##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 COMMISSION FILE NO. 001-32536
 COLUMBIA EQUITY TRUST, INC .
  Maryland
    
    20-1978579(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)1750 H Street, N.W.,Suite 500, Washington, D.C.
    
    20006(Address of principal executive office)
    
    (Zip code)
 (202) 303-3080
 o þ
 o þ




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COLUMBIA EQUITY TRUST, INC.
 FORM 10-Q
 TABLE OF CONTENTS
 PagePART I
   FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Historical Financial Statements   Columbia Equity Trust, Inc.Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004 (unaudited)
    
    
    4Statements of Operations for the three and six months ended June 30, 2005 (unaudited)
    
    
    5Statement of Cash Flows for the six months ended June 30, 2005 (unaudited)
    
    
    6Notes to Financial Statements
    
    
    7Historical Financial Statements  Columbia Equity Trust, Inc. PredecessorCombined Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004
    
    
    11Combined Statements of Operations for the three and six months ended June 30, 2005
(unaudited) and 2004 (unaudited)
    
    
    12Combined Statements of Cash Flows for the six months ended June 30, 2005 (unaudited) and
2004 (unaudited)
    
    
    13Notes to Combined Financial Statements
    
    
    14Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    49Item 4. Controls and Procedures
    
    
    49PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    50Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    50Item 3. Defaults Upon Senior Securities
    
    
    51Item 4. Submission of Matters to a Vote of Security Holders
    
    
    51Item 5. Other Information
    
    
    51Item 6. Exhibits
    
    
    51SIGNATURES
    
    
    52EXHIBIT INDEX
    
    
    53
 2




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PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
     3




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COLUMBIA EQUITY TRUST, INC.
 BALANCE SHEETS
 June 30,
    
    December 31,2005
    
    2004(Unaudited)
    
    (Unaudited)AssetsCash
    
    $
    300
    
    
    $
    Total assets
    
    $
    300
    
    
    $
    Liabilities and Shareholders EquityDeferred offering costs
    
    $
    
    
    
    $
    
    
    
    
    Commitments and contingenciesShareholders equityPreferred
stock, $0.001 par value, 100,000,000 and 0 shares
authorized in 2005 and 2004, respectively, no shares issued or
outstanding in either period
    
    
    
    
    
    
    Common stock, $0.001 par value, 500,000,000 and 1,000 shares
authorized, 1,000 and 1,000 issued and outstanding
in 2005 and 2004, respectively
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    999
    
    
    
    999Less  Common stock subscribed
    
    
    
    
    
    
    (1,000
    )Accumulated deficit
    
    
    (700
    )
    
    
    Total shareholders equity
    
    
    300
    
    
    
    Total liabilities and shareholders equity
    
    $
    300
    
    
    $
    
  4




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COLUMBIA EQUITY TRUST, INC.
 STATEMENTS OF OPERATIONS
 Three
    
    SixMonths
    
    MonthsEnded
    
    EndedJune 30,
    
    June 30,2005
    
    2005(Unaudited)
    
    (Unaudited)General and administrative expenses
    
    $
    600
    
    
    $
    700Net loss
    
    $
    600
    
    
    $
    700
  5




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COLUMBIA EQUITY TRUST, INC.
 STATEMENT OF CASH FLOWS
 SixMonthsEndedJune 30,2005(Unaudited)Cash flows from operating activitiesNet loss
    
    $
    (700
    )Net cash used in operating activities
    
    
    (700
    )Cash flows from financing activitiesPayment for subscribed stock
    
    
    1,000Net cash provided by financing activities
    
    
    1,000Net increase in cash and cash equivalents
    
    
    300Cash and cash equivalents, beginning of period
    
    
    Cash and cash equivalents, end of period
    
    $
    300
  6




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COLUMBIA EQUITY TRUST, INC.
 NOTES TO FINANCIAL STATEMENTS
 1. Organization and Description of Business
      2. Summary of Significant Accounting Policies
 a) Cash and Cash Equivalents
  7




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b) Segment Disclosure
 
 c) Concentration of Credit Risk
 
 d) Unaudited Interim Combined Financial Information
 
 e) Income Taxes
  f) Share-Based Compensation
  g) New Accounting Pronouncements
   8




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3. Offering Costs
  4. Stock Split
  5. Subsequent Events
  9




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
    
    purchase approximately $81,600,000 of ownership interests in 13 commercial office
properties from Columbia Predecessor and certain third party investors;
    
    repay approximately $40,700,000 in outstanding indebtedness, interest and prepayment
penalties associated with certain of the 13 commercial office properties described
above; and
    
    the balance for general corporate and working capital purposes, including future
investments in office properties.
      10




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##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 COMBINED BALANCE SHEETS
 June 30,
    
    December 31,2005
    
    2004(Unaudited)AssetsCash and cash equivalents
    
    $
    2,723,573
    
    
    $
    1,188,146Prepaid expenses
    
    
    542,818
    
    
    
    102,798Accounts and other receivables
    
    
    220,797
    
    
    
    185,864Due from related parties
    
    
    140,000
    
    
    
    140,000Furniture, fixtures and equipment, net of accumulated
depreciation of $51,062 in 2005 and $56,887 in 2004
    
    
    30,644
    
    
    
    34,232Investments in real estate entities
    
    
    4,273,035
    
    
    
    4,189,766Deferred offering costs
    
    
    3,866,140
    
    
    
    1,172,964Total assets
    
    $
    11,797,007
    
    
    $
    7,013,770Liabilities and Accumulated EquityLiabilitiesAccounts payable and accrued expenses
    
    $
    3,845,315
    
    
    $
    1,124,258Profit sharing plan contribution payable
    
    
    100,000
    
    
    
    100,000Accrued interest payable to shareholders
    
    
    81,732
    
    
    
    77,232Notes payable to shareholders
    
    
    90,000
    
    
    
    90,000Total liabilities
    
    
    4,117,047
    
    
    
    1,391,490Commitments and contingenciesAccumulated equity
    
    
    7,679,960
    
    
    
    5,622,280Total liabilities and accumulated equity
    
    $
    11,797,007
    
    
    $
    7,013,770
  11




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##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 COMBINED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004RevenuesFee income, primarily from related parties
    
    $
    815,997
    
    
    $
    490,448
    
    
    $
    1,438,356
    
    
    $
    608,942ExpensesGeneral and administrative, including amounts
paid to related parties of $74,337,
$61,471, $134,391 and $123,753
for the periods, respectively
    
    
    1,165,924
    
    
    
    403,175
    
    
    
    1,544,898
    
    
    
    761,975Depreciation
    
    
    4,357
    
    
    
    2,773
    
    
    
    7,360
    
    
    
    5,3221,170,281
    
    
    
    405,948
    
    
    
    1,552,258
    
    
    
    767,297Income (loss) from operations
    
    
    (354,284
    )
    
    
    84,500
    
    
    
    (113,902
    )
    
    
    (158,355
    )Other Income (Expense)Interest income
    
    
    14,546
    
    
    
    2,592
    
    
    
    19,878
    
    
    
    5,503Interest expense to shareholders
    
    
    (2,250
    )
    
    
    (2,250
    )
    
    
    (4,500
    )
    
    
    (4,500
    )Equity in net income of real estate entities
    
    
    2,202,058
    
    
    
    36,071
    
    
    
    2,304,975
    
    
    
    168,005Income before income taxes
    
    
    1,860,070
    
    
    
    120,913
    
    
    
    2,206,451
    
    
    
    10,653Provision for income taxes
    
    
    197,823
    
    
    
    
    
    
    
    231,884
    
    
    
    3,061Net income
    
    $
    1,662,247
    
    
    $
    120,913
    
    
    $
    1,974,567
    
    
    $
    7,592
  12




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COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 COMBINED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30,2005
    
    2004(Unaudited)
    
    (Unaudited)Cash flows from operating activitiesNet income
    
    $
    1,974,567
    
    
    $
    7,592Adjustments to reconcile net income to net
cash used in operating activitiesEquity in net income of real estate entities
    
    
    (2,304,975
    )
    
    
    (168,005
    )Distributions received from real estate entities
    
    
    19,055
    
    
    
    Depreciation and amortization
    
    
    7,360
    
    
    
    5,322Increase in assetsPrepaid expenses
    
    
    (440,020
    )
    
    
    (470,811
    )Accounts and other receivables
    
    
    (34,933
    )
    
    
    (2,304
    )Due from related parties
    
    
    
    
    
    
    Deferred offering costs
    
    
    (2,693,176
    )Increase in liabilitiesAccounts payable and accrued expenses
    
    
    2,721,057
    
    
    
    159,293Profit sharing plan contribution payable
    
    
    
    
    
    
    50,000Accrued interest payable to shareholders
    
    
    4,500
    
    
    
    4,500Net cash used in operating activities
    
    
    (746,565
    )
    
    
    (414,413
    )Cash flows from investing activitiesPurchase of furniture, fixtures and equipment
    
    
    (3,772
    )
    
    
    (8,369
    )Distributions from real estate entities
    
    
    2,707,753
    
    
    
    240,973Contributions made to real estate entities
    
    
    (508,000
    )
    
    
    (375,000
    )Net cash provided by (used in) investing activities
    
    
    2,195,981
    
    
    
    (142,396
    )Cash flows from financing activitiesContributions
    
    
    250,000
    
    
    
    250,000Distributions
    
    
    (163,989
    )
    
    
    (565,427
    )Net cash provided by (used in) financing activities
    
    
    86,011
    
    
    
    (315,427
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,535,427
    
    
    
    (872,236
    )Cash and cash equivalents, beginning of period
    
    
    1,188,146
    
    
    
    1,751,244Cash and cash equivalents, end of period
    
    $
    2,723,573
    
    
    $
    879,008Supplemental disclosuresCash paid for income taxes
    
    $
    
    
    
    $
    
  13




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COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 NOTES TO COMBINED FINANCIAL STATEMENTS
 1. Organization and Description of Business
      14




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Square
    
    DateEntity
    
    Location
    
    Feet
    
    AcquiredKing Street
    
    Alexandria, Virginia
    
    
    149,080
    
    
    December 16, 1999Sherwood Plaza
    
    Fairfax, Virginia
    
    
    92,960
    
    
    November 14, 2000Greenbriar
    
    Fairfax, Virginia
    
    
    111,721
    
    
    June 28, 2001Fair Oaks
    
    Fairfax, Virginia
    
    
    126,949
    
    
    November 6, 20011575 Eye Street
    
    Washington, D.C.
    
    
    210,372
    
    
    February 28, 2002Independence Center
    
    Chantilly, Virginia
    
    
    275,002
    
    
    September 9, 2002Madison Place
    
    Alexandria, Virginia
    
    
    107,960
    
    
    July 17, 2003Atrium
    
    Alexandria, Virginia
    
    
    138,507
    
    
    May 25, 2004Meadows IV
    
    Chantilly, Virginia
    
    
    148,160
    
    
    October 29, 2004Victory Point
    
    Chantilly, Virginia
    
    
    147,743
    
    
    March 8, 2005Suffolk Building
    
    Falls Church, Virginia
    
    
    257,425
    
    
    May 4, 2005
  2. Summary of Significant Accounting Policies
 a) Principles of Combination
  b) Cash and Cash Equivalents
  c) Real Estate Entities
   15




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##### 



e) New Accounting Pronouncements
     f) Profit-sharing Plan
 
 g) Income Taxes
  16




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h) Managements Estimates and Critical Accounting Policies
    i) Segment Disclosure
  j) Concentration of Credit Risk
   k) Unaudited Interim Combined Financial Information
  17




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3. Investments in Real Estate Entities
   Six Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,Entity
    
    2005
    
    2004King Street
    
    
    14
    %
    
    
    14
    %Sherwood Plaza
    
    
    1
    %
    
    
    1
    %Greenbriar
    
    
    9
    %
    
    
    9
    %Fair Oaks
    
    
    29
    %
    
    
    30
    %1575 Eye Street
    
    
    22
    %
    
    
    22
    %Independence Center
    
    
    5
    %
    
    
    5
    %Madison Place
    
    
    3
    %
    
    
    3
    %Atrium
    
    
    3
    %
    
    
    3
    %Meadows IV
    
    
    13
    %
    
    
    N/AVictory Point
    
    
    1
    %
    
    
    N/ASuffolk
    
    
    2
    %
    
    
    N/A
   (a)
    
    Columbia Predecessor owns 22.07% of 1575 Eye Street which in turn owns 41.59% of 1575
Associates for a net ownership of 9.18%. However, Columbia Predecessor currently has the
right under the 1575 Associates partnership agreement to receive 9.82% of distributions and
net income and loss.
  18




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##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 INVESTMENTS IN REAL ESTATE ENTITIES
CONDENSED BALANCE SHEETS
As of June 30, 2005
 King
    
    Sherwood
    
    
    
    
    
    Fair
    
    1575
    
    Independence
    
    Madison
    
    
    
    
    
    
    
    
    
    Victory
    
    SuffolkStreet
    
    Plaza
    
    Greenbriar
    
    Oaks
    
    Associates
    
    Center
    
    Place
    
    Atrium
    
    Meadows IV
    
    Point
    
    Building
    
    Total(Note a)AssetsInvestments in real estate
    
    $
    22,824,112
    
    
    $
    11,643,111
    
    
    $
    14,736,393
    
    
    $
    18,563,548
    
    
    $
    8,628,322
    
    
    $
    43,076,227
    
    
    $
    17,722,794
    
    
    $
    31,340,529
    
    
    $
    22,128,557
    
    
    $
    20,502,509
    
    
    $
    63,337,409
    
    
    $
    274,503,511Receivables and deferred rents
    
    
    335,604
    
    
    
    209,858
    
    
    
    179,154
    
    
    
    311,575
    
    
    
    1,871,867
    
    
    
    3,749,636
    
    
    
    456,406
    
    
    
    467,009
    
    
    
    375,192
    
    
    
    
    
    
    
    544,248
    
    
    
    8,500,549Other assets
    
    
    3,286,884
    
    
    
    779,885
    
    
    
    1,212,830
    
    
    
    1,691,567
    
    
    
    6,621,659
    
    
    
    3,945,741
    
    
    
    4,840,180
    
    
    
    4,644,189
    
    
    
    6,401,131
    
    
    
    2,525,259
    
    
    
    9,703,141
    
    
    
    45,652,466Total assets
    
    $
    26,446,600
    
    
    $
    12,632,854
    
    
    $
    16,128,377
    
    
    $
    20,566,690
    
    
    $
    17,121,848
    
    
    $
    50,771,604
    
    
    $
    23,019,380
    
    
    $
    36,451,727
    
    
    $
    28,904,880
    
    
    $
    23,027,768
    
    
    $
    73,584,798
    
    
    $
    328,656,526Liabilities and EquityMortgage loans
    
    $
    21,881,562
    
    
    $
    8,971,405
    
    
    $
    10,579,970
    
    
    $
    16,640,000
    
    
    $
    42,454,939
    
    
    $
    31,363,398
    
    
    $
    15,500,000
    
    
    $
    24,155,505
    
    
    $
    23,275,000
    
    
    $
    14,800,000
    
    
    $
    42,000,000
    
    
    $
    251,621,779Other liabilities
    
    
    947,427
    
    
    
    232,776
    
    
    
    255,916
    
    
    
    800,941
    
    
    
    1,127,349
    
    
    
    2,313,465
    
    
    
    563,953
    
    
    
    774,028
    
    
    
    1,321,778
    
    
    
    366,805
    
    
    
    4,460,562
    
    
    
    13,165,00022,828,989
    
    
    
    9,204,181
    
    
    
    10,835,886
    
    
    
    17,440,941
    
    
    
    43,582,288
    
    
    
    33,676,863
    
    
    
    16,063,953
    
    
    
    24,929,533
    
    
    
    24,596,778
    
    
    
    15,166,805
    
    
    
    46,460,562
    
    
    
    264,786,779Other Owners share of
Partners/Members capital
    
    
    5,051,136
    
    
    
    3,395,484
    
    
    
    4,812,616
    
    
    
    3,037,605
    
    
    
    (21,190,421
    )
    
    
    16,240,004
    
    
    
    6,721,401
    
    
    
    11,176,528
    
    
    
    3,755,776
    
    
    
    7,769,025
    
    
    
    26,717,372
    
    
    
    67,486,526Columbia Predecessors share
of Partners/Members capital
    
    
    (1,433,525
    )
    
    
    33,189
    
    
    
    479,875
    
    
    
    88,144
    
    
    
    (5,270,019
    )
    
    
    854,737
    
    
    
    234,026
    
    
    
    345,666
    
    
    
    552,326
    
    
    
    91,938
    
    
    
    406,864
    
    
    
    (3,616,779
    )Total liabilities and equity
    
    $
    26,446,600
    
    
    $
    12,632,854
    
    
    $
    16,128,377
    
    
    $
    20,566,690
    
    
    $
    17,121,848
    
    
    $
    50,771,604
    
    
    $
    23,019,380
    
    
    $
    36,451,727
    
    
    $
    28,904,880
    
    
    $
    23,027,768
    
    
    $
    73,584,798
    
    
    $
    328,656,526Net investment balance
    
    $
    
    
    
    $
    33,189
    
    
    $
    479,875
    
    
    $
    88,144
    
    
    $
    1,176,885
    
    
    $
    854,737
    
    
    $
    234,026
    
    
    $
    345,666
    
    
    $
    552,326
    
    
    $
    91,938
    
    
    $
    406,864
    
    
    $
    4,263,650Other entities (Note b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,385Investments in
real estate entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,273,035
 19




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##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 INVESTMENTS IN REAL ESTATE ENTITIES
CONDENSED BALANCE SHEETS
As of December 31, 2004
 King
    
    Sherwood
    
    
    
    
    
    Fair
    
    1575
    
    Independence
    
    MadisonStreet
    
    Plaza
    
    Greenbriar
    
    Oaks
    
    Associates
    
    Center
    
    Place
    
    Atrium
    
    Meadows IV
    
    Total(Note a)AssetsInvestments in real estate
    
    $
    23,045,418
    
    
    $
    11,521,085
    
    
    $
    14,734,785
    
    
    $
    18,656,052
    
    
    $
    9,112,248
    
    
    $
    43,399,196
    
    
    $
    17,481,749
    
    
    $
    31,660,078
    
    
    $
    22,429,644
    
    
    $
    192,040,255Receivables and deferred rents
    
    
    468,816
    
    
    
    175,176
    
    
    
    319,405
    
    
    
    461,440
    
    
    
    2,538,482
    
    
    
    3,750,980
    
    
    
    348,441
    
    
    
    445,240
    
    
    
    81,501
    
    
    
    8,589,481Other assets
    
    
    3,886,187
    
    
    
    956,317
    
    
    
    1,403,400
    
    
    
    1,602,357
    
    
    
    6,239,578
    
    
    
    4,363,120
    
    
    
    5,710,434
    
    
    
    5,143,877
    
    
    
    8,831,522
    
    
    
    38,136,792Total assets
    
    $
    27,400,421
    
    
    $
    12,652,578
    
    
    $
    16,457,590
    
    
    $
    20,719,849
    
    
    $
    17,890,308
    
    
    $
    51,513,296
    
    
    $
    23,540,624
    
    
    $
    37,249,195
    
    
    $
    31,342,667
    
    
    $
    238,766,528Liabilities and EquityMortgage loans
    
    $
    22,000,000
    
    
    $
    9,071,517
    
    
    $
    10,698,033
    
    
    $
    16,640,000
    
    
    $
    42,454,939
    
    
    $
    31,689,834
    
    
    $
    15,500,000
    
    
    $
    24,375,698
    
    
    $
    23,375,000
    
    
    $
    195,805,021Other liabilities
    
    
    1,348,386
    
    
    
    280,501
    
    
    
    322,043
    
    
    
    894,258
    
    
    
    1,066,943
    
    
    
    2,669,043
    
    
    
    665,340
    
    
    
    869,487
    
    
    
    2,943,587
    
    
    
    11,059,58823,348,386
    
    
    
    9,352,018
    
    
    
    11,020,076
    
    
    
    17,534,258
    
    
    
    43,521,882
    
    
    
    34,358,877
    
    
    
    16,165,340
    
    
    
    25,245,185
    
    
    
    26,318,587
    
    
    
    206,864,609Other Owners share of
Partners/Members capital
    
    
    5,467,106
    
    
    
    3,268,611
    
    
    
    4,936,876
    
    
    
    3,080,128
    
    
    
    (20,740,473
    )
    
    
    16,296,698
    
    
    
    7,135,995
    
    
    
    11,643,890
    
    
    
    4,380,602
    
    
    
    35,469,433Columbia Predecessors share
of Partners/Members capital
    
    
    (1,415,071
    )
    
    
    31,949
    
    
    
    500,638
    
    
    
    105,463
    
    
    
    (4,891,101
    )
    
    
    857,721
    
    
    
    239,289
    
    
    
    360,120
    
    
    

    643,478
    
    
    
    (3,567,514
    )Total liabilities and equity
    
    $
    27,400,421
    
    
    $
    12,652,578
    
    
    $
    16,457,590
    
    
    $
    20,719,849
    
    
    $
    17,890,308
    
    
    $
    51,513,296
    
    
    $
    23,540,624
    
    
    $
    37,249,195
    
    
    $
    31,342,667
    
    
    $
    238,766,528Net investment balance
    
    $
    
    
    
    $
    31,949
    
    
    $
    500,638
    
    
    $
    105,463
    
    
    $
    1,307,690
    
    
    $
    857,721
    
    
    $
    239,289
    
    
    $
    360,120
    
    
    $
    643,478
    
    
    $
    4,046,348Other entities (Note b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143,418Investments in
real estate entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,189,766
 20




---



##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 INVESTMENTS IN REAL ESTATE ENTITIES
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2005
 King
    
    Sherwood
    
    
    
    
    
    Fair
    
    1575
    
    Independence
    
    Madison
    
    
    
    
    
    
    
    
    
    Victory
    
    SuffolkStreet
    
    Plaza
    
    Greenbriar
    
    Oaks
    
    Associates
    
    Center
    
    Place
    
    Atrium
    
    Meadows IV
    
    Point
    
    Building
    
    Total(Note a)Revenues
    
    $
    1,032,748
    
    
    $
    556,086
    
    
    $
    449,255
    
    
    $
    673,526
    
    
    $
    2,117,522
    
    
    $
    1,547,168
    
    
    $
    640,084
    
    
    $
    1,203,521
    
    
    $
    906,321
    
    
    $
    6,609
    
    
    $
    1,152,453
    
    
    $
    10,285,293ExpensesOperating and other
    
    
    455,196
    
    
    
    197,579
    
    
    
    218,812
    
    
    
    324,167
    
    
    
    861,686
    
    
    
    590,171
    
    
    
    275,939
    
    
    
    436,233
    
    
    
    330,882
    
    
    
    191,158
    
    
    
    252,607
    
    
    
    4,134,430Depreciation
    
    
    385,411
    
    
    
    149,297
    
    
    
    121,611
    
    
    
    142,251
    
    
    
    340,246
    
    
    
    525,665
    
    
    
    240,478
    
    
    
    382,687
    
    
    
    450,612
    
    
    
    108,545
    
    
    
    613,924
    
    
    
    3,460,727Interest
    
    
    295,217
    
    
    
    121,019
    
    
    
    148,368
    
    
    
    271,457
    
    
    
    768,184
    
    
    
    565,691
    
    
    
    185,953
    
    
    
    480,411
    
    
    
    329,610
    
    
    
    261,061
    
    
    
    361,686
    
    
    
    3,788,657Total expenses
    
    
    1,135,824
    
    
    
    467,895
    
    
    
    488,791
    
    
    
    737,875
    
    
    
    1,970,116
    
    
    
    1,681,527
    
    
    
    702,370
    
    
    
    1,299,331
    
    
    
    1,111,104
    
    
    
    560,764
    
    
    
    1,228,217
    
    
    
    11,383,814Net income (loss)
    
    $
    (103,076
    )
    
    $
    88,191
    
    
    $
    (39,536
    )
    
    $
    (64,349
    )
    
    $
    147,406
    
    
    $
    (134,359
    )
    
    $
    (62,286
    )
    
    $
    (95,810
    )
    
    $
    (204,783
    )
    
    $
    (554,155
    )
    
    $
    (75,764
    )
    
    $
    (1,098,521
    )Equity in net income (loss)
of real estate entities
    
    $
    
    
    
    $
    854
    
    
    $
    (11,051
    )
    
    $
    (18,623
    )
    
    $
    (41,140
    )
    
    $
    (6,718
    )
    
    $
    (1,869
    )
    
    $
    (2,874
    )
    
    $
    (26,228
    )
    
    $
    (6,484
    )
    
    $
    (1,136
    )
    
    $
    (115,269
    )Other entities (Note b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,317,327$
    2,202,058
 21




---



##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 INVESTMENTS IN REAL ESTATE ENTITIES
 CONDENSED STATEMENTS OF OPERATIONS
 For the Three Months Ended June 30, 2004
 King
    
    Sherwood
    
    
    
    
    
    Fair
    
    1575
    
    Independence
    
    MadisonStreet
    
    Plaza
    
    Greenbriar
    
    Oaks
    
    Associates
    
    Center
    
    Place
    
    Atrium
    
    Total(Note a)Revenues
    
    $
    1,314,899
    
    
    $
    550,230
    
    
    $
    626,956
    
    
    $
    650,678
    
    
    $
    2,196,627
    
    
    $
    1,183,453
    
    
    $
    571,816
    
    
    $
    443,816
    
    
    $
    7,538,475ExpensesOperating and other
    
    
    333,114
    
    
    
    169,079
    
    
    
    174,232
    
    
    
    282,734
    
    
    
    654,171
    
    
    
    405,558
    
    
    
    226,358
    
    
    
    84,129
    
    
    
    2,329,375Depreciation
    
    
    304,636
    
    
    
    94,560
    
    
    
    96,975
    
    
    
    116,179
    
    
    
    414,816
    
    
    
    412,801
    
    
    
    194,410
    
    
    
    170,343
    
    
    
    1,804,720Interest
    
    
    295,217
    
    
    
    83,944
    
    
    
    102,674
    
    
    
    107,420
    
    
    
    764,887
    
    
    
    359,394
    
    
    
    185,919
    
    
    
    228,613
    
    
    
    2,128,068Total expenses
    
    
    932,967
    
    
    
    347,583
    
    
    
    373,881
    
    
    
    506,333
    
    
    
    1,833,874
    
    
    
    1,177,753
    
    
    
    606,687
    
    
    
    483,085
    
    
    
    6,262,163Net income (loss)
    
    $
    381,932
    
    
    $
    202,647
    
    
    $
    253,075
    
    
    $
    144,345
    
    
    $
    362,753
    
    
    $
    5,700
    
    
    $
    (34,871
    )
    
    $
    (39,269
    )
    
    $
    1,276,312Equity in net income (loss)
of real estate entities
    
    $
    20,057
    
    
    $
    1,962
    
    
    $
    23,300
    
    
    $
    13,872
    
    
    $
    (21,180
    )
    
    $
    285
    
    
    $
    (1,046
    )
    
    $
    (1,179
    )
    
    $
    36,071Other entities (Note b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    36,071
 22




---



##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 INVESTMENTS IN REAL ESTATE ENTITIES
 CONDENSED STATEMENTS OF OPERATIONS
 For the Six Months Ended June 30, 2005
 King
    
    Sherwood
    
    
    
    
    
    Fair
    
    1575
    
    Independence
    
    Madison
    
    
    
    
    
    
    
    
    
    Victory
    
    SuffolkStreet
    
    Plaza
    
    Greenbriar
    
    Oaks
    
    Associates
    
    Center
    
    Place
    
    Atrium
    
    Meadows IV
    
    Point
    
    Building
    
    Total(Note a)Revenues
    
    $
    2,192,390
    
    
    $
    999,932
    
    
    $
    837,843
    
    
    $
    1,367,450
    
    
    $
    4,294,459
    
    
    $
    2,941,844
    
    
    $
    1,204,579
    
    
    $
    2,449,196
    
    
    $
    1,842,293
    
    
    $
    6,609
    
    
    $
    1,152,453
    
    
    $
    19,289,048ExpensesOperating and other
    
    
    823,237
    
    
    
    370,041
    
    
    
    434,636
    
    
    
    620,509
    
    
    
    1,724,301
    
    
    
    1,076,438
    
    
    
    552,581
    
    
    
    789,066
    
    
    
    688,228
    
    
    
    224,199
    
    
    
    252,607
    
    
    
    7,555,843Depreciation
    
    
    763,142
    
    
    
    269,397
    
    
    
    241,536
    
    
    
    284,249
    
    
    
    691,863
    
    
    
    938,665
    
    
    
    455,499
    
    
    
    810,142
    
    
    
    901,156
    
    
    
    143,597
    
    
    
    613,924
    
    
    
    6,113,170Interest
    
    
    590,433
    
    
    
    232,381
    
    
    
    281,695
    
    
    
    521,967
    
    
    
    1,532,161
    
    
    
    986,419
    
    
    
    371,906
    
    
    
    980,803
    
    
    
    653,886
    
    
    
    327,849
    
    
    
    361,686
    
    
    
    6,841,186Total expenses
    
    
    2,176,812
    
    
    
    871,819
    
    
    
    957,867
    
    
    
    1,426,725
    
    
    
    3,948,325
    
    
    
    3,001,522
    
    
    
    1,379,986
    
    
    
    2,580,011
    
    
    
    2,243,270
    
    
    
    695,645
    
    
    
    1,228,217
    
    
    
    20,510,199Net income (loss)
    
    $
    15,578
    
    
    $
    128,113
    
    
    $
    (120,024
    )
    
    $
    (59,275
    )
    
    $
    346,134
    
    
    $
    (59,678
    )
    
    $
    (175,407
    )
    
    $
    (130,815
    )
    
    $
    (400,977
    )
    
    $
    (689,036
    )
    
    $
    (75,764
    )
    
    $
    (1,221,151
    )Equity in net income (loss)
of real estate entities
    
    $
    20,591
    
    
    $
    1,240
    
    
    $
    (18,461
    )
    
    $
    (17,155
    )
    
    $
    (22,085
    )
    
    $
    (2,984

    )
    
    $
    (5,263
    )
    
    $
    (3,924
    )
    
    $
    (51,356
    )
    
    $
    (8,062
    )
    
    $
    (1,136
    )
    
    $
    (108,595
    )Other entities (Note b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,413,570$
    2,304,975
 23




---



##### 



COLUMBIA EQUITY TRUST, INC. PREDECESSOR
 INVESTMENTS IN REAL ESTATE ENTITIES
 CONDENSED STATEMENTS OF OPERATIONS
 For the Six Months Ended June 30, 2004
  King
    
    Sherwood
    
    
    
    
    
    Fair
    
    1575
    
    Independence
    
    MadisonStreet
    
    Plaza
    
    Greenbriar
    
    Oaks
    
    Associates
    
    Center
    
    Place
    
    Atrium
    
    Total(Note a)Revenues
    
    $
    2,471,926
    
    
    $
    964,070
    
    
    $
    1,085,751
    
    
    $
    1,357,554
    
    
    $
    4,470,877
    
    
    $
    2,191,057
    
    
    $
    1,066,125
    
    
    $
    443,816
    
    
    $
    14,051,176ExpensesOperating and other
    
    
    698,029
    
    
    
    344,610
    
    
    
    406,217
    
    
    
    578,713
    
    
    
    1,432,835
    
    
    
    843,273
    
    
    
    461,196
    
    
    
    84,129
    
    
    
    4,849,002Depreciation
    
    
    715,377
    
    
    
    200,290
    
    
    
    190,086
    
    
    
    241,120
    
    
    
    839,275
    
    
    
    825,602
    
    
    
    383,462
    
    
    
    170,343
    
    
    
    3,565,555Interest
    
    
    590,433
    
    
    
    168,425
    
    
    
    205,780
    
    
    
    213,905
    
    
    
    1,548,847
    
    
    
    578,520
    
    
    
    371,838
    
    
    
    228,613
    
    
    
    3,906,361Total expenses
    
    
    2,003,839
    
    
    
    713,325
    
    
    
    802,083
    
    
    
    1,033,738
    
    
    
    3,820,957
    
    
    
    2,247,395
    
    
    
    1,216,496
    
    
    
    483,085
    
    
    
    12,320,918Net income (loss)
    
    $
    468,087
    
    
    $
    250,745
    
    
    $
    283,668
    
    
    $
    323,816
    
    
    $
    649,920
    
    
    $
    (56,338
    )
    
    $
    (150,371
    )
    
    $
    (39,269
    )
    
    $
    1,730,258Equity in net income (loss)
of real estate entities
    
    $
    155,272
    
    
    $
    2,427
    
    
    $
    26,117
    
    
    $
    13,872
    
    
    $
    (21,176
    )
    
    $
    (2,817
    )
    
    $
    (4,511
    )
    
    $
    (1,179
    )
    
    $
    168,005Other entities (Note b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    168,005
 24




---



##### 



Summary of Significant Accounting Policies
       Mortgage Loans
  25




---



##### 



Interest
    
    
    
    June 30,
    
    December 31,Property
    
    Rate
    
    Maturity Date
    
    2005
    
    2004King Street
    
    5.06%
    
    March 1, 2008
    
    $
    21,881,562
    
    
    $
    22,000,000Sherwood Plaza (c)
    
    LIBOR + 2.50%
    
    July 1, 2008
    
    
    8,971,405
    
    
    
    9,071,517Greenbriar (c)
    
    LIBOR + 2.50%
    
    July 1, 2008
    
    
    10,579,970
    
    
    
    10,698,033Fair Oaks (c)
    
    LIBOR + 2.10%
    
    December 1, 2006
    
    
    10,200,000
    
    
    
    10,200,000Fair Oaks (c)
    
    LIBOR + 4.50%
    
    August 24, 2005
    
    
    6,440,000
    
    
    
    6,440,0001575 Associates (a)
    
    6.82%
    
    March 1, 2009
    
    
    42,454,939
    
    
    
    42,454,939Independence Center (b)
    
    5.04%
    
    September 10, 2009
    
    
    31,363,398
    
    
    
    31,689,834Madison Place
    
    4.49%
    
    August 1, 2008
    
    
    15,500,000
    
    
    
    15,500,000Atrium
    
    8.43%
    
    September 1, 2012
    
    
    18,259,001
    
    
    
    18,426,645Atrium
    
    6.21%
    
    September 1, 2012
    
    
    5,896,504
    
    
    
    5,949,053Meadows IV
    
    4.95%
    
    November 1, 2011
    
    
    19,000,000
    
    
    
    19,000,000Meadows IV (c)
    
    LIBOR + 4.50%
    
    May 1, 2006
    
    
    4,275,000
    
    
    
    4,375,000Victory Point
    
    LIBOR + 2.95%
    
    March 31, 2008
    
    
    14,800,000
    
    
    
    N/ASuffolk Building
    
    5.10%
    
    May 11, 2015
    
    
    42,000,000
    
    
    
    N/A
 
 (a)
    
    On April 14, 2005, the mortgage loan on 1575 Associates was converted, effective as of
January 1, 2005, from an amortizing loan with payments based on a 25 year amortization to an
interest-only loan with the entire principal balance due at maturity on March 1, 2009.(b)
    
    On August 20, 2004, Independence Center entered into a new mortgage agreement, borrowing
$31,850,000 at a rate of 5.04% over 5 years, with payments due in monthly installments of
$186,935, based on a 25 year amortization schedule. The remaining balance is due on September
10, 2009. The proceeds of the new borrowing were used to repay the existing mortgage and
finance tenant improvements.(c)
    
    On July 5, 2005 these mortgage notes were repaid as part of the formation transactions. 4. Notes Payable  Shareholders
  5. Income Taxes
  26




---



##### 



6. Fair Value of Financial Instruments
   7. Related Party Transactions
     8. Subsequent Events
    27




---



##### 



28




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
   Forward Looking Statements
   
    
    general risks affecting the commercial office property industry (including, without
limitation, the inability to enter into or renew leases, dependence on tenants financial
condition and competition from other developers, owners, operators and managers of real
estate);
    
    risks associated with the availability and terms of financing and the use of debt to
fund acquisitions and developments;
    
    failure to manage effectively (i) our growth, including the successful integration of
recent and future acquisitions and (ii) our transition from a privately held to a publicly
held company;
    
    risks and uncertainties affecting property development and construction (including,
without limitation, construction delays, cost overruns, inability to obtain necessary
permits and public opposition to such activities);
    
    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;
 29




---



##### 




    
    potential liability for uninsured losses and environmental contamination;
    
    risks associated with the potential failure to qualify as a REIT under the Internal
Revenue Code of 1986, as amended, and possible adverse changes in tax and environmental
laws;
    
    risks associated with possible federal, state and local tax audits;
    
    risks associated with our dependence on key personnel whose continued service is not
guaranteed; and
    
    the other risk factors identified in our Prospectus dated June 28, 2005, including those
described under the caption Risk Factors.
  Overview and Recent Developments
     30




---



##### 



Explanatory Note
       31




---



##### 



Office Market Trends
   
    
    employment growth;
    
    economic conditions;
    
    technological advances that improve operating efficiencies; and
    
    workspace density trends as defined by the average square footage of office space
occupied by an employee.
    Property
    
    OccupancyFair Oaks
    
    
    84
    %Greenbriar
    
    
    60Meadows IV (1)
    
    
    100Loudoun Gateway IV
    
    
    100Sherwood
    
    
    91Atrium
    
    
    100Madison Place
    
    
    79Independence Center
    
    
    91King Street
    
    
    85Suffolk Building
    
    
    1001575 Eye Street
    
    
    99Barlow Building (2)
    
    
    96Victory Point
    
    
    0Weighted Average (3)
    
    
    92
    %
 
 (1)
    
    Acquired from an unaffiliated third-party on July 8, 2005 as part of the Formation
Transactions.(2)
    
    Acquired from an unaffiliated third-party on July 15, 2005 as part of the Formation
Transactions.(3)
    
    Calculated as a weighted average based on net rentable square feet. Excludes the
occupancy of Victory Point which was acquired vacant and is in the initial stages of leasing. The weighted average occupancy
including Victory Point was approximately 86%. 32




---



##### 



Summary of Critical Accounting Policies and Estimates
    Revenue Recognition and Allowance for Doubtful Accounts Receivable
   33




---



##### 



Investments in Real Estate
       34




---



##### 



Assets Held for Sale
    Joint Ventures
  Depreciation, Amortization and Impairment of Long-Lived Assets
   35




---



##### 



Results of Operations
   Comparison of Three Months Ended June 30, 2005 to Three Months Ended June 30, 2004
 Fee Income
 Three Months Ended June 30,2005
    
    2004Transaction fees
    
    $
    467,534
    
    
    $
    352,750Asset management fees
    
    
    348,463
    
    
    
    137,698Total fee income
    
    $
    815,997
    
    
    $
    490,448
  General and Administrative Expenses.
 Equity in Net Income of Real Estate Entities.
  36




---



##### 



Three Months EndedJune 30,2005
    
    2004Revenues
    
    $
    10,285,293
    
    
    $
    7,538,475Operating and Other expenses
    
    
    4,134,430
    
    
    
    2,329,375Interest expense
    
    
    3,788,657
    
    
    
    2,128,068Depreciation and amortization
    
    
    3,460,727
    
    
    
    1,804,720Net income (loss)
    
    $
    (1,098,521
    )
    
    $
    1,276,312Columbia Predecessors share of net income (loss)
above in real estate entities (1)
    
    $
    (115,269
    )
    
    $
    2,142Cash distributions recorded as equity in net income
of real estate entities (1)
    
    
    
    
    
    
    33,929Equity in net income of other entities (2)
    
    
    2,317,327
    
    
    
    Equity in net income of real estate entities
    
    $
    2,202,058
    
    
    $
    36,071
 
 (1)
    
    Columbia Predecessors investment account in certain entities has been reduced to zero,
therefore: for the three months ended June 30, 2005 and 2004, cash distributions from these
entities were recorded as an increase in equity in net income of real estate entities.(2)
    
    Carr Capital held partnership interests in several entities that are not being sold or
transferred to the Company as part of the Formation Transactions. Amounts above represent the
equity in net income of investments in real estate entities for these entities for the
respective periods.  
    
    Combined revenues for the real estate entities increased $2.7 million, or 36.4%, to
$10.3 million for the three months ended June 30, 2005. The increase was due primarily to
the acquisition of the Suffolk Building property in May of 2005 resulting in an
additional $1.2 million of revenues; the acquisition of Meadows IV in October 2004
resulting in an additional $0.9 million of revenues; the acquisition of Atrium in May
2004 resulting in an additional $0.8 million of revenues; and increased revenues of $0.4
million at Independence Center due to higher average occupancy levels. The revenue
increases were partially offset by revenue declines of $0.5 million, collectively, at the
King Street and Greenbriar properties due to lower occupancy levels.
 37




---



##### 




    
    Combined operating and other expenses for the real estate entities increased $1.8
million, or
77.5%, to $4.1 million for the three months ended June 30, 2005. The increase was due
primarily to the acquisition of Atrium in May 2004 resulting in an additional $0.4 million
of expenses; the acquisition of Meadows IV in October 2004 resulting in an additional $0.3
million of expenses; the acquisition of Suffolk Building in May 2005 resulting in an
additional $0.3 million of expenses; the acquisition of Victory Point in March 2004
resulting in an additional $0.2 million of expenses and increased operating expenses at 1575
Associates of $0.2 million due primarily to higher franchise taxes.
    
    Combined interest expense for the real estate entities increased $1.7 million, or 78.0%,
to $3.8 million for the three months ended June 30, 2005 due primarily to additional
expenses resulting from: (i) higher loan balances for Independence Center; (ii) the
acquisition financing of Atrium in May 2004; and (iii) the acquisition financing of Meadows
IV in October 2004; (iv) the acquisition financing of Victory Point in March 2005; and (v)
the acquisition financing of Suffolk Building in May 2005.
    
    Combined depreciation and amortization expense for the real estate entities increased $1.7
million, or 91.8%, to $3.5 million for the three months ended June 30, 2005 due primarily to higher
depreciation associated with the acquisitions of Atrium and Meadows IV in 2004; and Suffolk
Building and Victory Point in 2005.
 Comparison of the Six Months Ended June 30, 2005 to the Six Months Ended June 30, 2004
 Fee Income
 Six Months Ended June 30,2005
    
    2004Transaction fees
    
    $
    737,162
    
    
    $
    352,750Asset management fees
    
    
    701,194
    
    
    
    256,192Total fee income
    
    $
    1,438,356
    
    
    $
    608,942
  General and Administrative Expenses.
 Equity in Net Income of Real Estate Entities.
 38




---



##### 



Six Months EndedJune 30,2005
    
    2004Revenues
    
    $
    19,289,048
    
    
    $
    14,051,176Operating and Other expenses
    
    
    7,555,843
    
    
    
    4,849,002Interest expense
    
    
    6,841,186
    
    
    
    3,906,361Depreciation and amortization
    
    
    6,113,170
    
    
    
    3,565,555Net income (loss)
    
    $
    (1,221,151
    )
    
    $
    1,730,258Columbia Predecessors share of net income (loss)
above in real estate entities (1)
    
    $
    (129,186
    )
    
    $
    (1,139
    )Cash distributions recorded as equity in net income
of real estate entities (1)
    
    
    20,591
    
    
    
    169,144Equity in net income of other entities (2)
    
    
    2,413,570
    
    
    
    Equity in net income of real estate entities
    
    $
    2,304,975
    
    
    $
    168,005
 
 (1)
    
    Columbia Predecessors investment account in certain entities has been reduced to zero,
therefore: (i) for the six months ended June 30, 2005
losses not recognized were $20,591 and
(ii) cash distributions from these entities were recorded as an increase in equity in net income
of real estate entities.(2)
    
    Carr Capital held partnership interests in several entities that are not being sold or
transferred to the Company as part of the Formation Transactions. Amounts above represent the
equity in net income of investments in real estate entities for these entities for the
respective periods.  
    
    Combined revenues for the real estate entities increased $5.2 million or 37.3%, to $19.3
million for the six months ended June 30, 2005. The increase was due primarily to the
acquisition of the Suffolk Building property in May of 2005 resulting in an additional $1.2
million of revenues; the acquisition of Meadows IV in October 2004 resulting in an
additional $1.8 million of revenues; the acquisition of Atrium in May 2004 resulting in an
additional $2.0 million of revenues; and increased revenues of $0.8 million at Independence
Center due to higher average occupancy levels. The revenue increases were partially offset
by revenue declines of $0.5 million, collectively, at the King Street and Greenbriar
properties due to lower occupancy levels.
 39




---



##### 




    
    Combined operating and other expenses for the real estate entities increased by $2.7
million or
55.8%, to $7.6 million for the six months ended June 30, 2005. The increase was due
primarily to the acquisition of Atrium in May 2004 resulting in an additional $0.7 million
of expenses; the acquisition of Meadows IV in October 2004 resulting in an additional $0.7
million of expenses; the acquisition of Suffolk Building in May 2005 resulting in an
additional $0.3 million of expenses; the acquisition of Victory Point in March 2004
resulting in an additional $0.2 million of expenses; increased operating expenses at 1575
Associates of $0.3 million due primarily to higher franchise taxes; and increased operating
expenses at Independence Center $0.2 million due to higher occupancy levels.
    
    Combined interest expense for the real estate entities increased $2.9 million, or
75.1%, to $6.8 million for the six months ended June 30, 2005 due primarily to additional
expenses resulting from: (i) higher loan balances for Independence Center; (ii) the
acquisition financing of Atrium in May 2004; and (iii) the acquisition financing of Meadows
IV in October 2004; (iv) the acquisition financing of Victory Point in March 2005; and (v)
the acquisition financing of Suffolk Building in May 2005.
    
    Combined depreciation and amortization expense for the real estate entities increased
$2.5 million or 71.5%, to $6.1 million for the six months ended June 30, 2005 due
primarily to higher depreciation associated with the acquisitions of Atrium and Meadows IV
in 2004; and Suffolk Building and Victory Point in 2005.
 Liquidity and Capital Resources
   Short-Term Liquidity Requirements
  
    
    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.
 40




---



##### 



Long-Term Liquidity Requirements
  Commitments
  41




---



##### 



OutstandingPrincipal
    
    Pro FormaAnnual
    
    Balance as of
    
    OutstandingInterest
    
    Maturity
    
    Debt
    
    June 30,
    
    PrincipalRate
    
    Date
    
    Service
    
    2005
    
    BalanceFixed Rate DebtKing Street
    
    5.06%
    
    
    3/1/2008
    
    
    $
    1,584,958
    
    
    $
    21,881,562
    
    
    $
    21,881,562Madison Place
    
    4.49
    
    
    8/1/2008
    
    
    
    685,952
    (1)
    
    
    15,500,000
    
    
    
    15,500,0001575 Eye Street
    
    6.82
    
    
    3/1/2009
    
    
    
    3,713,100
    
    
    
    42,454,939
    
    
    
    42,454,939Independence Center
    
    5.04
    
    
    9/10/2009
    
    
    
    2,243,219
    
    
    
    31,363,398
    
    
    
    31,363,398Meadows IV
    
    4.95
    
    
    11/1/2011
    
    
    
    971,850
    
    
    
    19,000,000
    
    
    
    19,000,000Atrium
    
    8.43
    
    
    9/1/2012
    
    
    
    1,882,812
    
    
    
    18,259,001
    
    
    
    18,259,001Atrium
    
    6.21
    
    
    9/1/2012
    
    
    
    473,184
    
    
    
    5,896,504
    
    
    
    5,896,504Suffolk
    
    5.10
    
    
    5/11/2015
    
    
    
    2,142,000
    
    
    
    42,000,000
    
    
    
    42,000,00013,697,075
    
    
    
    196,355,404
    
    
    
    196,355,404Floating Rate Debt (3)Fair Oaks (2)
    
    LIBOR + 4.50%
    
    
    8/24/2005
    
    
    
    511,020
    
    
    
    6,440,000
    
    
    
    Fair Oaks
    
    LIBOR + 2.10
    
    
    12/1/2006
    
    
    
    485,331
    
    
    
    10,200,000
    
    
    
    Sherwood Plaza
    
    LIBOR + 2.50
    
    
    7/1/2008
    
    
    
    667,523
    
    
    
    8,971,405
    
    
    
    Greenbriar
    
    LIBOR + 2.50
    
    
    7/1/2008
    
    
    
    787,209
    
    
    
    10,579,970
    
    
    
    Meadows IV (2)
    
    LIBOR + 4.50
    
    
    5/1/2006
    
    
    
    325,048
    
    
    
    4,275,000
    
    
    
    Victory Point
    
    LIBOR + 2.95
    
    
    3/31/2008
    
    
    
    825,100
    
    
    
    14,800,000
    
    
    
    14,800,0003,601,231
    
    
    
    55,266,375
    
    
    
    14,800,000$
    17,298,306
    
    
    $
    251,621,779
    

    
    $
    211,155,404
 
 (1)
    
    Beginning in September 2005, annual debt service of principal and interest increases to
$1,032,792.(2)
    
    Mezzanine debt secured by partnership interests in the entity that owns the property.(3)
    
    Annual debt service for floating rate debt estimated based on interest rates in effect at
June 30, 2005.  Payments by Period2005
    
    2006-2007
    
    2008-2009
    
    Thereafter
    
    TotalSecured notes payable
    
    $
    1,135,999
    
    
    $
    15,260,994
    
    
    $
    141,780,549
    
    
    $
    82,729,237
    
    
    $
    240,906,779Mezzanine loans payable
    
    
    6,590,000
    
    
    
    1,075,000
    
    
    
    1,200,000
    
    
    
    1,850,000
    
    
    
    10,715,0007,725,999
    
    
    
    16,335,994
    
    
    
    142,980,549
    
    
    
    84,579,237
    
    
    
    251,621,779Investments in initial
properties (1)
    
    
    81,625,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,625,678Total
    
    $
    89,351,677
    
    
    $
    16,335,994
    
    
    $
    142,980,549
    
    
    $
    84,579,237
    
    
    $
    333,247,457
 
 (1)
    
    Represents cash portion of contractual obligations relating to our investments in
the Initial Properties as described in detail under the heading Use of Proceeds in the
Companys Registration Statement on Form S-11 (Registration No. 333-122644) filed on
June 28, 2005 (the Registration Statement) with the
Securities and Exchange Commission
(the SEC) in connection with our IPO. In addition, we issued Units in July 2005 in the
Formation Transactions having a value of approximately $20.4 million in exchange for
interests in the Initial Properties and the acquisition of certain asset management
agreements. 42




---



##### 



Cash Distribution Policy
  New Accounting Standards
   43




---



##### 



Inflation
  Geographic Concentration
  Pro Forma Combined Financial Statements (Unaudited)
  
    
    Initial public offering of 13,800,000 shares (including shares purchased
pursuant to the exercise of the over-allotment option) of our common stock at
$15.00 per share, with estimated net proceeds of $188.6 million, net of the
underwriters discount and other offering costs, and contribution of the net
proceeds to our Operating Partnership.
 44




---



##### 




    
    Acquisition of 100% of the ownership interests in the properties commonly
referred to as Greenbriar, Sherwood Plaza, Fair Oaks, Meadows IV and Loudoun
Gateway IV for cash of approximately $39.3 million, and the issuance of 3,680
Units with a value of $0.1 million. The acquisitions have been reflected at the
estimated fair value of the consideration exchanged for the amounts paid and
Units issued to third parties and related parties and at historical cost for
the amounts applicable to interests owned by Columbia Predecessor.
    
    Acquisition of joint venture ownership interests in the properties commonly
referred to as Independence Center, King Street, Madison Place, Atrium, 1575
Eye Street, Victory Point, Suffolk Building and Barlow Building for cash of
approximately $41.4 million and the issuance of 5,563 Units with a value of
$0.1 million. The acquisitions have been reflected at the estimated fair value
of the consideration exchanged for the amounts paid and Operating Partnership
units issued to third parties and related parties and at historical cost for
the amounts applicable to interests owned by Columbia Predecessor.
    
    Repayment of approximately $40.7 million in debt related to the wholly
owned properties, including prepayment fees of $0.2 million.
    
    Assumption of $19.0 million in debt related to the acquisition of the
Meadows IV property.
    
    A stock split in the form of a stock dividend to a management member who
held 1,000 shares, issuing 62,334 additional shares with a fair value of
$949,010, based on the IPO price. The Company recorded compensation expense
of $949,010 at the time of the IPO based on the fair value of the Companys
stock on the grant date, which will be reflected in general and administrative
expense in the financial statements for the three month period ended September
30, 2005.
    
    The granting of 290,000 LTIP Units at the offering with a value of
$4,350,000. 35,000 of the LTIP Units granted immediately vested upon grant and
an expense of $525,000 was recognized at that time and will be reflected in
general and administrative expense in the financial statements for the three
month period ended September 30, 2005. The remaining LTIP Units, which have a
value of $3,825,000, will vest and be recognized as expense ratably over a
five-year period, beginning on the date of grant.
  45




---



##### 



Pro Forma Balance Sheet as of June 30, 2005
 ASSETSReal estate, net
    
    $
    88,589,000Cash and cash equivalents
    
    
    68,135,000Accounts and other receivables
    
    
    149,000Furniture, fixtures and equipment, net
    
    
    25,000Investments in real estate entities
    
    
    44,892,000Intangible assets
    
    
    13,445,000Other assets
    
    
    520,000Total assets
    
    $
    215,755,000LIABILITIES AND OWNERS EQUITYLIABILITIESAccounts payable and accrued expenses
    
    $
    701,000Notes payable
    
    
    19,000,000Deferred liabilities
    
    
    1,079,000Other liabilities
    
    
    1,097,000Total liabilities
    
    
    21,877,000MINORITY INTERESTS
    
    
    14,282,000OWNERS EQUITYCommon shares and paid-in capital
    
    
    175,942,000Accumulated equity
    
    
    3,654,000Total owners equity
    
    
    179,596,000TOTAL LIABILITIES AND OWNERS EQUITY
    
    $
    215,755,000
 46




---



##### 



Pro Forma Statement of Operations
For the Six Months Ended June 30, 2005
 RevenuesRental
    
    $
    6,176,000Fee income
    
    
    784,000Total revenues
    
    
    6,960,000Operating expensesOperating and other
    
    
    2,309,000General and administrative
    
    
    3,477,000Depreciation and amortization
    
    
    2,346,000Total operating expenses
    
    
    8,132,000Loss from operations
    
    
    (1,172,000
    )Other income (expense)Interest income
    
    
    20,000Interest expense
    
    
    (474,000
    )Equity in net income of
real estate entities
    
    
    (237,000
    )Minority interest
    
    
    137,000Loss before income taxes
    
    
    (1,726,000
    )Provision for income taxes
    
    
    Net loss
    
    $
    (1,726,000
    )Net loss per common share  Basic
    
    $
    (0.12
    )Weighted average common shares
outstanding  Basic
    
    
    14,965,779Net loss per common share  Diluted
    
    $
    (0.12
    )Weighted average common shares
outstanding  Diluted
    
    
    14,965,779Reconciliation of Pro Forma Net Loss to FFO (1)Pro forma net loss
    
    $
    (1,726,000
    )Plus:Depreciation and amortization on
wholly owned properties
    
    
    2,346,000Depreciation and amortization attributable to
uncombined real estate entities
    
    
    2,274,000Minority interest
    
    
    (137,000
    )Pro forma FFO (1)
    
    $
    2,757,000
 47




---



##### 



(1)
    
    As defined by the National Association of Real Estate Investment Trusts, or
NAREIT, Funds form Operations, FFO represents net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from sales of property, plus real
estate-related depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint
ventures will be calculated to reflect funds from operations on the same basis. Our
interpretation of the NAREIT definition is that minority interest in net income (loss)
should be added back (deducted) from net income (loss) as part of reconciling net
income (loss) to FFO. We present FFO because we believe it facilitates an
understanding of the operating performance of our properties without giving effect to
real estate depreciation and amortization, which assumes that the value of real estate
diminishes ratably over time. Historically, however, real estate values have risen or
fallen with market conditions. Because FFO excludes depreciation and amortization
unique to real estate, gains and losses from property dispositions and extraordinary
items, it provides a performance measure that, when compared year over year, reflects
the impact to operations from trends in occupancy rates, rental rates, operating
costs, development activities and interest costs, providing perspective not
immediately apparent from net income. Our FFO computation may not be comparable to FFO
reported by other REITs that do not compute FFO in accordance with the NAREIT
definition or that interpret the NAREIT definition differently than we do. FFO does not
represent cash generated from operating activities in accordance with GAAP and should
not be considered to be an alternative to net income (loss) (determined in accordance
with GAAP) as a measure of our liquidity, nor is it indicative of funds available for
our cash needs, including cash distributions to stockholders. 48




---



##### 



Item 3. Quantitative and Qualitative Disclosure About Market Risk
      Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  49




---



##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 2. Changes in Securities and Use of Proceeds
 Use of Proceeds from Registered Securities
   Unregistered Securities
   50




---



##### 



Item 3. Defaults upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other information
  Item 6. Exhibits
 31.1
    
    Section 302 Certification from Mr. Oliver T. Carr, dated August 15, 200531.2
    
    Section 302 Certification from Mr. John A. Schissel, dated August 15, 200532.1

    
    Section 906 Certification from Mr. Oliver T. Carr, III and John A. Schissel,
dated August 15, 2005
 51




---



##### 



SIGNATURES
  COLUMBIA EQUITY TRUST, INC.Date: August 15, 2005
    
    By:
    
    /s/ Oliver T. Carr, IIIOliver T. Carr, IIIPresident and Chief Executive OfficerDate: August 15, 2005
    
    By:
    
    /s/ John A. SchisselJohn A. SchisselExecutive Vice President and
Chief Financial Officer
 52




---



##### 



EXHIBIT INDEX
 No.
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a14(a) and Rule 15d-14(a)
of the Securities Exchange Act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a14(a) and Rule 15d-14(a)
of the Securities Exchange Act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 53