script for the IVR, script to be used by the Vendor Call Center for solicitation purposes. This also includes providing Training to Vendor Call Center for more complicated proposals
Proxy - Record Keeping
Keeping historical records of the Annual and Special Proxy mailing lists, various communications and voting files
Proxy - Call Center Support
Wells Client Services team has helped solicit votes from the largest stockholders in various proxies to help achieve the required number of votes
NIGO Letters - Look and Feel, Content - Updates
Responsible for ensuring the day to day Investor, Rep and Third Party communication for Not In Good Order processing is as clear and concise as possible. Also, responsible for the Compliance sign-off.
DST FANWeb - Look and Feel - Updates
Responsible for confirming the content, disclosures and messaging is current and as accurate as possible
Mail Room / Scanning
Responsible for opening, sorting and directing any Investor Account related mail is forwarded to the appropriate Transfer Agent for processing.
Monitoring and Enforcing Work Queue and SLAs
Monitor DST to ensure timely and accurate processing of the daily work for the Fund including but not limited to using business intelligence tools and a battery of custom data quality reports
Monthly Written Inquiry Reporting
Provide monthly reports to Wells Compliance to document that Written Inquiry responses are being turned around within the SEC guidelines
Fund / Product Board Reporting - CS Information
Compile and validate data to put together performance indicators that are presented to the Board on a quarterly basis

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Tax Basis Requests - Current
Work with Wells IT to develop account level reports that provide the historical information an Investor would need to calculate their tax basis.
Misc - Projects
Hours allocated for one-off projects and tasks that always come up through out the year

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Investor Communication Services
Task Description
Summary
Custodian Distribution File Support - REITs
Using relationships at various custodian partners, create and maintain quarterly distribution files used to post dividends to investor accounts.
Custodian Position File Support - REITs
Using relationships at various custodian partners, create and maintain monthly position files used to post account balances to investor accounts.
Issuer Communications Mailing List Validations
Support the investor communication process by providing mailing list validation and approvals ensuring that accurate data is provided to the mail vendors
Proxy Support
Provide validation support for proxy process including but not limited to: share counts and investor counts verification, mailing file validation
Review all data pulled by Wells IT and Third Party Vendor to ensure the appropriate investor information is being populated
CDLY - Look and Feel - Updates
Ensure daily confirmation statements (for ongoing account maintenance and re-registrations) contain current and accurate Fund information.
Checks - Look and Feel - Updates
Ensure dividend and redemption checks contain current and accurate Fund information
Tax Reporting - Look and Feel - Updates
Ensure year end tax forms contain current and accurate Fund information
Monitoring and Enforcing Work Queue and SLAs
Monitor DST to ensure timely and accurate processing of the daily work for the Fund including but not limited to using business intelligence tools and a battery of custom data quality reports
Daily activity includes account updates (Such as address changes, rep changes, etc.) transfers and re-registrations, redemptions, dividend check reissues, etc.
Monthly activity averages around 3,000 - 4,000 transactions
Several people play a role in this process that entails recurring conference calls to set priorities, manage projects, discuss system updates / implementations, etc.
Quarterly Distribution - REITs - Oversight - Includes Ownership of the Statement
Oversee the quarterly statement and distribution process, including but not limited to:
coordinating the successful transfer and quality control of statement data files from DST to SCICOM, validate the custom rep file that Wells sends as a supplement (this is needed for a number of reasons, most famous is to get the rep photo on the statement)
updating disclosures, validating control totals, validating distribution calculations, reviewing statement samples, on-site vendor visits, etc. During the month leading up to the statement and for a few days after the statements are mailed, this process requires more than one FTE.
Redemptions - Daily Oversight
Review pending redemptions entered by DST to ensure accuracy, research and resolve any errors
Rep Maintenance - Daily Oversight
Research and resolve issues related to FA relationships to investor accounts
Escalated Issue Resolution
Assist DST operations, Wells call center and DST call center in researching and resolving various service related issues for investor accounts

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National Change of Address (NCOA)
Oversee the quarterly NCOA process, provide certification to Wells compliance
Requests for Information
Provide recurring custom monthly and quarterly assets under management reports to broker dealers, provide various ad-hoc reports to broker dealers for due diligence purposes.
SEC / FINRA Audit Support
Provide ad-hoc reports to satisfy regulatory requests for specific investor information. These requests come both directly to Wells and through our broker dealers.
Redemption Summary Reporting - Accounting / Boards / Doug
Including but not limited to - redemption accrual, redemptions by month and category, life to date redemptions by type
Internal and Independent Audit Support
Produce documents used by internal audit to validate proper controls are in place. Example - quarterly distribution packets provided to internal audit
Daily Fund Balancing and Reconciliation
Run daily reports used to create a schedule used to provide a sign-off to the Fund each month, research and resolve reconciling items for the Fund
Redemptions - Monthly Balancing and Funding
Review pending redemptions entered by DST to ensure accuracy, research and resolve any errors, coordinate monthly balancing and funding with DST and the Fund
DST Invoicing
Oversee vendor invoices, allocate expenses and provide to Fund, produce estimated budgets and projections
SCICOM Invoicing
Oversee vendor invoices, allocate expenses and provide to Fund, produce estimated budgets and projections, postage request and funding
Year End DST Tax Support
Oversee year-end tax processing - includes completing annual technical requirements, developing account test samples, providing reallocation numbers, providing training to staff on any tax form updates, coordinating year-end RMD and fair market value mailing
Convert to Universal Dealer / SalesConnect
Conversion project in process to alter the source system of FA and BD information and to take advantage of DST's Universal Dealer Database and support team.
This project also requires the redesign of many internal Wells systems such as integration with the datawarehouse (needed to continue to support many reporting requirements, etc.), WellsAccess and SalesForce, SCICOM statements, etc.
The scope of this project is on par with the integration of Salesforce.com. I would estimate that close to 1,000 hours will have been used once the project is completed in Q1 2013.
Misc - Projects
Hours allocated for one-off projects and tasks that always come up through out the year

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Transfer Agent Support Services and Investor Communication Services
Task Description
Summary
Subpoena responses
Determine requirements, gather documents and prepare responses
Tax Basis Requests - Future
Work with DST to implement a more automated solution that can be used distributed to Investors on demand or as part of an exit event
Convert State Street IRAs to First Trust
Work with DST, marketing, compliance, etc. to coordinate the conversion of over 50,000 accounts to DST's new custodian vendor.
Draft communication to interested parties
Update all references to State Street in all print and electronic media
Convert statement vendor from SCICOM to DSTO
Work with DST to design new statements for the Fund.
The conversion project requires dedicated resources over at least a six month period. The resources design, test and implement all aspects of a statement conversion.
Pre-listing activities for REIT II
The anticipated scope of a listing project will require over 1,000 hours from OPS / CS
Transition workload from exiting staff
Several hundred hours have been used to work on transitioning tasks from exiting staff. The transitions have in many cases required the remaining staff to redesign processes in order to support the new organization structure.
Implementation of A.I. Industry Initiatives
Work with Transfer Agent and Third Party Financial Institutions to participate in AIP initiative that is being rolled out via the DTCC. Timeframe and workload TBD. We expect that system changes, new procedures as well as internal and external communication and eduction will need to be developed tested and rolled out.





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Exhibit 10.4
CONSULTING SERVICES AGREEMENT
THIS CONSULTING SERVICES AGREEMENT, effective as of March 1, 2013, is between WELLS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation (the “Company”) and WELLS REAL ESTATE FUNDS, INC., a Georgia corporation ( “Wells REF”).
W I T N E S S E T H
WHEREAS, Wells REF was the parent company of Wells Real Estate Advisory Services II, LLC (“WREAS II”), the former advisor of the Company and, together with its affiliates, provided advisory services to the Company;
WHEREAS, the Company is now self-managed as result of Wells REF assigning its interest in WREAS II to the Company;
WHEREAS, the Company desires to avail itself of the experience, sources of information and advice of Wells REF and to have Wells REF undertake the services hereinafter set forth, at the request and subject to the supervision of the Company all as provided herein;
WHEREAS, Wells REF is willing to undertake to render such services upon the request and subject to the supervision of the Company, on the terms and conditions hereinafter set forth; and
WHEREAS, the Company and WREAS II were parties to a Renewal Advisory Agreement (the “Advisory Agreement”) effective as of January 1, 2013, which agreement has now terminated;
WHEREAS, the parties are party to a Transition Services Agreement (the “Transition Agreement”), dated as of July 1, 2012;
WHEREAS, in connection with the assignment of the ownership interests in WREAS II to the Company, the parties hereto agreed to enter into a consulting services agreement on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:
1. Definitions . As used in this Consulting Services Agreement (the “Agreement”), the following terms have the definitions hereinafter indicated:
Acquisition Expenses . As such term is defined in the Articles of Incorporation.
Adjusted Cost . (A) As of any date of determination and until such time as the Company completes an Asset-based Valuation, the sum of: (a) the actual amount invested on behalf of the Company in the Properties as of the date of determination; plus (b) (1) with respect to Joint Ventures, the actual amount invested on behalf of the Company in the Joint Ventures as of the date of determination, plus (2) the Company's allocable share of capital improvements relating to building improvements and/or initial leaseup of space in the building (such improvements to exclude any expenditures of capital for normal building improvement, maintenance and repair and tenant improvements relating to existing leases or lease renewals) made by the Joint Venture from cash flows generated by the Joint Venture; less (c) the amounts invested in Properties or Joint Ventures relating to Vacant Properties plus any additions to Adjusted Cost related to such Joint Ventures




pursuant clause (b)(2) above; less (d) any amounts recognized on the Company's consolidated financial statements on or before such date of determination as impairments to the carrying value of the Properties or Joint Venture investments in accordance with Generally Accepted Accounting Principles, excluding any temporary impairments or impairment charges related to Vacant Properties for which the amount invested has been deducted from the foregoing calculation. In all cases, “Adjusted Cost” excludes the Lindbergh/Energy Center Adjusted Cost.
(B) On and after such time as the Company completes an Asset-based Valuation, “Adjusted Cost” means, as of any date of determination, the lesser of (1) the amount determined in accordance with Paragraph (A) above, or (2) the aggregate value of the Company's interest in the Properties and Joint Ventures as established in connection with the most recent Asset-based Valuation, plus, with respect to any Properties purchased or Joint Ventures entered into after the date of the most recent Asset-based Valuation, the adjusted cost for such Properties or Joint Ventures determined in accordance with Paragraph (A) above; until such time as the next Asset-based Valuation by the Company, at which time the Adjusted Cost of such properties will be determined in accordance with Paragraph (A) above . In all cases, “Adjusted Cost” excludes the Lindbergh/Energy Center Adjusted Cost.
Affiliate or Affiliated . An Affiliate of another Person includes only the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person.
AM Consulting Fee . The AM Consulting Fee payable to WREAS II as defined in Paragraph 4(a).
AM Consulting Fee Ceiling . The ceiling on the AM Consulting Fee as defined in Paragraph 4(a).
AM Consulting Fee Percentage . The AM Consulting Fee Percentage equals (1)  0.625%, until the monthly payment of the AM Consulting Fee under this Agreement equals $2,708,333.33; (2) thereafter, the Fixed Fee Percentage for so long as the sum of Adjusted Cost plus the Lindbergh/Energy Center Adjusted Cost, as of any date of determination, is less than $6,500,000,000; and (3) 0.50% commencing when the sum of Adjusted Cost plus the Lindbergh/Energy Center Adjusted Cost, as of any date of determination, is at least $6,500,000,000.
Articles of Incorporation . The Articles of Incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.
Asset-based Valuation . An estimate of the value of a share of the Company's common stock approved by the Board of Directors of the Company and based in part on an estimate of the value of the Company's assets (as opposed to an estimate based solely on the most recent price paid for a share of the Company's common stock in an offering of such shares).
Average Invested Assets . For a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties and Loans secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.

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Board of Directors or Board . The persons holding such office, as of any particular time, under the Articles of Incorporation of the Company, whether they be the Directors named therein or additional or successor Directors.
Bulk Liquidation . A liquidation of all or substantially all of the Company's assets effected in a transaction or series of transactions with three or fewer buyers or their Affiliates that are closed in a period of 12 months or less.
Bylaws . The bylaws of the Company, as the same are in effect from time to time.
Cause. With respect to the termination of this Agreement, (i) fraud, criminal conduct, willful misconduct or (ii) a material breach of this Agreement by Wells REF which remains uncured after 30 days' written notice
Ceiling Excess . The extent to which the sum of the three previous monthly AM Consulting Fee payments exceeds the AM Consulting Fee Ceiling, as defined in Paragraph 4(a).
Code . Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
Company . Wells Real Estate Investment Trust II, Inc., a corporation organized under the laws of the State of Maryland.
Competitive Real Estate Commission . A real estate or brokerage commission for the purchase or sale of property which is reasonable, customary, and competitive in light of the size, type, and location of the property.
Contract Sales Price . The total consideration received by the Company for the sale of a Property.
Director . A member of the Board of Directors of the Company.
Fee Acceleration Payment. The aggregate amount of fees earned by Wells REF in the last full month immediately preceding the Termination Date multiplied by the months in the period between the Termination Date and December 31, 2013.
Fee Acceleration Payment Adjustment. The difference between (i) the total fees that would be due and payable to Wells REF under this Agreement if the Agreement was in effect for the period from the Termination Date through December 31, 2013 and (ii) the Fee Acceleration Payment.
Fixed Fee Percentage . The Fixed Fee Percentage equals the quotient of (A) (x) $32,500,000, less (y) the product of (1) 0.50% times (2) the Lindbergh/Energy Center Adjusted Cost; divided by (B) the Adjusted Cost.
Gross Proceeds . The aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses.
Investor Services Agreement. The investor services agreement between Wells REF and the Company effective as of July 1, 2012, and any successor agreement.

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Joint Venture . Any joint venture, limited liability company or other Affiliate of the Company that owns, in whole or in part on behalf of the Company, any Properties.
Lindbergh/Energy Center Adjusted Cost . (A) As of any date of determination and until such time as the Company completes an Asset-based Valuation, the actual amount, if any, invested in the two Properties commonly known as AT&T Lindbergh Center and in one Property commonly known as Energy Center I for so long as such Properties are owned on behalf of the Company less any amounts recognized on or before such date of determination as impairments to the carrying value of AT&T Lindbergh Center and Energy Center I in accordance with Generally Accepted Accounting Principles. In all cases, the Lindbergh/Energy Center Adjusted Cost shall be reduced as appropriate if either the AT&T Lindbergh Center (treated as one Property) or Energy Center I is considered a Vacant Property, as defined herein.
(B) On or after such time as the Company completes an Asset-based Valuation, “Lindbergh/Energy Center Adjusted Cost” means, as of any date of determination, the lesser of (1) the amount determined in accordance with Paragraph (A) above, or (2) the value of the Company's interest in the AT&T Lindbergh Center and in Energy Center I as established in connection with the Company's most recent Asset-based Valuation. In all cases, the Lindbergh/Energy Center Adjusted Cost shall be reduced as appropriate if either the AT&T Lindbergh Center (treated as one Property) or Energy Center I is considered a Vacant Property, as defined herein.
Master Property Management, Leasing and Construction Management Agreement. The agreement by and between Wells Management Company, Inc., the Company and the Partnership dated as of June [__], 2012 and effective as of July 1, 2012, and any successor agreement.
Net Asset Value . The excess of (i) the aggregate of the Adjusted Cost plus the Lindbergh/Energy Center Adjusted Cost over (ii) the aggregate outstanding amount of debt of the Company, the Partnership, and the Joint Ventures (as adjusted for the Company's interest in such Joint Ventures) and any accrued interest thereon.
Offering . Any offering of Shares that is registered with the SEC, excluding Shares offered under any employee benefit plan.
Organization and Offering Expenses . All expenses incurred by and to be paid from the assets of the Company in connection with and in preparing the Company for registration of and subsequently offering and distributing its Shares to the public, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys); expenses for printing, engraving and mailing; salaries of employees while engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants' and attorneys' fees.
Partnership . Wells Operating Partnership II, L.P., a Delaware limited partnership formed to own and operate properties on behalf of the Company.
Person . An individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

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Property or Properties . Any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly.
Property Manager. Any entity that has been retained to perform and carry out property management services at one or more of the Properties, excluding persons, entities or independent contractors retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and ultimately paid by the tenant at such Property.
Sale or Sales . (i) Any transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with respect to any Property which gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Partnership in any joint venture in which it is a co-venturer or partner; or (C) any joint venture in which the Company or the Partnership as a co-venturer or partner sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including any event with respect to any Property which gives rise to insurance claims or condemnation awards, but (ii) not including any transaction or series of transactions specified in clause (i) (A), (i) (B), or (i) (C) above in which the proceeds of such transaction or series of transactions are reinvested in one or more Properties within 180 days thereafter.
Shares . The Company's shares of common stock, par value $0.01 per share.
Termination Date . The date of termination of the Agreement.
Vacant Property . A Property that (i) for over thirty percent (30%) of its leasable square feet does not have third-party tenant leases in place; or (ii) has not collected at least seventy percent (70%) of the Property's total potential rental revenue based upon full occupancy, except if not attaining seventy percent is a result of tenant improvements, concessions or similar leasing incentives contained in leases approved by the Board for (i) the period from acquisition until the applicable measurement date, if less than six months or (ii) for the six months immediately preceding the date of measurement.
2. Appointment . The Company hereby retains Wells REF to provide consulting services to it on the terms and conditions set forth in this Agreement, and Wells REF hereby accepts such appointment. The Company agrees that this appointment does not render Wells REF to be the Advisor (as that term is defined in the Articles of Incorporation) to the Company because, among other reasons, the Company's employees are the persons responsible for directing and performing the day-to-day business affairs of the Company.
3. Duties of Wells REF . As requested by the Company and under the supervision of the employees of the Company, Wells REF, either directly or by engaging an Affiliate, shall provide consulting and support services to the Company including:
(a) consulting in connection with the Company's efforts to identify potential investment opportunities consistent with the investment objectives and policies of the Company;
(b) consulting with respect to various administrative functions of the Company;
(c) assisting with the maintenance of the accounting and other record-keeping functions at the Company level, including assisting with the Company's compliance with its obligations under applicable securities laws;

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(d) consulting with respect to financings, leases and other contracts;
(e) providing reports concerning the value of investments or contemplated investments of the Company in Properties;
(f) consulting with respect to the strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing, and disposition of Properties on an overall portfolio basis.
Notwithstanding the foregoing list of duties of Wells REF, Wells REF has no obligation hereunder to provide the Stockholder and communication services that are the subject of the Investor Services Agreement nor the property management services that are the subject of the Master Property Management, Leasing and Construction Management Agreement, nor any other services provided for pursuant to any other agreements entered into between the Company and Wells REF and its Affiliates not mentioned herein.
4. Fees .
(a) AM Consulting Fee . Subject to the overall limitations contained below in this Paragraph 4(a), commencing on the date hereof, Wells REF shall be paid as compensation for the consultation services rendered to the Company hereunder a monthly fee (the “AM Consulting Fee”) in an amount equal to one-twelfth of the sum of (i) the product of the AM Consulting Fee Percentage multiplied by the Adjusted Cost calculated on the last day of each preceding month , plus (ii) 0.50% of the Lindbergh/Energy Center Adjusted Cost as of the last day of each preceding month. For purposes of clarity, the AM Consulting Fee payment due in the first month of this Agreement will be based on Adjusted Cost amounts from the last date of the month prior to this Agreement, notwithstanding that this date precedes the effective date of this Agreement. Notwithstanding the foregoing, if this Agreement is in effect for less than a full month, the amount of the AM Consulting Fee shall be prorated to account for the percentage of the month in which this Agreement is in effect.
Notwithstanding the foregoing, the aggregate AM Consulting Fee payable to Wells REF in any three-month period pursuant to this Paragraph 4(a) shall not exceed 0.25% of the average Net Asset Value during such three-month period, calculated based on Net Asset Value as of the last day of each preceding month during the three-month period (the “AM Consulting Fee Ceiling”). To the extent the sum of the three previous monthly AM Consulting Fee payments exceeds the AM Consulting Fee Ceiling (such amount the “Ceiling Excess”), each next succeeding monthly payment of the AM Consulting Fee will be reduced, with the amount by which the AM Consulting Fee is reduced to be applied against the Ceiling Excess until the Ceiling Excess is eliminated. In no event, however, will Wells REF be required to make a cash payment on account of any Ceiling Excess.
(b) Fee Credit . Within 15 days of the end of each month in which this Agreement is in effect, Wells REF shall credit an amount of $166,667 against all earned but unpaid fees owed to Wells REF under this Agreement, which amount represents a reduction in the monthly fees earned by Wells REF pursuant to this Paragraph 4 during the term of this Agreement. Notwithstanding the foregoing, if this Agreement is in effect for less than a full month, the amount credited to the Company shall be prorated to account for the percentage of the month in which this Agreement was in effect.
5. Expenses for Other Services . Should the Board request that Wells REF or any director, officer or employee thereof render services for the Company other than set forth in Paragraph 2, such services shall be separately compensated at such rates and in such amounts as are agreed by Wells REF and the

6


Company, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.
Notwithstanding the foregoing, Wells REF shall obtain the Company's written approval prior to incurring any third-party expenses for the account of, or reimbursable by, the Company.
6. Occupancy .
(a) Occupancy Rights. During the term of this Agreement, the Company shall have the right to occupy the 6th floor at 6200 The Corners Parkway in Norcross, Georgia.
(b) Occupancy Costs. For so long as the Company occupies space at 6200 The Corners Parkway pursuant to Paragraph 6(a) above, the Company shall reimburse Wells REF for occupancy costs at a fixed amount of $21,000 per month. This amount shall be paid to Wells REF on the first business day of each month in which this agreement is in effect, provided, however, that if the term of this Agreement begins during a month for which Wells REF has been paid an occupancy cost fee pursuant to the Advisory Agreement, then the fee pursuant to this Section 6(b) shall commence on the first business day of the following month. No other amounts related to the Company's occupancy of space at 6200 The Corners Parkway, such as tenant improvement costs, operating expenses, or common area maintenance, shall be due.
7. Representations and Warranties .
(a) Of the Company . To induce Wells REF to enter into this Agreement, the Company hereby represents and warrants that:
(i) The Company is a corporation, duly organized, validly existing and in good standing under the laws of the State of Maryland with all requisite corporate power and authority and all material licenses, permits and authorizations necessary to carry out the transactions contemplated by this Agreement.
(ii) The Company's execution, delivery and performance of this Agreement have been duly authorized. This Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Company's execution and delivery of this Agreement and its fulfillment of and compliance with the respective terms hereof do not and will not (A) conflict with or result in a breach of the terms, conditions or provisions of, (B) constitute a default under, (C) result in the creation of any lien, security interest, charge or encumbrance upon the assets of the Company pursuant to, (D) give any third party the right to modify, terminate or accelerate any obligation under, (E) result in a violation of or (F) require any authorization, consent, approval, exception or other action by or notice to any court or administrative or governmental body pursuant to, the Articles of Incorporation or Bylaws or any law, statute, rule or regulation to which the Company is subject, or any agreement, instrument, order, judgment or decree by which the Company is bound, in any such case in a manner that would have a material adverse effect on the ability of the Company to perform any of its obligations under this Agreement.
(b) Of Wells REF . To induce Company to enter into this Agreement, Wells REF represents and warrants that:
(i) Wells REF is a corporation, duly organized, validly existing and in good standing under the laws of the State of Georgia with all requisite corporate power and authority and all material licenses, permits and authorizations necessary to carry out the transactions contemplated by this Agreement.

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(ii) Wells REF's execution, delivery and performance of this Agreement have been duly authorized. This Agreement constitutes a valid and binding obligation of Wells REF, enforceable against Wells REF in accordance with its terms. Wells REF's execution and delivery of this Agreement and its fulfillment of and compliance with the respective terms hereof do not and will not (A) conflict with or result in a breach of the terms, conditions or provisions of, (B) constitute a default under, (C) result in the creation of any lien, security interest, charge or encumbrance upon Wells REF's assets pursuant to, (D) give any third party the right to modify, terminate or accelerate any obligation under, (E) result in a violation of or (F) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to, Wells REF's articles of incorporation or bylaws, or any law, statute, rule or regulation to which Wells REF is subject, or any agreement, instrument, order, judgment or decree by which Wells REF is bound, in any such case in a manner that would have a material adverse effect on the ability of Wells REF to perform any of its obligations under this Agreement.
(iii) Wells REF has received copies of the (A) Articles of Incorporation, (B) Bylaws, (C) registration statements relating to the Company's past and ongoing public offerings, and (D) the Partnership's limited partnership agreement and is familiar with the terms thereof, including without limitation the investment limitations included therein. Wells REF warrants that it will use reasonable care to avoid any act or omission that would conflict with the terms of the foregoing in the absence of the express direction of the Company.
8. Term; Termination of Agreement . This Agreement shall continue in force through December 31, 2013. Notwithstanding the foregoing, this Agreement may be terminated (i) by the Company for Cause, (ii) by the Company other than for Cause provided that the Company pays Wells REF the Fee Acceleration Payment and the Fee Acceleration Payment Adjustment as described in Paragraph 10 below, or (iii) by Wells REF for a material breach of this Agreement by the Company which remains uncured after 10 days' written notice or the bankruptcy of the Company. The provisions of Paragraphs 1 and 10 through 20 survive termination of this Agreement.
9. Assignment to an Affiliate . This Agreement may be assigned by Wells REF to an Affiliate with the approval of the Company. Wells REF may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Company. This Agreement shall not be assigned by the Company without the consent of Wells REF, except in the case of an assignment by the Company to a corporation or other organization which is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.
10. Payments to Wells REF upon Termination . After the Termination Date, Wells REF shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination all unpaid reimbursements of expenses and all earned but unpaid fees payable to Wells REF prior to termination of this Agreement. Notwithstanding the foregoing, if the Company terminates this Agreement other than for Cause, Wells REF shall be entitled to receive from the Company the Fee Acceleration Payment on or prior to the effective date of such termination and the Fee Acceleration Payment Adjustment within 45 days of December 31, 2013; provided however, that if the Fee Acceleration Payment Adjustment is negative, such amount shall be refunded to the Company within 45 days of December 31, 2013.
11. Notices . Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Articles of Incorporation, the Bylaws, or accepted by the party to whom it is given, and

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shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
To the Board and to the Company:
 
Wells Real Estate Investment Trust II, Inc.
 
 
6200 The Corners Parkway, Suite 250
 
 
Norcross, Georgia 30092
 
 
 
To Wells REF:
 
Wells Real Estate Funds
 
 
6200 The Corners Parkway, Suite 250
 
 
Norcross, Georgia 30092
 
 
 
 
 
 
 
 
 
Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Paragraph 10.
12. Modification . This Agreement shall not be changed, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assignees.
13. Severability . The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
14. Construction . The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Georgia.
15. Entire Agreement . This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
16. Indulgences, Not Waivers . Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
17. Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

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18. Titles Not to Affect Interpretation . The titles of paragraphs and subparagraphs contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
19. Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when the counterparts hereof, taken together, bear the signatures of all of the parties reflected hereon as the signatories.
20. Name . Wells REF has a proprietary interest in the name “Wells.” Accordingly, and in recognition of this right, if at any time the Company ceases to retain Wells REF or an Affiliate thereof to provide consulting services to the Company, the Company will, promptly after receipt of written request from Wells REF, cease to conduct business under or use the name “Wells” or any derivative thereof and the Company shall use its best efforts to change the name of the Company to a name that does not contain the name “Wells” or any other word or words that might, in the sole discretion of Wells REF, be susceptible of indication of some form of relationship between the Company and Wells REF or any Affiliate thereof. Consistent with the foregoing, it is specifically recognized that Wells REF or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Wells” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company or its Board.
[Signatures appear on next page.]

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IN WITNESS WHEREOF, the parties hereto have executed this Consulting Services Agreement on February 28, 2013, effective as of the 1st day of March, 2013.

 
WELLS REAL ESTATE INVESTMENT TRUST II, INC.
 
 
 
By: /s/ E. Nelson Mills     
 
Name: E. Nelson Mills
 
Title: President
 
 
 
WELLS REAL ESTATE FUNDS, INC.
 
 
 
By: /s/ Robert M. McCullough
 
Name: Robert M. McCullough
 
Title: Vice President



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Exhibit 10.5

ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”), dated as of February 28, 2013 (the “ Assignment Effective Date ”) is made by and between Wells Real Estate Funds, Inc., a Georgia corporation (“ Wells REF ”), to Wells Operating Partnership II, L.P. (“ REIT II ”).
WHEREAS , Wells REF owns all of the issued and outstanding limited liability company membership interests in Wells Real Estate Advisory Services II, LLC, a Delaware limited liability company (“ WREAS II ”);
WHEREAS , each of Wells REF, WREAS II, and REIT II are parties to the Transition Services Agreement (the “ Transition Services Agreement ”), whereby REIT II is granted the option to acquire all issued and outstanding limited liability company interests of WREAS II held by Wells REIT, and all rights, title, benefits, privileges and interests therein (the “ Units ”);
WHEREAS , pursuant to Section 2 of Article V of the Transition Services Agreement, REIT II is granted the option, in its sole discretion upon delivery of written notice (the “ Option Notice ”) to Wells REF at any time on or after January 1, 2013 and before the expiration of the Transition Period to require Wells REF to effect the WREAS II Assignment; and
WHEREAS , REIT II has duly delivered the Option Notice to Wells REF, evidencing its desire to acquire and assume the Units.
NOW THEREFORE , in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
1. Recitals . The foregoing recitals are made a part of this Agreement.
2. Definitions . All capitalized terms used in this Agreement but not otherwise defined herein are given the meanings set forth in the Transition Services Agreement.
3. Transfer and Assignment of the Units . Wells REF hereby grants, conveys, assigns, transfers and delivers the Units to REIT II, and its successors and assigns, and REIT II hereby accepts such Units (including without limitation, all of Wells REF's right, title, benefits, privileges and interest in and to the profits, losses, distributions, and capital of WREAS II represented by the Units) as of the date hereof.
4. Acceptance of Assignment . REIT II hereby accepts the assignment and transfer of Wells REF's right, title, benefits, privileges and interest in and to the Units. Notwithstanding any provision in WREAS II's limited liability company operating agreement to the contrary, REIT II is hereby admitted as the sole member of WREAS II. Effective as of the execution and delivery of this Agreement by all parties hereto, Wells REF shall no longer be a member of WREAS II.
5. Representations and Warranties of Wells REF . Wells REF represents and warrants to REIT II that, (a) each of the representations and warranties made by Wells REF in the Transition Services Agreement and the Asset Transfer Agreement are true and correct in all respects as of the date hereof; (b) WREAS II has no obligations or liabilities to Wells REF or any of its affiliates (other than its obligations with respect to the Assumed Liabilities as defined in and pursuant to the Asset Transfer Agreement); (c) WREAS II's current assets are not less than the current liabilities and WREAS II has no indebtedness or other long-



term liabilities other than the compensation plans relating to WREAS II employees set forth on Schedule A hereto (the “Assumed Compensation Plans”); (d) WREAS II is not in default under any contract to which WREAS II is a party and has made all payments when due under such contracts; and (e) WREAS II has operated in the ordinary course of business since the Asset Transfer Closing. Wells REF and WREAS II agree that the actual current assets and current liabilities as of the Assignment Effective Date shall be finally determined no later than thirty (30) days following the Assignment Effective Date. If current liabilities exceed current assets as finally determined, then Wells REF shall be responsible for the deficiency, after taking into account any reimbursement obligations of REIT II under the Renewal Advisory Agreement.
6. Indemnification . REIT II hereby agrees to cause WREAS II to indemnify, defend and hold harmless Wells REF, its successors and assigns, of and from any and all costs, liabilities and expense, including court costs and attorneys fees, arising from or connected with the operation of the Business by WREAS II or REIT II after the Assignment Effective Date and the Assumed Compensation Plans. Wells REF hereby agrees to indemnify, defend and hold harmless REIT II and WREAS II, their successors and assigns, of and from any and all costs, liabilities and expenses, including court costs and attorney fees, arising from or connected with the operation of the Business by WREAS II or Wells REF before the Assignment Effective Date.
7. Consulting Agreement . The parties hereto hereby represent and warrant, and it shall be a condition precedent to execution and delivery of this Agreement, that as of the date of this Agreement, each party has duly executed and delivered to the other party the consulting agreement among Wells REF, WREAS II, and REIT II in substantially the form of Exhibit C to the Transition Services Agreement.
8. Further Assurances . The parties hereto hereby each covenant and agree that, at any time and from time to time after the delivery of this Agreement, at the other party's request and expense, each party, its successors and assigns, will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, any and all such further acts, conveyances, transfers, assignments, powers of attorney and assurances as the other party reasonably may require to more effectively grant, convey, assign, transfer, set over to or vest in REIT II the Units, or to otherwise carry into effect the intent and purposes of this Agreement.
9. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia without reference to the choice of law principles thereof.
10. Binding Effect . This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.
11. Counterparts . This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which shall be considered one and the same agreement.

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IN WITNESS WHEREOF, this Assignment and Assumption Agreement has been signed by or on behalf of each of the parties as of the date first written above.
 
WELLS REF:
 
 
 
Wells Real Estate Funds, Inc.
 
 
 
By: /s/ Robert M. McCullough
 
Name: Robert M. McCullough
 
Title: Vice President
 
 
 
REIT II:
 
 
 
Wells Operating Partnership II, L.P.
 
 
 
By: /s/ E. Nelson Mills
 
Name: E. Nelson Mills
 
Title: President


            








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Schedule A to the Assignment and Assumption Agreement

Obligations for payments due after the Assignment Effective Date under the Long Term Incentive Plan with respect to eight (8) employees of WREAS II in amounts not to exceed the amounts set forth in the Schedule previously provided to REIT II to the extent the payments become due in accordance with the terms of the plan, unless agreed to by a majority vote of the Conflicts Committee. The Conflicts Committee can also agree to add employees of Wells REF who are currently under the Wells REF LTIP to the WREAS II LTIP at the same terms if the Conflicts Committee deems it in the best interests of the Company for such employees to become employees of WREAS II prior to the Assignment Effective Date. Wells REF shall be solely responsible for all payments to be made for LTIP awards earned during 2012. If the Assignment Effective Date is December 31, 2013, then Wells REF shall be responsible for payments to be made for awards earned during 2013.





Exhibit 10.6

ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”), dated as of February 28, 2013 (the “ Assignment Effective Date ”) is made by and between Wells Real Estate Funds, Inc., a Georgia corporation (“ Wells REF ”) and Wells Management Company, Inc., a Georgia corporation (“ Wells Management ”) to Wells Operating Partnership II, L.P. (“ REIT II ”).
WHEREAS , Wells REF owns all of the issued and outstanding shares of Wells Management and Wells Management owns all of the issued and outstanding limited liability company membership interests in Wells Real Estate Services, LLC, a Georgia limited liability company (“ WRES ”);
WHEREAS , each of Wells REF, Wells Management, WRES, and REIT II are parties to the Transition Services Agreement, as amended by the Amendment to Transition Services Agreement (as amended, the “ Transition Services Agreement ”), whereby REIT II is granted the option to acquire all issued and outstanding limited liability company membership interests in WRES held by Wells Management, and all rights, title, benefits, privileges and interests therein (the “ Units ”), upon delivery of written notice (the “ WRES Option Notice ”) to Wells REF of the exercise of such; and
WHEREAS , REIT II has duly delivered the WRES Option Notice to Wells REF, evidencing its desire to acquire and assume the Units.
NOW, THEREFORE , in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
1. Recitals . The foregoing recitals are made a part of this Agreement.
2. Definitions . All capitalized terms used in this Agreement but not otherwise defined herein are given the meanings set forth in the Transition Services Agreement.
3. Transfer and Assignment of the Units . Wells Management hereby grants, conveys, assigns, transfers and delivers the Units to REIT II, and its successors and assigns, and REIT II hereby accepts such Units (including without limitation, all of Wells Management's right, title, benefits, privileges and interest in and to the profits, losses, distributions, and capital of WRES represented by the Units) as of the date hereof.
4. Acceptance of Assignment . REIT II hereby accepts the assignment and transfer of Wells Management's right, title, benefits, privileges and interest in and to the Units. Notwithstanding any provision in WRES's limited liability company operating agreement to the contrary, REIT II is hereby admitted as the sole member of WRES. Effective as of the execution and delivery of this Agreement by all parties hereto, Wells Management shall no longer be a member of WRES.
5. Representations and Warranties of Wells REF . Wells REF and Wells Management represent and warrant to REIT II that, (a) each of the representations and warranties made by Wells REF and Wells Management in the Transition Services Agreement and the Property Management Asset Transfer Agreement are true and correct in all respects as of the date hereof; (b) WRES has no obligations or liabilities to Wells REF, Wells Management or any of their affiliates; (c) WRES's current assets are not less than its current liabilities and WRES has no indebtedness or other long-term liabilities; (d) WRES is not in default under any contract to which WRES is a party and has made all payments when due under such contracts; and



(e) WRES has operated in the ordinary course of business since the Effective Date of the Amendment to the Transition Services Agreement. Wells REF and REIT II agree that the actual current assets and current liabilities as of the Assignment Effective Date shall be finally determined no later than thirty (30) days following the Assignment Effective Date. If current liabilities exceed current assets as finally determined, then Wells REF shall be responsible for the deficiency, after taking into account any reimbursement obligations of REIT II under the Property Management Agreement for periods prior to the Assignment Effective Date.
6. Indemnification . REIT II hereby agrees to cause WRES to indemnify, defend and hold harmless Wells REF and Wells Management and their successors and assigns, of and from any and all costs, liabilities and expense, including court costs and attorneys fees, arising from or connected with the operation of the Property Management Business by WRES or REIT II after the Assignment Effective Date. Wells REF and Wells Management hereby agree to indemnify, defend and hold harmless REIT II and WRES, and their successors and assigns, of and from any and all costs, liabilities and expenses, including court costs and attorney fees, arising from or connected with the operation of the Property Management Business by WRES, Wells REF or Wells Management before the Assignment Effective Date.
7. Further Assurances . Wells REF and Wells Management hereby each covenant and agree that, at any time and from time to time after the delivery of this Agreement, at REIT II's request and expense, Wells REF and Wells Management, and their successors and assigns, will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, any and all such further acts, conveyances, transfers, assignments, powers of attorney and assurances as REIT II reasonably may require to more effectively grant, convey, assign, transfer, set over to or vest in REIT II the Units, or to otherwise carry into effect the intent and purposes of this Agreement.
8. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia without reference to the choice of law principles thereof.
9. Binding Effect . This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.
10. Counterparts . This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which shall be considered one and the same agreement.
[Signature page follows]

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IN WITNESS WHEREOF, this Assignment and Assumption Agreement has been signed by or on behalf of each of the parties as of the date first written above.

 
WELLS REF :
 
 
 
Wells Real Estate Funds, Inc.
 
 
 
By: /s/ Robert M. McCullough     
 
Name: Robert M. McCullough     
 
Title: Vice President     
 
 
 
WELLS MANAGEMENT :
 
 
 
Wells Management Company, Inc.
 
 
 
By: /s/ Robert M. McCullough     
 
Name: Robert M. McCullough     
 
Title: Vice President     
 
 
 
REIT II :
 
 
 
Wells Operating Partnership II, L.P.
 
 
 
By: /s/ E. Nelson Mills     
 
Name: E. Nelson Mills     
 
Title: President     


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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.
I have reviewed this quarterly report on Form 10-Q of Columbia Property Trust, Inc. for the quarter ended March 31, 2013 ;
2.
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;
3.
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;
4.
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;
b.
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;
c.
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
d.
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
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Dated:
May 8, 2013
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, Wendy W. Gill, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Columbia Property Trust, Inc. for the quarter ended March 31, 2013 ;
2.
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;
3.
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;
4.
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;
b.
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;
c.
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
d.
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
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Dated:
May 8, 2013
By:
/s/ Wendy W. Gill
 
 
 
Wendy W. Gill
 
 
 
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 Quarterly Report of Columbia Property Trust, Inc. (the “Registrant”) on Form 10-Q for the quarter ended March 31, 2013 , as filed with the Securities and Exchange Commission (the “Report”), the undersigned, E. Nelson Mills, Principal Executive Officer of the Registrant, and Wendy W. Gill, 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)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)
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
May 8, 2013
 
/s/ WENDY W. GILL
Wendy W. Gill
Principal Financial Officer
May 8, 2013