##### 









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|  |  | For the fiscal year ended December 31, 2005                                                 
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the transition period
    from           to                                             

Commission file number 001-32536


COLUMBIA EQUITY TRUST, INC.


(Exact name of registrant as specified in its charter)


|                                                                                        |  |                                        
|--------------------------------------------------------------------------------------- |  | ---------------------------------------
|Maryland                                                                                |  | 20-1978579                             
|(State of incorporation)                                                                |  | (I.R.S. Employer Identification Number)
|                                                                                       
|1750 H Street, NW, Suite 500
    Washington, DC(Address of principal executive offices) |  | 20006(Zip Code)                        

(202) 303-3080


(Registrants telephone number, including area code)


Securities registered pursuant to Section 12(b) of the
Act:


|                                         |  |                                       
|---------------------------------------- |  | --------------------------------------
|Title of Class                           |  | Name of Exchange upon Which Registered
|                                         |  |                                       
|Common Stock, $0.001 par value per share |  | New York Stock Exchange               

o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o o þ


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE


10-K










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Columbia Equity Trust, Inc.


Form 10-K
Annual Report


For the Year Ended December 31, 2005


Table of Contents


|         |  |                                                                                                                      |  |      |    | 
|-------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                                                      |  | Page
|         |  |                                                                                                                      |  |     
|PART I  
|Item 1.  |  | Business                                                                                                             |  |      | 2  | 
|Item 1A. |  | Risk Factors                                                                                                         |  |      | 13 | 
|Item 1B. |  | Unresolved Staff Comments                                                                                            |  |      | 26 | 
|Item 2.  |  | Properties                                                                                                           |  |      | 26 | 
|Item 3.  |  | Legal Proceedings                                                                                                    |  |      | 27 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 27 | 
|        
|PART II 
|Item 5.  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 27 | 
|Item 6.  |  | Selected Financial Data                                                                                              |  |      | 28 | 
|Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 30 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 44 | 
|Item 8.  |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 44 | 
|Item 9.  |  | Changes and Disagreements with Accountants
    on Accounting and Financial Disclosure                                |  |      | 45 | 
|Item 9A. |  | Controls and Procedures                                                                                              |  |      | 45 | 
|Item 9B. |  | Other Information                                                                                                    |  |      | 45 | 
|        
|PART III
|Item 10. |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 45 | 
|Item 11. |  | Executive Compensation                                                                                               |  |      | 46 | 
|Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 46 | 
|Item 13. |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 46 | 
|Item 14. |  | Principal Accountant Fees and Services                                                                               |  |      | 46 | 
|        
|PART III
|Item 15. |  | Exhibits and Financial Statement
    Schedules                                                                       |  |      | 46 | 





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Forward Looking Statements


10-K,






| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | general risks affecting the commercial office property industry;                                                                                                         
|
| |  | risks associated with the availability and terms of financing
    and the use of debt, equity or other types of financings;                                              
|
| |  | failure to manage effectively (i) our growth and
    (ii) our transition from a privately held to a publicly
    held company;                                           
|
| |  | risks and uncertainties affecting property development and
    construction;                                                                                             
|
| |  | risks associated with downturns in the national and local
    economies, increases in interest rates and volatility in the
    securities markets;                       
|
| |  | risks associated with actual and threatened terrorist attacks;                                                                                                           
|
| |  | costs of compliance with the Americans with Disabilities Act and
    other similar laws and potential liability for uninsured losses
    and environmental contamination;
|
| |  | risks associated with the potential failure to qualify as a
    REIT; and                                                                                                
|
| |  | the other risk factors identified in Item 1A
    under the caption Risk Factors.                                                                                     



1



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##### 






PART I







|        |         
|------- | --------
|ITEM 1. | BUSINESS

General










| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | owned interests in 17 commercial office properties consisting of
    approximately 2.5 million square feet and one development
    property, including:



| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 100% fee simple ownership in eight properties totaling
    approximately 831,000 square feet of net rentable area;                                                                                                                     
|
| |  | a 100% leasehold interest in an approximately
    126,000 square foot office building in North Rockville,
    Maryland (the property is subject to a ground lease with a
    remaining term, including extension options, of 70 years);
|
| |  | partial interests ranging from 9% to 50% in eight office
    properties totaling approximately 1.6 million square feet
    of net rentable area; and                                                                                   
|
| |  | an 8.1% joint venture interest in an approximately
    115,000 square foot office building development adjacent to
    our Independence Center I property.                                                                             



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provided asset management services to related parties for three
    office buildings containing approximately 690,000 net
    rentable square feet and two hotel properties containing
    approximately 610 rooms.









2



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2005 Highlights Since Our Initial Public Offering






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During July 2005, the joint venture that owns Independence
    Center I, an approximately 275,002 net rentable square
    foot commercial office building in Chantilly, Virginia,
    commenced development on Independence Center II, an
    approximately 115,000 net rentable square foot office
    building adjacent to Independence Center I. The total cost of
    the development is expected to be approximately
    $24.5 million. In October 2005, a separate joint venture
    was formed to own Independence Center II. We maintain an
    8.1% ownership interest in the Independence Center II joint
    venture. The equity required to capitalize our share of the
    Independence Center II joint venture was approximately
    $713,000 and funded through proceeds from our IPO. The remaining
    costs of the project are expected to be funded through a
    $15.7 million construction loan that the joint venture
    closed in October 2005. As of December 31, 2005,
    approximately $7.5 million, or 31%, of total joint venture
    project costs had been expended. The project is expected to be
    completed in September 2006.
|
| |  | On August 23, 2005, we completed the acquisition of 14700
    Lee Road in Fairfax, Virginia for a purchase price of
    approximately $24.0 million, net of transaction costs. The
    acquisition was funded 100% with proceeds from our IPO. The
    property contains approximately 85,000 net rentable square
    feet of space and was 100% leased to one tenant as of
    December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | On September 29, 2005 we completed the acquisition of a
    100% leasehold interest in the Park Plaza II office
    building in Rockville, Maryland for a purchase price of
    $35.0 million, net of transaction costs. The acquisition
    was funded 100% with proceeds from our IPO. The property
    contains approximately 126,000 net rentable square feet of
    space and was 98% leased to seven tenants as of
    December 31, 2005. The property is subject to a ground
    lease with a remaining term, including extension options, of
    70 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | On November 28, 2005, we closed on a $75,000,000 secured,
    revolving credit facility, which we use to finance acquisitions
    and for other general corporate purposes. We refer to this
    secured revolving credit facility in this Annual Report as our
    credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | On December 1, 2005, we completed the acquisition of
    Patrick Henry Corporate Center in Newport News, Virginia for a
    purchase price of $14.5 million, net of transaction costs.
    The transaction was funded with proceeds from our IPO and the
    assumption of an $8.5 million mortgage loan which bears
    interest at a fixed rate of 5.02% and matures in April 2009. The
    property contains approximately 99,000 net rentable square
    feet of space and the property was 92% leased to ten tenants as
    of December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | On December 7, 2005, we entered into a material definitive
    agreement to acquire Georgetown Plaza, a five-story,
    approximately 151,000 square foot multi-tenant office and
    retail building located in Washington, D.C. for
    approximately $23,500,000. The ownership of Georgetown Plaza is
    subject to a ground lease which expires in December 2058. We
    expect to fund the transaction with proceeds from our revolving
    line of credit and the assumption of an approximately
    $16.1 million mortgage loan which bears interest at a fixed
    rate of 5.78% and matures in June 2013. The purchase of
    Georgetown Plaza is subject to customary closing conditions,
    including the satisfactory completion by us of a due diligence
    review during our inspection periods.                                                                                                                                                                                                                                                                                                                                                 
|
| |  | On December 9, 2005, we completed the acquisition of Oakton
    Corporate Center in Oakton, Virginia for a purchase price of
    $16.0 million, net of transaction costs. The transaction
    was funded with borrowings under our credit facility. The
    property contains approximately 65,000 net rentable square
    feet of space and was 100% leased to three tenants as of
    December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

3



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Since our IPO through December 31, 2005, we have declared
    aggregate dividends on our common stock and distributions on our
    operating partnership units of $0.26 per common share and
    unit, representing a dividend of $0.12 for the third quarter
    that was paid in October 2005, and a dividend of $0.14 for the
    fourth quarter that was paid in January 2006. The fourth quarter
    dividend of $0.14 is equivalent to an annualized dividend of
    $0.56 per share and unit.

Subsequent Events








Our Business Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Investing in
    Small-to-Medium Size
    Office Buildings. We invest principally in
    small-to-medium size
    office properties with an initial cost between $10 million
    and $60 million as we believe these properties present
    opportunities for attractive, risk-adjusted returns due to the
    lower degree of institutional focus on this segment of the
    office market.
|
| |  | Selective and Strategic Geographic Focus. We focus
    primarily on the Greater Washington, D.C. commercial office
    property market to take advantage of the strong economic and
    demographic characteristics of that market, leverage our local
    market expertise and relationships and create economies of scale
    through the clustering of properties.                       
|
| |  | Intensive and Efficient Asset Management. We intensively
    manage each of our properties through active property leasing
    and targeted capital improvements, which may include
    re-positioning or redeveloping certain properties, while
    maintaining efficiency through the outsourcing of non-strategic
    property functions.                                                
|
| |  | Strategic Joint Ventures. We selectively enter into joint
    ventures where appropriate to leverage our equity returns
    through fees and disproportionate cash flow distributions, as
    well as manage the risks associated with certain properties that
    may be inappropriate to wholly own due to size or vacancy levels.                                                        

4



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Recycling Capital. We evaluate individual properties in
    our portfolio to assess their future potential growth against
    current market values. If we believe that we have maximized a
    propertys value potential, we will look to sell or
    recapitalize the property and reinvest the profit generated from
    the sale or recapitalization into new investments that offer
    improved earnings potential for our stockholders.                                                                                                                 
|
| |  | Maintain Investment Flexibility. When the market for new
    acquisitions remains competitive, we will consider allocating
    additional capital into development and alternative investment
    structures, including, equity joint ventures and mezzanine debt,
    which may offer investment yields above those provided through
    wholly owned property acquisitions. In addition, we will
    consider investments in contiguous markets, as well as
    investments in mixed-use properties, that provide an appropriate
    investment yield premium.

Our Acquisition and Development Strategy






moderate-to near-to






| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | recovering sub-market fundamentals;                                                                                                              
|
| |  | in-place rents below market with ability to re-lease at market
    rents during the holding period; and                                          
|
| |  | ability to reposition the asset through pro-active leasing,
    targeted capital improvements, management and/or
    recapitalization strategies.







| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | significant in-place occupancies;                                
|
| |  | limited lease rollover exposure; and                             
|
| |  | attractive valuation to competing properties on a relative basis.





5



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Our Operating Strategy


day-to




Target Markets






| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the District of Columbia;                                                                                                                                                          
|
| |  | Northern Virginia, including, but not limited, to Arlington,
    Fairfax, Loudoun, Prince William and Stafford counties, and all
    the cities included within these counties; and
|
| |  | Suburban Maryland, including, but not limited, to Montgomery,
    Prince Georges, Calvert, Charles and Frederick counties,
    and all the cities included within these counties. 







Competition




6



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##### 



Properties






|                       |  |            |    |                   |               |  |                   |                    |  |                 |              |  |            |            |       |     |            |  |    |   |  |  |    |  
|---------------------- |  | ---------- | -- | ----------------- | ------------- |  | ----------------- | ------------------ |  | --------------- | ------------ |  | ---------- | ---------- | ----- | --- | ---------- |  | -- | - |  |  | -- | -
|                       |  |            |    |                   |               |  |                   |                    |  | Occupancy as of |             
|                       |  |            |    |                   |               |  |                   |                    |  | 12/31/2005 (1)  |             
|                       |  |            |    |                   |               |  |                   |                    |  |                 |             
|                       |  |            |    | Net Rentable Area |               |  | Pro Rata Share of |                    |  | Rent as a %     |              |  | In-Service |            |       | All |           
|Ownership Type         |  | Properties |    |                   | (Square Feet) |  |                   | Annualized Rent(2) |  |                 | of Portfolio |  |            | Properties |       |     | Properties | 
|                       |  |            |    |                   |               |  |                   |                    |  |                 |              |  |            |            |       |     |            | 
|Wholly Owned           |  |            | 9  |                   |               |  | 957,188           |                    |  | $               | 20,441,832   |  |            |            | 63.2  | %   |            |  | 95 | % |  |  | 95 | %
|Joint Venture(3)       |  |            | 8  |                   |               |  | 1,557,166         |                    |  |                 | 11,920,382   |  |            |            | 36.8  | %   |            |  | 94 | % |  |  | 85 | %
|                       |  |            |    |                   |               |  |                   |                    |  |                 |              |  |            |            |       |     |            | 
|Total/Weighted Average |  |            | 17 |                   |               |  | 2,514,354         |                    |  | $               | 32,362,214   |  |            |            | 100.0 | %   |            |  | 94 | % |  |  | 89 | %
|                       |  |            |    |                   |               |  |                   |                    |  |                 |              |  |            |            |       |     |            | 






|    |                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Properties acquired with occupancy levels of 65% or less are not
    considered In-Service until the earlier of one year from the
    date of acquisition or once occupancy exceeds 65%. In-Service
    occupancy information excludes Victory Point which was acquired
    through a joint venture in March 2005 and was 100% vacant at
    December 31, 2005.
|   
|(2) | Annualized rent is calculated by multiplying by a factor of
    twelve the actual contractual monthly base rent at
    December 31, 2005 for each tenant. For joint venture
    properties, annualized rent represents our pro rata share of
    annualized rent based upon our percentage ownership interest in
    each property.                            
|   
|(3) | Information set forth in this table excludes our 8.1% ownership
    interest in the joint venture that owns the Independence
    Center II development property.                                                                                                                                                                                               

7



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|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       |              |           |            |            |  |           |            |  |         |     |   |  |   |            |  |  |  |      |  
|-------------------------- |  | --------- | --- | - | ------- |  | ------------- | ------------- | ----------- |  | ----------------- | ----------- | ------------ | --------- | ------------ |  | ----- | ------------ | --------- | ---------- | ---------- |  | --------- | ---------- |  | ------- | --- | - |  | - | ---------- |  |  |  | ---- | -
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       | Our Pro      |          
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       | Rata         |          
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       | Share of     |          
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       | Total        |          
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       | Annualized   |          
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       | Rent as a    |          
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       | % of our     |          
|                           |  |           |     |   |         |  |               | Year Acquired |             |  |                   |             | Net Rentable |           |              |  |       | Total        |           |            | Total      | 
|                           |  | Ownership |     |   |         |  |               |               | by Columbia |  |                   | Year Built/ |              |           | Area (Square |  |       | Occupancy at |           |            | Annualized |  |           | Annualized | 
|Property(1)                |  | Interest  |     |   | Tenancy |  |               | Market        |             |  | or Predecessor    |             |              | Renovated |              |  | Feet) |              |           | 12/31/2005 |            |  | Rent(2)   |            |  | Rent(3) |    
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       |              |           |            |            |  |           |            |  |         |    
|14700 Lee Road             |  |           | 100 | % |         |  | Single Tenant |               |             |  | Northern Virginia |             |              |           | 2005         |  |       |              | 2000      |            |            |  | 84,652    |            |  |         | 100 | % |  | $ | 2,084,580  |  |  |  | 6.4  | %
|Fair Oaks                  |  |           | 100 | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2001         |  |       |              | 1985      |            |            |  | 126,949   |            |  |         | 84  | % |  |   | 2,450,448  |  |  |  | 7.6  | %
|Greenbriar                 |  |           | 100 | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2001         |  |       |              | 1985-1998 |            |            |  | 111,721   |            |  |         | 82  | % |  |   | 1,977,960  |  |  |  | 6.1  | %
|Loudoun Gateway IV         |  |           | 100 | % |         |  | Single Tenant |               |             |  | Northern Virginia |             |              |           | 2005         |  |       |              | 2002      |            |            |  | 102,987   |            |  |         | 100 | % |  |   | 1,532,448  |  |  |  | 4.8  | %
|Meadows IV                 |  |           | 100 | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2004         |  |       |              | 1988-1997 |            |            |  | 148,160   |            |  |         | 100 | % |  |   | 3,216,852  |  |  |  | 9.9  | %
|Oakton                     |  |           | 100 | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2005         |  |       |              | 1985      |            |            |  | 64,648    |            |  |         | 100 | % |  |   | 1,676,964  |  |  |  | 5.2  | %
|Park Plaza II(4)           |  |           | 100 | % |         |  | Multi-Tenant  |               |             |  | Suburban Maryland |             |              |           | 2005         |  |       |              | 2001      |            |            |  | 126,228   |            |  |         | 98  | % |  |   | 3,716,760  |  |  |  | 11.5 | %
|Patrick Henry              |  |           | 100 | % |         |  | Multi-Tenant  |               |             |  | Newport News, VA  |             |              |           | 2005         |  |       |              | 1989      |            |            |  | 98,883    |            |  |         | 92  | % |  |   | 1,716,312  |  |  |  | 5.3  | %
|Sherwood Plaza             |  |           | 100 | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2000         |  |       |              | 1984      |            |            |  | 92,960    |            |  |         | 100 | % |  |   | 2,069,508  |  |  |  | 6.4  | %
|King Street                |  |           | 50  | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 1999         |  |       |              | 1984-2004 |            |            |  | 149,080   |            |  |         | 87  | % |  |   | 3,879,540  |  |  |  | 6.0  | %
|Madison Place              |  |           | 50  | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2003         |  |       |              | 1989      |            |            |  | 108,252   |            |  |         | 79  | % |  |   | 2,237,256  |  |  |  | 3.5  | %
|Barlow Building            |  |           | 40  | % |         |  | Multi-Tenant  |               |             |  | Suburban Maryland |             |              |           | 2005         |  |       |              | 1966-2001 |            |            |  | 270,562   |            |  |         | 94  | % |  |   | 8,800,164  |  |  |  | 10.8 | %
|Atrium Building            |  |           | 37  | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2004         |  |       |              | 1978-1999 |            |            |  | 138,507   |            |  |         | 100 | % |  |   | 3,951,096  |  |  |  | 4.5  | %
|Suffolk Building           |  |           | 37  | % |         |  | Single Tenant |               |             |  | Northern Virginia |             |              |           | 2005         |  |       |              | 1964-2003 |            |            |  | 257,425   |            |  |         | 100 | % |  |   | 6,358,800  |  |  |  | 7.2  | %
|Independence Center        |  |           | 15  | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2002         |  |       |              | 1999      |            |            |  | 275,002   |            |  |         | 92  | % |  |   | 5,702,076  |  |  |  | 2.6  | %
|1575 Eye Street            |  |           | 9   | % |         |  | Multi-Tenant  |               |             |  | Washington, D.C.  |             |              |           | 2002         |  |       |              | 1979      |            |            |  | 210,372   |            |  |         | 99  | % |  |   | 7,836,036  |  |  |  | 2.2  | %
|Victory Point              |  |           | 10  | % |         |  | Multi-Tenant  |               |             |  | Northern Virginia |             |              |           | 2005         |  |       |              | 1989-2005 |            |            |  | 147,966   |            |  |         | 0   | % |  |   |           |  |  |  | 0.0  | %
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       |              |           |            |            |  |           |            |  |         |    
|Total/ Weighted Average(5) |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       |              |           |            |            |  | 2,514,354 |            |  |         | 94  | % |  | $ | 59,206,800 |  |  |  | 100  | %
|                           |  |           |     |   |         |  |               |               |             |  |                   |             |              |           |              |  |       |              |           |            |            |  |           |            |  |         |    






|    |                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Information set forth in this table excludes our 8.1% ownership
    interest in the joint venture that owns the Independence
    Center II development property.                                                                                                     
|   
|(2) | Annualized rent is calculated by multiplying by a factor of
    twelve the actual contractual monthly base rent at
    December 31, 2005 for each tenant. Total annualized rent
    includes our joint venture partners pro rata share of
    contractual base rent.
|   
|(3) | Represents the percentage of our pro rata share of annualized
    rent (which is based upon our percentage ownership interest in
    each property) divided by our total pro rata share of annualized
    rent of our portfolio.                                     
|   
|(4) | The property is subject to a ground lease with a remaining term,
    including extension options, of 70 years.                                                                                                                                                       
|   
|(5) | Excludes the occupancy of Victory Point which was acquired
    vacant in March 2005 by Columbia Predecessor through a joint
    venture. The weighted average occupancy including Victory Point
    was approximately 89% at December 31, 2005.                      

Tenant Information




8



---



##### 





|                                   |  |                            |  |            |   |  |              |  |           |                     |  |   |            |               |  |            |            |  |            |  |      |   |  |  |     | 
|---------------------------------- |  | -------------------------- |  | ---------- | - |  | ------------ |  | --------- | ------------------- |  | - | ---------- | ------------- |  | ---------- | ---------- |  | ---------- |  | ---- | - |  |  | --- | 
|                                   |  |                            |  |            |   |  |              |  |           | Columbias Pro Rata |  |   |           
|                                   |  |                            |  |            |   |  |              |  |           | Share(3)            |  |   | Weighted   |              
|                                   |  |                            |  |            |   |  |              |  |           |                     |  |   | Average    |              
|                                   |  |                            |  | Number     |   |  |              |  | Gross     |                     |  |   |            | Percentage of |  |            | Remaining  | 
|                                   |  |                            |  | of         |   |  | Total Leased |  |           | Annualized          |  |   | Annualized |               |  | Annualized |            |  | Lease Term | 
|Tenant(1)                          |  | Industry                   |  | Properties |   |  | Square Feet  |  |           | Base Rent(2)        |  |   | Base Rent  |               |  | Base Rent  |            |  | (years)    | 
|                                   |  |                            |  |            |   |  |              |  |           |                     |  |   |            |               |  |            |            |  |            | 
|General Dynamics Corp.(4)          |  | Defense                    |  |            | 2 |  |              |  | 101,373   |                     |  | $ | 2,559,780  |               |  | $          | 2,559,780  |  |            |  | 7.9  | % |  |  | 4.5 | 
|United States Government(5)        |  | Federal Government         |  |            | 5 |  |              |  | 269,800   |                     |  |   | 8,140,836  |               |  |            | 1,954,201  |  |            |  | 6.0  | % |  |  | 6.2 | 
|CACI, Inc.                         |  | Gov. Contracting           |  |            | 1 |  |              |  | 74,255    |                     |  |   | 1,694,472  |               |  |            | 1,694,472  |  |            |  | 5.2  | % |  |  | 3.9 | 
|Institutional Shareholder Services |  | Professional  Advisory    |  |            | 1 |  |              |  | 53,780    |                     |  |   | 1,657,476  |               |  |            | 1,657,476  |  |            |  | 5.1  | % |  |  | 6.6 | 
|America Online, Inc.(6)            |  | Technology                 |  |            | 1 |  |              |  | 102,987   |                     |  |   | 1,532,448  |               |  |            | 1,532,448  |  |            |  | 4.7  | % |  |  | 6.1 | 
|Online Resources Corporation       |  | Technology/Banking         |  |            | 1 |  |              |  | 73,905    |                     |  |   | 1,522,380  |               |  |            | 1,522,380  |  |            |  | 4.7  | % |  |  | 8.6 | 
|Northrop Grumman(7)                |  | Defense                    |  |            | 2 |  |              |  | 239,635   |                     |  |   | 5,242,236  |               |  |            | 1,440,056  |  |            |  | 4.4  | % |  |  | 6.7 | 
|TKC Communications                 |  | Gov. Contracting           |  |            | 1 |  |              |  | 112,874   |                     |  |   | 3,139,020  |               |  |            | 1,145,742  |  |            |  | 3.5  | % |  |  | 3.5 | 
|Vance International                |  | Professional  Security    |  |            | 1 |  |              |  | 41,968    |                     |  |   | 1,066,728  |               |  |            | 1,066,728  |  |            |  | 3.3  | % |  |  | 6.0 | 
|SI International                   |  | Gov. Contracting           |  |            | 1 |  |              |  | 23,980    |                     |  |   | 826,116    |               |  |            | 826,116    |  |            |  | 2.6  | % |  |  | 6.0 | 
|Oliff & Berridge                   |  | Professional  Legal       |  |            | 1 |  |              |  | 76,872    |                     |  |   | 2,116,728  |               |  |            | 783,189    |  |            |  | 2.4  | % |  |  | 5.2 | 
|Opus East                          |  | Real Estate                |  |            | 1 |  |              |  | 20,545    |                     |  |   | 539,916    |               |  |            | 539,916    |  |            |  | 1.7  | % |  |  | 4.7 | 
|J. Spargo & Associates             |  | Professional  Management  |  |            | 1 |  |              |  | 21,955    |                     |  |   | 528,276    |               |  |            | 528,276    |  |            |  | 1.6  | % |  |  | 8.9 | 
|Long & Foster Real Estate          |  | Professional  Real Estate |  |            | 3 |  |              |  | 28,843    |                     |  |   | 667,920    |               |  |            | 518,400    |  |            |  | 1.6  | % |  |  | 2.7 | 
|Patten, Wornom, Hatten             |  | Professional  Legal       |  |            | 1 |  |              |  | 25,606    |                     |  |   | 402,276    |               |  |            | 402,276    |  |            |  | 1.2  | % |  |  | 5.1 | 
|                                   |  |                            |  |            |   |  |              |  |           |                     |  |   |            |               |  |            |            |  |            | 
|Totals/Weighted Average            |  |                            |  |            |   |  |              |  | 1,268,378 |                     |  | $ | 31,636,608 |               |  | $          | 18,171,456 |  |            |  | 55.9 | % |  |  | 5.6 | 
|                                   |  |                            |  |            |   |  |              |  |           |                     |  |   |            |               |  |            |            |  |            | 






|    |                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Actual tenant obligated under the respective lease may be a
    subsidiary of entity named.                                                                                                                                                                                                          
|   
|(2) | Gross Annualized Base Rent is the monthly contractual base rent
    as of December 31, 2005 multiplied by 12.                                                                                                                                                                                        
|   
|(3) | Represents our pro rata share of tenants annualized base
    rent based on our percentage ownership interest in the property
    or properties in which the tenant pays rent.                                                                                                                       
|   
|(4) | A subsidiary of General Dynamics is obligated under the lease
    which currently expires in February 2011. Tenant has the one
    time right to terminate the lease with respect to
    42,326 square feet in February 2008 subject to
    12 months prior notice and certain termination penalties.
|   
|(5) | The General Services Administration, which leases
    144,551 square feet in the Suffolk Building, has the right
    to terminate its lease in 2010, subject to six months notice.
    The lease currently expires in 2013.                                                                          
|   
|(6) | America Onlines lease currently expires in December 2012.
    Tenant has option to terminate its lease in 2010 subject to nine
    months notice and a lease termination payment of one years
    base rent. America Online is the sole tenant in our Loudoun
    Gateway IV property.             
|   
|(7) | A subsidiary of Northrop Grumman has the option to terminate a
    portion of its lease for 118,421 square feet in whole or in
    part in 2009, subject to three months notice.                                                                                                                     

9



---



##### 



Lease Expirations




|         |  |                  |    |  |                                   |       |     |                                            |            |  |                   |  |  |          |           |  |             |  |            |            |  |  |               |   |  |            |            |  |            |   |            |            |  |    |            |  |  |  |       |   |  |   |            |  |  |  |       |  
|-------- |  | ---------------- | -- |  | --------------------------------- | ----- | --- | ------------------------------------------ | ---------- |  | ----------------- |  |  | -------- | --------- |  | ----------- |  | ---------- | ---------- |  |  | ------------- | - |  | ---------- | ---------- |  | ---------- | - | ---------- | ---------- |  | -- | ---------- |  |  |  | ----- | - |  | - | ---------- |  |  |  | ----- | -
|         |  | Number of Leases |    |  |                                   |       |     |                                            | Columbias | 
|         |  | Expiring         |    |  | Square Footage of Leases Expiring |       |     | Annualized Base Rent of Leases Expiring(1) |            |  | Pro Rata Share(2) | 
|         |  |                  |    |  |                                   |       |     |                                            |            |  |                   | 
|         |  |                  |    |  |                                   |       |     | Percentage                                 |            |  |                  
|         |  |                  |    |  |                                   | Total |     |                                            | Percentage |  |                   |  |  | of Total |           |  |             |  | Percentage |           
|         |  | Wholly           |    |  | Joint                             |       |     | Wholly                                     |            |  | Joint             |  |  | Square   |           |  | of Total    |  |            | Wholly     |  |  | Joint         |   |  | Total      |            |  | Portfolio  |   |            |            |  | of |           
|         |  | Owned            |    |  | Venture                           |       |     | Owned                                      |            |  | Venture           |  |  | Footage  |           |  | Leased      |  |            | Owned      |  |  | Venture       |   |  | Annualized |            |  | Annualized |   |            | Annualized |  |    | Annualized | 
|Year     |  | Properties       |    |  | Properties                        |       |     | Properties                                 |            |  | Properties(3)     |  |  | Expiring |           |  | Square Feet |  |            | Properties |  |  | Properties(3) |   |  | Base Rent  |            |  | Base Rent  |   |            | Base Rent  |  |    | Base Rent  | 
|         |  |                  |    |  |                                   |       |     |                                            |            |  |                   |  |  |          |           |  |             |  |            |            |  |  |               |   |  |            |            |  |            |   |            |            |  |    |            | 
|2005     |  |                  |   |  |                                   |       | 2   |                                            |            |  |                  |  |  |          | 7,247     |  |             |  | 7,247      |            |  |  | 0.3           | % |  | $          |           |  |            | $ | 238,716    |            |  | $  | 238,716    |  |  |  | 0.4   | % |  | $ | 70,941     |  |  |  | 0.2   | %
|2006     |  |                  | 7  |  |                                   |       | 26  |                                            |            |  | 43,621            |  |  |          | 72,997    |  |             |  | 116,618    |            |  |  | 5.2           | % |  |            | 969,732    |  |            |   | 2,460,960  |            |  |    | 3,430,692  |  |  |  | 5.8   | % |  |   | 1,923,061  |  |  |  | 5.9   | %
|2007     |  |                  | 6  |  |                                   |       | 21  |                                            |            |  | 16,739            |  |  |          | 63,557    |  |             |  | 80,296     |            |  |  | 3.6           | % |  |            | 373,116    |  |            |   | 1,955,748  |            |  |    | 2,328,864  |  |  |  | 3.9   | % |  |   | 1,019,415  |  |  |  | 3.2   | %
|2008     |  |                  | 13 |  |                                   |       | 30  |                                            |            |  | 59,997            |  |  |          | 116,731   |  |             |  | 176,728    |            |  |  | 7.9           | % |  |            | 1,423,872  |  |            |   | 4,071,804  |            |  |    | 5,495,676  |  |  |  | 9.3   | % |  |   | 2,451,622  |  |  |  | 7.6   | %
|2009     |  |                  | 18 |  |                                   |       | 26  |                                            |            |  | 203,149           |  |  |          | 245,705   |  |             |  | 448,854    |            |  |  | 20.1          | % |  |            | 4,593,612  |  |            |   | 6,726,660  |            |  |    | 11,320,272 |  |  |  | 19.1  | % |  |   | 6,894,735  |  |  |  | 21.2  | %
|2010     |  |                  | 16 |  |                                   |       | 31  |                                            |            |  | 55,777            |  |  |          | 147,475   |  |             |  | 203,252    |            |  |  | 9.1           | % |  |            | 1,268,340  |  |            |   | 5,231,964  |            |  |    | 6,500,304  |  |  |  | 11.0  | % |  |   | 2,200,908  |  |  |  | 6.8   | %
|2011 (4) |  |                  | 12 |  |                                   |       | 20  |                                            |            |  | 189,111           |  |  |          | 132,474   |  |             |  | 321,585    |            |  |  | 14.4          | % |  |            | 4,587,072  |  |            |   | 4,740,288  |            |  |    | 9,327,360  |  |  |  | 15.8  | % |  |   | 6,359,161  |  |  |  | 19.6  | %
|2012 (5) |  |                  | 16 |  |                                   |       | 10  |                                            |            |  | 216,009           |  |  |          | 43,495    |  |             |  | 259,504    |            |  |  | 11.6          | % |  |            | 4,614,048  |  |            |   | 1,306,752  |            |  |    | 5,920,800  |  |  |  | 10.0  | % |  |   | 5,198,133  |  |  |  | 16.1  | %
|2013 (6) |  |                  | 3  |  |                                   |       | 18  |                                            |            |  | 19,294            |  |  |          | 176,738   |  |             |  | 196,032    |            |  |  | 8.8           | % |  |            | 468,396    |  |            |   | 3,938,880  |            |  |    | 4,407,276  |  |  |  | 7.4   | % |  |   | 1,931,256  |  |  |  | 6.0   | %
|2014 (7) |  |                  | 2  |  |                                   |       | 24  |                                            |            |  | 76,816            |  |  |          | 270,741   |  |             |  | 347,557    |            |  |  | 15.6          | % |  |            | 1,592,976  |  |            |   | 6,547,836  |            |  |    | 8,140,812  |  |  |  | 13.7  | % |  |   | 3,100,298  |  |  |  | 9.6   | %
|2015     |  |                  | 3  |  |                                   |       | 15  |                                            |            |  | 8,919             |  |  |          | 43,310    |  |             |  | 52,229     |            |  |  | 2.3           | % |  |            | 121,560    |  |            |   | 1,346,016  |            |  |    | 1,467,576  |  |  |  | 2.5   | % |  |   | 703,838    |  |  |  | 2.2   | %
|2016     |  |                  | 2  |  |                                   |       | 4   |                                            |            |  | 17,737            |  |  |          | 6,380     |  |             |  | 24,117     |            |  |  | 1.1           | % |  |            | 429,108    |  |            |   | 199,344    |            |  |    | 628,452    |  |  |  | 1.1   | % |  |   | 508,846    |  |  |  | 1.6   | %
|         |  |                  |    |  |                                   |       |     |                                            |            |  |                   |  |  |          |           |  |             |  |            |            |  |  |               |   |  |            |            |  |            |   |            |            |  |    |            | 
|         |  |                  | 98 |  |                                   |       | 227 |                                            |            |  | 907,169           |  |  |          | 1,326,850 |  |             |  | 2,234,019  |            |  |  | 100.0         | % |  | $          | 20,441,832 |  |            | $ | 38,764,968 |            |  | $  | 59,206,800 |  |  |  | 100.0 | % |  | $ | 32,362,214 |  |  |  | 100.0 | %
|         |  |                  |    |  |                                   |       |     |                                            |            |  |                   |  |  |          |           |  |             |  |            |            |  |  |               |   |  |            |            |  |            |   |            |            |  |    |            | 






|    |                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Annualized Base Rent is the monthly contractual base rent as of
    December 31, 2005 multiplied by 12.                                                                                                                                                                                              
|   
|(2) | Represents our pro rata share of annualized base rent based on
    our percentage ownership interest in the property or properties
    in which the lease expiration occurs.                                                                                                                         
|   
|(3) | Includes both our share and our joint venture partners
    share.                                                                                                                                                                                                                                   
|   
|(4) | A subsidiary of General Dynamics is obligated under the lease
    which currently expires in February 2011. Tenant has the one
    time right to terminate the lease with respect to
    42,326 square feet in February 2008 subject to
    12 months prior notice and certain termination penalties.
|   
|(5) | America Onlines lease currently expires in December 2012.
    Tenant has option to terminate its lease in 2010 subject to nine
    months notice and a lease termination payment of one years
    base rent.                                                                                       
|   
|(6) | The General Services Administration which leases
    144,551 square feet in the Suffolk Building, has the right
    to terminate its lease in 2010, subject to six months notice.
    The lease currently expires in 2013.                                                                           
|   
|(7) | A subsidiary of Northrop Grumman has the option to terminate a
    portion of its lease for 118,421 square feet in whole or in
    part in 2009, subject to three months notice.                                                                                                                     

Environmental Matters




10



---



##### 







Regulation




Insurance




11



---



##### 



Employees




Available Information


10-K, 10-Q, 8-K, 10-K




12



---



##### 








|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

Investing in our company involves various risks, including
the risk that you might lose your entire investment. The
following discussion concerns some of the risks associated with
our business. These risks are interrelated, and you should treat
them as a whole. The risks described below are not the only
risks that may affect us. Additional risks and uncertainties not
presently known to us or not identified below may also
materially and adversely affect our business, financial
condition, results of operations and ability to make
distributions to our stockholders.


Risk Related to Our Business and Properties




| |                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Substantially all of our properties are located in the
    Greater Washington, D.C. area, making us vulnerable to
    changes in economic conditions in that region, including the
    adverse impact of decreased government spending.











| |                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our executive officers have limited experience operating a
    public company or a REIT, which could increase our general and
    administrative costs and reduce our cash available for
    distributions.



13



---



##### 





| |                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have experienced, and expect to experience in the
    future, significant growth and may not be able to adapt our
    management and operational systems to properly integrate
    additional properties without unanticipated significant
    disruption or expense.

day-to




| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be unable to renew expiring leases, lease vacant
    space or re-lease space on a timely basis or on comparable or
    better terms, which could significantly decrease our cash
    flow.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | We may be impacted by our tenants failure to make
    lease payments, which could cause a significant decrease in our
    revenues.







| |                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Properties owned in joint ventures could be adversely
    affected by our lack of sole decision-making authority, our
    reliance on our co-venturers financial condition and
    disputes between us and our co-venturers.



14



---



##### 







| |   |                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | one or more of our partners or co-venturers might become
    bankrupt or fail to fund their share of required capital
    contributions (in which event we and any other remaining general
    partners, members or co-venturers would generally remain liable
    for the liabilities of the partnership, joint venture or other
    entity);                
|
| |  | one or more of our partners or co-venturers may have economic or
    other business interests or goals which are inconsistent with
    our business interests or goals;                                                                                                                                                                                       
|
| |  | one or more of our partners or co-venturers may be in a position
    to take actions contrary to our instructions, requests, policies
    or objectives (including those related to our qualification as a
    REIT for tax purposes);                                                                                                                        
|
| |  | disputes between us and our partners or co-venturers may result
    in litigation or arbitration that would increase our expenses
    and prevent our officers and directors from focusing their time
    and effort on our business; or                                                                                                                      
|
| |  | most of our joint venture agreements contain provisions that
    could require us to buy our partners interest or sell our
    interest or the property or project at a time we do not deem
    favorable for financial or other reasons, including the
    availability of cash at such time and the impact of tax
    consequences resulting from any sale.







| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | If The Barlow Corporation fails to qualify as a REIT, we
    may fail to qualify as a REIT.





| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The substantial corporate tax on built-in gain
    that would be recognized in connection with a sale of the Barlow
    Building before December 31, 2010 would substantially
    reduce the funds available for distribution to our
    stockholders.



15



---



##### 







| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | We could recognize a substantial amount of taxable income
    in connection with a sale of the Barlow Building.







| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The representations and warranties in the merger agreement
    for the Barlow Building did not survive closing and we may have
    no recourse against the sellers for breaches of the
    representations and warranties or unknown liabilities.





| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | We compete with other parties for tenants and property
    acquisitions, and many of these parties have substantially
    greater resources than we have.



16



---



##### 







| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | We may not be successful in identifying suitable
    acquisitions that meet our criteria, which may impede our
    growth.





| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | We may invest in properties in other real estate markets
    outside the Greater Washington, D.C. area where we have no
    experience.





| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | a lack of market knowledge and understanding of the local
    economies;        
|
| |  | an inability to identify promising acquisition or development
    opportunities;
|
| |  | an inability to obtain qualified development and construction
    personnel; and
|
| |  | an unfamiliarity with local government and permitting procedures.               





| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certain of the joint venture agreements to which we are a
    party restrict our ability to make investments within geographic
    markets in which the joint venture owns property which could
    restrict our ability to make attractive investments.





| |                                                                                 
| | --------------------------------------------------------------------------------
| | Development and construction risks could adversely affect
    our profitability.



lease-up


17



---



##### 







| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Newly developed and acquired properties may not produce
    the cash flow that we expect, which could harm our overall
    financial performance.





| |                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have agreements for the management of certain of our
    properties, for certain corporate and administrative services
    and for corporate headquarters space. The termination of one or
    more of these agreements could cause us to pay higher costs for
    those services and office space.

day-to




| |                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our debt service obligations may have a negative impact on
    our ability to make distributions to our stockholders, pursue
    our business plan and maintain our REIT status and our
    management and board of directors have discretion to increase
    the amount of our outstanding debt at any time without approval
    of our stockholders.

debt-to


18



---



##### 





| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | If we were to default on our secured debt in the future,
    the loss of any property securing the debt would adversely
    affect our business.





| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Our debt agreements impose limits on our operations and
    our ability to make distributions to our stockholders.





| |                                                          
| | ---------------------------------------------------------
| | Variable rate debt subjects us to interest rate
    risk.





| |                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we originate mezzanine loans, it will subject us to the
    unique risks of a mezzanine lender, including the risk
    associated with having a subordinated position relative to other
    creditors with respect to the collateral underlying the loans we
    make or acquire.

loan-to




19



---



##### 





Risks Related to Our Organization and Structure




| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may experience conflicts of interest with our chairman,
    president and chief executive officer and certain of our
    executive officers relating to their ownership of operating
    partnership units.







| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on key personnel with long-standing business
    relationships, the loss of whom could threaten our ability to
    operate our business successfully.





| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our executive officers have agreements that provide them
    with benefits in the event of a change in control of our company
    or if their employment agreement is not renewed, which could
    deter a change in control that could be beneficial to our
    stockholders.



20



---



##### 







| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Our growth depends on external sources of capital which
    are outside of our control.







| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our rights and the rights of our stockholders to take
    action against our directors and officers are limited, which
    could limit stockholders recourse in the event of actions
    not in stockholders best interests.





| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Our board of directors may approve the issuance of
    preferred stock with terms that may discourage a third party
    from acquiring us.





| |                                                                               
| | ------------------------------------------------------------------------------
| | Our ownership limitations may restrict business
    combination opportunities.



21



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##### 



shares-in




| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our board of directors may change our investment and
    operational policies and practices without a vote of our common
    stockholders, which limits our stockholders control of our
    policies and practices.





| |                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our charter contains provisions that makes removal of our
    directors difficult, which could make it difficult for our
    stockholders to effect changes to our management.





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our bylaws may only be amended by our board of directors,
    which could limit our stockholders control of certain
    aspects of our corporate governance.





| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Provisions of Maryland law may limit the ability of a
    third party to acquire control of our company.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | business combination provisions that, subject to
    limitations, prohibit certain business combinations between us
    and an interested stockholder (defined generally as
    any person who beneficially owns 10% or more of the voting power
    of our shares or an affiliate thereof) for five years after the
    most recent date on which the stockholder becomes an interested
    stockholder, and thereafter impose special stockholder voting
    requirements on these combinations; and
|
| |  | control share provisions that provide that
    control shares of our company (defined as shares
    which, when aggregated with other shares controlled by the
    stockholder, entitle the stockholder to exercise one of three
    increasing ranges of voting power in electing directors)
    acquired in a control share                                                                                                                                                                        

22



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##### 



| |  |                                                                                                                                                                                                                                                                                                                                         
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | acquisition (defined as the direct or indirect acquisition
    of ownership or control of control shares) have no
    voting rights except to the extent approved by our stockholders
    by the affirmative vote of at least two-thirds of all the votes
    entitled to be cast on the matter, excluding all interested
    shares.





Risks Related to the Real Estate Industry




| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Terrorist attacks, such as the attacks that occurred in
    New York and Washington, D.C. on September 11, 2001,
    and other acts of violence or war may affect any market on which
    our common stock trades, the markets in which we operate, our
    operations and our profitability.









| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | Our insurance may not be adequate to cover losses,
    including those that result from earthquakes or terrorist
    acts.



23



---



##### 





| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | We obtained limited representations and warranties in the
    contribution and acquisition agreements for the initial
    properties.





| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | The costs of compliance with or liabilities under
    environmental laws could significantly reduce our
    profitability.





| |   |                                                             
| | - | ------------------------------------------------------------
| |  | our lack of knowledge of the contamination;                 
|
| |  | the timing of the contamination;                            
|
| |  | the cause of the contamination; or                          
|
| |  | the party responsible for the contamination of the property.









24



---



##### 







| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our properties may contain or develop harmful mold, which
    could lead to liability for adverse health effects and costs of
    remediating the problem.





| |                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Compliance with the Americans with Disabilities Act and
    fire, safety and other regulations may require us to make
    unintended expenditures that could significantly reduce the cash
    available for distribution to our stockholders.





Tax Risks of our Business and Structure




| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to qualify or remain qualified as a REIT for
    federal income tax purposes, we will not be able to deduct our
    dividends, and our income will be subject to taxation.



25



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##### 







| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Distribution requirements relating to qualification as a
    REIT for federal income tax purposes limit our flexibility in
    executing our business plan.









| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Our disposal of properties may have negative implications,
    including unfavorable tax consequences.








|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS








|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

10-K


26



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##### 








|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS








|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES

Market Price of and Dividends on the Registrants Common
Equity




|                  |  |             |       |  |                   |   |       |                    |  |   |               | 
|----------------- |  | ----------- | ----- |  | ----------------- | - | ----- | ------------------ |  | - | ------------- | 
|                  |  | Price Range |       |  |                  
|                  |  |             |       |  | Cash Distribution |  
|                  |  | High        |       |  | Low               |   |       | Declared Per Share | 
|                  |  |             |       |  |                   |   |       |                    | 
|2005              |  |             |       |  |                   |   |       |                    |  |   |               | 
|Second Quarter(1) |  | $           | 15.50 |  |                   | $ | 15.25 |                    |  |   | None declared | 
|Third Quarter     |  |             | 15.75 |  |                   |   | 14.25 |                    |  | $ | 0.12          | 
|Fourth Quarter    |  |             | 16.40 |  |                   |   | 13.65 |                    |  |   | 0.14          | 






|    |                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------
|(1) | In connection with our IPO, our common stock commenced trading
    on the New York Stock Exchange on June 29, 2005.



27



---



##### 



Securities Authorized for Issuance Under Equity Compensation
Plans




| |                                     
| | ------------------------------------
| | Equity Compensation Plan Information



|                                                       |  |                            |         |     |                      |                         |     |                         |  |  |           | 
|------------------------------------------------------ |  | -------------------------- | ------- | --- | -------------------- | ----------------------- | --- | ----------------------- |  |  | --------- | 
|                                                       |  |                            |         |     |                      | (c)                     |    
|                                                       |  |                            |         |     |                      | Number of Securities    |    
|                                                       |  |                            |         |     |                      | Remaining Available for |    
|                                                       |  | (a)                        |         |     | (b)                  |                         |     | Future Issuance Under   | 
|                                                       |  | Number of Securities to be |         |     | Weighted-average     |                         |     | Equity Compensation     | 
|                                                       |  | Issued upon Exercise of    |         |     | Exercise Price of    |                         |     | Plans (Excluding        | 
|                                                       |  | Outstanding Options,       |         |     | Outstanding Options, |                         |     | Securities Reflected in | 
|Plan Category                                          |  | Warrants and Rights        |         |     | Warrant and Rights   |                         |     | Columns (a))            | 
|                                                       |  |                            |         |     |                      |                         |     |                         | 
|Equity compensation plans approved by security holders |  |                            | 290,000 | (1) |                      |                         | N/A |                         |  |  | 1,041,880 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have only issued LTIP units under our 2005 Equity
    Compensation Plan. LTIP units are a special class of partnership
    interests in our operating partnership. Each LTIP unit awarded
    is deemed equivalent to an award of one share of common stock
    under our 2005 Equity Compensation Plan. Upon achieving full
    parity with units of limited partnership interest in our
    operating partnership (OP Units), LTIP units
    may be converted into OP Units. Such OP Units may,
    subject to the terms of a partnership agreement, be redeemed for
    cash or, at our option, shares of our common stock on a one for
    one basis.








|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA



28



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##### 





|                         |                                       |                                       |   |        |                                  |   |   |              |       |   |              |       |      |              |   |       |              |   |   |       |        |   |   |       |      |  
|------------------------ | ------------------------------------- | ------------------------------------- | - | ------ | -------------------------------- | - | - | ------------ | ----- | - | ------------ | ----- | ---- | ------------ | - | ----- | ------------ | - | - | ----- | ------ | - | - | ----- | ---- | -
|                         |                                       | Consolidated                          |   |        | Combined Columbia Predecessor(1) |  
|                         |                                       | Columbia Equity                       |   |        |                                  |  
|                         |                                       | Trust, Inc. for                       |   |        | For the Period                   |   |   | For the Year |       |   | For the Year |       |      | For the Year |   |       | For the Year |  
|                         |                                       | the Year Ended                        |   |        | January 1,                       |   |   | Ended        |       |   | Ended        |       |      | Ended        |   |       | Ended        |  
|                         |                                       | December 31,                          |   |        | 2005 to                          |   |   | December 31, |       |   | December 31, |       |      | December 31, |   |       | December 31, |  
|                         |                                       | 2005                                  |   |        | July 4, 2005                     |   |   | 2004         |       |   | 2003         |       |      | 2002         |   |       | 2001         |  
|                         |                                       |                                       |   |        |                                  |   |   |              |       |   |              |       |      |              |   |       |              |  
|                         |                                       | (In thousands, except per share data) |  
|Operating Data           |                                       |                                       |   |        |                                  |   |   |              |       |   |              |       |      |              |   |       |              |   |   |       |        |   |   |      
|                         | Rental revenue                        |                                       | $ | 7,894  |                                  |   | $ |             |       |   | $            |      |      |              | $ |      |              |   | $ |      |        |   | $ |      |     
|                         | Fee income and other income           |                                       |   | 577    |                                  |   |   | 1,438        |       |   |              | 1,897 |      |              |   | 1,923 |              |   |   | 2,098 |        |   |   | 1,142 |     
|                         | Net income (loss)                     |                                       |   | (2,501 | )                                |   |   | 1,948        |       |   |              | 569   |      |              |   | 3,122 |              |   |   | 446   |        |   |   | 27    |     
|                         | Dividends declared                    |                                       |   | 3,604  |                                  |   |   |             |       |   |              |      |      |              |   |      |              |   |   |      |        |   |   |      |     
|Share and Per Share Data |                                       |                                       |   |        |                                  |   |   |              |       |   |              |       |      |              |   |       |              |   |   |       |        |   |   |      
|                         | Basic and diluted loss per share      |                                       | $ | (0.18  | )                                |   | $ |             |       |   | $            |      |      |              | $ |      |              |   | $ |      |        |   | $ |      |     
|                         | Dividends declared per share          |                                       | $ | 0.26   |                                  |   | $ |             |       |   | $            |      |      |              | $ |      |              |   | $ |      |        |   | $ |      |     
|                         | Weighted average shares outstanding  |                                       |   |        |                                  |   |   |              |       |   |              |       |      |              |   |       |              |   |   |       |        |   |   |       |     
|                         |                                       | Basic and diluted                     |   |        | 13,773                           |   |   |              |      |   |              |       |     |              |   |       |             |   |   |       |       |   |   |       |     |  
|Other Data               |                                       |                                       |   |        |                                  |   |   |              |       |   |              |       |      |              |   |       |              |   |   |       |        |   |   |      
|                         | Net cash flow provided by (used in)   |                                       |   |        |                                  |   |   |              |       |   |              |       |      |              |   |       |              |   |   |       |        |   |   |       |     
|                         |                                       | Operating activities                  |   | $      | 2,834                            |   |   | $            | (747  | ) |              | $     | (110 | )            |   | $     | 765          |   |   | $     | 414    |   |   | $     | 15   |  
|                         |                                       | Investing activities                  |   |        | (162,589                         | ) |   |              | 2,196 |   |              |       | (754 | )            |   |       | 2,578        |   |   |       | (2,458 | ) |   |       | (428 | )
|                         |                                       | Financing activities                  |   |        | 167,905                          |   |   |              | 86    |   |              |       | 301  |              |   |       | (2,577       | ) |   |       | 2,190  |   |   |       | 391  |  

|                   |                                              |                   |   |         |                                   |  |   |              |  |  |              |       |  |              |   |       |  |  |   |       | 
|------------------ | -------------------------------------------- | ----------------- | - | ------- | --------------------------------- |  | - | ------------ |  |  | ------------ | ----- |  | ------------ | - | ----- |  |  | - | ----- | 
|                   |                                              | Consolidated      |   |         | Combined Columbia Predecessor (a) | 
|                   |                                              | Columbia Equity   |   |         |                                   | 
|                   |                                              | Trust, Inc. as of |   |         | As of                             |  |   | As of        |  |  | As of        |       |  | As of        |  
|                   |                                              | December 31,      |   |         | December 31,                      |  |   | December 31, |  |  | December 31, |       |  | December 31, |  
|                   |                                              | 2005              |   |         | 2004                              |  |   | 2003         |  |  | 2002         |       |  | 2001         |  
|                   |                                              |                   |   |         |                                   |  |   |              |  |  |              |       |  |              |  
|                   |                                              | (In thousands)    |  
|Balance Sheet Data |                                              |                   |   |         |                                   |  |   |              |  |  |              |       |  |              |   |       |  |  |   |      
|                   | Real estate, before accumulated depreciation |                   | $ | 165,278 |                                   |  | $ |             |  |  | $            |      |  |              | $ |      |  |  | $ |      | 
|                   | Investments in real estate entities          |                   |   | 42,308  |                                   |  |   | 4,190        |  |  |              | 3,105 |  |              |   | 3,285 |  |  |   | 789   | 
|                   | Total assets                                 |                   |   | 243,330 |                                   |  |   | 7,014        |  |  |              | 5,093 |  |              |   | 4,508 |  |  |   | 1,764 | 
|                   | Indebtedness                                 |                   |   | 49,359  |                                   |  |   |             |  |  |              |      |  |              |   |      |  |  |   |      | 
|                   | Minority interest                            |                   |   | 14,206  |                                   |  |   |             |  |  |              |      |  |              |   |      |  |  |   |      | 
|                   | Total equity                                 |                   |   | 172,275 |                                   |  |   | 5,622        |  |  |              | 4,753 |  |              |   | 4,205 |  |  |   | 1,569 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We completed our IPO on July 5, 2005. We had no significant
    operations prior to the completion of the IPO and the formation
    transactions on July 5, 2005. On July 5, 2005,
    concurrent with the consummation of the IPO, the company and its
    operating partnership, Columbia Equity, LP, entered into certain
    formation transactions and acquired the office real estate
    investment properties and joint venture interests, management
    contracts and certain other assets of Columbia Predecessor from
    its owners and other parties which held direct or indirect
    ownership interests in Columbia Predecessors real estate
    properties. Columbia Predecessor was not a legal entity but
    rather a combination of real estate entities under common
    ownership and management. The ultimate owners of Columbia
    Predecessor were Carr Capital Corporation and its wholly-owned
    subsidiary, Carr Capital Real Estate Investments, LLC, The
    Oliver Carr Company and Carr Holdings, LLC, all of which are
    controlled by Oliver T. Carr, Jr. and Oliver T.
    Carr, III, acting as a common control group. The operating
    results and financial condition of Columbia Predecessor are not
    comparable to those of the Company.

29



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##### 








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS





Overview and Recent Developments










| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | owned interests in 17 commercial office properties consisting of
    approximately 2.5 million square feet and one development
    property, including:



| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 100% fee simple ownership in eight properties totaling
    approximately 831,000 square feet of net rentable area;                                                                                                                     
|
| |  | a 100% leasehold interest in an approximately
    126,000 square foot office building in North Rockville,
    Maryland (the property is subject to a ground lease with a
    remaining term, including extension options, of 70 years);
|
| |  | partial interests ranging from 9% to 50% in eight office
    properties totaling approximately 1.6 million square feet
    of net rentable area; and                                                                                   
|
| |  | an 8.1% joint venture interest in an approximately
    115,000 square foot office building development adjacent to
    our Independence Center I property.                                                                             



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provided asset management services to related parties for three
    office buildings containing approximately 690,000 net
    rentable square feet and two hotel properties containing
    approximately 610 rooms.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We commenced operations on July 5, 2005 after completing
    our initial public offering (IPO). Our IPO consisted
    of the sale of 13,800,000 shares of common stock, including
    1,800,000 shares sold pursuant to the underwriters
    exercise of an over-allotment option. The offering price was
    $15.00 per share resulting in gross proceeds of
    $207,000,000. The proceeds to us, net of underwriters
    discount, financial advisory fees and other offering expenses,
    were approximately $188.4 million. In connection with our
    IPO, we completed certain formation transactions pursuant to
    which we acquired interests in

30



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##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | 13 properties and five third-party asset management agreements
    (collectively, the Formation Transactions), which we
    completed on July 15, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | During July 2005, the joint venture that owns Independence
    Center I, an approximately 275,002 net rentable square
    foot commercial office building in Chantilly, Virginia,
    commenced development on Independence Center II, an
    approximately 115,000 net rentable square foot office
    building adjacent to Independence Center I. The total cost of
    the development is expected to be approximately
    $24.5 million. In October 2005, a separate joint venture
    was formed to own Independence Center II. We maintain an
    8.1% ownership interest in the Independence Center II joint
    venture. The equity required to capitalize our share of the
    Independence Center II joint venture was approximately
    $713,000 and funded through proceeds from our IPO. The remaining
    costs of the project are expected to be funded through a
    $15.7 million construction loan that the joint venture
    closed in October 2005. As of December 31, 2005,
    approximately $7.5 million, or 31%, of total joint venture
    project costs had been expended. The project is expected to be
    completed in September 2006.
|
| |  | On August 23, 2005, we completed the acquisition of 14700
    Lee Road in Fairfax, Virginia for a purchase price of
    approximately $24.0 million, net of transaction costs. The
    acquisition was funded 100% with proceeds from our IPO. The
    property contains approximately 85,000 net rentable square
    feet of space and was 100% leased to one tenant as of
    December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | On September 29, 2005, we completed the acquisition of a
    100% leasehold interest in the Park Plaza II office
    building in Rockville, Maryland for a purchase price of
    $35.0 million, net of transaction costs. The acquisition
    was funded 100% with proceeds from our IPO. The property
    contains approximately 126,000 net rentable square feet of
    space and was 98% leased to seven tenants as of
    December 31, 2005. The property is subject to a ground
    lease with a remaining term, including extension options, of
    70 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | On November 28, 2005, we closed on a $75,000,000 secured,
    revolving credit facility, which we use to finance acquisitions
    and for other general corporate purposes. We refer to this
    secured revolving credit facility in this Annual Report as our
    credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | On December 1, 2005, we completed the acquisition of
    Patrick Henry Corporate Center in Newport News, Virginia for a
    purchase price of $14.5 million, net of transaction costs.
    The transaction was funded with proceeds from our IPO and the
    assumption of an $8.5 million mortgage loan which bears
    interest at a fixed rate of 5.02% and matures in April 2009. The
    property contains approximately 99,000 net rentable square
    feet of space and the property was 92% leased to ten tenants as
    of December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | On December 7, 2005, we entered into a material definitive
    agreement to acquire Georgetown Plaza, a five-story,
    approximately 151,000 square foot multi-tenant office and
    retail building located in Washington, D.C. for
    $23,500,000. The ownership of Georgetown Plaza is subject to a
    ground lease which expires in December 2058. We expect to fund
    the transaction with proceeds from our revolving line of credit
    and the assumption of an approximately $16.1 million
    mortgage loan which bears interest at a fixed rate of 5.78% and
    matures in June 2013. The purchase of Georgetown Plaza is
    subject to customary closing conditions, including the
    satisfactory completion by us of a due diligence review during
    our inspection periods.                                                                                                                                                                                                                                                                                                                                                               
|
| |  | On December 9, 2005, we completed the acquisition of Oakton
    Corporate Center in Oakton, Virginia for a purchase price of
    $16.0 million, net of transaction costs. The transaction
    was funded with borrowings under our credit facility. The
    property contains approximately 65,000 net rentable square
    feet of space and was 100% leased to three tenants as of
    December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Since our IPO through December 31, 2005, we have declared
    aggregate dividends on our common stock and distributions on our
    operating partnership units of $0.26 per common share and
    unit, representing a dividend of $0.12 for the third quarter
    that was paid in October 2005, and a dividend of $0.14 for the
    fourth quarter that was paid in January 2006. The fourth quarter
    dividend of $0.14 is equivalent to an annualized dividend of
    $0.56 per share and unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

31



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Office Market Commentary








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Market-wide office vacancy levels improved throughout the year
    decreasing to 9.2% at December 31, 2005. This compares to
    vacancy rates of 9.5% at September 30, 2005; 10.1% at
    June 30, 2005; and 10.3% at March 31, 2005.                                                                                                                                                                            
|
| |  | Vacancy levels by region at December 31, 2005 stood at 7.6%
    for the District of Columbia; 9.6% for suburban Maryland; and
    10.1% for northern Virginia.                                                                                                                                                                                                                                                    
|
| |  | The average quoted asking rental rate for all classes of
    available office space was $31.04 at December 31, 2005,
    representing a 3.8% increase in quoted rental rates from $29.91
    at December 31, 2004.                                                                                                                                                                                                
|
| |  | There was approximately 15.9 million square feet of office
    space under construction at December 31, 2005, represented
    by 6.9 million square feet in the District of Columbia,
    7.4 million square feet in northern Virginia and
    1.6 million square feet in suburban Maryland. This compares
    to a total of 13.8 million square feet of office space
    under construction at December 31, 2004.
|
| |  | Sales activity of office buildings remained brisk during the
    first nine months of 2005, the most recent time period for which
    this information is available. Total volume amounted to
    approximately $7.1 billion compared to $4.3 billion
    for the first nine months of 2004.                                                                                                                      









Summary of Critical Accounting Policies and Estimates




32



---



##### 









| |                                                                       
| | ----------------------------------------------------------------------
| | Revenue Recognition and Allowance for Doubtful Accounts
    Receivable







| |                           
| | --------------------------
| | Investments in Real Estate









33



---



##### 



lease-up




step-up




| |                     
| | --------------------
| | Assets Held for Sale









| |                                                   
| | --------------------------------------------------
| | Investments in Unconsolidated Real Estate Entities



34



---



##### 





| |                                                                   
| | ------------------------------------------------------------------
| | Depreciation, Amortization and Impairment of Long-Lived
    Assets





Results of Operations








| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Comparison of the Year Ended December 31, 2005 to the
    Year Ended December 31, 2004

Base Rents






| |                        
| | -----------------------
| | Recoveries from Tenants



35



---



##### 







| |           
| | ----------
| | Fee Income





| |                            
| | ---------------------------
| | Property Operating Expenses





| |                 
| | ----------------
| | Utility Expenses





| |                                         
| | ----------------------------------------
| | Real Estate Taxes and Insurance Expenses





| |                                    
| | -----------------------------------
| | General and Administrative Expenses



36



---



##### 





| |                              
| | -----------------------------
| | Share-based Compensation Cost





| |                                       
| | --------------------------------------
| | Depreciation and Amortization Expenses





| |                
| | ---------------
| | Interest Income





| |                 
| | ----------------
| | Interest Expense





| |                                                                
| | ---------------------------------------------------------------
| | Equity in Net Income of Unconsolidated Real Estate
    Entities





| |                  
| | -----------------
| | Minority Interest





| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Comparison of the Year Ended December 31, 2004 to the
    Year Ended December 31, 2003



| |           
| | ----------
| | Fee Income



37



---



##### 







| |                                     
| | ------------------------------------
| | General and Administrative Expenses.





| |                                                                 
| | ----------------------------------------------------------------
| | Equity in Net Income of Unconsolidated Real Estate
    Entities.



Consolidated Cash Flows




|                                                |  |                                 |              |   |          |   |          |      |  |   |              |   |  |              |              |   |  |   |            |  
|----------------------------------------------- |  | ------------------------------- | ------------ | - | -------- | - | -------- | ---- |  | - | ------------ | - |  | ------------ | ------------ | - |  | - | ---------- | -
|                                                |  | For the Year Ended December 31, |              |   | Variance |  
|                                                |  |                                 |              |   |          |  
|                                                |  | 2005                            |              |   | 2004     |   |          | 2003 |  |   | 2005 vs 2004 |   |  | 2004 vs 2003 |             
|                                                |  |                                 |              |   |          |   |          |      |  |   |              |   |  |              |             
|Cash provided by (used in) operating activities |  | $                               | 2,087,795    |   |          | $ | (109,658 | )    |  | $ | (765,407     | ) |  | $            | 2,197,453    |   |  | $ | 655,749    |  
|Cash provided by (used in) investing activities |  |                                 | (160,393,331 | ) |          |   | (754,208 | )    |  |   | 2,577,630    |   |  |              | (159,639,123 | ) |  |   | (3,331,838 | )
|Cash provided by (used in) financing activities |  |                                 | 167,990,597  |   |          |   | 300,768  |      |  |   | 256,728      |   |  |              | 167,689,829  |   |  |   | 44,040     |  







Liquidity and Capital Resources




38



---



##### 



debt-to




| |                     
| | --------------------
| | Short-term Liquidity





| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | recurring maintenance, repairs and other operating expenses
    necessary to properly maintain our properties;                                    
|
| |  | property taxes and insurance expenses;                                                                                                            
|
| |  | interest expense and scheduled principal payments on outstanding
    indebtedness;                                                                
|
| |  | capital expenditures incurred to facilitate the leasing of space
    at our properties, including tenant improvements and leasing
    commissions;
|
| |  | general and administrative expenses; and                                                                                                          
|
| |  | distributions to our stockholders and operating partnership unit
    holders.                                                                     





| |                    
| | -------------------
| | Long-term Liquidity







39



---



##### 









|                       |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         |  |   |             |  |  |   |             | 
|---------------------- | ------------- | ---------------------- |  |  | ------------------ | ------ |  | ------------- | ------------- | -------- | ------------- | ------------ | ---------- | ------- |  | - | ----------- |  |  | - | ----------- | 
|                       |               |                        |  |  |                    |        |  |               |               | Pro Rata |              
|                       |               |                        |  |  |                    |        |  |               |               | Share of |              
|                       |               |                        |  |  |                    |        |  | Principal     |               |          | Principal     |             
|                       |               |                        |  |  |                    |        |  | Balance as of |               |          | Balance as of |             
|                       |               |                        |  |  |                    | Annual |  |               | December 31,  |          |               | December 31, |           
|                       |               | Interest Rate          |  |  | Maturity Date      |        |  | Debt Service  |               |          | 2005          |              |            | 2005(1) | 
|                       |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         | 
|Consolidated Debt      |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         |  |   |             |  |  |  
|                       | Fixed Rate    |                        |  |  |                    |        |  |               |               |          |               |              |            |         |  |   |             |  |  |   |            
|                       |               | Patrick Henry          |  |  | 5.02%              |        |  |               | 4/1/2009      |          |               | $            | 558,490    |         |  | $ | 8,358,998   |  |  | $ | 8,358,998   | 
|                       |               | Meadows IV             |  |  | 4.95%              |        |  |               | 11/1/2011     |          |               |              | 953,563    |         |  |   | 19,000,000  |  |  |   | 19,000,000  | 
|                       | Floating Rate |                        |  |  |                    |        |  |               |               |          |               |              |            |         |  |   |             |  |  |   |            
|                       |               | Credit Facility        |  |  | LIBOR + 1.10 - 1.3 |        |  |               | 5% 11/28/2007 |          |               |              | 1,226,806  |         |  |   | 22,000,000  |  |  |   | 22,000,000  | 
|                       |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         | 
|                       |               | Subtotal               |  |  |                    |        |  |               |               |          |               |              | 2,738,859  |         |  |   | 49,358,998  |  |  |   | 49,358,998  | 
|                       |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         | 
|Unconsolidated Debt(2) |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         |  |   |             |  |  |  
|                       | Fixed Rate    |                        |  |  |                    |        |  |               |               |          |               |              |            |         |  |   |             |  |  |   |            
|                       |               | King Street            |  |  | 5.06%              |        |  |               | 3/1/2008      |          |               |              | 1,584,960  |         |  |   | 21,640,155  |  |  |   | 10,820,077  | 
|                       |               | Madison Place          |  |  | 4.49%              |        |  |               | 8/1/2008      |          |               |              | 1,032,793  |         |  |   | 15,358,591  |  |  |   | 7,679,296   | 
|                       |               | 1575 Eye Street        |  |  | 6.82%              |        |  |               | 3/1/2009      |          |               |              | 2,895,426  |         |  |   | 42,454,939  |  |  |   | 3,893,118   | 
|                       |               | Independence Center I  |  |  | 5.04%              |        |  |               | 9/10/2009     |          |               |              | 2,243,219  |         |  |   | 31,028,648  |  |  |   | 4,573,623   | 
|                       |               | Independence Center II |  |  | 6.02%              |        |  |               | 9/10/2009     |          |               |              | 133,995    |         |  |   | 2,225,824   |  |  |   | 180,292     | 
|                       |               | Barlow Building        |  |  | 5.04%              |        |  |               | 8/1/2012      |          |               |              | 3,155,425  |         |  |   | 61,750,000  |  |  |   | 24,700,000  | 
|                       |               | Atrium  Loan #1       |  |  | 8.43%              |        |  |               | 9/1/2012      |          |               |              | 1,882,813  |         |  |   | 18,054,307  |  |  |   | 6,680,093   | 
|                       |               | Atrium  Loan #2       |  |  | 6.21%              |        |  |               | 9/1/2012      |          |               |              | 473,183    |         |  |   | 5,833,104   |  |  |   | 2,158,248   | 
|                       |               | Suffolk                |  |  | 5.10%              |        |  |               | 5/4/2015      |          |               |              | 2,171,750  |         |  |   | 42,000,000  |  |  |   | 15,330,000  | 
|                       | Floating Rate |                        |  |  |                    |        |  |               |               |          |               |              |            |         |  |   |             |  |  |   |            
|                       |               | Victory Point          |  |  | LIBOR + 2.95%      |        |  |               | 3/31/2008     |          |               |              | 1,129,465  |         |  |   | 15,552,012  |  |  |   | 1,555,201   | 
|                       |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         | 
|                       |               | Subtotal               |  |  |                    |        |  |               |               |          |               |              | 16,703,029 |         |  |   | 255,897,580 |  |  |   | 77,569,948  | 
|                       |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         | 
|                       |               | Total                  |  |  |                    |        |  |               |               |          |               | $            | 19,441,888 |         |  | $ | 305,256,578 |  |  | $ | 126,928,946 | 
|                       |               |                        |  |  |                    |        |  |               |               |          |               |              |            |         | 






|    |                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Principal amount multiplied by our percentage interest in the
    joint venture entity that owns the property.                                                                                                                                                                                                
|   
|(2) | With the exception of a limited guarantee in the amount of
    approximately $737,000 for the debt at our Independence Center
    II property, our pro rata share of unconsolidated debt is
    non-recourse to us and is collateralized by the real estate
    properties held by the joint venture entities.



40



---



##### 





Contractual Obligations










|                                                         |       |       |            |             |        |   |           |            |  |       |            |            |       |         |            |            |  |   |            |            | 
|-------------------------------------------------------- | ----- | ----- | ---------- | ----------- | ------ | - | --------- | ---------- |  | ----- | ---------- | ---------- | ----- | ------- | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                         |       |       |            | Less Than   |        |   | 1 - 3     |            |  | 4 - 5 |            |            | After |        
|                                                         |       | Total |            |             | 1 Year |   |           | Years      |  |       | Years      |            |       | 5 Years |           
|                                                         |       |       |            |             |        |   |           |            |  |       |            |            |       |         |           
|Mortgage and other notes payable  consolidated          |       | $     | 49,445,643 |             |        | $ | 131,691   |            |  | $     | 30,313,952 |            |       | $       | 19,000,000 |            |  | $ |           |           
|Interest payments  consolidated(1)                      |       |       | 9,318,645  |             |        |   | 2,607,167 |            |  |       | 4,963,715  |            |       |         | 1,747,763  |            |  |   |           |           
|Share of unconsolidated mortgage and other notes payable |       |       | 77,569,948 |             |        |   | 678,893   |            |  |       | 28,821,237 |            |       |         | 513,741    |            |  |   | 47,556,077 |           
|Share of unconsolidated interest payments(1)             |       |       | 24,154,074 |             |        |   | 4,249,429 |            |  |       | 10,729,960 |            |       |         | 5,339,413  |            |  |   | 3,835,272  |           
|Tenant related capital(2)                                |       |       | 2,790,191  |             |        |   | 2,701,650 |            |  |       | 76,699     |            |       |         | 11,842     |            |  |   |           |           
|Ground leases(3)                                         |       |       | 23,523,961 |             |        |   | 332,968   |            |  |       | 998,904    |            |       |         | 665,936    |            |  |   | 21,526,153 |           
|Operating leases                                         |       |       | 1,745,691  |             |        |   | 255,467   |            |  |       | 766,401    |            |       |         | 510,934    |            |  |   | 212,889    |           
|                                                         |       |       |            |             |        |   |           |            |  |       |            |            |       |         |           
|                                                         | Total |       | $          | 188,548,153 |        |   | $         | 10,957,265 |  |       | $          | 76,670,868 |       |         | $          | 27,789,629 |  |   | $          | 73,130,391 | 
|                                                         |       |       |            |             |        |   |           |            |  |       |            |            |       |         |           






|    |                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Interest payments assume current credit line and variable rate
    borrowings rates remain at the December 31, 2005 level
    until maturity.                                                                                                 
|   
|(2) | Committed tenant-related capital based on executed leases as of
    December 31, 2005.                                                                                                                                                        
|   
|(3) | Represents estimated payments, including extensions, under Park
    Plaza ground lease obligation based on current contractual rent.
    Payments are subject to an increase every ten years based on
    changes in the Consumer Price Index.

41



---



##### 



Unconsolidated Investments and Joint Ventures










| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | Absence of exclusive control over the development, financing,
    leasing, management and other aspects of the project; and
|
| |  | Possibility that our co-venturer or partner might:                                                                         



| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | become bankrupt;                                                                                                                                     
|
| |  | have interests or goals that are inconsistent with ours;                                                                                             
|
| |  | take action contrary to our instructions, requests or interests
    (including those related to our qualification as a REIT for tax
    purposes); or
|
| |  | otherwise impede our objectives; and                                                                                                                 



| |   |                                                                       
| | - | ----------------------------------------------------------------------
| |  | Possibility that we may elect to fund losses of the joint
    venture.

Off Balance Sheet Arrangements








42



---



##### 





Cash Distribution Policy




Inflation




Geographic Concentration




Funds From Operations




43



---



##### 







|                      |                                                         |   |            |           |  
|--------------------- | ------------------------------------------------------- | - | ---------- | --------- | -
|Net loss              |                                                         | $ | (2,500,518 | )        
|Adjustments           |                                                         |   |            |          
|                      | Minority interests                                      |   |            | (191,061  | )
|                      | Depreciation and amortization  consolidated entities   |   |            | 4,495,789 |  
|                      | Depreciation and amortization  unconsolidated entities |   |            | 2,734,065 |  
|                      |                                                         |   |           
|Funds from operations |                                                         | $ | 4,538,275  |          
|                      |                                                         |   |           






|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK











|                                                         |  |      |         |  |      |   |            |      |  |   |            |  |  |      |           |  |            |   |         |       |  |   |            |  |  |   |            | 
|-------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ---------- | ---- |  | - | ---------- |  |  | ---- | --------- |  | ---------- | - | ------- | ----- |  | - | ---------- |  |  | - | ---------- | 
|                                                         |  | 2006 |         |  | 2007 |   |            | 2008 |  |   | 2009       |  |  | 2010 |           |  | Thereafter |   |         | Total | 
|                                                         |  |      |         |  |      |   |            |      |  |   |            |  |  |      |           |  |            |   |         |       | 
|Mortgage and Other Notes Payable  Consolidated          |  | $    | 131,691 |  |      | $ | 22,138,553 |      |  | $ | 144,590    |  |  | $    | 8,030,809 |  |            | $ |        |       |  | $ | 19,000,000 |  |  | $ | 49,445,643 | 
|Share of Unconsolidated Mortgage and Other Notes Payable |  | $    | 678,894 |  |      | $ | 749,167    |      |  | $ | 19,523,478 |  |  | $    | 8,548,591 |  |            | $ | 246,700 |       |  | $ | 47,823,118 |  |  | $ | 77,569,948 | 






|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

10-K 10-K.


44



---



##### 








|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 9. | CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
    AND FINANCIAL DISCLOSURES








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures


13a-15(e) 15d-15(e)


Internal Control Over Financial Reporting









|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION



|                      |                                      |                           |        |  | 
|--------------------- | ------------------------------------ | ------------------------- | ------ |  | 
|Name                  |                                      | 2005 Cash Incentive Bonus |       
|                      |                                      |                           |       
|Oliver T. Carr, III   |                                      | $                         | 50,000 | 
|                      | Chairman, President and CEO          |                           |        |  | 
|John A. Schissel      |                                      | $                         | 40,000 | 
|                      | EVP and CFO                          |                           |        |  | 
|Clinton D. Fisch      |                                      | $                         | 22,750 | 
|                      | SVP and Director of Acquisitions     |                           |        |  | 
|Christian H. Clifford |                                      | $                         | 22,750 | 
|                      | SVP and Director of Asset Management |                           |        |  | 
|John M. Novack        |                                      | $                         | 27,000 | 
|                      | SVP and CAO                          |                           |        |  | 




PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





45



---



##### 



10-K







|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS








|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES






PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements and Schedules.




| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | COLUMBIA EQUITY TRUST, INC. AND COLUMBIA EQUITY TRUST, INC.
    PREDECESSOR                                                                                                                            
|
| | Report of Independent Registered Public Accounting Firm                                                                                                                                                
|
| | Consolidated and Combined Balance Sheets as of December 31,
    2005 and 2004                                                                                                                          
|
| | Consolidated and Combined Statements of Operations for the
    Periods July 5, 2005 to December 31, 2005 and
    January 1, 2005 to July 4, 2005 and for the Years
    Ended December 31, 2004 and 2003
|
| | Consolidated and Combined Statements of Equity for the Periods
    July 5, 2005 to December 31, 2005 and January 1,
    2005 to July 4, 2005 and for the Years Ended
    December 31, 2004 and 2003    
|
| | Consolidated and Combined Statements of Cash Flows for the
    Periods July 5, 2005 to December 31, 2005 and
    January 1, 2005 to July 4, 2005 and for the Years
    Ended December 31, 2004 and 2003
|
| | Notes to Consolidated and Combined Financial Statements                                                                                                                                                
|
| | FINANCIAL STATEMENT SCHEDULES                                                                                                                                                                          
|
| | Schedule II  Valuation and Qualifying Accounts                                                                                                                                                        
|
| | Schedule III  Real Estate and Accumulated
    Depreciation                                                                                                                                            
|
| | FINANCIAL STATEMENTS OF SIGNIFICANT UNCONSOLIDATED 50 PERCENT
    OR LESS OWNED PERSONS                                                                                                                
|
| | King I, LLC                                                                                                                                                                                            
|
| | Carr Capital 1575 Eye Street Associates, LLC                                                                                                                                                           

46



---



##### 



Exhibits. S-K


|        |    |                         |  |                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description of Document
|        |    |                        
|        | 3  | .1                      |  | Articles of Amendment and Restatement of the Registrant
    (incorporated by reference to Exhibit 3.1 to the
    Registrants Registration Statement on Form S-11/A
    (File No. 333-122644) filed on June 24, 2005).                                                                                                        
|        | 3  | .2                      |  | Amended and Restated Bylaws of the Registrant (incorporated by
    reference to Exhibit 3.2 to the Registrants
    Registration Statement on Form S-11/A (File
    No. 333-122644) filed on June 24, 2005).                                                                                                                  
|        | 4  | .1                      |  | Specimen Common Stock Certificate (incorporated by reference to
    Exhibit 4.1 to the Registrants Quarterly Report on
    Form 10-Q filed on November 14, 2005).                                                                                                                                                            
|        | 4  | .2                      |  | Amended and Restated Agreement of Limited Partnership of
    Columbia Equity, LP (incorporated by reference to
    Exhibit 3.3 to the Registrants Registration Statement
    on Form S-11/A (File No. 333-122644) filed on
    June 24, 2005).                                                                               
|        | 10 | .1                      |  | Form of Employment Agreement, by and between the Registrant and
    Oliver T. Carr, III (incorporated by reference to
    Exhibit 10.48 to the Registrants Registration
    Statement on Form S-11/A (File No. 333-122644) filed
    on June 28, 2005).                                                                      
|        | 10 | .2                      |  | Form of Employment Agreement, by and between the Registrant and
    John A. Schissel (incorporated by reference to
    Exhibit 10.49 to the Registrants Registration
    Statement on Form S-11/A (File No. 333-122644) filed
    on June 28, 2005).                                                                         
|        | 10 | .3                      |  | Columbia Equity Trust, Inc. 2005 Equity Incentive Plan
    (incorporated by reference to Exhibit 10.50 to the
    Registrants Registration Statement on Form S-11/A
    (File No. 333-122644) filed on June 24, 2005).                                                                                                       
|        | 10 | .4                      |  | Form of Employment Agreement, by and between the Registrant and
    Clinton D. Fisch (incorporated by reference to
    Exhibit 10.70 to the Registrants Registration
    Statement on Form S-11/A (File No. 333-122644) filed
    on June 28, 2005).                                                                         
|        | 10 | .5                      |  | Form of Employment Agreement, by and between the Registrant and
    Christian H. Clifford (incorporated by reference to
    Exhibit 10.71 to the Registrants Registration
    Statement on Form S-11/A (File No. 333-122644) filed
    on June 28, 2005).                                                                    
|        | 10 | .6                      |  | Form of Employment Agreement, by and between the Registrant and
    John M. Novack (incorporated by reference to Exhibit 10.72
    to the Registrants Registration Statement on
    Form S-11/A (File No. 333-122644) filed on
    June 28, 2005).                                                                           
|        | 10 | .7                      |  | Agreement and Plan of Merger between Carr Capital Corporation
    and the Barlow Corporation, dated March 25, 2005 (Barlow
    Building) (incorporated by reference to Exhibit 10.74 to
    the Registrants Registration Statement on Form S-11/A
    (File No. 333-122644) filed on May 27, 2005).                          
|        | 10 | .8                      |  | Master Agreement dated June 23, 2005 among Carr Capital
    Corporation, Wisconsin Avenue Realty Company LLC and Columbia
    Equity, LP. (incorporated by reference to Exhibit 10.75 to
    the Registrants Registration Statement on Form S-11/A
    (File No. 333-122644) filed on June 24, 2005).                        
|        | 10 | .9                      |  | Loan Agreement, by and among Barlow Enterprises LLC as borrower,
    5454 Wisconsin Inc. as guarantor, and General Electric Capital
    Corporation as lender, dated as of July 15, 2005
    (incorporated by reference to Exhibit 10.4 to the
    Registrants Quarterly Report on Form 10-Q filed on
    November 14, 2005).
|        | 10 | .10                     |  | Revolving Loan Agreement between Columbia Equity, LP and Wells
    Fargo Bank, National Association, dated November 28, 2005
    (incorporated by reference to Exhibit 10.1 to the
    Registrants Current Report on Form 8-K filed on
    November 28, 2005).                                                               
|        | 10 | .11*                    |  | Real Estate Purchase and Sale Agreement, by and between 1025
    Vermont Investors, L.L.C. and Columbia Equity Trust, Inc., dated
    November 11, 2005.                                                                                                                                                                      
|        | 10 | .12*                    |  | First Amendment to Real Estate Purchase and Sale Agreement, by
    and between 1025 Vermont Investors, L.L.C. and Columbia Equity
    Trust, Inc., dated November 21, 2005.                                                                                                                                                   
|        | 10 | .13*                    |  | Transfer and Assumption and Loan Modification by and between
    Principal Life Insurance Company and 1025 Vermont Avenue, LLC,
    dated January 12, 2006.                                                                                                                                                                   

47



---



##### 



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description of Document
|        |    |                        
|        | 10 | .14*                    |  | Secured Promissory Note payable to Principal Life Insurance
    Company, dated December 20, 2004.                                                                                                                                                                                                                                                                                               
|        | 10 | .15*                    |  | Amended, Restated and Consolidated and Secured Promissory Note
    by and between Principal Life Insurance Company and 1025 Vermont
    Avenue, LLC, dated February 10, 2006.                                                                                                                                                                                                                   
|        | 10 | .16*                    |  | Agreement of Sale, by and between, Carfax Enterprises Limited
    Partnership and Columbia Equity Trust, Inc., dated
    November 10, 2005.                                                                                                                                                                                                                                                     
|        | 10 | .17*                    |  | First Amendment to Agreement of Sale, by and between, Carfax
    Enterprises Limited Partnership and Columbia Equity Trust, Inc.,
    dated November 23, 2005.                                                                                                                                                                                                                                  
|        | 10 | .18*                    |  | Agreement for Purchase and Sale, by and between Unicorn
    Wisconsin, LLC and Columbia Equity Trust, Inc., dated
    December 6, 2005.                                                                                                                                                                                                                                                         
|        | 10 | .19                     |  | Fixed Rate Note payable to Wachovia Bank, National Association,
    dated February 16, 2006 (incorporated by reference to
    Exhibit 10.1 to the Registrants Current Report on
    Form 8-K filed on February 22, 2006).                                                                                                                                                                      
|        | 10 | .20                     |  | Leasehold Indemnity Deed of Trust and Security Agreement, by
    Park Plaza II, L.L.C. as grantor to Alexander Title Agency
    Incorporated, as trustee, for the benefit of Wachovia Bank,
    National Association, as beneficiary, dated February 16,
    2006 (incorporated by reference to Exhibit 10.2 to the
    Registrants Current Report on Form 8-K filed on
    February 22, 2006).
|        | 10 | .21                     |  | Indemnity Guaranty Agreement by Park Plaza II, L.L.C.,
    dated February 16, 2006 (incorporated by reference to
    Exhibit 10.3 to the Registrants Current Report on
    Form 8-K filed on February 22, 2006).                                                                                                                                                                               
|        | 10 | .22*                    |  | Summary of Cash Incentive Bonuses Payable to Executive Officers.                                                                                                                                                                                                                                                                                                                                
|        | 21 | .1*                     |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                                 
|        | 23 | .1*                     |  | Consent of Deloitte & Touche LLP (Registrants
    independent registered public accounting firm).                                                                                                                                                                                                                                                                                              
|        | 31 | .1*                     |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 of Chief Executive Officer.                                                                                                                                                                                                                                                                                         
|        | 31 | .2*                     |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 of Chief Financial Officer.                                                                                                                                                                                                                                                                                         
|        | 32 | .1*                     |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002 of Chief Executive Officer and Chief Financial
    Officer.                                                                                                                                                                                                                                                         






|  |                
|- | ---------------
|* | Filed herewith.

48



---



##### 



SIGNATURES






| |                            
| | ---------------------------
| | COLUMBIA EQUITY TRUST, INC.



| |     |                        
| | --- | -----------------------
| | By: | /s/ Oliver T. Carr, III

| |                        
| | -----------------------
| |                        
| | Oliver T. Carr, III    
| | Chief Executive Officer



|                                             |  |                                                                                                              |  |                |  | 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                    |  | Title                                                                                                        |  | Date          
|                                             |  |                                                                                                              |  |               
|                                            
|/s/ Oliver T. Carr, IIIOliver T. Carr, III   |  | President, Chief Executive Officer and Chairman of our Board of
    Directors (Principal Executive Officer)  |  | March 31, 2006
|                                            
|/s/ John A. SchisselJohn A. Schissel         |  | Executive Vice President, Chief Financial Officer, Secretary and
    Treasurer (Principal Financial Officer) |  | March 31, 2006
|                                            
|/s/ John M. NovackJohn M. Novack             |  | Senior Vice President and Chief Accounting Officer (Principal
    Accounting Officer)                        |  | March 31, 2006
|                                            
|/s/ Bruce M. JohnsonBruce M. Johnson         |  | Director                                                                                                     |  | March 31, 2006
|                                            
|/s/ Robert J. McGovernRobert J. McGovern     |  | Director                                                                                                     |  | March 31, 2006
|                                            
|/s/ Rebecca L. OwenRebecca L. Owen           |  | Director                                                                                                     |  | March 31, 2006
|                                            
|/s/ Hal A. VasvariHal A. Vasvari             |  | Director                                                                                                     |  | March 31, 2006
|                                            
|/s/ Thomas A. Young, Jr.Thomas A. Young, Jr. |  | Director                                                                                                     |  | March 31, 2006

49



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##### 



COLUMBIA EQUITY TRUST, INC. AND COLUMBIA EQUITY TRUST, INC.
PREDECESSOR




COLUMBIA EQUITY TRUST, INC. AND COLUMBIA EQUITY TRUST, INC.
PREDECESSOR


|                                                                                                                                                                                                        |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                                                                        |  | Page
|                                                                                                                                                                                                        |  |     
|Report of Independent Registered Public
    Accounting Firm                                                                                                                                             |  |      | 51 | 
|Consolidated and Combined Balance Sheets as
    of December 31, 2005 and 2004                                                                                                                           |  |      | 52 | 
|Consolidated and Combined Statements of
    Operations for the Periods July 5, 2005 to
    December 31, 2005 and January 1, 2005 to July 4,
    2005 and for the Years Ended December 31, 2004 and 2003 |  |      | 53 | 
|Consolidated and Combined Statements of
    Equity for the Periods July 5, 2005 to December 31,
    2005 and January 1, 2005 to July 4, 2005 and for the
    Years Ended December 31, 2004 and 2003     |  |      | 54 | 
|Consolidated and Combined Statements of
    Cash Flows for the Periods July 5, 2005 to
    December 31, 2005 and January 1, 2005 to July 4,
    2005 and for the Years Ended December 31, 2004 and 2003 |  |      | 55 | 
|Notes to Consolidated and Combined
    Financial Statements                                                                                                                                             |  |      | 56 | 
|                                                                                                                                                                                                       
|FINANCIAL STATEMENT SCHEDULES                                                                                                                                                                           |  |      |    | 
|Schedule II  Valuation and
    Qualifying Accounts                                                                                                                                                     |  |      | 74 | 
|Schedule III  Real Estate
    and Accumulated Depreciation                                                                                                                                             |  |      | 75 | 

FINANCIAL STATEMENTS OF SIGNIFICANT UNCONSOLIDATED
50 PERCENT OR LESS OWNED PERSONS






50



---



##### 






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




















51



---



##### 



COLUMBIA EQUITY TRUST, INC.


AND COLUMBIA EQUITY TRUST, INC. PREDECESSOR





CONSOLIDATED AND COMBINED BALANCE SHEETS


|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   |  |           |           |           | 
|--------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ----------- | ----------- | ----------------- |  | --------- | --------- | --------- | 
|                                                                                                          |                                                                                                                                                                            | Consolidated                 |             |             | Combined          | 
|                                                                                                          |                                                                                                                                                                            | Columbia                     |             |             | Columbia          | 
|                                                                                                          |                                                                                                                                                                            | Equity Trust, Inc.           |             |             | Predecessor       | 
|                                                                                                          |                                                                                                                                                                            | December 31, 2005            |             |             | December 31, 2004 | 
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|ASSETS                                                                                                   
|Rental property                                                                                           |                                                                                                                                                                            |                              |             |             |                   |  |           |          
|                                                                                                          | Land                                                                                                                                                                       |                              | $           | 19,300,819  |                   |  | $         |          |          
|                                                                                                          | Buildings                                                                                                                                                                  |                              |             | 120,509,954 |                   |  |           |          |          
|                                                                                                          | Tenant improvements                                                                                                                                                        |                              |             | 24,377,997  |                   |  |           |          |          
|                                                                                                          | Furniture, fixtures and equipment                                                                                                                                          |                              |             | 1,088,989   |                   |  |           |          |          
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|                                                                                                          |                                                                                                                                                                            |                              | 165,277,759 |             |                   |  |          |          
|                                                                                                          | Accumulated depreciation                                                                                                                                                   |                              |             | (2,805,222  | )                 |  |           |          |          
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|                                                                                                          |                                                                                                                                                                            | Total rental property, net   |             |             | 162,472,537       |  |           |           |          | 
|Cash and cash equivalents                                                                                 |                                                                                                                                                                            |                              | 8,149,634   |             |                   |  | 1,188,146 |          
|Restricted deposits                                                                                       |                                                                                                                                                                            |                              | 256,356     |             |                   |  |          |          
|Accounts and other receivables, net of reserves for doubtful
    accounts of $39,401 and $0, respectively |                                                                                                                                                                            |                              | 1,039,510   |             |                   |  | 185,864   |          
|Due from related parties                                                                                  |                                                                                                                                                                            |                              |            |             |                   |  | 140,000   |          
|Investments in unconsolidated real estate entities                                                        |                                                                                                                                                                            |                              | 42,308,003  |             |                   |  | 4,189,766 |          
|Accrued straight-line rents                                                                               |                                                                                                                                                                            |                              | 524,258     |             |                   |  |          |          
|Deferred leasing costs, net                                                                               |                                                                                                                                                                            |                              | 490,609     |             |                   |  |          |          
|Deferred financing costs, net                                                                             |                                                                                                                                                                            |                              | 955,129     |             |                   |  |          |          
|Intangible assets                                                                                         |                                                                                                                                                                            |                              |             |             |                   |  |           |          
|                                                                                                          | Above market leases, net                                                                                                                                                   |                              |             | 3,610,453   |                   |  |           |          |          
|                                                                                                          | In-place leases, net                                                                                                                                                       |                              |             | 15,813,098  |                   |  |           |          |          
|                                                                                                          | Tenant relationships, net                                                                                                                                                  |                              |             | 6,387,594   |                   |  |           |          |          
|Deferred offering costs                                                                                   |                                                                                                                                                                            |                              |            |             |                   |  | 1,172,964 |          
|Prepaid expenses and other assets                                                                         |                                                                                                                                                                            |                              | 1,323,308   |             |                   |  | 137,030   |          
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|                                                                                                          |                                                                                                                                                                            | Total assets                 |             | $           | 243,330,489       |  |           | $         | 7,013,770 | 
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|                                                                                                         
|LIABILITIES AND EQUITY                                                                                   
|Liabilities                                                                                               |                                                                                                                                                                            |                              |             |             |                   |  |           |          
|                                                                                                          | Revolving loan payable                                                                                                                                                     |                              | $           | 22,000,000  |                   |  | $         |          |          
|                                                                                                          | Mortgage notes payable                                                                                                                                                     |                              |             | 27,358,998  |                   |  |           |          |          
|                                                                                                          | Accounts payable and accrued expenses                                                                                                                                      |                              |             | 2,252,575   |                   |  |           | 1,124,258 |          
|                                                                                                          | Profit sharing plan contribution payable                                                                                                                                   |                              |             |            |                   |  |           | 100,000   |          
|                                                                                                          | Accrued interest payable to stockholders                                                                                                                                   |                              |             |            |                   |  |           | 77,232    |          
|                                                                                                          | Notes payable to stockholders                                                                                                                                              |                              |             |            |                   |  |           | 90,000    |          
|                                                                                                          | Dividends payable                                                                                                                                                          |                              |             | 1,940,867   |                   |  |           |          |          
|                                                                                                          | Security deposits                                                                                                                                                          |                              |             | 945,158     |                   |  |           |          |          
|                                                                                                          | Rent received in advance                                                                                                                                                   |                              |             | 758,265     |                   |  |           |          |          
|                                                                                                          | Deferred credits  Below market leases, net                                                                                                                                |                              |             | 1,593,812   |                   |  |           |          |          
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|                                                                                                          |                                                                                                                                                                            | Total liabilities            |             |             | 56,849,675        |  |           |           | 1,391,490 | 
|Commitments and contingencies                                                                             |                                                                                                                                                                            |                              |             |             |                   |  |           |          
|Minority interest                                                                                         |                                                                                                                                                                            |                              | 14,205,638  |             |                   |  |          |          
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|Equity                                                                                                    |                                                                                                                                                                            |                              |             |             |                   |  |           |          
|                                                                                                          | Preferred stock, $0.001 par value, 100,000,000 and
    0 shares authorized in 2005 and 2004, respectively,
    0 shares issued or outstanding                              |                              |             |            |                   |  |           |          |          
|                                                                                                          | Common stock, $0.001 par value, 500,000,000 and
    1,000 shares authorized, and 13,863,334 and
    1,000 shares issued and outstanding in 2005 and 2004,
    respectively |                              |             | 13,863      |                   |  |           |          |          
|                                                                                                          | Additional paid-in capital                                                                                                                                                 |                              |             | 178,366,298 |                   |  |           |          |          
|                                                                                                          | Less  Common stock subscribed                                                                                                                                             |                              |             |            |                   |  |           |          |          
|Cumulative dividends in excess of net income                                                              |                                                                                                                                                                            |                              | (6,104,985  | )           |                   |  |          |          
|Accumulated equity  Columbia Predecessor                                                                 |                                                                                                                                                                            |                              |            |             |                   |  | 5,622,280 |          
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|                                                                                                          |                                                                                                                                                                            | Total equity                 |             |             | 172,275,176       |  |           |           | 5,622,280 | 
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 
|                                                                                                          |                                                                                                                                                                            | Total liabilities and equity |             | $           | 243,330,489       |  |           | $         | 7,013,770 | 
|                                                                                                          |                                                                                                                                                                            |                              |             |             |                   | 



52



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##### 



COLUMBIA EQUITY TRUST, INC.


AND COLUMBIA EQUITY TRUST, INC. PREDECESSOR





CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS


|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |           |           |         |        |           |           |           | 
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------ | ----------------- | --------- | -------------------- | ---------- | ------- | ------------------- | --------- | --------- | ------------------- | --------- | --------- | ------- | ------ | --------- | --------- | --------- | 
|                                                                            |                                                                          | Consolidated                                                                                                             |                   |           | Combined             |            |         |                     |           |          
|                                                                            |                                                                          | Columbia Equity                                                                                                          |                   |           | Columbia             |            |         | Combined            |           |           | Combined            |          
|                                                                            |                                                                          | Trust, Inc.                                                                                                              |                   |           | Predecessor for the  |            |         | Columbia            |           |           | Columbia            |          
|                                                                            |                                                                          | for the Period                                                                                                           |                   |           | Period               |            |         | Predecessor for the |           |           | Predecessor for the |          
|                                                                            |                                                                          | July 5, 2005 to                                                                                                          |                   |           | January 1, 2005 to   |            |         | Year Ended          |           |           | Year Ended          |          
|                                                                            |                                                                          | December 31, 2005                                                                                                        |                   |           | through July 4, 2005 |            |         | December 31, 2004   |           |           | December 31, 2003   |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|Revenues                                                                    |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |           |           |         |        |          
|                                                                            | Base rents                                                               |                                                                                                                          | $                 | 7,485,628 |                      |            | $       |                    |           |           | $                   |          |           |         | $      |          |          
|                                                                            | Recoveries from tenants                                                  |                                                                                                                          |                   | 407,774   |                      |            |         |                    |           |           |                     |          |           |         |        |          |          
|                                                                            | Fee income, primarily from related parties                               |                                                                                                                          |                   | 554,053   |                      |            |         | 1,438,356           |           |           |                     | 1,896,873 |           |         |        | 1,923,269 |          
|                                                                            | Parking and other income                                                 |                                                                                                                          |                   | 23,261    |                      |            |         |                    |           |           |                     |          |           |         |        |          |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|                                                                            |                                                                          | Total revenues                                                                                                           |                   |           | 8,470,716            |            |         |                     | 1,438,356 |           |                     |           | 1,896,873 |         |        |           | 1,923,269 |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|Operating expenses                                                          |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |           |           |         |        |          
|                                                                            | Property operating                                                       |                                                                                                                          |                   | 1,507,085 |                      |            |         |                    |           |           |                     |          |           |         |        |          |          
|                                                                            | Utilities                                                                |                                                                                                                          |                   | 632,264   |                      |            |         |                    |           |           |                     |          |           |         |        |          |          
|                                                                            | Real estate taxes and insurance                                          |                                                                                                                          |                   | 652,205   |                      |            |         |                    |           |           |                     |          |           |         |        |          |          
|                                                                            | General and administrative                                               |                                                                                                                          |                   | 1,827,549 |                      |            |         | 1,549,127           |           |           |                     | 1,727,197 |           |         |        | 1,673,467 |          
|                                                                            | Share-based compensation cost                                            |                                                                                                                          |                   | 1,931,910 |                      |            |         |                    |           |           |                     |          |           |         |        |          |          
|                                                                            | Depreciation and amortization                                            |                                                                                                                          |                   | 4,503,894 |                      |            |         | 7,385               |           |           |                     | 11,562    |           |         |        | 10,247    |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|                                                                            |                                                                          | Total operating expenses                                                                                                 |                   |           | 11,054,907           |            |         |                     | 1,556,512 |           |                     |           | 1,738,759 |         |        |           | 1,683,714 |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|                                                                            |                                                                          | Operating income (loss)                                                                                                  |                   |           | (2,584,191           | )          |         |                     | (118,156  | )         |                     |           | 158,114   |         |        |           | 239,555   |          
|Other income and expense                                                    |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |           |           |         |        |          
|                                                                            | Interest income                                                          |                                                                                                                          |                   | 514,390   |                      |            |         | 21,450              |           |           |                     | 15,921    |           |         |        | 15,232    |          
|                                                                            | Interest expense                                                         |                                                                                                                          |                   | (631,513  | )                    |            |         | (4,597              | )         |           |                     | (9,000    | )         |         |        | (9,045    | )        
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|                                                                            |                                                                          | Income (loss) before income taxes, equity in net income of
    unconsolidated real estate entities and minority interest |                   |           | (2,701,314           | )          |         |                     | (101,303  | )         |                     |           | 165,035   |         |        |           | 245,742   |          
|                                                                            | Equity in net income of unconsolidated real estate entities              |                                                                                                                          |                   | 34,735    |                      |            |         | (139,460            | )         |           |                     | 363,392   |           |         |        | 2,476,034 |          
|                                                                            | Income of other unconsolidated entities, not contributed to the
    REIT |                                                                                                                          |                   |          |                      |            |         | 2,421,101           |           |           |                     | 47,201    |           |         |        | 455,084   |          
|                                                                            | Minority interest                                                        |                                                                                                                          |                   | 191,061   |                      |            |         |                    |           |           |                     |          |           |         |        |          |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|                                                                            |                                                                          | Income (loss) before income taxes                                                                                        |                   |           | (2,475,518           | )          |         |                     | 2,180,338 |           |                     |           | 575,628   |         |        |           | 3,176,860 |          
|Provision for income taxes                                                  |                                                                          |                                                                                                                          | 25,000            |           |                      |            | 231,884 |                     |           |           | 6,849               |           |           |         | 54,575 |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|                                                                            |                                                                          |                                                                                                                          | Net income (loss) |           | $                    | (2,500,518 | )       |                     | $         | 1,948,454 |                     |           | $         | 568,779 |        |           | $         | 3,122,285 | 
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|Net loss per common share  Basic and diluted                               |                                                                          | $                                                                                                                        | (0.18             | )         |                      |            |         |                     |           |           |                     |           |           |         |        |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          
|Weighted average shares of common stock outstanding 
    Basic and diluted |                                                                          |                                                                                                                          | 13,773,334        |           |                      |            |         |                     |           |           |                     |           |           |         |        |          
|                                                                            |                                                                          |                                                                                                                          |                   |           |                      |            |         |                     |           |           |                     |          



53



---



##### 



COLUMBIA EQUITY TRUST, INC.


AND COLUMBIA EQUITY TRUST, INC. PREDECESSOR





CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY


|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |   |   |             |             |            |   |           |            |   | 
|-------------------------- | -------------------------------------------- | --------------------------------- | ---------- | ---------- | --------- | - | ------------ | --------------- | ----- | ------------ | ----------- | ----------- | ---------- | ------------- | ------ | ------ | --------------- | - | ---------- | ----------- | - | - | ----------- | ----------- | ---------- | - | --------- | ---------- | - | 
|                           |                                              | Columbia Equity Trust, Inc.       |            |            |          
|                           |                                              |                                   |            |            |          
|                           |                                              |                                   |            | Cumulative |           |   | Total        |                 |       |             
|                           |                                              |                                   |            | Common     |           |   | Dividends in |                 |       | Consolidated |             |             | Combined   |              
|                           |                                              | Number of                         |            |            | Common    |   |              | Additional      |       |              | Stock       |             |            | Excess of Net |        |        | Columbia Equity |   |            | Columbia    |  
|                           |                                              | Shares                            |            |            | Stock     |   |              | Paid-In Capital |       |              | Subscribed  |             |            | Income        |        |        | Trust, Inc.     |   |            | Predecessor |  
|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |  
|Balance, January 1, 2003   |                                              |                                   |           |            |           | $ |             |                 |       | $            |            |             |            | $             |       |        |                 | $ |           |             |   | $ |            |             |            | $ | 4,205,176 |           
|                           | Net income                                   |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            |            |   |   |             |            |            |   |           | 3,122,285  |  
|                           | Distributions                                |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            |            |   |   |             |            |            |   |           | (2,574,728 | )
|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |  
|Balance, December 31, 2003 |                                              |                                   |           |            |           |   |             |                 |       |              |            |             |            |               |       |        |                 |   |           |             |   |   |            |             |            |   | 4,752,733 |           
|                           | Common stock subscribed                      |                                   |            | 1,000      |           |   |              | 1               |       |              |             | 999         |            |               |        | (1,000 | )               |   |            |             |   |   |             |             |            |   |           |            |  
|                           | Net income                                   |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            |            |   |   |             |            |            |   |           | 568,779    |  
|                           | Distributions                                |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            |            |   |   |             |            |            |   |           | (1,682,737 | )
|                           | Contributions                                |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            |            |   |   |             |            |            |   |           | 1,983,505  |  
|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |  
|Balance, December 31, 2004 |                                              |                                   | 1,000      |            |           |   | 1            |                 |       |              | 999         |             |            |               | (1,000 | )      |                 |   |           |             |   |   |            |             |            |   | 5,622,280 |           
|                           | Payment received for common stock subscribed |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        | 1,000  |                 |   |            |            |   |   |             | 1,000       |            |   |           |            |  
|                           | Net income (loss)                            |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            | (700        | ) |   |             | (700        | )          |   |           | 1,948,454  |  
|                           | Distributions                                |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            |            |   |   |             |            |            |   |           | (163,989   | )
|                           | Contributions                                |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            |            |   |   |             |            |            |   |           | 250,000    |  
|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |  
|Balance, July 4, 2005      |                                              |                                   | 1,000      |            |           |   | 1            |                 |       |              | 999         |             |            |               |       |        |                 |   | (700       | )           |   |   | 300         |             |            | $ | 7,656,745 |           
|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |  
|                           | Shares issued in stock split                 |                                   |            | 62,334     |           |   |              | 62              |       |              |             | (62         | )          |               |        |       |                 |   |            |            |   |   |             |            |            |   |           |            |  
|                           | Compensation cost related to stock split     |                                   |            |           |           |   |              |                |       |              |             | 949,010     |            |               |        |       |                 |   |            |            |   |   |             | 949,010     |            |   |           |            |  
|                           | Initial public offering of common stock      |                                   |            | 12,000,000 |           |   |              | 12,000          |       |              |             | 179,988,000 |            |               |        |       |                 |   |            |            |   |   |             | 180,000,000 |            |   |           |            |  
|                           | Sale of common stock                        |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |   |   |             |             |            |   |           |            |  
|                           |                                              | Exercise of over-allotment option |            |            | 1,800,000 |   |              |                 | 1,800 |              |             |             | 26,998,200 |               |        |        |                |   |            |             |  |   |             |             | 27,000,000 |   |           |            |   | 
|                           | Underwriters discount and offering expenses |                                   |            |           |           |   |              |                |       |              |             | (18,567,975 | )          |               |        |       |                 |   |            |            |   |   |             | (18,567,975 | )          |   |           |            |  
|                           | Minority interest in offering proceeds       |                                   |            |           |           |   |              |                |       |              |             | (11,001,874 | )          |               |        |       |                 |   |            |            |   |   |             | (11,001,874 | )          |   |           |            |  
|                           | Net loss                                     |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            | (2,499,818  | ) |   |             | (2,499,818  | )          |   |           |            |  
|                           | Dividends declared                           |                                   |            |           |           |   |              |                |       |              |             |            |            |               |        |       |                 |   |            | (3,604,467  | ) |   |             | (3,604,467  | )          |   |           |            |  
|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |  
|Balance, December 31, 2005 |                                              |                                   | 13,863,334 |            |           | $ | 13,863       |                 |       | $            | 178,366,298 |             |            | $             |       |        |                 | $ | (6,104,985 | )           |   | $ | 172,275,176 |             |            |   |           |           
|                           |                                              |                                   |            |            |           |   |              |                 |       |              |             |             |            |               |        |        |                 |   |            |             |  



54



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##### 



COLUMBIA EQUITY TRUST, INC.


AND COLUMBIA EQUITY TRUST, INC. PREDECESSOR





CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS


|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |            |          |            |           |            |            |            |         | 
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------------------- | ------------ | --------- | ------------------- | ---------- | ---------- | ------------------- | ---------- | -------- | ---------- | --------- | ---------- | ---------- | ---------- | ------- | 
|                                                     |                                                                                                       | Consolidated                                                                    |                                                     |                                                     |                     |              |           |                     |           
|                                                     |                                                                                                       | Columbia Equity                                                                 |                                                     |                                                     | Combined Columbia   |              |           | Combined            |            |            | Combined            |           
|                                                     |                                                                                                       | Trust, Inc. for the                                                             |                                                     |                                                     | Predecessor for the |              |           | Columbia            |            |            | Columbia            |           
|                                                     |                                                                                                       | Period July 5,                                                                  |                                                     |                                                     | Period January 1,   |              |           | Predecessor for the |            |            | Predecessor for the |           
|                                                     |                                                                                                       | 2005 to                                                                         |                                                     |                                                     | 2005 to Through     |              |           | Year Ended          |            |            | Year Ended          |           
|                                                     |                                                                                                       | December 31, 2005                                                               |                                                     |                                                     | July 4, 2005        |              |           | December 31, 2004   |            |            | December 31, 2003   |           
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|Cash flows from operating activities                 |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |            |          |            |           |           
|                                                     | Net income (loss)                                                                                     |                                                                                 | $                                                   | (2,500,518                                          | )                   |              | $         | 1,948,454           |            |            | $                   | 568,779    |          |            | $         | 3,122,285  |           
|                                                     | Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |            |          |            |           |            |           
|                                                     |                                                                                                       | Minority interest                                                               |                                                     |                                                     | (191,061            | )            |           |                     |           |            |                     |            |         |            |           |            |           |           
|                                                     |                                                                                                       | Equity in net income of unconsolidated real estate entities                     |                                                     |                                                     | (34,735             | )            |           |                     | (2,281,641 | )          |                     |            | (410,593 | )          |           |            | (2,931,118 | )         
|                                                     |                                                                                                       | Equity in management fees recognized on unconsolidated real
    estate entities |                                                     |                                                     | 82,920              |              |           |                     |           |            |                     |            |         |            |           |            |           |           
|                                                     |                                                                                                       | Compensation cost related to stock split                                        |                                                     |                                                     | 949,010             |              |           |                     |           |            |                     |            |         |            |           |            |           |           
|                                                     |                                                                                                       | Compensation cost related to LTIP units                                         |                                                     |                                                     | 907,500             |              |           |                     |           |            |                     |            |         |            |           |            |           |           
|                                                     |                                                                                                       | Distributions received from earnings of unconsolidated real
    estate entities |                                                     |                                                     | 226,670             |              |           |                     | 19,055     |            |                     |            | 62,763   |            |           |            | 515,528    |           
|                                                     |                                                                                                       | Depreciation and amortization                                                   |                                                     |                                                     | 4,503,843           |              |           |                     | 7,385      |            |                     |            | 11,562   |            |           |            | 10,247     |           
|                                                     |                                                                                                       | Amortization of above and below market leases                                   |                                                     |                                                     | 165,095             |              |           |                     |           |            |                     |            |         |            |           |            |           |           
|                                                     |                                                                                                       | Amortization of deferred financing costs                                        |                                                     |                                                     | 31,285              |              |           |                     |           |            |                     |            |         |            |           |            |           |           
|                                                     |                                                                                                       | Changes in assets and liabilities                                               |                                                     |                                                     |                     |              |           |                     |            |            |                     |            |          |            |           |            |            |           
|                                                     |                                                                                                       |                                                                                 | Accounts and other receivables                      |                                                     |                     | (368,044     | )         |                     |            | (36,505    | )                   |            |          | (149,439   | )         |            |            | 36,893     |        
|                                                     |                                                                                                       |                                                                                 | Accrued straight-line rents                         |                                                     |                     | (524,258     | )         |                     |            |           |                     |            |          |           |           |            |            |           |        
|                                                     |                                                                                                       |                                                                                 | Deferred leasing costs                              |                                                     |                     | (518,124     | )         |                     |            |           |                     |            |          |           |           |            |            |           |        
|                                                     |                                                                                                       |                                                                                 | Deferred offering costs                             |                                                     |                     |             |           |                     |            | (2,693,176 | )                   |            |          | (1,172,964 | )         |            |            |           |        
|                                                     |                                                                                                       |                                                                                 | Prepaid expenses and other assets                   |                                                     |                     | (1,065,422   | )         |                     |            | (440,020   | )                   |            |          | (70,990    | )         |            |            | (28,113    | )      
|                                                     |                                                                                                       |                                                                                 | Accounts payable and accrued expenses               |                                                     |                     | 1,146,358    |           |                     |            | 2,725,286  |                     |            |          | 1,074,993  |           |            |            | 17,345     |        
|                                                     |                                                                                                       |                                                                                 | Profit sharing plan contribution payable            |                                                     |                     |             |           |                     |            |           |                     |            |          | (32,769    | )         |            |            | 14,514     |        
|                                                     |                                                                                                       |                                                                                 | Accrued interest payable to stockholders            |                                                     |                     |             |           |                     |            | 4,597      |                     |            |          | 9,000      |           |            |            | 7,826      |        
|                                                     |                                                                                                       |                                                                                 | Rent received in advance                            |                                                     |                     | 23,841       |           |                     |            |           |                     |            |          |           |           |            |            |           |        
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|                                                     |                                                                                                       |                                                                                 |                                                     | Net cash provided by (used in) operating activities |                     |              | 2,834,360 |                     |            |            | (746,565            | )          |          |            | (109,658  | )          |            |            | 765,407 | 
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|Cash flows from investing activities                 |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |            |          |            |           |           
|                                                     | Purchases of interests in rental property and related net assets                                      |                                                                                 |                                                     | (120,337,306                                        | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Purchases of interests in unconsolidated real estate entities                                         |                                                                                 |                                                     | (41,950,254                                         | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Deposit on pending purchase of interest in rental property                                            |                                                                                 |                                                     | (800,000                                            | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Additions to rental properties                                                                        |                                                                                 |                                                     | (1,385,442                                          | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Additions to rental property furniture, fixtures and equipment                                        |                                                                                 |                                                     | (54,212                                             | )                   |              |           | (3,772              | )          |            |                     | (17,453    | )        |            |           | (17,578    | )         
|                                                     | Restricted deposits                                                                                   |                                                                                 |                                                     | 813,988                                             |                     |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Distributions in excess of net income received from real estate
    entities                          |                                                                                 |                                                     | 1,393,680                                           |                     |              |           | 2,707,753           |            |            |                     | 1,607,565  |          |            |           | 2,853,208  |           
|                                                     | Contributions made to unconsolidated real estate entities                                             |                                                                                 |                                                     | (269,766                                            | )                   |              |           | (508,000            | )          |            |                     | (2,344,320 | )        |            |           | (258,000   | )         
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|                                                     |                                                                                                       |                                                                                 | Net cash (used in) provided by investing activities |                                                     |                     | (162,589,312 | )         |                     |            | 2,195,981  |                     |            |          | (754,208   | )         |            |            | 2,577,630  |        
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|Cash flows from financing activities                 |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |            |          |            |           |           
|                                                     | Gross proceeds from initial public offering of common stock                                           |                                                                                 |                                                     | 207,000,000                                         |                     |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Payment of offering costs, underwriting discount and advisory
    fees                                |                                                                                 |                                                     | (18,567,975                                         | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Payment received for subscribed common stock                                                          |                                                                                 |                                                     | 1,000                                               |                     |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Borrowings under revolving credit line                                                                |                                                                                 |                                                     | 22,000,000                                          |                     |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Repayment of mortgage loans and prepayment penalties                                                  |                                                                                 |                                                     | (40,653,668                                         | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Dividends                                                                                             |                                                                                 |                                                     | (1,663,600                                          | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Contributions                                                                                         |                                                                                 |                                                     |                                                    |                     |              |           | 250,000             |            |            |                     | 1,983,505  |          |            |           |           |           
|                                                     | Distributions                                                                                         |                                                                                 |                                                     | (128,397                                            | )                   |              |           | (163,989            | )          |            |                     | (1,682,737 | )        |            |           | (2,574,728 | )         
|                                                     | Security deposits                                                                                     |                                                                                 |                                                     | (82,774                                             | )                   |              |           |                    |            |            |                     |           |          |            |           |           |           
|                                                     | Repayment of notes payable to shareholders                                                            |                                                                                 |                                                     |                                                    |                     |              |           |                    |            |            |                     |           |          |            |           | (2,000     | )         
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|                                                     |                                                                                                       |                                                                                 | Net cash provided by (used in) financing activities |                                                     |                     | 167,904,586  |           |                     |            | 86,011     |                     |            |          | 300,768    |           |            |            | (2,576,728 | )      
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|Net increase (decrease) in cash and cash equivalents |                                                                                                       |                                                                                 | 8,149,634                                           |                                                     |                     |              | 1,535,427 |                     |            |            | (563,098            | )          |          |            | 766,309   |           
|Cash and cash equivalents, beginning of period       |                                                                                                       |                                                                                 |                                                    |                                                     |                     |              | 1,188,146 |                     |            |            | 1,751,244           |            |          |            | 984,935   |           
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           
|Cash and cash equivalents, end of period             |                                                                                                       | $                                                                               | 8,149,634                                           |                                                     |                     | $            | 2,723,573 |                     |            | $          | 1,188,146           |            |          | $          | 1,751,244 |           
|                                                     |                                                                                                       |                                                                                 |                                                     |                                                     |                     |              |           |                     |            |            |                     |           



55



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR





NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS




|   |                                         
|-- | ----------------------------------------
|1. | Organization and Description of Business











|   |                                                                         
|-- | ------------------------------------------------------------------------
|2. | Basis of Presentation and Summary of Significant Accounting
    Policies



| |                               
| | ------------------------------
| | a) Principles of Consolidation





| |                             
| | ----------------------------
| | b) Cash and Cash Equivalents



56



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




| |                                       
| | --------------------------------------
| | c) Fair Value of Financial Instruments





| |                       
| | ----------------------
| | d) Revenue Recognition







| |                                  
| | ---------------------------------
| | e) Investments in Rental Property







57



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COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






| |                                                          
| | ---------------------------------------------------------
| | f) Investments in Unconsolidated Real Estate
    Entities









| |                     
| | --------------------
| | g) Minority Interest









58



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COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






|                                                                                                        |                                           |   |            |            | 
|------------------------------------------------------------------------------------------------------- | ----------------------------------------- | - | ---------- | ---------- | 
|Minority share of initial sale of common stock                                                          |                                           | $ | 72         |           
|Minority share of stock split                                                                           |                                           |   | 67,996     |           
|Minority share of proceeds of the public offering of common
    stock and related offering transactions |                                           |   | 13,699,324 |           
|Cost of vested LTIP Units                                                                               |                                           |   | 525,000    |           
|Amortization of cost of unvested LTIP Units                                                             |                                           |   | 382,500    |           
|Minority share of net loss                                                                              |                                           |   | (191,061   | )         
|Distributions made to OP Unit holders                                                                   |                                           |   | (278,193   | )         
|                                                                                                        |                                           |   |           
|                                                                                                        | Minority interest as of December 31, 2005 |   | $          | 14,205,638 | 
|                                                                                                        |                                           |   |           



| |                        
| | -----------------------
| | h) Tenant Leasing Costs





| |                            
| | ---------------------------
| | i) Deferred Financing Costs





| |                              
| | -----------------------------
| | j) Share  Based Compensation





| |                                 
| | --------------------------------
| | k) New Accounting Pronouncements



59



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COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




04-5, 04-5). 04-5, 04-5.






| |                
| | ---------------
| | l) Income Taxes







| |                          
| | -------------------------
| | m) Managements Estimates



60



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




| |                      
| | ---------------------
| | n) Segment Disclosure





| |                                
| | -------------------------------
| | o) Concentration of Credit Risk







|   |                   
|-- | ------------------
|3. | Earnings Per Share

03-6 03-06), 03-6,


|                                    |  |                   |            |  
|----------------------------------- |  | ----------------- | ---------- | -
|                                    |  | Columbia Equity   |           
|                                    |  | Trust, Inc.       |           
|                                    |  | for the Period    |           
|                                    |  | July 5, 2005 to   |           
|                                    |  | December 31, 2005 |           
|                                    |  |                   |           
|Net loss                            |  | $                 | (2,500,518 | )
|                                    |  |                   |           
|Weighted average shares outstanding |  |                   | 13,773,334 |  
|                                    |  |                   |           
|Basic and diluted loss per share    |  | $                 | (0.18      | )
|                                    |  |                   |           

61



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|   |               
|-- | --------------
|4. | Offering Costs





|   |            
|-- | -----------
|5. | Stock Split





|   |                             
|-- | ----------------------------
|6. | Acquisitions and Development





|                                               |  |          |                   |        |      |   |             |          |  |  |                |  |  |   |             | 
|---------------------------------------------- |  | -------- | ----------------- | ------ | ---- | - | ----------- | -------- |  |  | -------------- |  |  | - | ----------- | 
|                                               |  |          |                   | Square |      |   | Date        |          |  | 
|Property                                       |  | Location |                   |        | Feet |   |             | Acquired |  |  | Purchase Price | 
|                                               |  |          |                   |        |      |   |             |          |  |  |                | 
|Fair Oaks                                      |  |          | Fairfax, Va.      |        |      |   | 126,949     |          |  |  | 7/5/05         |  |  | $ | 18,734,110  | 
|Greenbriar                                     |  |          | Fairfax, Va.      |        |      |   | 111,721     |          |  |  | 7/5/05         |  |  |   | 15,390,155  | 
|Lee Road                                       |  |          | Chantilly, Va.    |        |      |   | 84,652      |          |  |  | 8/23/05        |  |  |   | 24,223,618  | 
|Loudoun Gateway IV                             |  |          | Dulles, Va.       |        |      |   | 102,987     |          |  |  | 7/8/05         |  |  |   | 21,787,021  | 
|Meadows IV                                     |  |          | Chantilly, Va.    |        |      |   | 148,160     |          |  |  | 7/5/05         |  |  |   | 28,136,318  | 
|Oakton                                         |  |          | Oakton, Virginia  |        |      |   | 64,648      |          |  |  | 12/9/05        |  |  |   | 16,136,306  | 
|Park Plaza II                                  |  |          | Rockville, Md.    |        |      |   | 126,228     |          |  |  | 9/29/05        |  |  |   | 35,121,600  | 
|Patrick Henry                                  |  |          | Newport News, Va. |        |      |   | 98,883      |          |  |  | 12/1/05        |  |  |   | 14,529,219  | 
|Sherwood Plaza                                 |  |          | Fairfax, Va.      |        |      |   | 92,960      |          |  |  | 7/5/05         |  |  |   | 15,853,477  | 
|                                               |  |          |                   |        |      |   |             |          |  |  |                | 
|                                               |  |          |                   |        |      |   |             |          |  |  |                |  |  |   | 189,911,824 | 
|                                               |  |          |                   |        |      |   |             |          |  |  |                | 
|Less-Mortgage notes assumed                    |  |          |                   |        |      |   | (68,010,445 | )       
|Less-Other assets and liabilities assumed, net |  |          |                   |        |      |   | (555,073    | )       
|                                               |  |          |                   |        |      |  
|Net assets acquired                            |  |          |                   |        |      | $ | 121,346,306 |         
|                                               |  |          |                   |        |      |  



62



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                       |                           |                     |             |             |             | 
|---------------------- | ------------------------- | ------------------- | ----------- | ----------- | ----------- | 
|Rental property        |                           | $                   | 163,858,000 |            
|Intangible assets      |                           |                     | 27,764,000  |            
|Other assets           |                           |                     | 2,184,000   |            
|                       |                           |                     |            
|                       | Total assets acquired     |                     |             | 193,806,000 |            
|                       |                           |                     |            
|Mortgage notes payable |                           |                     | 68,010,000  |            
|Deferred credits       |                           |                     | 1,711,000   |            
|Other liabilities      |                           |                     | 2,739,000   |            
|                       |                           |                     |            
|                       | Total liabilities assumed |                     |             | 72,460,000  |            
|                       |                           |                     |            
|                       |                           | Net assets acquired |             | $           | 121,346,000 | 
|                       |                           |                     |            



|                                              |  |                   |            |                |                 |   |            |  
|--------------------------------------------- |  | ----------------- | ---------- | -------------- | --------------- | - | ---------- | -
|                                              |  |                   |            | Actual Results |                
|                                              |  | Pro Forma         |            |                | for the Period  |  
|                                              |  | for the Six       |            |                | July 5, 2005    |  
|                                              |  | Months Ended      |            |                | to December 31, |  
|                                              |  | December 31, 2005 |            |                | 2005            |  
|                                              |  |                   |            |                |                 |  
|                                              |  | (Unaudited)       |            |                |                
|Revenues                                      |  | $                 | 11,358,000 |                |                 | $ | 8,470,716  |  
|                                              |  |                   |            |                |                 |  
|Net loss                                      |  | $                 | (3,051,000 | )              |                 | $ | (2,500,518 | )
|                                              |  |                   |            |                |                 |  
|Net loss per share                            |  | $                 | (0.22      | )              |                 | $ | (0.18      | )
|                                              |  |                   |            |                |                 |  
|Weighted average number of shares outstanding |  |                   | 13,773,334 |                |                 |   | 13,773,334 |  
|                                              |  |                   |            |                |                 |  



|   |                                                   
|-- | --------------------------------------------------
|7. | Investments in Unconsolidated Real Estate Entities



63



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                         |  |          |                   |  |             |      |           |          |          |  |         |         |  |       |            |  |  |  |       |     
|------------------------ |  | -------- | ----------------- |  | ----------- | ---- | --------- | -------- | -------- |  | ------- | ------- |  | ----- | ---------- |  |  |  | ----- | ----
|                         |  |          |                   |  |             | Date |           |          | Purchase |  |         | Percent | 
|Property                 |  | Location |                   |  | Square Feet |      |           | Acquired |          |  | Price   |         |  | Owned |           
|                         |  |          |                   |  |             |      |           |          |          |  |         |         |  |       |           
|1575 Eye Street          |  |          | Washington,  D.C. |  |             |      | 210,372   |          |          |  | 7/5/05  |         |  | $     | 1,172,398  |  |  |  | 9.18  | %   
|Atrium                   |  |          | Alexandria, Va.   |  |             |      | 138,507   |          |          |  | 7/5/05  |         |  |       | 5,002,925  |  |  |  | 37.00 | %   
|Barlow Building          |  |          | Chevy Chase, Md.  |  |             |      | 270,490   |          |          |  | 7/15/05 |         |  |       | 13,700,000 |  |  |  | 40.00 | %   
|Independence Center  I  |  |          | Chantilly, Va.    |  |             |      | 275,002   |          |          |  | 7/5/05  |         |  |       | 2,539,006  |  |  |  | 14.74 | %   
|Independence Center  II |  |          | Chantilly, Va.    |  |             |      | Land Only |          |          |  | 7/5/05  |         |  |       | 368,500    |  |  |  | 8.10  | %(1)
|King Street              |  |          | Alexandria, Va.   |  |             |      | 149,080   |          |          |  | 7/5/05  |         |  |       | 4,009,252  |  |  |  | 50.00 | %   
|Madison Place            |  |          | Alexandria, Va.   |  |             |      | 107,960   |          |          |  | 7/5/05  |         |  |       | 5,990,270  |  |  |  | 50.00 | %   
|Suffolk Building         |  |          | Falls Church, Va. |  |             |      | 257,425   |          |          |  | 7/5/05  |         |  |       | 9,986,803  |  |  |  | 36.50 | %   
|Victory Point            |  |          | Chantilly, Va.    |  |             |      | 147,743   |          |          |  | 7/5/05  |         |  |       | 925,335    |  |  |  | 10.00 | %   
|                         |  |          |                   |  |             |      |           |          |          |  |         |         |  |       |           
|                         |  |          |                   |  |             |      |           |          |          |  |         |         |  | $     | 43,694,489 |  |  |  |       |     
|                         |  |          |                   |  |             |      |           |          |          |  |         |         |  |       |           






|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | On October 1, 2005 a third party invested in Independence
    Center II, reducing the Companys ownership from
    14.74% to 8.10%.





|       |                                      |                              |   |             |             |  |   |             |             | 
|------ | ------------------------------------ | ---------------------------- | - | ----------- | ----------- |  | - | ----------- | ----------- | 
|       |                                      | 2005                         |   |             | 2004        | 
|       |                                      |                              |   |             |             | 
|Assets |                                      |                              |   |             |             |  |   |            
|       | Investments in real estate           |                              | $ | 306,193,345 |             |  | $ | 202,859,243 |            
|       | Receivables and deferred rents       |                              |   | 9,458,009   |             |  |   | 8,589,481   |            
|       | Other assets                         |                              |   | 51,513,600  |             |  |   | 38,137,050  |            
|       |                                      |                              |   |             |             | 
|       |                                      | Total assets                 |   | $           | 367,164,954 |  |   | $           | 249,585,774 | 
|       |                                      |                              |   |             |             | 
|      
|       | Liabilities and Equity               |                              |   |             |             |  |   |             |            
|       | Mortgage loans                       |                              | $ | 255,897,580 |             |  | $ | 195,805,021 |            
|       | Other liabilities                    |                              |   | 16,515,825  |             |  |   | 11,060,088  |            
|       | Equity  Columbia Equity Trust, Inc. |                              |   | 35,176,959  |             |  |   |            |            
|       | Equity  Columbia Predecessor        |                              |   |            |             |  |   | 2,631,499   |            
|       | Equity  Other owners                |                              |   | 59,574,590  |             |  |   | 40,089,166  |            
|       |                                      |                              |   |             |             | 
|       |                                      | Total liabilities and equity |   | $           | 367,164,954 |  |   | $           | 249,585,774 | 
|       |                                      |                              |   |             |             | 

64



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                              |  |      |            |   |      |   |           | 
|------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | 
|                                                                                                              |  | 2005 |            |   | 2004 |  
|                                                                                                              |  |      |            |   |      |  
|Equity in underlying real estate entities, above                                                              |  | $    | 35,176,959 |   |      | $ | 2,631,499 | 
|Excess of purchase price over underlying assets acquired by
    Columbia Equity Trust, Inc.                   |  |      | 7,314,565  |   |      |   |          | 
|Additional investment by Columbia Equity Trust, Inc.                                                          |  |      | 12,283     |   |      |   |          | 
|Less additional depreciation and amortization of underlying
    assets of unconsolidated real estate entities |  |      | (195,804   | ) |      |   |          | 
|Cumulative losses in excess of investment                                                                     |  |      |           |   |      |   | 1,414,849 | 
|Assets not contributed by Columbia Predecessor at the Initial
    Public Offering                             |  |      |           |   |      |   | 143,418   | 
|                                                                                                              |  |      |            |   |      |  
|Investments in unconsolidated real estate entities                                                            |  | $    | 42,308,003 |   |      | $ | 4,189,766 | 
|                                                                                                              |  |      |            |   |      |  



|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |            |  |   |            |            |  
|------------------------------------------------------------------------------------------------------------- | ----------------- | ----------------- | ---------- | ---------- | --------------- | ------------ | ---------- | ------------ | ------------ | - | ------------ | ---------- |  | - | ---------- | ---------- | -
|                                                                                                              |                   |                   |            |            |                 | For the Year |            |              | For the Year |  
|                                                                                                              |                   | For the Period    |            |            | For the Period  |              |            | Ended        |              |   | Ended        |           
|                                                                                                              |                   | July 5, 2005 to   |            |            | January 1, 2005 |              |            | December 31, |              |   | December 31, |           
|                                                                                                              |                   | December 31, 2005 |            |            | to July 4, 2005 |              |            | 2004         |              |   | 2003         |           
|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |           
|Revenues                                                                                                      |                   | $                 | 22,083,017 |            |                 | $            | 19,628,722 |              |              | $ | 31,015,121   |            |  | $ | 20,567,374 |           
|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |           
|Operating and other                                                                                           |                   |                   | 7,106,642  |            |                 |              | 7,803,566  |              |              |   | 11,693,625   |            |  |   | 7,369,559  |           
|Depreciation                                                                                                  |                   |                   | 7,713,179  |            |                 |              | 6,666,025  |              |              |   | 8,111,299    |            |  |   | 4,950,661  |           
|Interest                                                                                                      |                   |                   | 6,395,872  |            |                 |              | 6,444,013  |              |              |   | 9,552,723    |            |  |   | 8,383,178  |           
|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |           
|                                                                                                              | Total expenses    |                   |            | 21,215,693 |                 |              |            | 20,913,604   |              |   |              | 29,357,647 |  |   |            | 20,703,398 |  
|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |           
|                                                                                                              | Net income (loss) |                   | $          | 867,324    |                 |              | $          | (1,284,882   | )            |   | $            | 1,657,474  |  |   | $          | (136,024   | )
|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |           
|Company and Columbia Predecessor share of net income (loss)                                                   |                   | $                 | 147,619    |            |                 | $            | (139,460   | )            |              | $ | 363,392      |            |  | $ | 2,476,034  |           
|Less additional depreciation and amortization of underlying
    assets of unconsolidated real estate entities |                   |                   | (195,804   | )          |                 |              |           |              |              |   |             |            |  |   |           |           
|Elimination of intercompany revenues and expenses                                                             |                   |                   | 82,920     |            |                 |              |           |              |              |   |             |            |  |   |           |           
|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |           
|Equity in net income of unconsolidated real estate entities                                                   |                   | $                 | 34,735     |            |                 | $            | (139,460   | )            |              | $ | 363,392      |            |  | $ | 2,476,034  |           
|                                                                                                              |                   |                   |            |            |                 |              |            |              |              |   |              |           

65



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|   |                  
|-- | -----------------
|8. | Intangible Assets



|                  |                          |                    |            |            |  
|----------------- | ------------------------ | ------------------ | ---------- | ---------- | -
|                  |                          | Consolidated       |           
|                  |                          | Columbia           |           
|                  |                          | Equity Trust, Inc. |           
|                  |                          | December 31, 2005  |           
|                  |                          |                    |           
|Intangible Assets |                          |                    |            |           
|                  | Above market leases      |                    | $          | 3,892,695  |  
|                  | Accumulated amortization |                    |            | (282,242   | )
|                  |                          |                    |           
|                  |                          | $                  | 3,610,453  |           
|                  |                          |                    |           
|                  | In-Place leases          |                    | $          | 16,980,485 |  
|                  | Accumulated amortization |                    |            | (1,167,387 | )
|                  |                          |                    |           
|                  |                          | $                  | 15,813,098 |           
|                  |                          |                    |           
|                  | Tenant relationships     |                    | $          | 6,891,313  |  
|                  | Accumulated amortization |                    |            | (503,719   | )
|                  |                          |                    |           
|                  |                          | $                  | 6,387,594  |           
|                  |                          |                    |           
|Deferred Credits  |                          |                    |            |           
|                  | Below market leases      |                    | $          | 1,710,959  |  
|                  | Accumulated amortization |                    |            | (117,147   | )
|                  |                          |                    |           
|                  |                          | $                  | 1,593,812  |           
|                  |                          |                    |           







|           |  |   |           | 
|---------- |  | - | --------- | 
|2006       |  | $ | 460,843   | 
|2007       |  |   | 420,598   | 
|2008       |  |   | 369,671   | 
|2009       |  |   | 319,637   | 
|2010       |  |   | 221,654   | 
|Thereafter |  |   | 224,238   | 
|           |  |   |          
|           |  | $ | 2,016,641 | 
|           |  |   |          

66



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|           |  |   |            | 
|---------- |  | - | ---------- | 
|2006       |  | $ | 4,620,000  | 
|2007       |  |   | 4,220,243  | 
|2008       |  |   | 3,854,339  | 
|2009       |  |   | 3,569,687  | 
|2010       |  |   | 2,719,555  | 
|Thereafter |  |   | 3,216,868  | 
|           |  |   |           
|           |  | $ | 22,200,692 | 
|           |  |   |           



|   |                
|-- | ---------------
|9. | Debt Agreements



|                |  |      |      |   |          |      |            |           |            |   |            |  |  |       |         |   |  |   |            | 
|--------------- |  | ---- | ---- | - | -------- | ---- | ---------- | --------- | ---------- | - | ---------- |  |  | ----- | ------- | - |  | - | ---------- | 
|                |  |      |      |   |          | Note |            |           | Fair Value |   |            | 
|Type/Issuer     |  | Rate |      |   | Maturity |      |            | Principal |            |   | Adjustment |  |  | Total |        
|                |  |      |      |   |          |      |            |           |            |   |            |  |  |       |        
|Credit Facility |  |      | 5.55 | % |          |      | 11/28/2007 |           |            | $ | 22,000,000 |  |  | $     |        |   |  | $ | 22,000,000 | 
|Meadows IV      |  |      | 4.95 | % |          |      | 11/1/2011  |           |            |   | 19,000,000 |  |  |       |        |   |  |   | 19,000,000 | 
|Patrick Henry   |  |      | 5.02 | % |          |      | 4/1/2009   |           |            |   | 8,445,643  |  |  |       | (86,645 | ) |  |   | 8,358,998  | 
|                |  |      |      |   |          |      |            |           |            |   |            |  |  |       |        
|                |  |      |      |   |          |      |            |           |            | $ | 49,445,643 |  |  | $     | (86,645 | ) |  | $ | 49,358,998 | 
|                |  |      |      |   |          |      |            |           |            |   |            |  |  |       |        







67



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)


30-year




|           |  |   |            | 
|---------- |  | - | ---------- | 
|2006       |  | $ | 131,691    | 
|2007       |  |   | 22,138,533 | 
|2008       |  |   | 144,590    | 
|2009       |  |   | 8,030,829  | 
|2010       |  |   |           | 
|Thereafter |  |   | 19,000,000 | 
|           |  |   |           
|           |  | $ | 49,445,643 | 
|           |  |   |           



|    |                       
|--- | ----------------------
|10. | Income and Other Taxes





|    |                         
|--- | ------------------------
|11. | Equity Compensation Plan



68



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                |  |                         |         |              |            |  |        |            |  |   |         | 
|--------------- |  | ----------------------- | ------- | ------------ | ---------- |  | ------ | ---------- |  | - | ------- | 
|                |  | As of December 31, 2005 |        
|                |  |                         |        
|                |  |                         |         | Minority     |           
|                |  |                         |         | Interest and |           
|                |  |                         |         | Compensation |           
|                |  | LTIP Units              |         |              | LTIP Units |  |        | Expense    | 
|Recipient Class |  | Granted                 |         |              | Vested     |  |        | Recognized | 
|                |  |                         |         |              |            |  |        |            | 
|Directors       |  |                         | 20,000  |              |            |  | 20,000 |            |  | $ | 300,000 | 
|Consultants     |  |                         | 15,000  |              |            |  | 15,000 |            |  |   | 225,000 | 
|Employees       |  |                         | 255,000 |              |            |  |       |            |  |   | 382,500 | 
|                |  |                         |         |              |            |  |        |            | 
|                |  |                         | 290,000 |              |            |  | 35,000 |            |  | $ | 907,500 | 
|                |  |                         |         |              |            |  |        |            | 



|    |                       
|--- | ----------------------
|12. | Minimum Future Rentals



|                          |  |   |             | 
|------------------------- |  | - | ----------- | 
|Years Ending December 31, |  |  
|                          |  |  
|2006                      |  | $ | 20,311,844  | 
|2007                      |  |   | 20,187,844  | 
|2008                      |  |   | 19,404,319  | 
|2009                      |  |   | 18,072,021  | 
|2010                      |  |   | 13,796,655  | 
|Thereafter                |  |   | 21,895,776  | 
|                          |  |   |            
|                          |  | $ | 113,668,459 | 
|                          |  |   |            





|    |                           
|--- | --------------------------
|13. | Related Party Transactions



69



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)


Transactions Reflected in the Consolidated and Combined
Financial Statements


















|                        |                         |                 |           |         |                 |  |              |              |  |              |              |           |  |  |   |           | 
|----------------------- | ----------------------- | --------------- | --------- | ------- | --------------- |  | ------------ | ------------ |  | ------------ | ------------ | --------- |  |  | - | --------- | 
|                        |                         | For the Period  |           |         |                 |  | For the Year |              |  | For the Year |             
|                        |                         | July 5, 2005 to |           |         | For the Period  |  |              | Ended        |  |              | Ended        |          
|                        |                         | December 31,    |           |         | January 1, 2005 |  |              | December 31, |  |              | December 31, |          
|Service                 |                         | 2005            |           |         | to July 4, 2005 |  |              | 2004         |  |              | 2003         |          
|                        |                         |                 |           |         |                 |  |              |              |  |              |              |          
|Revenues                |                         |                 |           |         |                 |  |              |              |  |              |              |           |  |  |   |          
|                        | Asset management        |                 | $         | 418,531 |                 |  | $            | 701,194      |  |              | $            | 889,722   |  |  | $ | 542,443   | 
|                        | Construction management |                 |           | 60,522  |                 |  |              |             |  |              |              |          |  |  |   |          | 
|                        | Transaction advisory    |                 |           | 75,000  |                 |  |              | 737,162      |  |              |              | 1,006,285 |  |  |   | 1,345,055 | 
|                        | Rental revenues         |                 |           | 83,994  |                 |  |              | 52,793       |  |              |              |          |  |  |   |          | 
|Expenses                |                         |                 |           |         |                 |  |              |              |  |              |              |           |  |  |   |          
|                        | Office space            |                 |           | 108,990 |                 |  |              | 89,391       |  |              |              | 144,984   |  |  |   | 124,295   | 
|                        | Administrative services |                 |           | 46,312  |                 |  |              | 45,129       |  |              |              | 134,692   |  |  |   | 105,000   | 
|Purchases of properties |                         |                 | 4,733,002 |         |                 |  |             |              |  |              |             |           |  |  |  |          
|Reimbursements of fees  |                         |                 | 595,000   |         |                 |  |             |              |  |              |             |           |  |  |  |          

70



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COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)


|            |                         |              |   |         |              |  |   |         | 
|----------- | ----------------------- | ------------ | - | ------- | ------------ |  | - | ------- | 
|            |                         | As of        |   |         | As of        | 
|            |                         | December 31, |   |         | December 31, | 
|            |                         | 2005         |   |         | 2004         | 
|            |                         |              |   |         |              | 
|Receivables |                         |              |   |         |              |  |   |        
|            | Asset management        |              | $ | 166,850 |              |  | $ | 185,864 | 
|            | Construction management |              |   | 40,242  |              |  |   |        | 
|            | Rental revenues         |              |   | 13,999  |              |  |   |        | 

Transactions Reflected in the Unconsolidated Real Estate
Entities




co-investors




co-developer




|    |                                                     
|--- | ----------------------------------------------------
|14. | Selected Quarterly Financial Information (unaudited)



|                                              |  |         |      |   |         |   |      |         |  |   |            |   |  |   |           |  
|--------------------------------------------- |  | ------- | ---- | - | ------- | - | ---- | ------- |  | - | ---------- | - |  | - | --------- | -
|                                              |  | First   |      |   | Second  |   |      | Third   |  |   | Fourth     |  
|                                              |  | Quarter |      |   | Quarter |   |      | Quarter |  |   | Quarter    |  
|                                              |  | 2005    |      |   | 2005    |   |      | 2005    |  |   | 2005       |  
|                                              |  |         |      |   |         |   |      |         |  |   |            |  
|Rental revenues                               |  | $       |     |   |         | $ |     |         |  | $ | 3,013,815  |   |  | $ | 4,879,587 |  
|Fee and other income                          |  |         |     |   |         |   |     |         |  |   | 262,101    |   |  |   | 315,213   |  
|Operating loss                                |  |         | (100 | ) |         |   | (600 | )       |  |   | (1,979,087 | ) |  |   | (604,404  | )
|Net loss                                      |  |         | (100 | ) |         |   | (600 | )       |  |   | (1,702,929 | ) |  |   | (796,889  | )
|Net loss per common share  Basic and diluted |  |         | N/A  |   |         |   | N/A  |         |  |   | (0.12      | ) |  |   | (0.06     | )

71



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COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |                                   
|--- | ----------------------------------
|15. | Supplemental Cash Flow Information



|                                                          |                                                                                                      |                   |            |           |                    |   |        |   | 
|--------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ----------------- | ---------- | --------- | ------------------ | - | ------ | - | 
|                                                          |                                                                                                      | For the Period    |            |           |                   
|                                                          |                                                                                                      | July 5, 2005 to   |            |           | For the Year Ended |  
|                                                          |                                                                                                      | December 31, 2005 |            |           | December 31, 2003  |  
|                                                          |                                                                                                      |                   |            |           |                    |  
|Cash paid for income taxes                                |                                                                                                      | $                 |           |           |                    | $ | 75,100 |  
|Cash paid for interest                                    |                                                                                                      |                   | 432,547    |           |                    |   |       |  
|Debt assumed in purchases of interests in rental property |                                                                                                      |                   | 68,010,445 |           |                    |   |       |  
|Non-cash investing activities                             |                                                                                                      |                   |            |           |                    |   |        |  
|                                                          | Investments in rental properties                                                                     |                   |            | 20,185    |                    |   |        |  | 
|                                                          | Operating Partnership Units issued to acquire rental properties                                      |                   |            | 1,009,001 |                    |   |        |  | 
|                                                          | Operating Partnership Units issued to acquire investments in
    unconsolidated real estate entities |                   |            | 1,756,518 |                    |   |        |  | 



|    |            
|--- | -----------
|16. | Commitments







72



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##### 



COLUMBIA EQUITY TRUST, INC. AND


COLUMBIA EQUITY TRUST, INC. PREDECESSOR


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                          |      |   |            |         | 
|------------------------- | ---- | - | ---------- | ------- | 
|Years Ending December 31, |      |  
|                          |      |  
|                          | 2006 |   | $          | 332,968 | 
|                          | 2007 |   |            | 332,968 | 
|                          | 2008 |   |            | 332,968 | 
|                          | 2009 |   |            | 332,968 | 
|                          | 2010 |   |            | 332,968 | 
|Thereafter                |      |   | 21,845,207 |        
|                          |      |   |           
|                          |      | $ | 23,510,047 |        
|                          |      |   |           





|    |                  
|--- | -----------------
|17. | Subsequent Events









73



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COLUMBIA EQUITY TRUST, INC.


AND COLUMBIA EQUITY TRUST, INC. PREDECESSOR





Schedule II: Valuations and Qualifying Accounts


|                               |                                         |                                                  |  |              |   |  |             |   |        |            |  |          |        |  |  |   |   |  |  |   |        | 
|------------------------------ | --------------------------------------- | ------------------------------------------------ |  | ------------ | - |  | ----------- | - | ------ | ---------- |  | -------- | ------ |  |  | - | - |  |  | - | ------ | 
|                               |                                         |                                                  |  | Additions    |   |  | Additions   |   |        |            |  |         
|                               |                                         | Balance,                                         |  | Charged      |   |  | Charged     |   |        | Deductions |  | Balance, |       
|                               |                                         | Beginning of                                     |  | to Costs and |   |  | to Other    |   |        | from       |  | End of   |       
|Description                    |                                         | Period                                           |  | Expenses     |   |  | Accounts(1) |   |        | Reserve    |  | Period   |       
|                               |                                         |                                                  |  |              |   |  |             |   |        |            |  |          |       
|Reserves for Doubtful Accounts |                                         |                                                  |  |              |   |  |             |   |        |            |  |          |        |  |  |   |   |  |  |  
|                               | Columbia Equity Trust, Inc.             |                                                  |  |              |   |  |             |   |        |            |  |          |        |  |  |   |   |  |  |   |       
|                               |                                         | For the period July 5, 2005 to December 31, 2005 |  | $            |  |  |             | $ | 16,521 |            |  | $        | 22,880 |  |  | $ |  |  |  | $ | 39,401 | 
|                               | Columbia Equity Trust, Inc. Predecessor |                                                  |  |              |   |  |             |   |        |            |  |          |        |  |  |   |   |  |  |   |       
|                               |                                         | For the period January 1, 2005 to July 4, 2005   |  | $            |  |  |             | $ |       |            |  | $        |       |  |  | $ |  |  |  | $ |       | 
|                               |                                         | For the year ended December 31, 2004             |  |              |  |  |             |   |       |            |  |          |       |  |  |   |  |  |  |   |       | 
|                               |                                         | For the year ended December 31, 2003             |  |              |  |  |             |   |       |            |  |          |       |  |  |   |  |  |  |   |       | 






|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents accounts written off as part of acquisition
    accounting but restored to accounts receivable for purposes of
    continued collection efforts.

74



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##### 



COLUMBIA EQUITY TRUST, INC.


AND COLUMBIA EQUITY TRUST, INC. PREDECESSOR





Schedule III: Real Estate and Accumulated
Depreciation(1)


|                                 |                                   |                 |   |               |        |               |             |                        |               |                 |             |        |         |               |    |     |              |  |             |       |        |               |              |        |         |            |    |        |          |  |   |     |       |  |  |           |  |  |  |      |  | 
|-------------------------------- | --------------------------------- | --------------- | - | ------------- | ------ | ------------- | ----------- | ---------------------- | ------------- | --------------- | ----------- | ------ | ------- | ------------- | -- | --- | ------------ |  | ----------- | ----- | ------ | ------------- | ------------ | ------ | ------- | ---------- | -- | ------ | -------- |  | - | --- | ----- |  |  | --------- |  |  |  | ---- |  | 
|                                 |                                   |                 |   |               |        |               |             |                        |               | Gross Amount at |             |        |         |               |    |     |              |  |            
|                                 |                                   |                 |   |               |        |               |             | Which Carried at Close |               |                 |             |        |         |               |    |     |             
|                                 |                                   |                 |   | Initial Costs |        |               | Costs       |                        |               | of Period       |             |        |         |               |    |     |              |  |            
|                                 |                                   |                 |   |               |        |               | Capitalized |                        |               |                 |             |        |         |               |    |     | Date of      |  |             |      
|                                 |                                   |                 |   |               |        | Buildings and |             |                        | Subsequent to |                 |             |        |         | Buildings and |    |     |              |  | Accumulated |       |        | Construction/ |              |        | Year    |           
|Properties                       |                                   | Encumbrances    |   |               | Land   |               |             | Improvements           |               |                 | Acquisition |        |         | Land          |    |     | Improvements |  |             | Total |        |               | Depreciation |        |         | Renovation |    |        | Acquired | 
|                                 |                                   |                 |   |               |        |               |             |                        |               |                 |             |        |         |               |    |     |              |  |             |       |        |               |              |        |         |            |    |        |          | 
|                                 |                                   |                 |   |               |        | (2)           |             |                        |               |                 | (2)         |        |         |               |    |     |              |  |             |       |        |              
|                                 |                                   | (In thousands)  |  
|Office buildings                 |                                   |                 |   |               |        |               |             |                        |               |                 |             |        |         |               |    |     |              |  |             |       |        |               |              |        |         |            |    |        |          |  |   |     |       |  |  |           |  |  |  |     
|                                 | Fair Oaks  Fairfax, Va.          |                 | $ |              |        |               | $           | 3,917                  |               |                 | $           | 11,905 |         |               | $  | 237 |              |  | $           | 3,917 |        |               | $            | 12,142 |         |            | $  | 16,059 |          |  | $ | 407 |       |  |  | 1985      |  |  |  | 2005 | 
|                                 | Greenbriar  Fairfax, Va.         |                 |   |              |        |               |             | 1,886                  |               |                 |             | 11,758 |         |               |    | 921 |              |  |             | 1,886 |        |               |              | 12,679 |         |            |    | 14,565 |          |  |   | 338 |       |  |  | 1985/1998 |  |  |  | 2005 | 
|                                 | Lee Road  Chantilly, Va.         |                 |   |              |        |               |             | 2,370                  |               |                 |             | 18,839 |         |               |    |    |              |  |             | 2,370 |        |               |              | 18,839 |         |            |    | 21,209 |          |  |   | 301 |       |  |  | 2000      |  |  |  | 2005 | 
|                                 | Loudoun Gateway IV  Dulles, Va.  |                 |   |              |        |               |             | 2,344                  |               |                 |             | 17,648 |         |               |    |    |              |  |             | 2,344 |        |               |              | 17,648 |         |            |    | 19,992 |          |  |   | 416 |       |  |  | 2002      |  |  |  | 2005 | 
|                                 | Meadows IV  Chantilly, Va.       |                 |   | 19,000        |        |               |             | 3,581                  |               |                 |             | 20,588 |         |               |    | 85  |              |  |             | 3,581 |        |               |              | 20,673 |         |            |    | 24,254 |          |  |   | 600 |       |  |  | 1988/1997 |  |  |  | 2005 | 
|                                 | Oakton  Oakton, Virginia         |                 |   |              |        |               |             | 1,616                  |               |                 |             | 12,544 |         |               |    | (6  | )            |  |             | 1,616 |        |               |              | 12,538 |         |            |    | 14,154 |          |  |   | 39  |       |  |  | 1985      |  |  |  | 2005 | 
|                                 | Park Plaza II  Rockville, Md.    |                 |   |              |        |               |             |                       |               |                 |             | 28,578 |         |               |    |    |              |  |             |      |        |               |              | 28,578 |         |            |    | 28,578 |          |  |   | 310 |       |  |  | 2001      |  |  |  | 2005 | 
|                                 | Patrick Henry  Newport News, Va. |                 |   | 8,359         |        |               |             | 1,978                  |               |                 |             | 10,433 |         |               |    | 2   |              |  |             | 1,978 |        |               |              | 10,435 |         |            |    | 12,413 |          |  |   | 38  |       |  |  | 1989      |  |  |  | 2005 | 
|                                 | Sherwood Plaza  Fairfax, Va.     |                 |   |              |        |               |             | 1,609                  |               |                 |             | 12,265 |         |               |    | 126 |              |  |             | 1,609 |        |               |              | 12,391 |         |            |    | 14,000 |          |  |   | 348 |       |  |  | 1984      |  |  |  | 2005 | 
|                                 |                                   |                 |   |               |        |               |             |                        |               |                 |             |        |         |               |    |     |              |  |             |       |        |               |              |        |         |            |    |        |          | 
|                                 |                                   | Property totals |   |               | 27,359 |               |             |                        | 19,301        |                 |             |        | 144,558 |               |    |     | 1,365        |  |             |       | 19,301 |               |              |        | 145,923 |            |    |        | 165,224  |  |   |     | 2,797 |  |  |           |  |  |  |      |  | 
|Corporate furniture and fixtures |                                   |                 |  |               |        |               |            |                        |               |                 |            |        |         |               | 54 |     |              |  |            |       |        |               |             |        |         |            | 54 |        |          |  | 8 |     |       |  |  |           |  |  |  |     
|                                 |                                   |                 |   |               |        |               |             |                        |               |                 |             |        |         |               |    |     |              |  |             |       |        |               |              |        |         |            |    |        |          | 
|                                 |                                   | Total           |   | $             | 27,359 |               |             | $                      | 19,301        |                 |             | $      | 144,558 |               |    | $   | 1,419        |  |             | $     | 19,301 |               |              | $      | 145,923 |            |    | $      | 165,278  |  |   | $   | 2,805 |  |  |           |  |  |  |      |  | 
|                                 |                                   |                 |   |               |        |               |             |                        |               |                 |             |        |         |               |    |     |              |  |             |       |        |               |              |        |         |            |    |        |          | 



|                       |  |                                                                
|---------------------- |  | ---------------------------------------------------------------
|Base building          |  | 39  40 years                                                  
|Building components    |  | 5  20 years                                                   
|Tenant improvements    |  | Lesser of the terms of the leases or useful lives of the assets
|Furniture and fixtures |  | 3 to 15 years                                                  





|                         |                              |                                   |   |           |           |  
|------------------------ | ---------------------------- | --------------------------------- | - | --------- | --------- | -
|                         |                              | Consolidated                      |  
|                         |                              | Columbia Equity                   |  
|                         |                              | Trust, Inc. for the               |  
|                         |                              | Year Ended                        |  
|                         |                              | December 31,                      |  
|                         |                              | 2005                              |  
|                         |                              |                                   |  
|Real Estate Assets       |                              |                                   |   |          
|                         | Balance, beginning of period |                                   | $ |          |          
|                         |                              | Acquisitions                      |   |           | 163,859   |  
|                         |                              | Improvements                      |   |           | 1,425     |  
|                         |                              | Sales, retirements and write-offs |   |           | (6        | )
|                         |                              |                                   |  
|                         | Balance, end of period       |                                   | $ | 165,278   |          
|                         |                              |                                   |  
|Accumulated Depreciation |                              |                                   |   |          
|                         | Balance, beginning of period |                                   | $ |          |          
|                         |                              | Depreciation for the period       |   |           | 2,805,222 |  
|                         |                              | Sales, retirements and write-offs |   |           |          |  
|                         |                              |                                   |  
|                         | Balance, end of period       |                                   | $ | 2,805,222 |          
|                         |                              |                                   |  






|    |                                                                       
|--- | ----------------------------------------------------------------------
|(1) | Columbia Equity Trust, Inc. Predecessor had no real estate
    assets.
|   
|(2) | Amounts include furniture and fixtures located at properties.         

75



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















76



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KING I, LLC


BALANCE SHEETS


|                                                                                                               |                                             |                                       |            |            |            |  |            |            |            | 
|-------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------- | ---------- | ---------- | ---------- |  | ---------- | ---------- | ---------- | 
|                                                                                                               |                                             | December 31,                          |           
|                                                                                                               |                                             |                                       |           
|                                                                                                               |                                             | 2005                                  |            |            | 2004       | 
|                                                                                                               |                                             |                                       |            |            |            | 
|ASSETS                                                                                                        
|Rental property                                                                                                |                                             |                                       |            |            |            |  |            |           
|                                                                                                               | Land                                        |                                       | $          | 4,425,179  |            |  | $          | 4,425,179  |           
|                                                                                                               | Buildings                                   |                                       |            | 23,914,263 |            |  |            | 23,761,012 |           
|                                                                                                               | Tenant improvements                         |                                       |            | 1,221,966  |            |  |            | 750,724    |           
|                                                                                                               | Furniture, fixtures and equipment           |                                       |            | 153,862    |            |  |            | 153,862    |           
|                                                                                                               |                                             |                                       |            |            |            | 
|                                                                                                               |                                             |                                       | 29,715,270 |            |            |  | 29,090,777 |           
|                                                                                                               | Accumulated depreciation                    |                                       |            | (6,770,869 | )          |  |            | (6,045,359 | )         
|                                                                                                               |                                             |                                       |            |            |            | 
|                                                                                                               |                                             | Total rental property, net            |            |            | 22,944,401 |  |            |            | 23,045,418 | 
|Cash and cash equivalents                                                                                      |                                             |                                       | 962,863    |            |            |  | 1,417,783  |           
|Restricted deposits                                                                                            |                                             |                                       | 349,309    |            |            |  | 786,713    |           
|Accounts and other receivables, net of reserves for doubtful
    accounts of $24,054 and $39,141, respectively |                                             |                                       | 49,308     |            |            |  | 258,916    |           
|Accrued straight-line rents                                                                                    |                                             |                                       | 373,337    |            |            |  | 209,900    |           
|Deferred leasing costs, net                                                                                    |                                             |                                       | 389,938    |            |            |  | 193,062    |           
|Deferred financing costs, net of accumulated amortization of
    $247,252 and $179,587, respectively           |                                             |                                       | 91,075     |            |            |  | 158,740    |           
|Intangible assets                                                                                              |                                             |                                       |            |            |            |  |            |           
|                                                                                                               | Above market leases, net                    |                                       |            | 9,666      |            |  |            | 26,238     |           
|                                                                                                               | In-place leases, net                        |                                       |            | 380,468    |            |  |            | 1,032,698  |           
|                                                                                                               | Tenant relationships, net                   |                                       |            | 74,688     |            |  |            | 202,723    |           
|Prepaid expenses and other assets                                                                              |                                             |                                       | 68,363     |            |            |  | 68,230     |           
|                                                                                                               |                                             |                                       |            |            |            | 
|                                                                                                               |                                             | Total assets                          |            | $          | 25,693,416 |  |            | $          | 27,400,421 | 
|                                                                                                               |                                             |                                       |            |            |            | 
|                                                                                                              
|LIABILITIES AND MEMBERS EQUITY                                                                               
|Liabilities                                                                                                    |                                             |                                       |            |            |            |  |            |           
|                                                                                                               | Mortgage note payable                       |                                       | $          | 21,640,154 |            |  | $          | 22,000,000 |           
|                                                                                                               | Accounts payable and accrued expenses       |                                       |            | 439,834    |            |  |            | 592,764    |           
|                                                                                                               | Security deposits                           |                                       |            | 235,285    |            |  |            | 288,316    |           
|                                                                                                               | Rent received in advance                    |                                       |            | 139,329    |            |  |            | 181,586    |           
|                                                                                                               | Deferred credits  Below market leases, net |                                       |            | 105,265    |            |  |            | 285,720    |           
|                                                                                                               |                                             |                                       |            |            |            | 
|                                                                                                               |                                             | Total liabilities                     |            |            | 22,559,867 |  |            |            | 23,348,386 | 
|Commitments and contingencies                                                                                  |                                             |                                       |            |            |            |  |            |           
|Members equity                                                                                                |                                             |                                       | 3,133,549  |            |            |  | 4,052,035  |           
|                                                                                                               |                                             |                                       |            |            |            | 
|                                                                                                               |                                             | Total liabilities and members equity |            | $          | 25,693,416 |  |            | $          | 27,400,421 | 
|                                                                                                               |                                             |                                       |            |            |            | 



77



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KING I, LLC


STATEMENTS OF OPERATIONS


|                         |                                 |                                  |                   |            |           |        |   |            |           |         |   |            |           |            |  
|------------------------ | ------------------------------- | -------------------------------- | ----------------- | ---------- | --------- | ------ | - | ---------- | --------- | ------- | - | ---------- | --------- | ---------- | -
|                         |                                 | For the Years Ended December 31, |                  
|                         |                                 |                                  |                  
|                         |                                 | 2005                             |                   |            | 2004      |        |   | 2003       |          
|                         |                                 |                                  |                   |            |           |        |   |            |          
|Revenues                 |                                 |                                  |                   |            |           |        |   |            |           |         |   |           
|                         | Building rental                 |                                  | $                 | 4,301,616  |           |        | $ | 4,665,618  |           |         | $ | 4,262,768  |          
|                         | Garage rental                   |                                  |                   | 54,588     |           |        |   | 51,849     |           |         |   | 61,864     |          
|                         |                                 |                                  |                   |            |           |        |   |            |          
|                         |                                 | Total revenues                   |                   |            | 4,356,204 |        |   |            | 4,717,467 |         |   |            | 4,324,632 |           
|                         |                                 |                                  |                   |            |           |        |   |            |          
|Operating expenses       |                                 |                                  |                   |            |           |        |   |            |           |         |   |           
|                         | Property operating              |                                  |                   | 986,547    |           |        |   | 889,492    |           |         |   | 803,112    |          
|                         | Utilities                       |                                  |                   | 217,849    |           |        |   | 250,567    |           |         |   | 251,678    |          
|                         | Real estate taxes and insurance |                                  |                   | 364,646    |           |        |   | 352,835    |           |         |   | 381,731    |          
|                         | Depreciation and amortization   |                                  |                   | 1,548,991  |           |        |   | 1,447,832  |           |         |   | 1,352,155  |          
|                         |                                 |                                  |                   |            |           |        |   |            |          
|                         |                                 | Total operating expenses         |                   |            | 3,118,033 |        |   |            | 2,940,726 |         |   |            | 2,788,676 |           
|                         |                                 |                                  |                   |            |           |        |   |            |          
|                         |                                 | Operating income                 |                   |            | 1,238,171 |        |   |            | 1,776,741 |         |   |            | 1,535,956 |           
|Other income and expense |                                 |                                  |                   |            |           |        |   |            |           |         |   |           
|                         | Interest income                 |                                  |                   | 16,665     |           |        |   | 10,521     |           |         |   | 3,681      |          
|                         | Interest expense                |                                  |                   | (1,173,322 | )         |        |   | (1,180,865 | )         |         |   | (2,953,392 | )        
|                         |                                 |                                  |                   |            |           |        |   |            |          
|                         |                                 |                                  | Net income (loss) |            | $         | 81,514 |   |            | $         | 606,397 |   |            | $         | (1,413,755 | )
|                         |                                 |                                  |                   |            |           |        |   |            |          



78



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KING I, LLC


STATEMENTS OF MEMBERS EQUITY


FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005


|                           |                                                                       |              |            |            |             |   |            |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |             |       |   |         |          |   |   |          |         |   |       |         |         |   |   |      |      |   |   |      |      |   |   |            |             |  
|-------------------------- | --------------------------------------------------------------------- | ------------ | ---------- | ---------- | ----------- | - | ---------- | ----------- | - | - | --------- | ---------- | - | ------- | -------- | -------- | ---------- | - | ---------- | ---------- | - | - | --------- | -------- | - | ----- | --------- | ----------- | ----- | - | ------- | -------- | - | - | -------- | ------- | - | ----- | ------- | ------- | - | - | ---- | ---- | - | - | ---- | ---- | - | - | ---------- | ----------- | -
|                           |                                                                       |              |            | Carr King  |             |   | Carr Real  |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |            
|                           |                                                                       |              |            | Street I   |             |   | Estate     |             |   |   |           | The Oliver |   |         |          |          | AETNA Life |   |            |            |   |   |           |          |   |       |           |             |       |  
|                           |                                                                       | Clark King I |            |            | Associates, |   |            | Investment, |   |   | Oliver T. |            |   | Carr    |          |          | Columbia   |   |            | Insurance  |   |   | Judith O. |          |   | Anson |           |             | Felix |   |         | Lee W.   |   |   | Susan M. |         |   |      
|                           |                                                                       | LLC          |            |            | LP          |   |            | LLC         |   |   | Carr, Jr. |            |   | Company |          |          | Equity, LP |   |            | Company    |   |   | Klock     |          |   | Klock |           |             | Klock |   |         | Campbell |   |   | Freeling |         |   | Total |        
|                           |                                                                       |              |            |            |             |   |            |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |             |       |   |         |          |   |   |          |         |   |       |        
|Balance, January 1, 2003   |                                                                       | $            | (985,934   | )          |             | $ | (4,619,274 | )           |   | $ | 120,202   |            |   | $       | 97,702   |          |            | $ |           |            |   | $ |          |          |   | $     |          |             |       | $ |        |          |   | $ |         |         |   | $     |        |         |   | $ |     |      |   | $ |     |      |   | $ | (5,387,304 | )          
|                           | Net loss for period from January 1, 2003 to
    February 19, 2003     |              |            | (903,630   | )           |   |            | (632,799    | ) |   |           | (29,045    | ) |         |          | (29,045  | )          |   |            |           |   |   |           |         |   |       |           |            |       |   |         |         |   |   |          |        |   |       |         |        |   |   |      |     |   |   |      |     |   |   |            | (1,594,519  | )
|                           |                                                                       |              |            |            |             |   |            |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |             |       |   |         |          |   |   |          |         |   |       |        
|Balance, February 20, 2003 |                                                                       |              | (1,889,564 | )          |             |   | (5,252,073 | )           |   |   | 91,157    |            |   |         | 68,657   |          |            |   |           |            |   |   |          |          |   |       |          |             |       |   |        |          |   |   |         |         |   |       |        |         |   |   |     |      |   |   |     |      |   |   | (6,981,823 | )          
|                           | Contributions                                                         |              |            |           |             |   |            |            |   |   |           |           |   |         |          |         |            |   |            |           |   |   |           |         |   |       |           | 9,732,500   |       |   |         |         |   |   |          |        |   |       |         |        |   |   |      |     |   |   |      |     |   |   |            | 9,732,500   |  
|                           | Costs of raising equity                                               |              |            |           |             |   |            |            |   |   |           | (20,240    | ) |         |          | (20,204  | )          |   |            | (110,254   | ) |   |           |         |   |       |           | (933,365    | )     |   |         | (7,970   | ) |   |          | (2,989  | ) |       |         | (2,989  | ) |   |      | (20  | ) |   |      | (8   | ) |   |            | (1,098,039  | )
|                           | Distributions                                                         |              |            | (6,546,265 | )           |   |            | (3,734,653  | ) |   |           | (33        | ) |         |          | (33      | )          |   |            | (178       | ) |   |           |         |   |       |           | (775,000    | )     |   |         | (16,096  | ) |   |          | (6,036  | ) |       |         | (6,035  | ) |   |      |     |   |   |      |     |   |   |            | (11,084,329 | )
|                           | Deemed contributions (distributions)                                  |              |            |           |             |   |            | (1,717,500  | ) |   |           | 211,047    |   |         |          | 211,047  |            |   |            | 1,149,975  |   |   |           |         |   |       |           |            |       |   |         | 83,103   |   |   |          | 31,164  |   |       |         | 31,164  |   |   |      |     |   |   |      |     |   |   |            |            |  
|                           | Net effect of purchase accounting                                     |              |            |           |             |   |            |            |   |   |           |           |   |         |          |         |            |   |            |           |   |   |           |         |   |       |           | 14,232,668  |       |   |         |         |   |   |          |        |   |       |         |        |   |   |      |     |   |   |      |     |   |   |            | 14,232,668  |  
|                           | Net income for period from February 20, 2003 to
    December 31, 2003 |              |            |           |             |   |            |            |   |   |           | 3,332      |   |         |          | 3,327    |            |   |            | 18,151     |   |   |           |         |   |       |           | 153,652     |       |   |         | 1,312    |   |   |          | 492     |   |       |         | 492     |   |   |      | 4    |   |   |      | 2    |   |   |            | 180,764     |  
|                           | Reallocation                                                          |              |            | 8,435,829  |             |   |            | 10,704,226  |   |   |           | (441,002   | ) |         |          | (417,893 | )          |   |            | (1,905,802 | ) |   |           |         |   |       |           | (16,133,814 | )     |   |         | (137,757 | ) |   |          | (51,659 | ) |       |         | (51,660 | ) |   |      | (334 | ) |   |      | (134 | ) |   |            |            |  
|                           |                                                                       |              |            |            |             |   |            |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |             |       |   |         |          |   |   |          |         |   |       |        
|Balance, December 31, 2003 |                                                                       |              |           |            |             |   |           |             |   |   | (155,739  | )          |   |         | (155,099 | )        |            |   | (848,108   | )          |   |   |          |          |   |       | 6,276,641 |             |       |   | (77,408 | )        |   |   | (29,028  | )       |   |       | (29,028 | )       |   |   | (350 | )    |   |   | (140 | )    |   |   | 4,981,741  |            
|                           | Distributions                                                         |              |            | (44,479    | )           |   |            | (10,578     | ) |   |           | (42,594    | ) |         |          | (42,594  | )          |   |            | (246,622   | ) |   |           |         |   |       |           | (1,119,626  | )     |   |         | (16,889  | ) |   |          | (6,333  | ) |       |         | (6,333  | ) |   |      | (39  | ) |   |      | (16  | ) |   |            | (1,536,103  | )
|                           | Net income                                                            |              |            |           |             |   |            |            |   |   |           | 11,188     |   |         |          | 11,188   |            |   |            | 60,867     |   |   |           |         |   |       |           | 515,437     |       |   |         | 4,427    |   |   |          | 1,638   |   |       |         | 1,637   |   |   |      | 11   |   |   |      | 4    |   |   |            | 606,397     |  
|                           | Reallocation                                                          |              |            | 44,479     |             |   |            | 10,578      |   |   |           | (1,016     | ) |         |          | (1,016   | )          |   |            | (5,526     | ) |   |           |         |   |       |           | (46,799     | )     |   |         | (402     | ) |   |          | (149    | ) |       |         | (148    | ) |   |      | (1   | ) |   |      |     |   |   |            |            |  
|                           |                                                                       |              |            |            |             |   |            |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |             |       |   |         |          |   |   |          |         |   |       |        
|Balance, December 31, 2004 |                                                                       |              |           |            |             |   |           |             |   |   | (188,161  | )          |   |         | (187,521 | )        |            |   | (1,039,389 | )          |   |   |          |          |   |       | 5,625,653 |             |       |   | (90,272 | )        |   |   | (33,872  | )       |   |       | (33,872 | )       |   |   | (379 | )    |   |   | (152 | )    |   |   | 4,052,035  |            
|                           | Transfers of member interests                                         |              |            |           |             |   |            |            |   |   |           | 190,605    |   |         |          | 189,965  |            |   |            | 1,052,700  |   |   |           | 450,076  |   |       |           | (2,043,580  | )     |   |         | 91,233   |   |   |          | 34,233  |   |       |         | 34,233  |   |   |      | 382  |   |   |      | 153  |   |   |            |            |  
|                           | Distributions                                                         |              |            |           |             |   |            |            |   |   |           | (2,765     | ) |         |          | (2,765   | )          |   |            | (15,061    | ) |   |           | (150,000 | ) |       |           | (827,500    | )     |   |         | (1,089   | ) |   |          | (408    | ) |       |         | (408    | ) |   |      | (3   | ) |   |      | (1   | ) |   |            | (1,000,000  | )
|                           | Net income                                                            |              |            |           |             |   |            |            |   |   |           | 321        |   |         |          | 321      |            |   |            | 1,750      |   |   |           | 32,036   |   |       |           | 46,864      |       |   |         | 128      |   |   |          | 47      |   |       |         | 47      |   |   |      |     |   |   |      |     |   |   |            | 81,514      |  
|                           |                                                                       |              |            |            |             |   |            |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |             |       |   |         |          |   |   |          |         |   |       |        
|Balance, December 31, 2005 |                                                                       | $            |           |            |             | $ |           |             |   | $ |          |            |   | $       |         |          |            | $ |           |            |   | $ | 332,112   |          |   | $     | 2,801,437 |             |       | $ |        |          |   | $ |         |         |   | $     |        |         |   | $ |     |      |   | $ |     |      |   | $ | 3,133,549  |            
|                           |                                                                       |              |            |            |             |   |            |             |   |   |           |            |   |         |          |          |            |   |            |            |   |   |           |          |   |       |           |             |       |   |         |          |   |   |          |         |   |       |        



79



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KING I, LLC


STATEMENTS OF CASH FLOWS


|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |           |         |            |             |           |         |            |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------------------------------------------- | ---------------------------------------------- | --------------------------------------------------- | --------- | -------- | ---------- | ---------- | --------- | ------- | ---------- | ----------- | --------- | ------- | ---------- | -
|                                                     |                                                                                                       | For the Years Ended December 31,              |                                               
|                                                     |                                                                                                       |                                               |                                               
|                                                     |                                                                                                       | 2005                                          |                                                |                                                     | 2004      |          |            | 2003       |          
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|Cash flows from operating activities                 |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |           |         |            |            
|                                                     | Net income (loss)                                                                                     |                                               | $                                              | 81,514                                              |           |          | $          | 606,397    |           |         | $          | (1,413,755  | )        
|                                                     | Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities |                                               |                                                |                                                     |           |          |            |            |           |         |            |             |          
|                                                     |                                                                                                       | Depreciation and amortization                 |                                                |                                                     | 1,548,991 |          |            |            | 1,447,832 |         |            |             | 1,352,155 |        
|                                                     |                                                                                                       | Amortization of above and below market leases |                                                |                                                     | (163,883  | )        |            |            | (163,880  | )       |            |             | (169,420  | )      
|                                                     |                                                                                                       | Amortization of deferred financing costs      |                                                |                                                     | 67,665    |          |            |            | 67,665    |         |            |             | 19,060    |        
|                                                     |                                                                                                       | Changes in assets and liabilities             |                                                |                                                     |           |          |            |            |           |         |            |             |           |        
|                                                     |                                                                                                       | Accounts and other receivables                |                                                |                                                     | 209,608   |          |            |            | (137,656  | )       |            |             | 52,993    |        
|                                                     |                                                                                                       |                                               | Accrued straight-line rents                    |                                                     |           | (163,437 | )          |            |           | (94,818 | )          |             |           | (84,718 | )         
|                                                     |                                                                                                       |                                               | Deferred leasing costs                         |                                                     |           | (240,092 | )          |            |           | (14,511 | )          |             |           | (23,698 | )         
|                                                     |                                                                                                       |                                               | Prepaid expenses and other assets              |                                                     |           | (133     | )          |            |           | (82,897 | )          |             |           | 4,093   |           
|                                                     |                                                                                                       |                                               | Accounts payable and accrued expenses          |                                                     |           | (69,441  | )          |            |           | 290,261 |            |             |           | 93,774  |           
|                                                     |                                                                                                       |                                               | Due from affiliate                             |                                                     |           |         |            |            |           | 17,110  |            |             |           | (17,110 | )         
|                                                     |                                                                                                       |                                               | Security deposits and rent received in advance |                                                     |           | (95,288  | )          |            |           | (1,354  | )          |             |           | 61,162  |           
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|                                                     |                                                                                                       |                                               |                                                | Net cash provided by (used in) operating activities |           |          | 1,175,504  |            |           |         | 1,934,149  |             |           |         | (125,464   | )
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|Cash flows from investing activities                 |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |           |         |            |            
|                                                     | Additions to rental properties                                                                        |                                               |                                                | (707,982                                            | )         |          |            | (1,380,559 | )         |         |            | (126,752    | )        
|                                                     | Restricted deposits                                                                                   |                                               |                                                | 437,404                                             |           |          |            | 665,302    |           |         |            | (1,146,760  | )        
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|                                                     |                                                                                                       |                                               |                                                | Net cash used in investing activities               |           |          | (270,578   | )          |           |         | (715,257   | )           |           |         | (1,273,512 | )
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|Cash flows from financing activities                 |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |           |         |            |            
|                                                     | Repayment of principal on mortgage note payable                                                       |                                               |                                                | (359,846                                            | )         |          |            |           |           |         |            | (16,875,332 | )        
|                                                     | Proceeds for issuance of mortgage note payable                                                        |                                               |                                                |                                                    |           |          |            |           |           |         |            | 22,000,000  |          
|                                                     | Payment of deferred financing costs                                                                   |                                               |                                                |                                                    |           |          |            |           |           |         |            | (273,324    | )        
|                                                     | Contributions                                                                                         |                                               |                                                |                                                    |           |          |            |           |           |         |            | 8,634,461   |          
|                                                     | Distributions                                                                                         |                                               |                                                | (1,000,000                                          | )         |          |            | (1,536,103 | )         |         |            | (11,076,376 | )        
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|                                                     |                                                                                                       |                                               |                                                | Net cash provided by (used in) financing activities |           |          | (1,359,846 | )          |           |         | (1,536,103 | )           |           |         | 2,409,429  |  
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|Net increase (decrease) in cash and cash equivalents |                                                                                                       |                                               | (454,920                                       | )                                                   |           |          | (317,211   | )          |           |         | 1,010,453  |            
|Cash and cash equivalents, beginning of period       |                                                                                                       |                                               | 1,417,783                                      |                                                     |           |          | 1,734,994  |            |           |         | 724,541    |            
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|Cash and cash equivalents, end of period             |                                                                                                       | $                                             | 962,863                                        |                                                     |           | $        | 1,417,783  |            |           | $       | 1,734,994  |            
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          
|Supplemental disclosures                             |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |           |         |            |            
|                                                     | Cash paid for interest                                                                                |                                               | $                                              | 1,107,173                                           |           |          | $          | 1,180,865  |           |         | $          | 1,163,122   |          
|                                                     |                                                                                                       |                                               |                                                |                                                     |           |          |            |            |          



80



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KING I, LLC


NOTES TO FINANCIAL STATEMENTS


For the Years Ended December 31, 2005, 2004 and 2003




|   |             
|-- | ------------
|1. | Organization







|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies

Investment in Real Estate Accounting for the Impairment or Disposal of
Long-Lived Assets,


Cash and Cash equivalents


Accrued Straight-Line Rents


Deferred Financing Costs


Tenant Leasing Costs


Intangible Assets


Deferred Credits


Revenue Recognition


81



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KING I, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)


For the Years Ended December 31, 2005, 2004 and 2003




Income Taxes


Use of Estimates


Reclassifications




|   |                    
|-- | -------------------
|3. | Purchase Accounting



|                                                   |  |                |             |  
|-------------------------------------------------- |  | -------------- | ----------- | -
|                                                   |  | Purchase Price |            
|                                                   |  | Adjustment     |            
|                                                   |  |                |            
|Land                                               |  | $              | 2,344,239   |  
|Building and Tenant Improvements                   |  |                | 10,555,335  |  
|Deferred costs                                     |  |                | (370,764    | )
|Intangible Deferred Charges  Above Market Leases  |  |                | 56,621      |  
|Intangible Deferred Charges  In-place Leases      |  |                | 2,228,454   |  
|Intangible Deferred Charges  Tenant Relationships |  |                | 437,452     |  
|Accrued Rental Income                              |  |                | (402,115    | )
|Intangible Deferred Credit  Below Market Leases   |  |                | (616,554    | )
|Members Capital (Deficit)                         |  |                | (14,232,668 | )

Business Combinations,


82



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KING I, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)


For the Years Ended December 31, 2005, 2004 and 2003




|                  |                          |      |         |            |      |   |           |            |  
|----------------- | ------------------------ | ---- | ------- | ---------- | ---- | - | --------- | ---------- | -
|                  |                          | 2005 |         |            | 2004 |  
|                  |                          |      |         |            |      |  
|Intangible Assets |                          |      |         |            |      |   |           |           
|                  | Above market leases      |      | $       | 56,621     |      |   | $         | 56,621     |  
|                  | Accumulated amortization |      |         | (46,955    | )    |   |           | (30,383    | )
|                  |                          |      |         |            |      |  
|                  |                          | $    | 9,666   |            |      | $ | 26,238    |           
|                  |                          |      |         |            |      |  
|                  | In-Place leases          |      | $       | 2,228,454  |      |   | $         | 2,228,454  |  
|                  | Accumulated amortization |      |         | (1,847,986 | )    |   |           | (1,195,756 | )
|                  |                          |      |         |            |      |  
|                  |                          | $    | 380,468 |            |      | $ | 1,032,698 |           
|                  |                          |      |         |            |      |  
|                  | Tenant relationships     |      | $       | 437,452    |      |   | $         | 437,452    |  
|                  | Accumulated amortization |      |         | (362,764   | )    |   |           | (234,729   | )
|                  |                          |      |         |            |      |  
|                  |                          | $    | 74,688  |            |      | $ | 202,723   |           
|                  |                          |      |         |            |      |  
|Deferred Credits  |                          |      |         |            |      |   |           |           
|                  | Below market leases      |      | $       | 616,554    |      |   | $         | 616,554    |  
|                  | Accumulated amortization |      |         | (511,289   | )    |   |           | (330,834   | )
|                  |                          |      |         |            |      |  
|                  |                          | $    | 105,265 |            |      | $ | 285,720   |           
|                  |                          |      |         |            |      |  





|   |                                                                                 
|-- | --------------------------------------------------------------------------------
|4. | Members Capital Contributions, Distributions, and
    Participation Percentages







83



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##### 



KING I, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)


For the Years Ended December 31, 2005, 2004 and 2003




|                                         |  |      |        |   |      |  |        |  
|---------------------------------------- |  | ---- | ------ | - | ---- |  | ------ | -
|                                         |  | 2005 |        |   | 2004 | 
|                                         |  |      |        |   |      | 
|AETNA Life Insurance Company             |  |      | 50.00  | % |      |  | 85.00  | %
|Columbia Equity, LP                      |  |      | 50.00  |   |      |  |       |  
|The Oliver Carr Company                  |  |      |       |   |      |  | 10.05  |  
|Carr Capital Real Estate Investment, LLC |  |      |       |   |      |  | 1.84   |  
|Oliver T. Carr Jr.                       |  |      |       |   |      |  | 1.84   |  
|Judith O. Klock                          |  |      |       |   |      |  | 0.73   |  
|Anson Klock                              |  |      |       |   |      |  | 0.27   |  
|Felix Klock                              |  |      |       |   |      |  | 0.27   |  
|Lee W. Campbell                          |  |      |       |   |      |  | 0.00   |  
|Susan M. Freeling                        |  |      |       |   |      |  | 0.00   |  
|                                         |  |      |        |   |      | 
|                                         |  |      | 100.00 | % |      |  | 100.00 | %
|                                         |  |      |        |   |      | 



|   |                      
|-- | ---------------------
|5. | Mortgage Note Payable





|             |  |   |            | 
|------------ |  | - | ---------- | 
|Years Ending |  |  
|December 31, |  |  
|             |  |  
|2006         |  | $ | 501,491    | 
|2007         |  |   | 527,463    | 
|2008         |  |   | 20,611,200 | 
|             |  |   |           
|             |  | $ | 21,640,154 | 
|             |  |   |           

84



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KING I, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)


For the Years Ended December 31, 2005, 2004 and 2003




|   |                       
|-- | ----------------------
|6. | Minimum Future Rentals



|             |  |   |            | 
|------------ |  | - | ---------- | 
|Years Ending |  |  
|December 31, |  |  
|             |  |  
|2006         |  | $ | 3,628,604  | 
|2007         |  |   | 3,156,571  | 
|2008         |  |   | 2,824,781  | 
|2009         |  |   | 2,142,875  | 
|2010         |  |   | 1,714,915  | 
|Thereafter   |  |   | 5,840,531  | 
|             |  |   |           
|             |  | $ | 19,308,277 | 
|             |  |   |           





|   |                           
|-- | --------------------------
|7. | Related Party Transactions











85



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KING I, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)


For the Years Ended December 31, 2005, 2004 and 2003










86



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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















87



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##### 



CARR CAPITAL 1575 EYE STREET ASSOCIATES, LLC


BALANCE SHEETS


|                                |                  |                                       |           |     |           |   |           |     |           | 
|------------------------------- | ---------------- | ------------------------------------- | --------- | --- | --------- | - | --------- | --- | --------- | 
|                                |                  | December 31,                          |          
|                                |                  |                                       |          
|                                |                  | 2005                                  |           |     | 2004      |  
|                                |                  |                                       |           |     |           |  
|ASSETS                         
|Investment in partnership       |                  | $                                     | 5,113,500 |     |           | $ | 5,927,886 |    
|Cash                            |                  |                                       | 784       |     |           |   | 259       |    
|                                |                  |                                       |           |     |           |  
|                                |                  | Total assets                          |           | $   | 5,114,284 |   |           | $   | 5,928,145 | 
|                                |                  |                                       |           |     |           |  
|                               
|LIABILITIES AND MEMBERS EQUITY
|Liabilities                     |                  |                                       |           |     |           |   |           |    
|                                | Accounts payable |                                       | $         | 250 |           |   | $         |    |          
|                                | Due to owners    |                                       |           | 500 |           |   |           | 500 |          
|                                |                  |                                       |           |     |           |  
|                                |                  | Total liabilities                     |           |     | 750       |   |           |     | 500       | 
|Commitments and contingencies   |                  |                                       |           |     |           |   |           |    
|Members equity                 |                  |                                       | 5,113,534 |     |           |   | 5,927,645 |    
|                                |                  |                                       |           |     |           |  
|                                |                  | Total liabilities and members equity |           | $   | 5,114,284 |   |           | $   | 5,928,145 | 
|                                |                  |                                       |           |     |           |  



88



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##### 



CARR CAPITAL 1575 EYE STREET ASSOCIATES, LLC


STATEMENTS OF OPERATIONS


|                                  |                                                                  |                                 |                   |        |         |        |         |        |         |         |          |          |        |          |  
|--------------------------------- | ---------------------------------------------------------------- | ------------------------------- | ----------------- | ------ | ------- | ------ | ------- | ------ | ------- | ------- | -------- | -------- | ------ | -------- | -
|                                  |                                                                  | For the Year Ended December 31, |                  
|                                  |                                                                  |                                 |                  
|                                  |                                                                  | 2005                            |                   |        | 2004    |        |         | 2003   |        
|                                  |                                                                  |                                 |                   |        |         |        |         |        |        
|Revenues                          |                                                                  |                                 |                   |        |         |        |         |        |         |         |          |         
|                                  | Revenues                                                         |                                 | $                 |       |         |        | $       |       |         |         | $        |         |       
|                                  |                                                                  |                                 |                   |        |         |        |         |        |        
|Operating expenses                |                                                                  |                                 |                   |        |         |        |         |        |         |         |          |         
|                                  | Audit and tax fees                                               |                                 |                   | 20,075 |         |        |         | 14,100 |         |         |          | 5,780    |       
|                                  | Accounting fees, paid to a related party                         |                                 |                   | 1,063  |         |        |         | 1,000  |         |         |          | 1,000    |       
|                                  | Miscellaneous                                                    |                                 |                   | 311    |         |        |         | 577    |         |         |          |         |       
|                                  |                                                                  |                                 |                   |        |         |        |         |        |        
|                                  |                                                                  | Total operating expenses        |                   |        | 21,449  |        |         |        | 15,677  |         |          |          | 6,780  |         
|                                  |                                                                  |                                 |                   |        |         |        |         |        |        
|                                  |                                                                  | Operating loss                  |                   |        | (21,449 | )      |         |        | (15,677 | )       |          |          | (6,780 | )       
|Other                             |                                                                  |                                 |                   |        |         |        |         |        |         |         |          |         
|                                  | Equity in net income (loss) of unconsolidated real estate entity |                                 |                   | 75,614 |         |        |         | 1,600  |         |         |          | (159,351 | )     
|                                  |                                                                  |                                 |                   |        |         |        |         |        |        
|Income (loss) before income taxes |                                                                  |                                 | 54,165            |        |         |        | (14,077 | )      |         |         | (166,131 | )       
|Provision for income taxes        |                                                                  |                                 | 11,700            |        |         |        |        |        |         |         |         |         
|                                  |                                                                  |                                 |                   |        |         |        |         |        |        
|                                  |                                                                  |                                 | Net income (loss) |        | $       | 42,465 |         |        | $       | (14,077 | )        |          | $      | (166,131 | )
|                                  |                                                                  |                                 |                   |        |         |        |         |        |        



89



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##### 



CARR CAPITAL 1575 EYE STREET ASSOCIATES, LLC


STATEMENTS OF MEMBERS EQUITY


For the Years Ended December 31, 2003, 2004 and 2005


|                           |                               |            |           |          |            |              |             |              |   |            |         |         |      |           |         |          |           |   |         |          |   |   |         |          |   |   |           |          |  
|-------------------------- | ----------------------------- | ---------- | --------- | -------- | ---------- | ------------ | ----------- | ------------ | - | ---------- | ------- | ------- | ---- | --------- | ------- | -------- | --------- | - | ------- | -------- | - | - | ------- | -------- | - | - | --------- | -------- | -
|                           |                               |            |           |          |            | Carr Capital |             |              |   |            |         |         |      |           |        
|                           |                               | AETNA Life |           |          |            |              | Real Estate |              |   | The Oliver |         |         | Carr |           |         |          |           |  
|                           |                               | Insurance  |           |          | Columbia   |              |             | Investments, |   |            | Carr    |         |      | Holdings, |         |          | Other     |   |         |         
|                           |                               | Company    |           |          | Equity, LP |              |             | Inc.         |   |            | Company |         |      | LLC       |         |          | Investors |   |         | Total    |  
|                           |                               |            |           |          |            |              |             |              |   |            |         |         |      |           |         |          |           |   |         |          |  
|Balance, January 1, 2003   |                               | $          | 4,877,871 |          |            | $            |            |              |   | $          | 93,798  |         |      | $         | 782,808 |          |           | $ | 782,807 |          |   | $ | 984,984 |          |   | $ | 7,522,268 |         
|                           | Distributions                 |            |           | (436,503 | )          |              |             |             |   |            |         | (8,414  | )    |           |         | (69,886  | )         |   |         | (70,052  | ) |   |         | (88,245  | ) |   |           | (673,100 | )
|                           | Net loss                      |            |           | (107,728 | )          |              |             |             |   |            |         | (2,074  | )    |           |         | (17,291  | )         |   |         | (17,291  | ) |   |         | (21,747  | ) |   |           | (166,131 | )
|                           |                               |            |           |          |            |              |             |              |   |            |         |         |      |           |         |          |           |   |         |          |  
|Balance, December 31, 2003 |                               |            | 4,333,640 |          |            |              |            |              |   |            | 83,310  |         |      |           | 695,631 |          |           |   | 695,464 |          |   |   | 874,992 |          |   |   | 6,683,037 |         
|                           | Distributions                 |            |           | (480,745 | )          |              |             |             |   |            |         | (9,266  | )    |           |         | (76,949  | )         |   |         | (77,173  | ) |   |         | (97,182  | ) |   |           | (741,315 | )
|                           | Net loss                      |            |           | (9,129   | )          |              |             |             |   |            |         | (176    | )    |           |         | (1,465   | )         |   |         | (1,465   | ) |   |         | (1,842   | ) |   |           | (14,077  | )
|                           |                               |            |           |          |            |              |             |              |   |            |         |         |      |           |         |          |           |   |         |          |  
|Balance, December 31, 2004 |                               |            | 3,843,766 |          |            |              |            |              |   |            | 73,868  |         |      |           | 617,217 |          |           |   | 616,826 |          |   |   | 775,968 |          |   |   | 5,927,645 |         
|                           | Transfers of member interests |            |           |         |            |              |             | 1,172,397    |   |            |         | (66,184 | )    |           |         | (553,375 | )         |   |         | (552,838 | ) |   |         |         |   |   |           |         |  
|                           | Distributions                 |            |           | (555,490 | )          |              |             | (80,080      | ) |            |         | (6,166  | )    |           |         | (51,199  | )         |   |         | (51,345  | ) |   |         | (112,296 | ) |   |           | (856,576 | )
|                           | Net income (loss)             |            |           | 27,539   |            |              |             | 36,178       |   |            |         | (1,518  | )    |           |         | (12,643  | )         |   |         | (12,643  | ) |   |         | 5,552    |   |   |           | 42,465   |  
|                           |                               |            |           |          |            |              |             |              |   |            |         |         |      |           |         |          |           |   |         |          |  
|Balance, December 31, 2005 |                               | $          | 3,315,815 |          |            | $            | 1,128,495   |              |   | $          |        |         |      | $         |        |          |           | $ |        |          |   | $ | 669,224 |          |   | $ | 5,113,534 |         
|                           |                               |            |           |          |            |              |             |              |   |            |         |         |      |           |         |          |           |   |         |          |  



90



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##### 



CARR CAPITAL 1575 EYE STREET ASSOCIATES, LLC


STATEMENTS OF CASH FLOWS


|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |        |          |     |          |         |          |  
|------------------------------------ | --------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------------------- | -------- | ------- | -------- | ---- | -------- | ------ | -------- | --- | -------- | ------- | -------- | -
|                                     |                                                                                         | For the Year Ended December 31,                                  |                                          
|                                     |                                                                                         |                                                                  |                                          
|                                     |                                                                                         | 2005                                                             |                                           |          | 2004    |          |      | 2003     |       
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|Cash flows from operating activities |                                                                                         |                                                                  |                                           |          |         |          |      |          |        |          |     |         
|                                     | Net income (loss)                                                                       |                                                                  | $                                         | 42,465   |         |          | $    | (14,077  | )      |          | $   | (166,131 | )      
|                                     | Adjustments to reconcile net income (loss) to net cash used in
    operating activities |                                                                  |                                           |          |         |          |      |          |        |          |     |          |        
|                                     |                                                                                         | Equity in net income (loss) of unconsolidated real estate entity |                                           |          | (75,614 | )        |      |          | (1,600 | )        |     |          | 159,351 |         
|                                     |                                                                                         | Change in accounts payable                                       |                                           |          | 250     |          |      |          |       |          |     |          |        |         
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|                                     |                                                                                         |                                                                  | Net cash used in operating activities     |          |         | (32,899  | )    |          |        | (15,677  | )   |          |         | (6,780   | )
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|Cash flows from investing activities |                                                                                         |                                                                  |                                           |          |         |          |      |          |        |          |     |         
|                                     | Distributions in excess of net income received from real estate
    entities            |                                                                  |                                           | 890,000  |         |          |      | 756,500  |        |          |     | 680,281  |        
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|                                     |                                                                                         |                                                                  | Net cash provided by investing activities |          |         | 890,000  |      |          |        | 756,500  |     |          |         | 680,281  |  
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|Cash flows from financing activities |                                                                                         |                                                                  |                                           |          |         |          |      |          |        |          |     |         
|                                     | Distributions                                                                           |                                                                  |                                           | (856,576 | )       |          |      | (741,315 | )      |          |     | (673,100 | )      
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|                                     |                                                                                         |                                                                  | Net cash used in financing activities     |          |         | (856,576 | )    |          |        | (741,315 | )   |          |         | (673,100 | )
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|Net increase (decrease) in cash      |                                                                                         |                                                                  | 525                                       |          |         |          | (492 | )        |        |          | 401 |         
|Cash, beginning of period            |                                                                                         |                                                                  | 259                                       |          |         |          | 751  |          |        |          | 350 |         
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|Cash, end of period                  |                                                                                         | $                                                                | 784                                       |          |         | $        | 259  |          |        | $        | 751 |         
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       
|Supplemental disclosures             |                                                                                         |                                                                  |                                           |          |         |          |      |          |        |          |     |         
|Cash paid for income taxes           |                                                                                         | $                                                                | 11,700                                    |          |         | $        |     |          |        | $        |    |         
|                                     |                                                                                         |                                                                  |                                           |          |         |          |      |          |       



91



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##### 



CARR CAPITAL 1575 EYE STREET ASSOCIATES, LLC


NOTES TO THE FINANCIAL STATEMENTS


For the Years Ended December 31, 2005, 2004 and 2003




|   |             
|-- | ------------
|1. | Organization











|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies

Method of Accounting and Use of Estimates


Investment


Income Taxes




|   |                          
|-- | -------------------------
|3. | Investment in Partnership



92



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##### 



CARR CAPITAL 1575 EYE STREET ASSOCIATES, LLC


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)


For the Years Ended December 31, 2005, 2004 and 2003




|                                                                |  |      |          |   |      |   |          |      |  |   |          |  
|--------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                |  | 2005 |          |   | 2004 |   |          | 2003 | 
|                                                                |  |      |          |   |      |   |          |      | 
|Equity in investees net income                                 |  | $    | 560,012  |   |      | $ | 485,998  |      |  | $ | 325,048  |  
|Amortization of purchase price allocation to depreciable assets |  |      | (484,398 | ) |      |   | (484,398 | )    |  |   | (484,399 | )
|                                                                |  |      |          |   |      |   |          |      | 
|                                                                |  | $    | 75,614   |   |      | $ | 1,600    |      |  | $ | (159,351 | )
|                                                                |  |      |          |   |      |   |          |      | 



|                                |            |      |           |           |      |   |           |           |  |   |           |         | 
|------------------------------- | ---------- | ---- | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | ------- | 
|                                |            | 2005 |           |           | 2004 |   |           | 2003      | 
|                                |            |      |           |           |      |   |           |           | 
|Revenues                        |            | $    | 9,212,648 |           |      | $ | 8,937,125 |           |  | $ | 8,475,857 |        
|Operating expenses and interest |            |      | 7,866,141 |           |      |   | 7,768,579 |           |  |   | 7,745,413 |        
|                                |            |      |           |           |      |   |           |           | 
|                                | Net income |      | $         | 1,346,507 |      |   | $         | 1,168,546 |  |   | $         | 730,444 | 
|                                |            |      |           |           |      |   |           |           | 



|                                                 |  |      |             |   |      |   |             |  
|------------------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                 |  | 2005 |             |   | 2004 |  
|                                                 |  |      |             |   |      |  
|Assets, primarily depreciable property           |  | $    | 17,066,021  |   |      | $ | 17,890,307  |  
|                                                 |  |      |             |   |      |  
|Liabilities, primarily nonrecourse mortgage debt |  | $    | 43,351,087  |   |      | $ | 43,521,881  |  
|Partners deficit                                |  |      | (26,285,066 | ) |      |   | (25,631,574 | )
|                                                 |  |      |             |   |      |  
|                                                 |  | $    | 17,066,021  |   |      | $ | 17,890,307  |  
|                                                 |  |      |             |   |      |  



|   |                                                                                 
|-- | --------------------------------------------------------------------------------
|4. | Members Capital Contributions, Distributions, and
    Participation Percentages



93



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##### 



CARR CAPITAL 1575 EYE STREET ASSOCIATES, LLC


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)


For the Years Ended December 31, 2005, 2004 and 2003




|                                           |  |      |        |   |      |  |        |      |  |  |        |  
|------------------------------------------ |  | ---- | ------ | - | ---- |  | ------ | ---- |  |  | ------ | -
|                                           |  | 2005 |        |   | 2004 |  |        | 2003 | 
|                                           |  |      |        |   |      |  |        |      | 
|AETNA                                      |  |      | 64.85  | % |      |  | 64.85  | %    |  |  | 64.85  | %
|Columbia Equity, LP                        |  |      | 22.07  |   |      |  |       |      |  |  |       |  
|The Oliver Carr Company                    |  |      |       |   |      |  | 10.41  |      |  |  | 10.41  |  
|Carr Holdings, LLC                         |  |      |       |   |      |  | 10.41  |      |  |  | 10.41  |  
|Carr Capital Real Estate Investments, Inc. |  |      |       |   |      |  | 1.25   |      |  |  | 1.25   |  
|Karen S. Mayers                            |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|George F. Miller                           |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|Jeffrey L. Stanfield                       |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|John T. Beaty                              |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|Anne Mehringer                             |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|Philip Zeidman                             |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|Edison W. Dick                             |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|Sally W. Dick                              |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|Kenneth G. Lore                            |  |      | 1.25   |   |      |  | 1.25   |      |  |  | 1.25   |  
|Thomas Humphrey                            |  |      | 0.61   |   |      |  | 0.61   |      |  |  | 0.61   |  
|Kent R. Morrison                           |  |      | 0.61   |   |      |  | 0.61   |      |  |  | 0.61   |  
|Leslie Shroyer                             |  |      | 0.61   |   |      |  | 0.61   |      |  |  | 0.61   |  
|                                           |  |      |        |   |      |  |        |      | 
|                                           |  |      | 100.00 | % |      |  | 100.00 | %    |  |  | 100.00 | %
|                                           |  |      |        |   |      |  |        |      | 



|   |                           
|-- | --------------------------
|5. | Related Party Transactions





94



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##### 



Exhibit Index


|        |    |                         |  |                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description of Document
|        |    |                        
|        | 3  | .1                      |  | Articles of Amendment and Restatement of the Registrant
    (incorporated by reference to Exhibit 3.1 to the
    Registrants Registration Statement on Form S-11/ A
    (File No. 333-122644) filed on June 24, 2005).                                                                                                       
|        | 3  | .2                      |  | Amended and Restated Bylaws of the Registrant (incorporated by
    reference to Exhibit 3.2 to the Registrants
    Registration Statement on Form S-11/ A (File
    No. 333-122644) filed on June 24, 2005).                                                                                                                 
|        | 4  | .1                      |  | Specimen Common Stock Certificate (incorporated by reference to
    Exhibit 4.1 to the Registrants Quarterly Report on
    Form 10-Q filed on November 14, 2005).                                                                                                                                                            
|        | 4  | .2                      |  | Amended and Restated Agreement of Limited Partnership of
    Columbia Equity, LP (incorporated by reference to
    Exhibit 3.3 to the Registrants Registration Statement
    on Form S-11/ A (File No. 333-122644) filed on
    June 24, 2005).                                                                              
|        | 10 | .1                      |  | Form of Employment Agreement, by and between the Registrant and
    Oliver T. Carr, III (incorporated by reference to
    Exhibit 10.48 to the Registrants Registration
    Statement on Form S-11/ A (File No. 333-122644) filed
    on June 28, 2005).                                                                     
|        | 10 | .2                      |  | Form of Employment Agreement, by and between the Registrant and
    John A. Schissel (incorporated by reference to
    Exhibit 10.49 to the Registrants Registration
    Statement on Form S-11/ A (File No. 333-122644) filed
    on June 28, 2005).                                                                        
|        | 10 | .3                      |  | Columbia Equity Trust, Inc. 2005 Equity Incentive Plan
    (incorporated by reference to Exhibit 10.50 to the
    Registrants Registration Statement on Form S-11/ A
    (File No. 333-122644) filed on June 24, 2005).                                                                                                      
|        | 10 | .4                      |  | Form of Employment Agreement, by and between the Registrant and
    Clinton D. Fisch (incorporated by reference to
    Exhibit 10.70 to the Registrants Registration
    Statement on Form S-11/ A (File No. 333-122644) filed
    on June 28, 2005).                                                                        
|        | 10 | .5                      |  | Form of Employment Agreement, by and between the Registrant and
    Christian H. Clifford (incorporated by reference to
    Exhibit 10.71 to the Registrants Registration
    Statement on Form S-11/ A (File No. 333-122644) filed
    on June 28, 2005).                                                                   
|        | 10 | .6                      |  | Form of Employment Agreement, by and between the Registrant and
    John M. Novack (incorporated by reference to Exhibit 10.72
    to the Registrants Registration Statement on
    Form S-11/ A (File No. 333-122644) filed on
    June 28, 2005).                                                                          
|        | 10 | .7                      |  | Agreement and Plan of Merger between Carr Capital Corporation
    and the Barlow Corporation, dated March 25, 2005 (Barlow
    Building) (incorporated by reference to Exhibit 10.74 to
    the Registrants Registration Statement on Form S-11/
    A (File No. 333-122644) filed on May 27, 2005).                         
|        | 10 | .8                      |  | Master Agreement dated June 23, 2005 among Carr Capital
    Corporation, Wisconsin Avenue Realty Company LLC and Columbia
    Equity, LP. (incorporated by reference to Exhibit 10.75 to
    the Registrants Registration Statement on Form S-11/
    A (File No. 333-122644) filed on June 24, 2005).                       
|        | 10 | .9                      |  | Loan Agreement, by and among Barlow Enterprises LLC as borrower,
    5454 Wisconsin Inc. as guarantor, and General Electric Capital
    Corporation as lender, dated as of July 15, 2005
    (incorporated by reference to Exhibit 10.4 to the
    Registrants Quarterly Report on Form 10-Q filed on
    November 14, 2005).
|        | 10 | .10                     |  | Revolving Loan Agreement between Columbia Equity, LP and Wells
    Fargo Bank, National Association, dated November 28, 2005
    (incorporated by reference to Exhibit 10.1 to the
    Registrants Current Report on Form 8-K filed on
    November 28, 2005).                                                               
|        | 10 | .11*                    |  | Real Estate Purchase and Sale Agreement, by and between 1025
    Vermont Investors, L.L.C. and Columbia Equity Trust, Inc., dated
    November 11, 2005.                                                                                                                                                                      
|        | 10 | .12*                    |  | First Amendment to Real Estate Purchase and Sale Agreement, by
    and between 1025 Vermont Investors, L.L.C. and Columbia Equity
    Trust, Inc., dated November 21, 2005.                                                                                                                                                   
|        | 10 | .13*                    |  | Transfer and Assumption and Loan Modification by and between
    Principal Life Insurance Company and 1025 Vermont Avenue, LLC,
    dated January 12, 2006.                                                                                                                                                                   
|        | 10 | .14*                    |  | Secured Promissory Note payable to Principal Life Insurance
    Company, dated December 20, 2004.                                                                                                                                                                                                                             

95



---



##### 



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description of Document
|        |    |                        
|        | 10 | .15*                    |  | Amended, Restated and Consolidated and Secured Promissory Note
    by and between Principal Life Insurance Company and 1025 Vermont
    Avenue, LLC, dated February 10, 2006.                                                                                                                                                                                                                   
|        | 10 | .16*                    |  | Agreement of Sale, by and between, Carfax Enterprises Limited
    Partnership and Columbia Equity Trust, Inc., dated
    November 10, 2005.                                                                                                                                                                                                                                                     
|        | 10 | .17*                    |  | First Amendment to Agreement of Sale, by and between , Carfax
    Enterprises Limited Partnership and Columbia Equity Trust, Inc.,
    dated November 23, 2005.                                                                                                                                                                                                                                 
|        | 10 | .18*                    |  | Agreement for Purchase and Sale, by and between Unicorn
    Wisconsin, LLC and Columbia Equity Trust, Inc., dated
    December 6, 2005.                                                                                                                                                                                                                                                         
|        | 10 | .19                     |  | Fixed Rate Note payable to Wachovia Bank, National Association,
    dated February 16, 2006 (incorporated by reference to
    Exhibit 10.1 to the Registrants Current Report on
    Form 8-K filed on February 22, 2006).                                                                                                                                                                      
|        | 10 | .20                     |  | Leasehold Indemnity Deed of Trust and Security Agreement, by
    Park Plaza II, L.L.C. as grantor to Alexander Title Agency
    Incorporated, as trustee, for the benefit of Wachovia Bank,
    National Association, as beneficiary, dated February 16,
    2006 (incorporated by reference to Exhibit 10.2 to the
    Registrants Current Report on Form 8-K filed on
    February 22, 2006).
|        | 10 | .21                     |  | Indemnity Guaranty Agreement by Park Plaza II, L.L.C.,
    dated February 16, 2006 (incorporated by reference to
    Exhibit 10.3 to the Registrants Current Report on
    Form 8-K filed on February 22, 2006).                                                                                                                                                                               
|        | 10 | .22*                    |  | Summary of Cash Incentive Bonuses Payable to Executive Officers.                                                                                                                                                                                                                                                                                                                                
|        | 21 | .1*                     |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                  
|        | 23 | .1*                     |  | Consent of Deloitte & Touche LLP (Registrants
    independent registered public accounting firm).                                                                                                                                                                                                                                                                                              
|        | 31 | .1*                     |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 of Chief Executive Officer.                                                                                                                                                                                                                                                                                         
|        | 31 | .2*                     |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 of Chief Financial Officer.                                                                                                                                                                                                                                                                                         
|        | 32 | .1*                     |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002 of Chief Executive Officer and Chief Financial
    Officer.                                                                                                                                                                                                                                                         






|  |               
|- | --------------
|* | filed herewith

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