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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Basis of PresentationThe 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 the 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. For additional information on Columbia Property Trust's unconsolidated joint ventures, which are accounted for using the equity method of accounting, see Note 4, Unconsolidated Joint Ventures. Columbia Property Trust's consolidated financial statements include the accounts of Columbia Property Trust, Columbia OP, and any variable-interest entity in which Columbia Property Trust or Columbia OP is 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 OP, or their subsidiaries own a controlling financial interest and any limited partnership in which Columbia Property Trust, Columbia OP, or their subsidiaries own a controlling general partnership interest. All intercompany balances and transactions have been eliminated in consolidation.

Fair Value Measurements

Columbia Property Trust estimates the fair value of its assets and liabilities (where currently required under GAAP) consistent with the provisions of Accounting Standard Codification 820, Fair Value Measurements ("ASC 820"). Under this standard, fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date, under current market conditions. 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 or 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. To determine the appropriate useful life of an asset, Columbia Property Trust considers the period of future benefit of the asset. These assessments have a direct impact on net income. The estimated useful lives of its assets by class are as follows:


Buildings						40 years
Building and site improvements						5-25 years
Tenant improvements						Shorter of economic life or lease term
Intangible lease assets						Lease term

Assets Held for Sale

Columbia Property Trust classifies properties as held for sale according to Accounting Standard Codification 360, Accounting for the Impairment or Disposal of Long-Lived Assets ("ASC 360"). According to ASC 360, properties having separately identifiable operations and cash flows are considered held for sale when all of 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 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.

•The sale of the property is probable (i.e., typically subject to a binding sale contract with a non-refundable deposit), and transfer of the property is expected to qualify for recognition as a completed sale within one year.

As of

Evaluating the Recoverability of Real Estate Assets

Columbia Property Trust continually monitors events and changes in circumstances that could indicate that the net carrying amounts of its real estate and related intangible assets and liabilities, of both operating properties and properties under development or redevelopment, may not be recoverable. When indicators of potential impairment are present that suggest that the net carrying amounts of real estate assets and related intangible assets and liabilities may not be recoverable, Columbia Property Trust assesses the recoverability of these net assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future cash flows expected from the use of the net 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 values of the real estate assets and related intangible assets and liabilities to the estimated fair values, pursuant to the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognizes an impairment loss. At such time that a property is required to be classified as held for sale, its net carrying amount is adjusted to the lower of its depreciated book value or its estimated fair value, less costs to sell, and depreciation is no longer recognized.

Estimated fair values are calculated based on the following hierarchy of information: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated residual value. Projections of expected future operating cash flows require that Columbia Property Trust estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. Due to the inherent subjectivity of the assumptions used to project future cash flows, estimated fair values may differ from the values that would be realized in market transactions. Certain of Columbia Property Trust's assets may be carried at an amount that exceeds that which could be realized in a current disposition transaction.

Intangible Assets and Liabilities Arising From In-Place Leases Where Columbia Property Trust Is the Lessor

Intangible Assets and Liabilities Arising From In-Place Leases Where Columbia Property Trust Is the LessorUpon the acquisition of real properties, Columbia Property Trust allocates the purchase price of the properties to tangible assets, consisting of land, building, site improvements, and identified intangible assets and liabilities, including the value of in-place leases, based in each case on Columbia Property Trust's estimate of their fair values in accordance with ASC 820 (see "Fair Value Measurements" section above for additional detail).

Investments in Unconsolidated Joint Ventures/Investments in Real Estate Funds/Noncontrolling Interests

Investments in Unconsolidated Joint Ventures

Columbia Property Trust uses the equity method to account for investments that are not wholly owned and: (i) are considered variable interest entities where the Company is not the primary beneficiary, or (ii) in which the Company, along with its co-owners, possesses substantive participation rights, including management selection and termination, and the approval of significant capital and operating decisions. Under the equity method, investments in unconsolidated joint ventures are recorded at cost and adjusted for cash contributions and distributions, and allocations of income or loss.

Investments in Real Estate Funds

In connection with the Normandy Acquisition described in Note 3, Transactions, Columbia Property Trust acquired general partnership interests and limited partnership interests in three real estate funds: Normandy Real Estate Fund III, LP; Normandy Real Estate Fund IV, LP; and Normandy Opportunity Zone Fund, LP (collectively, the "Real Estate Funds"). The Company owns minimal economic interests in the Real Estate Funds (ranging from 2.0% to 2.5%). Significant decision rights are shared between the general partners and limited partners; and the general partner can be removed with a majority vote from the limited partners. As a result, Columbia Property Trust accounts for its investments in the Real Estate Funds using the equity method. The Real Estate Funds are subject to the rules of the AICPA Investment Company Guide; as a result, GAAP requires the Company to record its investments in the Real Estate Funds at their respective estimated fair market values. The Company determines the Real Estate Funds' estimated net asset values per share using a discounted cash flow model, which is considered a Level 3 valuation technique (see Fair Value Measurements section above). As of March 31, 2020, investments in the Real Estate Funds of approximately $3.8 million are included in prepaid expenses and other assets on the accompanying consolidated balance sheet. From January 24, 2020 (date of acquisition) through March 31, 2020, Columbia Property Trust recognized an unrealized loss on its investments in Real Estate Funds of approximately $160,000, which is recorded as other income (loss) in the accompanying consolidated statements of operations.

Columbia Property Trust has entered into agreements to provide acquisition, disposition, investment management, property management, leasing, and other services to the properties in which the Real Estate Funds own interests. See Note 12, Non-Lease Revenues, for more details. From time to time, Columbia Property Trust may be required to make additional capital contributions to the Real Estate Funds. See Note 7, Commitments and Contingencies, for more details.

Noncontrolling InterestsNoncontrolling interests represent the portion of equity in consolidated entities that is owned by third-parties. Noncontrolling interests are adjusted for cash contributions and distributions, and for earnings. Earnings are allocated between the Company and noncontrolling interests using the hypothetical liquidation at book value method pursuant to the terms of the respective ownership agreements, and are reflected as net income (loss) attributable to noncontrolling interests in the accompanying consolidated statements of operations.

Goodwill

Goodwill represents purchase price not specifically assigned to assets acquired and liabilities assumed in a business combination. On January 24, 2020, Columbia Property Trust recorded goodwill of $63.8 million in connection with the Normandy Acquisition (see Note 3, Transactions for details). Columbia Property Trust assesses the recoverability of goodwill on an annual basis, and on an interim basis if an event occurs or circumstances change that would indicate that the carrying value of goodwill may be impaired. When indicators of potential impairment exist, Columbia evaluates whether the carrying value of the reporting unit to which the goodwill relates exceeds the reporting unit's estimated fair value. If the reporting unit's carrying value exceeds its estimated fair value, Columbia Property Trust would then perform the same assessment at the enterprise level. If the carrying value of Columbia Property Trust's equity exceeds the estimated fair value of the Company, then goodwill would be reduced, and an impairment loss would be recognized, for the amount of this excess (not to exceed total goodwill). Columbia Property Trust has determined that the carrying value of goodwill is recoverable as of March 31, 2020.

Interest Rate Swap Agreements

Interest Rate Swap AgreementsColumbia Property Trust enters into interest rate swap contracts to mitigate its interest rate risk on the related financial instruments. Columbia Property Trust does not enter into derivative or interest rate swap transactions for speculative purposes and currently does not have any derivatives that are not designated as hedges; however, certain of its derivatives may, at times, not qualify for hedge accounting treatment. Columbia Property Trust records the fair value of its interest rate swaps on its consolidated balance sheet either as prepaid expenses and other assets or as accounts payable, accrued expenses, and accrued capital expenditures. Changes in the fair value of interest rate swaps that are designated as cash flow hedges are recorded as other comprehensive income (loss). Changes in the fair value of interest rate swaps that do not qualify for hedge accounting treatment are recorded as gain or 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 or loss on interest rate swaps for contracts that do not qualify 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, the Company 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. To the extent that Columbia Property Trust satisfies the distribution requirement but distributes less than 100% of its REIT taxable income, the Company would be subject to federal and state corporate income tax on the undistributed income. Generally, the Company does not incur federal income taxes, other than as described in the following paragraph, because its stockholder distributions typically exceed its taxable income due to noncash expenses such as depreciation. 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 KCP TRS, LLC; Columbia Development TRS 13, LLC; and Columbia Development TRS 87, LLC (collectively, the "TRS Entities") are subsidiaries of the Company and are organized as Delaware limited liability companies. The TRS Entities, among other things, provide services related to asset and property management, construction and development, and other tenant services that Columbia Property Trust, as a REIT, cannot otherwise provide. The Company 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 the Company to continue to qualify as a REIT, Columbia Property Trust must limit its investments in taxable REIT subsidiaries to 20% 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, the Company records interest and penalties related to uncertain tax positions as general and administrative expense in the accompanying consolidated statements of operations.

Reclassification

Certain prior-period amounts on our consolidated statement of operations have been reclassified to conform with current-period's presentation: property operating costs includes amounts previously reported as asset and property management fees.

Recent Accounting Pronouncements

Accounting Standard Update 2020-04, Reference Rate Reform ("ASC 2020-04"), which was issued on and effective as of March 12, 2020, addresses the accounting and disclosure impacts of reference rate reform and the anticipated discontinuance of London Interbank Offering Rate ("LIBOR"). ASU 2020-04 provides optional guidance that may be elected over time, and includes practical expedients for activities that impact debt, leases, derivatives, and other contracts. Columbia Property Trust has matched LIBOR-based debt with LIBOR-based interest rate swaps, and has elected to apply the ASU 2020-04's practical expedients related to (i) probability and (ii) the assessment of the effectiveness for future LIBOR-indexed cash flows, which assume that the debt instrument will use the same index rate as its corresponding interest rate swap once a new reference rate is established to replace LIBOR. Application of these expedients preserves the effectiveness of our interest rate swaps as cash flow hedges in the event that our debt and interest rate swaps are not amended concurrently to reflect a new reference rate. Columbia Property Trust continues to evaluate the impact of the guidance and may apply other elections as additional reference rate changes occur. ASU 2020-04 did not have a material impact on Columbia Property Trust's consolidated financial statements or disclosures.

Accounting Standard Update 2018-13, Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which became effective for Columbia Property Trust on January 1, 2020, is intended to improve the effectiveness of disclosures required by entities regarding recurring and nonrecurring fair value measurements by removing, modifying, or adding certain disclosures. ASU 2018-13 did not have a material impact on Columbia Property Trust's consolidated financial statements or disclosures.

Recent Disclosure Pronouncement

The SEC's Final Rule Release No. 33-10762, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities (the "SEC Release No. 33-10762") was issued on March 2, 2020 and adopted by Columbia Property Trust in the first quarter of 2020. With respect to the disclosure requirements for subsidiary issuers and guarantors of registered debt securities, SEC Release No. 33-10762 amends SEC Rule 3-10 by, among other things:

•Simplifying the criteria that must be met for a parent registrant to qualify for an exemption allowing it to provide summarized financial information in lieu of standalone audited financial statements of the subsidiary issuer, including replacing the requirement that a subsidiary issuer be wholly owned by the parent guarantor with a requirement that the subsidiary issuer be consolidated in the parent guarantor’s financial statements.

•Upon qualifying for the exemption above, replacing the previous requirement to include condensed consolidating financial information in the registrant's (parent guarantor's) financial statements, with a requirement to include certain summarized financial information (Alternative Disclosures) in either the registrant's financial statement footnotes or in its Management’s Discussion and Analysis.

Our Bonds Payable (see Note 6., Bond Payable) were issued by Columbia OP, and are fully and unconditionally guaranteed by Columbia Property Trust and by no other party. Columbia Property Trust owns 97.2% of Columbia OP, and includes the accounts of Columbia OP in its consolidated financial statements. Therefore, upon adopting SEC Release No. 33-10762 this quarter, we are providing Alternative Disclosures in the Management's Discussion and Analysis section of this Form 10-Q.