UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM 10 -
Q





(Mark
One)


x           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the
quarterly period ended June 30, 2008.





OR





o           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the
transition period from _________ to __________.





Commission
File Number:  001-32470





Franklin
Street Properties Corp.


(Exact
name of registrant as specified in its charter)








Maryland
            04-3578653(State
      or other jurisdiction of incorporation
            (IRS
      Employer Identification Number)or
      organization)





401
Edgewater Place, Suite 200


Wakefield,
MA 01880-6210


(Address
of principal executive offices)(Zip Code)





(781)
557-1300


(Registrant’s
telephone number, including area code)





N/A


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





YES     x
            NO     o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer x
            Accelerated
      filer oNon-accelerated
      filer  o
      (Do not check if a smaller reporting company)
            Smaller
      reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).





YES     o
            NO     x





The
number of shares of common stock outstanding as of July 28, 2008 was
70,480,705.





Franklin
Street Properties Corp.





Form
10-Q





Quarterly
Report


June 30,
2008





Table of
Contents








Part
      I.
            Financial
      InformationPageItem
      1.
            Financial
      StatementsCondensed
      Consolidated Balance Sheets as of June 30, 2008 and December 31,
      2007
            3Condensed
      Consolidated Statements of Income for the three and six months
      endedJune
      30, 2008 and 2007
            4Condensed
      Consolidated Statements of Cash Flows for the six months
    endedJune
      30, 2008 and 2007
            5-6Notes
      to Condensed Consolidated Financial Statements
            7-17Item
      2.
            Management’s
      Discussion and Analysis of Financial Conditionand
      Results of Operations
            18-26Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            27Item
      4.
            Controls
      and Procedures
            28Part
      II.
            Other
      InformationItem
      1.
            Legal
      Proceedings
            29Item
      1A.
            Risk
      Factors
            29Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            29Item
      3.
            Defaults
      Upon Senior Securities
            30Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            30Item
      5.
            Other
      Information
            30Item
      6.
            Exhibits
            30Signatures
            
            31











PART
I – FINANCIAL INFORMATION


Item
1.                 Financial
Statements





Franklin
      Street Properties Corp.Condensed
      Consolidated Balance Sheets(Unaudited)June
      30,
            
            
            December 31,(in
      thousands, except share and par value amounts)
            
            2008
            
            
            2007Assets:Real
      estate assets:Land
            
            $
            100,440
            
            
            $
            99,140Buildings
      and improvements
            
            
            778,107
            
            
            
            743,027Fixtures
      and equipment
            
            
            219
            
            
            
            212878,766
            
            
            
            842,379Less
      accumulated depreciation
            
            
            63,056
            
            
            
            52,060Real
      estate assets, net
            
            
            815,710
            
            
            
            790,319Acquired
      real estate leases, less accumulated amortizationof
      $28,213 and $23,401, respectively
            
            
            30,905
            
            
            
            33,695Investment
      in non-consolidated REITs
            
            
            84,609
            
            
            
            85,663Assets
      held for syndication, net
            
            
            14,039
            
            
            
            26,310Cash
      and cash equivalents
            
            
            34,386
            
            
            
            46,988Restricted
      cash
            
            
            336
            
            
            
            336Tenant
      rent receivables, less allowance for doubtful accountsof
      $509 and $430, respectively
            
            
            989
            
            
            
            1,472Straight-line
      rent receivable, less allowance for doubtful accountsof
      $261 and $261, respectively
            
            
            7,894
            
            
            
            7,387Prepaid
      expenses
            
            
            1,061
            
            
            
            1,395Other
      assets
            
            
            1,588
            
            
            
            406Office
      computers and furniture, net of accumulated depreciationof
      $1,038 and $968, respectively
            
            
            331
            
            
            
            309Deferred
      leasing commissions, net of accumulated amortizationof
      $2,574, and $1,975, respectively
            
            
            10,509
            
            
            
            9,186Total
      assets
            
            $
            1,002,357
            
            
            $
            1,003,466Liabilities and Stockholders’
      Equity:Liabilities:Bank note
      payable
            
            $
            109,995
            
            
            $
            84,750Accounts payable and accrued
      expenses
            
            
            18,984
            
            
            
            20,255Accrued
      compensation
            
            
            1,845
            
            
            
            1,564Tenant security
      deposits
            
            
            1,810
            
            
            
            1,874Acquired unfavorable real estate
      leases, less accumulated amortizationof $1,455, and $1,226, respectively
            
            
            4,883
            
            
            
            4,405Total liabilities
            
            
            137,517
            
            
            
            112,848Commitments and
      contingenciesStockholders’
      Equity:Preferred
      stock, $.0001 par value, 20,000,000 shares
              authorized, none issued or
      outstanding
            
            
            -
            
            
            
            -Common
      stock, $.0001 par value, 180,000,000 shares authorized,
              70,480,705 and 70,480,705
      shares issued and outstanding, respectively
            
            
            7
            
            
            
            7Additional
      paid-in capital
            
            
            889,019
            
            
            
            889,019Earnings
      (distributions) in excess of accumulated
      earnings/distributions
            
            
            (24,186
            )
            
            
            1,592Total
      stockholders’ equity
            
            
            864,840
            
            
            
            890,618Total
      liabilities and stockholders’ equity
            
            $
            1,002,357
            
            
            $
            1,003,466The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.








3


Franklin
Street Properties Corp.


Condensed
Consolidated Statements of Income


(Unaudited)





For
      the
              Three
      Months Ended
              June
      30,
            
            
            For
      the
              Six
      Months Ended
              June
      30,(in
      thousands, except per share amounts)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Revenue:Rental
            
            $
            27,700
            
            
            $
            22,896
            
            
            $
            54,356
            
            
            $
            48,001Related
      party revenue:Syndication
      fees
            
            
            3,257
            
            
            
            3,448
            
            
            
            3,462
            
            
            
            6,403Transaction
      fees
            
            
            3,138
            
            
            
            3,761
            
            
            
            3,306
            
            
            
            6,842Management
      fees and interest income from loans
            
            
            423
            
            
            
            1,862
            
            
            
            984
            
            
            
            3,679Other
            
            
            19
            
            
            
            9
            
            
            
            39
            
            
            
            47Total
      revenue
            
            
            34,537
            
            
            
            31,976
            
            
            
            62,147
            
            
            
            64,972Expenses:Real
      estate operating expenses
            
            
            7,116
            
            
            
            5,668
            
            
            
            13,815
            
            
            
            11,875Real
      estate taxes and insurance
            
            
            4,505
            
            
            
            3,923
            
            
            
            8,784
            
            
            
            8,092Depreciation
      and amortization
            
            
            7,591
            
            
            
            6,778
            
            
            
            14,950
            
            
            
            13,954Selling,
      general and administrative
            
            
            2,621
            
            
            
            2,000
            
            
            
            4,630
            
            
            
            3,888Commissions
            
            
            1,654
            
            
            
            1,754
            
            
            
            1,812
            
            
            
            3,313Interest
            
            
            1,051
            
            
            
            1,622
            
            
            
            2,243
            
            
            
            4,298Total
      expenses
            
            
            24,538
            
            
            
            21,745
            
            
            
            46,234
            
            
            
            45,420Income
      before interest income, equity in earnings (losses) ofnon-consolidated
      REITs and taxes
            
            
            9,999
            
            
            
            10,231
            
            
            
            15,913
            
            
            
            19,552Interest
      income
            
            
            176
            
            
            
            560
            
            
            
            479
            
            
            
            1,213Equity
      in earnings (losses) of non-consolidated REITs
            
            
            694
            
            
            
            (142
            )
            
            
            1,487
            
            
            
            (758
            )Income
      before taxes
            
            
            10,869
            
            
            
            10,649
            
            
            
            17,879
            
            
            
            20,007Income
      tax expense (benefit)
            
            
            335
            
            
            
            425
            
            
            
            (41
            )
            
            
            721Income
      from continuing operations
            
            
            10,534
            
            
            
            10,224
            
            
            
            17,920
            
            
            
            19,286Income
      from discontinued operations
            
            
            -
            
            
            
            662
            
            
            
            -
            
            
            
            1,331Gain
      on sale of assets
            
            
            -
            
            
            
            21,590
            
            
            
            -
            
            
            
            21,590Net
      income
            
            $
            10,534
            
            
            $
            32,476
            
            
            $
            17,920
            
            
            $
            42,207Weighted
      average number of shares outstanding,basic
      and diluted
            
            
            70,481
            
            
            
            70,766
            
            
            
            70,481
            
            
            
            70,766Earnings
      per share, basic and diluted, attributable to:Continuing
      operations
            
            $
            0.15
            
            
            $
            0.14
            
            
            $
            0.25
            
            
            $
            0.27Discontinued
      operations
            
            
            -
            
            
            
            0.01
            
            
            
            -
            
            
            
            0.02Gains
      on sales of assets
            
            
            -
            
            
            
            0.31
            
            
            
            -
            
            
            
            0.31Net
      income per share, basic and diluted
            
            $
            0.15
            
            
            $
            0.46
            
            
            $
            0.25
            
            
            $
            0.60The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.





4


Franklin
Street Properties Corp.


Condensed
Consolidated Statements of Cash Flows


(Unaudited)


For
      the
              Six
      Months Ended
              June
      30,(in
      thousands)
            
            2008
            
            
            2007Cash
      flows from operating activities:Net
      income
            
            $
            17,920
            
            
            $
            42,208Adjustments
      to reconcile net income to net cash
              provided
      by  operating activities:Gains
      on assets sold
            
            
            -
            
            
            
            (21,590
            )Depreciation
      and amortization expense
            
            
            14,973
            
            
            
            14,938Amortization
      of above market lease
            
            
            2,259
            
            
            
            2,569Equity
      in earnings (losses) from non-consolidated REITs
            
            
            (1,487
            )
            
            
            725Distributions
      from non-consolidated REITs
            
            
            2,277
            
            
            
            723Increase
      in bad debt reserve
            
            
            79
            
            
            
            -Changes
      in operating assets and liabilities:Restricted
      cash
            
            
            1
            
            
            
            79Tenant
      rent receivables, net
            
            
            404
            
            
            
            334Straight-line
      rents, net
            
            
            (507
            )
            
            
            (2,049
            )Prepaid
      expenses and other assets, net
            
            
            160
            
            
            
            861Accounts
      payable and accrued expenses
            
            
            (2,002
            )
            
            
            (2,074
            )Accrued
      compensation
            
            
            281
            
            
            
            (1,726
            )Tenant
      security deposits
            
            
            (64
            )
            
            
            39Payment
      of deferred leasing commissions
            
            
            (2,131
            )
            
            
            (2,669
            )Net
      cash provided by operating activities
            
            
            32,163
            
            
            
            32,368Cash
      flows from investing activities:Purchase
      of real estate assets, office computers and
              furniture,
      capitalized merger costs
            
            
            (34,903
            )
            
            
            (72,416
            )Purchase
      of acquired favorable and unfavorable leases
            
            
            (2,067
            )
            
            
            (3,726
            )Investment
      in non-consolidated REITs
            
            
            (10
            )
            
            
            (9
            )Investment
      in loan receivable
            
            
            (1,000
            )
            
            
            -Redemption
      of certificate of deposit
            
            
            -
            
            
            
            5,143Investment
      in assets held for syndication, net
            
            
            11,698
            
            
            
            (74,420
            )Proceeds
      received on sales of real estate assets
            
            
            -
            
            
            
            74,812Net
      cash used in investing activities
            
            
            (26,282
            )
            
            
            (70,616
            )Cash
      flows from financing activities:Distributions
      to stockholders
            
            
            (43,698
            )
            
            
            (43,875
            )Repayments
      under bank note payable
            
            
            25,245
            
            
            
            119,750Deferred
      financing costs
            
            
            (30
            )
            
            
            -Net
      cash (used in) provided by financing activities
            
            
            (18,483
            )
            
            
            75,875Net
      increase (decrease) in cash and cash equivalents
            
            
            (12,602
            )
            
            
            37,627Cash
      and cash equivalents, beginning of period
            
            
            46,988
            
            
            
            69,973Cash
      and cash equivalents, end of period
            
            $
            34,386
            
            
            $
            107,600The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.








5


Franklin
Street Properties Corp.


Condensed
Consolidated Statements of Cash Flows


(Unaudited)





For
      the
              Six
      Months Ended
              June
      30,(in
      thousands)
            
            2008
            
            
            2007Non-cash investing and financing
      activities:Accrued costs for purchase of real
      estate assets
            
            $
            2,027
            
            
            $
            963Deposits on investments in assets
      held for syndication
            
            $
            -
            
            
            $
            5,010Investment in non-consolidated REITs converted to real
      estate assetsand acquired real estate leases in conjunction with
      merger
            
            $
            1,162
            
            
            $
            -The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.





6
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 1.      Organization,
Properties, Basis of Presentation and Recent Accounting
Pronouncements
 
 Organization
 
 Franklin
Street Properties Corp. (“FSP Corp.” or the “Company”) holds, directly and
indirectly, 100% of the interest in FSP Investments LLC, FSP Property Management
LLC, FSP Holdings LLC and FSP Protective TRS Corp.  The Company also
has a non-controlling common stock interest in twelve corporations organized to
operate as real estate investment trusts ("REITs") and a non-controlling
preferred stock interest in two of those REITs.
 
 The
Company operates in two business segments: real estate operations and investment
banking/investment services. FSP Investments LLC provides real estate investment
and broker/dealer services. FSP Investments LLC's services include: (i) the
organization of REIT entities (the "Sponsored REITs"), which are syndicated
through private placements; (ii) sourcing of the acquisition of real estate on
behalf of the Sponsored REITs; and (iii) the sale of preferred stock in the
Sponsored REITs.  FSP Investments LLC is a registered broker/dealer
with the Securities and Exchange Commission and is a member of the Financial
Industry Regulatory Authority, or FINRA.  FSP Property Management LLC
provides asset management and property management services for the Sponsored
REITs.
 
 The Company owns and operates a
portfolio of real estate, which consisted of 27 properties as ofJune 30, 2008.  From time-to-time the
Company may acquire real estate or invest in real estate by purchasing shares of
preferred stock offered in syndications of Sponsored REITs.  The
Company may also pursue, on a selective basis, the sale of its properties in
order to take advantage of the value creation and demand for its properties, or
for geographic or property specific reasons.
 
 On May
15, 2008, the Company acquired one of its Sponsored REITs, FSP Park Ten
Development Corp. (“Park Ten Development”) by merging a wholly-owned subsidiary
of the Company with and into Park Ten Development for a total purchase price of
approximately $35.4 million.  The holders of preferred stock in Park
Ten Development received cash consideration of approximately $127,290 per
share.  The merger was accounted for as a purchase and the acquired
assets and liabilities were recorded at their fair value.
 
 Properties
 
 The
following table summarizes the Company’s investment in real estate assets,
excluding assets held for syndication and assets held for sale:
 
 As
      ofJune
      30,2008
              
              2007Commercial
      real estate:Number
      of properties
              27
              
              25Square
      feet
              5,153,396
              
              4,672,475
 
 Basis
of Presentation
 
 The
unaudited condensed consolidated financial statements of the Company include all
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. These financial
statements should be read in conjunction with the Company's consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for its fiscal year ended December 31, 2007, as filed with the
Securities and Exchange Commission.
 
 The
accompanying interim financial statements are unaudited; however, the financial
statements have been prepared in accordance with generally accepted accounting
principles (“GAAP”) in the United States of America for interim financial
information and in conjunction with the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the disclosures
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring matters) necessary for a fair
presentation of the financial statements for these interim periods have been
included.  Operating results for the three and six months ended June
30, 2008 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2008 or for any other period.
 
  7
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 1.      Organization,
Properties, Basis of Presentation and Recent Accounting Pronouncements
(continued)
 
 Reclassifications
 
 Certain amounts from the 2007 income
statement have been reclassified to conform to the 2008
presentation.  The reclassificationprimarily reflected a state tax on gross
receipts as an income tax, which is further described in the income tax
footnote.Thereclassification changedthe amount of real estate taxes and
insurance and income taxes presented on the Company’s 2007 income statement.There was no
change to net incomeas a
result of this reclassification.
 
 Recent
Accounting Standards
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value Measurements, which defines fair value, establishes a
framework for measuring fair value in GAAP, and expands disclosures about fair
value measurements.  SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute.  SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years.  The adoption of this
standard did not have a material impact on the Company’s financial position,
operations or cash flow.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities — Including an amendment of FASB Statement No.
115, which permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured
at fair value and establishes presentation and disclosure requirements designed
to facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. This Statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The adoption of this standard did not have a material impact
the Company’s financial position, results of operations or cash
flows.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations, which establishes principles and requirements for how the acquirer
shall recognize and measure in its financial statements the identifiable assets
acquired, liabilities assumed, any noncontrolling interest in the acquiree and
goodwill acquired in a business combination. SFAS No. 141(R) is effective for
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. The Company is currently assessing the potential impact that the
adoption of SFAS No. 141(R) will have on our financial position, results of
operations or cash flows.
 
 2.      Investment
Banking/Investment Services Activity
  
 During
the six months ended June 30, 2008, the Company has sold on a best efforts
basis, through private placements, preferred stock in the following Sponsored
REITs:
 
 Sponsored
      REIT
              Property
      Location
              
              Gross
      Proceeds (1)(in
      thousands)FSP
      Grand Boulevard Corp.
              Kansas
      City, MO
              
              $
              21,175FSP
      385 Interlocken Development Corp.
              Broomfield,
      CO
              
              
              31,350Total
              
              $
              52,525
 
 (1). The
syndications of FSP Grand Boulevard Corp. (“Grand Boulevard”), which commenced
in September 2007, and FSP 385 Interlocken Development Corp. (“385
Interlocken”), which commenced in June 2008, were not complete at June 30,
2008.
 
 
  8
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 3.      Related
Party Transactions and Investments in Non-Consolidated Entities
 
 Investment
in Sponsored REITs:
 
 At June
30, 2008, the Company held an interest in twelve Sponsored REITs.  Ten
were fully syndicated and the Company no longer derives economic benefits or
risks from the common stock interest that is retained in them.  The
Company holds a non-controlling preferred stock investment in two of these
Sponsored REITs, FSP Phoenix Tower Corp. (“Phoenix Tower”) and FSP 303 East
Wacker Drive Corp. (“East Wacker”), from which it continues to derive economic
benefits and risks.  The remaining entities that were not fully
syndicated at June 30, 2008 are Grand Boulevard and 385
Interlocken.  Grand Boulevard has a carrying value of approximately
$14.0 million and $26.3 million on the accompanying condensed consolidated
balance sheets as of June 30, 2008 and December 31, 2007, respectively and is
classified as an asset held for syndication.
 
 The table below shows the Company’s
share ofrevenuesand expenses from Sponsored REITs prior
to consolidation.  Management fees of $18,000and interest expenseon acquisition loansmade by the Company to Sponsored REITsfor thesix monthsendedJune 30, 2007are eliminated in
consolidation.
  Six Months EndedJune
      30,(in
      thousands)
              
              2007Operating
      Data:Rental
      revenues
              
              $
              2,079Operating
      and maintenanceexpenses
              
              
              (1,102
              )Depreciation
      and amortization
              
              
              (442
              )Interest
      expense
              
              
              (992
              )Interest
      income
              
              
              39$
              (418
              )
 
 Equity in earnings (losses) of
investment in
non-consolidated Sponsored REITs:
 
 The
following table includes equity in earnings (losses) of investments in
non-consolidated Sponsored REITs:
 
 Six Months EndedJune 30,(in
    thousands)
              
              2008
              
              
              2007Equity in earnings (losses) of
      Sponsored REITs
              
              $
              103
              
              
              $
              (850
              )Equity in earnings (losses) of
      Park Ten Development
              
              
              9
              
              
              
              (11
              )Equity in earnings of Phoenix
      Tower
              
              
              14
              
              
              
              103Equity in earnings of East
      Wacker
              
              
              1,361
              
              
              
              -$
              1,487
              
              
              $
              (758
              )
 
 Equity in
earnings (losses) of investments in Sponsored REITs is derived from the
Company’s share of income or losses following the commencement of syndication of
Sponsored REITs.  Following the commencement of syndication, the
Company exercises influence over, but does not control these entities, and
investments are accounted for using the equity method.
 
 Equity in
earnings (losses) of Park Ten Development was derived from the Company’s
preferred stock investment in the entity.  In September 2005, the
Company acquired 8.5 preferred shares or 3.05% of the authorized preferred
shares of Park Ten Development via a non-monetary exchange of land valued at
$850,000.  The Company acquired Park Ten Development by merger on May
15, 2008, which merger was accounted for as a purchase, and the acquired assets
and liabilities were recorded at their fair value.
 
 Equity in
earnings of Phoenix Tower is derived from the Company’s preferred stock
investment in the entity.  In September 2006, the Company purchased 48
preferred shares or 4.6% of the outstanding preferred shares of Phoenix Tower
for $4,116,000 (which represented $4,800,000 at the offering price net of
commissions of $384,000 and fees of $300,000 that were
excluded).
  9
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 3.      Related
Party Transactions and Investments in Non-consolidated Entities
(continued)
 
 Equity in
earnings of East Wacker is derived from the Company’s preferred stock investment
in the entity.  In December 2007, the Company purchased 965.75
preferred shares or 43.7% of the outstanding preferred shares of East Wacker for
$82,813,000 (which represented $96,575,000 at the offering price net of
commissions of $7,726,000, loan fees of $5,553,000 and acquisition fees of
$483,000 that were excluded).
 
 The
Company recorded distributions declared of $2,277,000 and $723,000 from
Sponsored REITs during the six months ended June 30, 2008 and 2007,
respectively.
 
 Non-consolidated
Sponsored REITs:
 
 The
Company has in the past acquired by merger entities similar to the Sponsored
REITs.  On March 19, 2008, the Company entered into an agreement and
plan of merger to acquire Park Ten Development by merger for a total purchase
price of approximately $35.4 million. Upon completion of the acquisition on May
15, 2008, the holders of preferred stock in Park Ten Development received cash
consideration of approximately $127,290 per share. The acquisition was effected
by merging a wholly-owned subsidiary of the Company with and into Park Ten
Development.  Consummation of the acquisition required the approval of
Park Ten Development's stockholders.  The Company’s business model for
growth includes the potential acquisition by merger in the future of Sponsored
REITs.  The Company has no legal or any other enforceable obligation
to acquire or to offer to acquire any Sponsored REIT.  In addition,
any offer (and the related terms and conditions) that might be made in the
future to acquire any Sponsored REIT would require the approval of the boards of
directors of the Company and the Sponsored REIT and the approval of the
shareholders of the Sponsored REIT.
 
 The
operating data below for 2008 includes operations of the twelve Sponsored REITs
the Company held an interest in as of June 30, 2008, and Park Ten Development
from January through May 14, 2008.  The Company acquired Park Ten
Development by merger on May 15, 2008.  The operating data for 2007
includes operations of the eleven Sponsored REITs the Company held an interest
in as of June 30, 2007.
 
 At June
30, 2008, December 31, 2007 and June 30, 2007, the Company had ownership
interests in twelve, twelve and eleven Sponsored REITs,
respectively.  Summarized financial information for
these Sponsored REITs is as follows:
  June 30,
              
              
              December
31,(in
    thousands)
              
              2008
              
              
              2007Balance
      Sheet Data (unaudited):Real estate,
      net
              
              $
              680,765
              
              
              $
              684,441Other
assets
              
              
              120,506
              
              
              
              96,180Total
      liabilities
              
              
              (186,472
              )
              
              
              (202,757
              )Shareholders'
      equity
              
              $
              614,799
              
              
              $
              577,864For
      the Six Months EndedJune
      30,(in
    thousands)
              
              2008
              
              
              2007Operating
      Data (unaudited):Rental
    revenues
              
              $
              51,031
              
              
              $
              44,921Other
    revenues
              
              
              1,046
              
              
              
              1,513Operating and
      maintenance  expenses
              
              
              (25,412
              )
              
              
              (22,334
              )Depreciation and
      amortization
              
              
              (12,104
              )
              
              
              (10,512
              )Interest
      expense
              
              
              (5,725
              )
              
              
              (13,510
              )Net income
              
              $
              8,836
              
              
              $
              78
 
   10
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 3.      Related
Party Transactions and Investments in Non-consolidated Entities
(continued)
  Syndication fees and Transaction
fees:
  The
Company provides syndication and real estate acquisition advisory services for
Sponsored REITs.  Syndication and transaction
fees from non-consolidated entities amounted to approximately $6,768,000and$13,245,000for thesix months endedJune 30, 2008and 2007,respectively.
  Management fees and interest income from
loans:
  Asset
management fees range from 1% to 5% of collected rents and the applicable
contracts are cancelable with 30 days notice.  Asset managementfee income from non-consolidated
entities amounted to approximately$473,000and$477,000for thesix months endedJune 30, 2008and 2007,respectively.The
Company typically makes interim mortgage loans to Sponsored REITs that enable
Sponsored REITs to acquire their respective properties prior to the consummation
of the offerings of their equity interests.  The interim mortgage
loans are subsequently repaid out of offering proceeds.
 
 In
December 2007, the Company entered into a secured promissory note for a
revolving line of credit (the “Revolver”) for up to $5.5 million with a
Sponsored REIT, FSP Highland Place I Corp., that owns an office building in
Englewood, Colorado, of which $1.0 million was drawn in March 2008 and remained
outstanding as of June 30, 2008.  The balance of this loan is
classified in other assets.  Advances under the Revolver bear interest
at a rate equal to the 30 day LIBOR rate plus 200 basis points.  The
Revolver was made for the purpose of funding capital expenditures and other
costs of leasing.  The Company anticipates that any advances made
under the Revolver will be repaid at its maturity on December 31, 2010 or
earlier from long-term financing of the property, cash flows from the property
or a capital event.
 
 The
Company recognized interest income from interim mortgage loans and advances on
the Revolver of approximately $510,000 and $3,202,000 for thesix months endedJune 30, 2008and 2007,respectively.
 
 4.      Bank
Note Payable
 
 The
Company has a revolving line of credit agreement (the "Loan Agreement") with a
group of banks providing for borrowings at the Company’s election of up to
$250,000,000, which matures on August 11, 2011.  Borrowings under the
line of credit bear interest at either the bank's prime rate (5.00% at June 30,
2008) or a rate equal to LIBOR plus 100 basis points (3.46% at June 30, 2008).
There were borrowings of $109,995,000 and $84,750,000 at the LIBOR plus 100
basis point rate at a weighted average rate of 3.47% and 6.20% outstanding under
the line of credit at June 30, 2008 and December 31, 2007,
respectively.  The weighted average interest rate on amounts
outstanding during the six months ended June 30, 2008 and 2007 was approximately
4.15% and 6.57%, respectively; and for the year ended December 31, 2007 was
approximately 6.51%.
 
 The Loan
Agreement includes restrictions on property liens and requires compliance with
various financial covenants. Financial covenants include the maintenance of at
least $1,500,000 in operating cash accounts, a minimum unencumbered cash and
liquid investments balance and tangible net worth; limitations on permitted
secured debt and compliance with various debt and operating income ratios, as
defined in the Loan Agreement. The Company was in compliance with the Loan
Agreement's financial covenants as of June 30, 2008 and December 31, 2007.
 
 5.      Net
Income Per Share
 
 Basic net
income per share is computed by dividing net income by the weighted average
number of Company shares outstanding during the period.  Diluted net
income per share reflects the potential dilution that could occur if securities
or other contracts to issue shares were exercised or converted into
shares.  There were no potential dilutive shares outstanding at June
30, 2008 and 2007.
 
  11
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 6.      Discontinued
Operations
 
 During 2007,the Company soldfiveproperties.Accordingly, each of thefiveproperties sold are classified as
discontinued operations on our financial statements.  Income from
discontinued operations was approximately $1,331,000for thesixmonths endedJune 30, 2007.
 
 The operating results for these real
estate assets have been reflected as discontinued operations in the condensed
consolidated statements of income for all periods presented, and are summarized
below:
 
 For
      the Three Months Ended
              
              
              For
      the Six Months Ended(in
      thousands)
              
              June
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Rental
      revenue
              
              $
              -
              
              
              $
              1,842
              
              
              $
              -
              
              
              $
              3,722Rental
      operating expenses
              
              
              -
              
              
              
              (468
              )
              
              
              -
              
              
              
              (940
              )Real
      estate taxes and insurance
              
              
              -
              
              
              
              (234
              )
              
              
              -
              
              
              
              (493
              )Depreciation
      and amortization
              
              
              -
              
              
              
              (486
              )
              
              
              -
              
              
              
              (966
              )Interest
      income
              
              
              -
              
              
              
              8
              
              
              
              -
              
              
              
              8Net
      income from discontinued operations
              
              $
              -
              
              
              $
              662
              
              
              $
              -
              
              
              $
              1,331
 
 7.      Business
Segments
 
 The
Company operates in two business segments: real estate operations (including
real estate leasing, interest income on interim acquisition and other financings
and asset/property management) including discontinued operations and investment
banking/investment services (including real estate acquisition, development
services and broker/dealer services).  The Company has identified
these segments because this information is the basis upon which management makes
decisions regarding resource allocation and performance
assessment.  The accounting policies of the reportable segments are
the same as those described in the “Significant Accounting Policies” in Note 2
to the Company’s consolidated financial statements included in its Annual Report
on Form 10-K for the year ended December 31, 2007.   The
Company’s operations are located entirely in the United States of
America.
 
 The
Company evaluates the performance of its reportable segments based on Funds From
Operations (“FFO”) as management believes that FFO represents the most accurate
measure of the reportable segment’s activity and is the basis for distributions
paid to equity holders.  The Company defines FFO as net income
(computed in accordance with GAAP), excluding gains (or losses) from sales of
property, plus depreciation and amortization, and after adjustments to exclude
non-cash income (or losses) from non-consolidated or Sponsored REITs, plus
distributions received from non-consolidated or Sponsored REITs.
 
 FFO
should not be considered as an alternative to net income (determined in
accordance with GAAP), as an indicator of the Company’s financial performance,
nor as an alternative to cash flows from operating activities (determined in
accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the Company’s
needs.  Other real estate companies may define this term in a
different manner.  We believe that in order to facilitate a clear
understanding of the results of the Company, FFO should be examined in
connection with net income and cash flows from operating, investing and
financing activities in the consolidated financial statements.
 
  12
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 7.      Business
Segments (continued)
 
 The
calculation of FFO by business segment is shown in the following
table:
 
 (in thousands)
              
              Real
      Estate Operations
              
              
              Investment
      Banking/ Investment Services
              
              
              TotalThree
      Months Ended March 31, 2008Net
      Income
              
              $
              7,874
              
              
              $
              (488
              )
              
              $
              7,386Equity
      in income of non-consolidated REITs
              
              
              (793
              )
              
              
              -
              
              
              
              (793
              )Distributions
      from non-consolidated REITs
              
              
              546
              
              
              
              -
              
              
              
              546Depreciation
      and amortization
              
              
              8,464
              
              
              
              34
              
              
              
              8,498Funds
      From Operations
              
              $
              16,091
              
              
              $
              (454
              )
              
              $
              15,637Three
      Months Ended June 30, 2008Net
      Income
              
              $
              7,182
              
              
              $
              3,352
              
              
              $
              10,534Equity
      in income of non-consolidated REITs
              
              
              (694
              )
              
              
              -
              
              
              
              (694
              )Distributions
      from non-consolidated REITs
              
              
              1,731
              
              
              
              -
              
              
              
              1,731Depreciation
      and amortization
              
              
              8,677
              
              
              
              35
              
              
              
              8,712Funds
      From Operations
              
              $
              16,896
              
              
              $
              3,387
              
              
              $
              20,283Six
      Months Ended June 30, 2008Net
      Income
              
              $
              15,056
              
              
              $
              2,864
              
              
              $
              17,920Equity
      in income of non-consolidated REITs
              
              
              (1,487
              )
              
              
              -
              
              
              
              (1,487
              )Distributions
      from non-consolidated REITs
              
              
              2,277
              
              
              
              -
              
              
              
              2,277Depreciation
      and amortization
              
              
              17,141
              
              
              
              69
              
              
              
              17,210Funds
      From Operations
              
              $
              32,987
              
              
              $
              2,933
              
              
              $
              35,920
 
  13
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 7.           Business
Segments (continued)
 
 (in thousands)
              
              Real
      Estate Operations
              
              
              Investment
      Banking/ Investment Services
              
              
              TotalThree
      Months Ended March 31, 2007Net
      Income
              
              $
              6,548
              
              
              $
              3,184
              
              
              $
              9,732Equity
      in losses of non-consolidated REITs
              
              
              583
              
              
              
              -
              
              
              
              583Distributions
      from non-consolidated REITs
              
              
              281
              
              
              
              -
              
              
              
              281Depreciation
      and amortization
              
              
              8,960
              
              
              
              30
              
              
              
              8,990Funds
      From Operations
              
              $
              16,372
              
              
              $
              3,214
              
              
              $
              19,586Three
      Months Ended June 30, 2007Net
      Income
              
              $
              28,464
              
              
              $
              4,012
              
              
              $
              32,476Gain
      on sale of assets, net
              
              
              (21,590
              )
              
              
              -
              
              
              
              (21,590
              )Equity
      in losses of non-consolidated REITs
              
              
              142
              
              
              
              -
              
              
              
              142Distributions
      from non-consolidated REITs
              
              
              442
              
              
              
              -
              
              
              
              442Depreciation
      and amortization
              
              
              8,468
              
              
              
              31
              
              
              
              8,499Funds
      From Operations
              
              $
              15,926
              
              
              $
              4,043
              
              
              $
              19,969Six
      Months Ended June 30, 2007Net
      Income
              
              $
              35,012
              
              
              $
              7,196
              
              
              $
              42,208Gain
      on sale of assets, net
              
              
              (21,590
              )
              
              
              -
              
              
              
              (21,590
              )Equity
      in losses of non-consolidated REITs
              
              
              725
              
              
              
              -
              
              
              
              725Distributions
      from non-consolidated REITs
              
              
              723
              
              
              
              -
              
              
              
              723Depreciation
      and amortization
              
              
              17,428
              
              
              
              61
              
              
              
              17,489Funds
      From Operations
              
              $
              32,298
              
              
              $
              7,257
              
              
              $
              39,555
 
 
 
  14
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 7.      Business
Segments (continued)
 
 The
following table is a summary of other financial information by business
segment:
 
 (in thousands)
              
              Real
      Estate Operations
              
              
              Investment
      Banking/ Investment Services
              
              
              TotalThree Months Ended June 30,
      2008Revenue
              
              $
              28,142
              
              
              $
              6,395
              
              
              $
              34,537Interest
      income
              
              
              170
              
              
              
              6
              
              
              
              176Interest
      expense
              
              
              1,051
              
              
              
              -
              
              
              
              1,051Capital
      expenditures
              
              
              2,245
              
              
              
              -
              
              
              
              2,245Six Months Ended June 30,
      2008Revenue
              
              $
              55,379
              
              
              $
              6,768
              
              
              $
              62,147Interest
      income
              
              
              461
              
              
              
              18
              
              
              
              479Interest
      expense
              
              
              2,243
              
              
              
              -
              
              
              
              2,243Capital
      expenditures
              
              
              5,596
              
              
              
              -
              
              
              
              5,596Identifiable
      Assets as of June 30, 2008
              
              $
              995,973
              
              
              $
              6,384
              
              
              $
              1,002,357Three Months Ended June 30,
      2007Revenue
              
              $
              24,767
              
              
              $
              7,209
              
              
              $
              31,976Interest
      income
              
              
              540
              
              
              
              20
              
              
              
              560Interest
      expense
              
              
              1,622
              
              
              
              -
              
              
              
              1,622Capital
      expenditures
              
              
              2,193
              
              
              
              -
              
              
              
              2,193Six Months Ended June 30,
      2007Revenue
              
              $
              51,727
              
              
              $
              13,246
              
              
              $
              64,973Interest
      income
              
              
              1,184
              
              
              
              29
              
              
              
              1,213Interest
      expense
              
              
              4,298
              
              
              
              -
              
              
              
              4,298Capital
      expenditures
              
              
              5,048
              
              
              
              -
              
              
              
              5,048Identifiable
      Assets as of June 30, 2007
              
              $
              1,057,718
              
              
              $
              5,532
              
              
              $
              1,063,250
 
 8.      Cash Dividends
 
 The
Company declared and paid dividends as follows (in thousands, except per share
amounts):
 
 Quarter
      Paid
              
              Dividends
      PerShare
              
              
              Total
                DividendsFirst
      quarter of 2008
              
              $
              0.31
              
              
              $
              21,849Second
      quarter of 2008
              
              $
              0.31
              
              
              $
              21,849First
      quarter of 2007
              
              $
              0.31
              
              
              $
              21,937Second
      quarter of 2007
              
              $
              0.31
              
              
              $
              21,938
 
  15
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 9.      Income
Taxes
 
 The
Company has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code").  As a REIT, the Company generally is
entitled to a tax deduction for distributions paid to its shareholders, thereby
effectively subjecting the distributed net income of the Company to taxation at
the shareholder level only.  The Company must comply with a variety of
restrictions to maintain its status as a REIT.  These restrictions
include the type of income it can earn, the type of assets it can hold, the
number of shareholders it can have and the concentration of their ownership, and
the amount of the Company’s taxable income that must be distributed
annually.
 
 One such
restriction is that the Company generally cannot own more than 10% of the voting
power or value of the securities of any one issuer unless the issuer is itself a
REIT or a taxable REIT subsidiary (“TRS”).  In the case of TRSs, the
Company’s ownership of securities in all TRSs generally cannot exceed 20% of the
value of all of the Company’s assets and, when considered together with other
non-real estate assets, cannot exceed 25% of the value of all of the Company’s
assets.   FSP Investments LLC and FSP Protective TRS Corp, which
are subsidiaries of the Company, are TRSs and operate as taxable corporations
under the Code and have accounted for income taxes in accordance with the
provisions of SFAS No. 109, Accounting for Income Taxes.
 
 Income
taxes are recorded based on the future tax effects of the difference between the
tax and financial reporting bases of the Company’s assets and
liabilities.  In estimating future tax consequences, potential future
events are considered except for potential changes in income tax law or in
rates.
 
 The
Company follows the provisions of Financial Interpretation No. 48, Accounting
for Uncertainty in Income Taxes (“FIN 48”), which has not resulted in recording
a liability or recognition of any accrued interest or
penalties.  Accrued interest and penalties will be recorded as income
tax expense, if the Company records a liability in the future.  The
Company’s effective tax rate was not affected by the adoption of FIN
48.  The Company and one or more of its subsidiaries files income tax
returns in the U.S federal jurisdiction and various state
jurisdictions.  The statute of limitations for the Company’s income
tax returns is generally three years and as such, the Company’s returns that
remain subject to examination would be primarily from 2004 and
thereafter.
 
 The
income tax expense reflected in the condensed consolidated statements of income
related to the TRS was a tax benefit of $158,000 for the six months ended June
30, 2008 and tax expense of $613,000 for the six months ended June 30,
2007.  The expense differs from the amounts computed by applying the
Federal statutory rate of 34% to income before income taxes as
follows:
 
 For
      theSix
      Months EndedJune
      30,(in
      thousands)
              
              2008
              
              
              2007Federal
      income tax expense (credit) at statutory rate
              
              $
              (133
              )
              
              $
              518Increase
      in taxes resulting from:State
      income taxes (credit), net of federal impact
              
              
              (25
              )
              
              
              95Revised
      Texas franchise tax
              
              
              117
              
              
              
              108$
              (41
              )
              
              $
              721
 
 No
deferred income taxes were provided as there were no material temporary
differences between the financial reporting basis and the tax basis of the
TRS.
 
 In May
2006, the State of Texas enacted a new business tax (the “Revised Texas
Franchise Tax”) that replaced its existing franchise tax, which the Company
became subject to.  The Revised Texas Franchise Tax is a tax at a rate
of approximately 0.7% of revenues at Texas properties commencing with 2007
revenues.  Some of the Company’s leases allow reimbursement by tenants
for these amounts because the Revised Texas Franchise Tax replaces a portion of
the property tax for school districts.  Because the tax base on the
Revised Texas Franchise Tax is derived from an income based measure it is
considered an income tax and is accounted for in accordance with the provisions
of SFAS No. 109, Accounting for Income Taxes.  The Company recorded a
provision in income taxes on its income statement of $117,000 and $108,000 for
the six months ended June 30, 2008 and 2007, respectively.
 
  16
  Franklin
Street Properties Corp.
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
 
 10.     Subsequent
Event
 
 The
Company declared a cash distribution of $0.19 per share on July 21, 2008 to
stockholders of record on July 31, 2008 payable on August 20, 2008.
 
  17
  Item
2.    Management’s Discussion and Analysis of Financial
Condition and Results of Operations
 
 The
following discussion should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this report and in our Annual Report on
Form 10-K for the year ended December 31, 2007.  Historical results
and percentage relationships set forth in the condensed consolidated financial
statements, including trends which might appear, should not be taken as
necessarily indicative of future operations.  The following discussion
and other parts of this Quarterly Report on Form 10-Q may also contain
forward-looking statements based on current judgments and current knowledge of
management, which are subject to certain risks, trends and uncertainties that
could cause actual results to differ materially from those indicated in such
forward-looking statements.  Accordingly, readers are cautioned not to
place undue reliance on forward-looking statements.  Investors are
cautioned that our forward-looking statements involve risks and uncertainty,
including without limitation disruptions in the debt market,  changes
in economic conditions in the markets in which we own properties, changes in the
demand by investors for investment in Sponsored REITs, risks of a lessening of
demand for the types of real estate owned by us, changes in government
regulations, and expenditures that cannot be anticipated such as utility rate
and usage increases, unanticipated repairs, additional staffing, insurance
increases and real estate tax valuation reassessments.  See the
factors set forth below under the caption, Item 1A. “Risk
Factors”.  Although we believe the expectations reflected in the
forward looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.  We may not update
any of the forward-looking statements after the date this Quarterly Report on
Form 10-Q is filed to conform them to actual results or to changes in our
expectations that occur after such date, other than as required by
law.
 
 Overview
 
 FSP Corp.
or the Company, operates in two business segments: real estate operations and
investment banking/investment services. The real estate operations segment
involves real estate rental operations, leasing, secured financing of real
estate for interim acquisition or other property financing, and services
provided for asset management, property management, property acquisitions,
dispositions and development.  The investment banking/investment
services segment involves the structuring of real estate investments and
broker/dealer services that include the organization of Sponsored REITs, the
acquisition and development of real estate on behalf of Sponsored REITs and the
raising of capital to equitize the Sponsored REITs through sale of preferred
stock in private placements.
 
 The main
factor that affects our real estate operations is the broad economic market
conditions in the United States.  These market conditions affect the
occupancy levels and the rent levels on both a national and local
level.  We have no influence on the national market
conditions.   We look to acquire and/or develop quality
properties in good locations in order to lessen the impact of downturns in the
market and to take advantage of upturns when they occur.
 
 Our
investment banking/investment services customers are primarily institutions and
high net-worth individuals.  To the extent that the broad capital
markets affect these investors our business is also affected.  These
investors have many investment choices.  We must continually search
for real estate at a price and at a competitive risk/reward rate of return that
meets our customer’s risk/reward profile for providing a stream of income and as
a long-term hedge against inflation.
 
 Due to
the transactional nature of significant portions of our business, our quarterly
financial metrics have historically been quite variable.  We do not
manage our business to quarterly targets but rather manage our business to
longer-term targets.  Consequently, we consider annual financial
results to be much more meaningful for performance and trend
measurements.
 
 Critical
Accounting Policies
 
 We have
certain critical accounting policies that are subject to judgments and estimates
by our management and uncertainties of outcome that affect the application of
these policies.  We base our estimates on historical experience and on
various other assumptions we believe to be reasonable under the
circumstances.  On an on-going basis, we evaluate our
estimates.  In the event estimates or assumptions prove to be
different from actual results, adjustments are made in subsequent periods to
reflect more current information.  The accounting policies that we
believe are most critical to the understanding of our financial position and
results of operations, and that require significant management estimates and
judgments, are discussed in Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations in our Annual Report on Form 10-K
for the year ended December 31, 2007.
 
 Critical
accounting policies are those that have the most impact on the reporting of our
financial condition and results of operations and those requiring significant
judgments and estimates.  We believe that our judgments and
assessments are consistently applied and produce financial information that
fairly presents our results of operations.  No changes to our critical
accounting policies have occurred since the filing of our Annual Report on Form
10-K for the year ended December 31, 2007.
 
  18
  Trends
and Uncertainties
 
 Debt
Market Conditions
 
 Because
interest rate levels and the availability of financing may affect real estate
values, occupancy levels, property income and the propensity and the ability of
investors to invest in Sponsored REITs, debt market conditions have affected,
and likely will continue to affect, our business. The debt market is currently
experiencing unprecedented disruptions, including reduced liquidity and
increased credit risk premiums for certain market participants.  These
conditions, which increase the cost and reduce the availability of debt, may
continue or worsen in the future.  At this time, we cannot predict the
extent or duration of any negative impact that the current debt market
conditions will have on our business.
 
 On July
21, 2008, we announced that our board of directors declared a regular quarterly
dividend for the three months ended June 30, 2008 of $0.19 per share of common
stock, representing a reduction of $0.12 per share of common stock from the
$0.31 per share of common stock regular quarterly dividend that we had paid
since becoming a publicly-traded company in June 2005.  Our July 21,
2008 announcement noted that we had experienced a significant slowing of
activity in, and lower profit contribution from, two transactional components of
our business, investment banking/investment services and property dispositions,
since the onset of the current debt market disruption.   Our July
21, 2008 announcement also noted that, while our ongoing/recurring real estate
operations continued to show solid performance, our board of directors believed
that it was prudent to better align our regular quarterly dividends with the
results of our current real estate operations only, without taking into account
the results of our less predictable transactional operations.  The
reduction of our regular quarterly dividend reflects our uncertainty about the
ultimate duration and severity of the current debt market conditions and the
associated turmoil in the capital markets and their impact on our transactional
businesses.
 
 Real
Estate Operations
 
 Our real
estate portfolio was approximately 93% leased as of June 30, 2008, which
occupancy level is generally consistent with our occupancy levels over the past
two quarterly periods. Although we ended 2007 with strong leasing activity in
most of our markets, we have not seen a similar level of activity so far in
2008.  In fact, leasing activity has slowed in most of our
markets.  Notable exceptions include our markets with strong energy
drivers, including Houston and parts of Denver.  Approximately 3% of
our portfolio’s total square footage is projected to expire over the remainder
of 2008.
 
 At this
time we cannot predict whether the conditions in the credit markets will have a
negative impact on the financial strength of our existing tenants, but we have
taken that risk into account in reviewing our reserve for bad
debts.
 
 While we
cannot predict when existing vacancy will be leased or if existing tenants with
expiring leases will renew their leases or what the terms and conditions of the
lease renewals will be, we expect to renew or sign new leases at current market
rates for the locations in which the buildings are located, which in some cases
may be below the expiring rates.
 
 Investment
Banking/Investment Services
 
 Unlike
our real estate business, which provides a rental revenue stream that is ongoing
and recurring in nature, our investment banking/investment services business is
transactional in nature.  Equity raised for Sponsored REIT
syndications for the three and six months ended June 30, 2008 was $49.9 million
and $52.5 million, respectively compared to $60.1 million and $109.2 million for
the three and six months ended June 30, 2007, respectively.  The
resulting total decrease in equity raised was $10.2 million and $56.7 million
comparing the three and six months ended June 30, 2008 to the same periods in
2007, respectively.  The slowdown in our investment banking business
actually began in the third quarter of 2007 and, at this point, it remains
unclear when or if a higher volume of equity investment will
return.  Business in this area, while always uncertain, continues to
be adversely affected by the current turmoil in the financial, debt and real
estate markets.  Investors who have historically participated in our
private placement real estate offerings continue to express uncertainty about
investing in this environment.
 
 In
addition to difficulties in raising equity from potential real estate investors
in this market, our property acquisition executives are now grappling with
greater uncertainty surrounding the valuation levels for prime commercial
investment real estate.  We believe that the current turmoil in the
debt markets, as well as perceptions about the future U.S. economy and interest
rates, are producing a larger than normal divergence in the perception of value
and future relative investment performance of commercial
properties.  While we generally believe that such an environment has
the potential to produce some exceptional property acquisition opportunities,
caution, perspective and disciplined underwriting standards can significantly
impact the timing of any future acquisitions.  Consequently, our
ability to provide a regular stream of real estate investment product necessary
to grow our overall investment banking/investment services business continues to
remain uncertain as the second half of 2008 begins.  We also continue
to rely solely on our in-house investment executives to access interested
investors who have capital they can afford to place in an illiquid position for
an indefinite period of time (i.e., invest in a Sponsored REIT).  We
continue to evaluate whether our in-house sales force is capable, either through
our existing client base or through new clients, of raising sufficient
investment capital in Sponsored REITs to achieve future performance
objectives.
 
  19
  Discontinued
Operations
 
 During
the year ended December 31, 2007, the Company disposed of five office
properties.  The five office properties are located in Greenville,
South Carolina; Alpharetta, Georgia; San Diego, California; Westford,
Massachusetts and Austin, Texas.  The operating results for these real
estate assets have been reflected as discontinued operations in the financial
statements for the three and six months ended June 30, 2007.
 
 We
continue to evaluate our portfolio, and in the future may decide to dispose of
additional properties from time-to-time.  However, because of the
current uncertainty surrounding the valuation levels for real estate and the
current uncertainty in the capital and debt markets previously discussed, we do
not expect the level of disposition activity to be as significant as the prior
three years.
 
 The
following table shows results for the three months ended June 30, 2008 and
2007:
  (in
      thousands)Three
      months ended June 30,Revenue:
              
              2008
              
              
              2007
              
              
              ChangeRental
              
              $
              27,700
              
              
              $
              22,896
              
              
              $
              4,804Related
      party revenue:Syndication
      fees
              
              
              3,257
              
              
              
              3,448
              
              
              
              (191
              )Transaction
      fees
              
              
              3,138
              
              
              
              3,761
              
              
              
              (623
              )Management
      fees and interest income from loans
              
              
              423
              
              
              
              1,862
              
              
              
              (1,439
              )Other
              
              
              19
              
              
              
              9
              
              
              
              10Total
      revenue
              
              
              34,537
              
              
              
              31,976
              
              
              
              2,561Expenses:Real
      estate operating expenses
              
              
              7,116
              
              
              
              5,668
              
              
              
              1,448Real
      estate taxes and insurance
              
              
              4,505
              
              
              
              3,923
              
              
              
              582Depreciation
      and amortization
              
              
              7,591
              
              
              
              6,778
              
              
              
              813Selling,
      general and administrative
              
              
              2,621
              
              
              
              2,000
              
              
              
              621Commissions
              
              
              1,654
              
              
              
              1,754
              
              
              
              (100
              )Interest
              
              
              1,051
              
              
              
              1,622
              
              
              
              (571
              )Total
      expenses
              
              
              24,538
              
              
              
              21,745
              
              
              
              2,793Income
      before interest income, equity in earnings (losses) innon-consolidated
      REITs and taxes
              
              
              9,999
              
              
              
              10,231
              
              
              
              (232
              )Interest
      income
              
              
              176
              
              
              
              560
              
              
              
              (384
              )Equity
      in earnings (losses) in non-consolidated REITs
              
              
              694
              
              
              
              (142
              )
              
              
              836Income
      before taxes
              
              
              10,869
              
              
              
              10,649
              
              
              
              220Income
      tax expense (benefit)
              
              
              335
              
              
              
              425
              
              
              
              (90
              )Income
      from continuing operations
              
              
              10,534
              
              
              
              10,224
              
              
              
              310Income
      from discontinued operations
              
              
              -
              
              
              
              662
              
              
              
              (662
              )Gain
      on sale of assets
              
              
              -
              
              
              
              21,590
              
              
              
              (21,590
              )Net
      income
              
              $
              10,534
              
              
              $
              32,476
              
              
              $
              (21,942
              )
 
 
 Comparison
of the three months ended June 30, 2008 to the three months ended June 30,
2007:
  Revenues
  Total
revenue increased by approximately $2.6 million to $34.5 million for the quarter
ended June 30, 2008 compared to the quarter ended June 30, 2007.  The
increase was primarily a result of:
   20
  o
              An
      increase to rental revenue of approximately $4.8 million arising primarily
      from the acquisition of a property in Maryland in June 2007, a property in
      Texas in May 2008, and the benefit of net increases in leasing made over
      the last twelve months.
 
 This
increase was partially offset by:
  o
              A
      decrease in loan interest income of approximately $1.4 million, which was
      principally a result of a larger loan receivable balance during the second
      quarter of 2007 as compared to the second quarter of 2008, from which
      interest income is derived.  The impact of this decrease was
      also greater as a result of lower interest rates charged for the second
      quarter of 2008 compared to the same period in
  2007.
 
 o
              A
      $0.8 million decrease in syndication fees and transaction (loan
      commitment) fees, which was principally a result of the decrease in gross
      syndication proceeds in the quarter ended June 30, 2008 compared to the
      same period in 2007.
 
 Expenses
 
 Total
expenses increased by $2.8 million to $24.5 million for the three months ended
June 30, 2008 compared to the three months ended June 30, 2007.  The
increase was primarily a result of:
 
 o
              An
      increase in real estate operating expenses and real estate taxes and
      insurance of approximately $2.0 million, and depreciation and amortization
      of $0.8 million, which were primarily from the acquisition of a property
      in Maryland in June 2007 and to a lesser extent, a property acquired in
      Texas in May 2008.
 
 o
              Selling,
      general and administrative expenses, increased by $0.6 million to $2.6
      million for the three months ended June 30, 2008 compared to same period
      in 2007.  The increase was primarily a result of increased
      compensation related costs, and professional fees.  We had 37
      and 38 employees as of June 30, 2008 and 2007, respectively, at our
      headquarters in Wakefield.
 
 These
increases were partially offset by:
 
 o
              A
      decrease in interest expense of approximately $0.6 million primarily
      resulting from lower average loan balances outstanding during the three
      months ended June 30, 2008 compared to the three months ended June 30,
      2007 and lower interest rates during the three months ended June 30, 2008
      compared to the three months ended June 30,
  2007.
 
 Interest
income
 
 Interest
income decreased $0.4 million to $0.2 million during the three months ended June
30, 2008, which was primarily a result of lower average interest rates in effect
on invested funds and lower average balances of cash and cash equivalents in
2008 compared to the same period in 2007.
 
 Equity in earnings (losses)
in non-consolidated REITs
 
 Equity in
earnings (losses) in non-consolidated REITs increased approximately $0.8 million
to $0.7 million, which was principally a result of our preferred stock
investment in East Wacker acquired in December 2007, and equity in earnings of
non-consolidated REITs in the second quarter of 2008, compared to losses of
approximately $0.1 million in the second quarter of 2007.
 
 Taxes on
income
 
 Taxes on
income decreased approximately $0.1 million to $0.3 million in the second
quarter of 2008 compared to the second quarter of 2007.  The decrease
was primarily due to a lower taxable income from the investment banking and
investment services business in the 2008 period compared to
2007.  During the second quarter in each of 2008 and 2007, we had an
effective tax rate of 40.3%.
 
 Income from continuing
operations
 
 The
resulting income from continuing operations for the second quarter of 2008
increased $0.3 million to $10.5 million from $10.2 million in the second quarter
of 2007 for the reasons discussed above.
 
  21
  Discontinued operations and
gain on sale of assets
 
 During
2007, we completed the sale of five properties.  Accordingly, the
properties sold are reported as discontinued operations on our financial
statements for the relevant periods presented.  There was income from
discontinued operations of $0.7 million for the three months ended June 30, 2007
related to the properties sold.  During the three months ended June
30, 2007, we sold two of these properties and reported a $21.6 million gain on
sale of assets.
 
 The
Company will continue to evaluate its portfolio, and from time-to-time may
decide to dispose of other properties.
 
 Net
income
 
 Net
income for the three months ended June 30, 2008 decreased by approximately $22.0
million to $10.5 million compared to $32.5 million for the three months ended
June, 2007, for the reasons discussed above.
 
 The
following table shows results for the six months ended June 30, 2008 and
2007:
  (in
      thousands)Six
      months ended June 30,Revenue:
              
              2008
              
              
              2007
              
              
              ChangeRental
              
              $
              54,356
              
              
              $
              48,001
              
              
              $
              6,355Related
      party revenue:Syndication
      fees
              
              
              3,462
              
              
              
              6,403
              
              
              
              (2,941
              )Transaction
      fees
              
              
              3,306
              
              
              
              6,842
              
              
              
              (3,536
              )Management
      fees and interest income from loans
              
              
              984
              
              
              
              3,679
              
              
              
              (2,695
              )Other
              
              
              39
              
              
              
              47
              
              
              
              (8
              )Total
      revenue
              
              
              62,147
              
              
              
              64,972
              
              
              
              (2,825
              )Expenses:Real
      estate operating expenses
              
              
              13,815
              
              
              
              11,875
              
              
              
              1,940Real
      estate taxes and insurance
              
              
              8,784
              
              
              
              8,092
              
              
              
              692Depreciation
      and amortization
              
              
              14,950
              
              
              
              13,954
              
              
              
              996Selling,
      general and administrative
              
              
              4,630
              
              
              
              3,888
              
              
              
              742Commissions
              
              
              1,812
              
              
              
              3,313
              
              
              
              (1,501
              )Interest
              
              
              2,243
              
              
              
              4,298
              
              
              
              (2,055
              )Total
      expenses
              
              
              46,234
              
              
              
              45,420
              
              
              
              814Income
      before interest income, equity in earnings (losses) innon-consolidated
      REITs and taxes
              
              
              15,913
              
              
              
              19,552
              
              
              
              (3,639
              )Interest
      income
              
              
              479
              
              
              
              1,213
              
              
              
              (734
              )Equity
      in earnings (losses) in non-consolidated REITs
              
              
              1,487
              
              
              
              (758
              )
              
              
              2,245Income
      before taxes
              
              
              17,879
              
              
              
              20,007
              
              
              
              (2,128
              )Income
      tax expense (benefit)
              
              
              (41
              )
              
              
              721
              
              
              
              (762
              )Income
      from continuing operations
              
              
              17,920
              
              
              
              19,286
              
              
              
              (1,366
              )Income
      from discontinued operations
              
              
              -
              
              
              
              1,331
              
              
              
              (1,331
              )Gain
      on sale of assets
              
              
              -
              
              
              
              21,590
              
              
              
              (21,590
              )Net
      income
              
              $
              17,920
              
              
              $
              42,207
              
              
              $
              (24,287
              )
 
 
  22
  Comparison
of the six months ended June 30, 2008 to the six months ended June 30,
2007:
  Revenues
  Total
revenue decreased by $2.8 million to $62.1 million for the six months ended June
30, 2008 compared to the six months ended June 30, 2007.  The decrease
was primarily a result of:
  o
              A
      $6.5 million decrease in syndication fees and transaction (loan
      commitment) fees, which was principally a result of the decrease in gross
      syndication proceeds for the six months ended June 30, 2008 compared to
      the same period in 2007.
 
 o
              A
      decrease in loan interest income of approximately $2.7 million, which was
      principally a result of a larger loan receivable balance during the six
      months ended June 30, 2007 as compared the six months ended June 30, 2008,
      from which interest income is derived.  The impact of this
      decrease was also greater as a result of lower interest rates charged for
      the six months ended June 30, 2008 compared to the same period in
      2007.
 
 This
increase was partially offset by:
  o
              An
      increase to rental revenue of approximately $6.4 million arising primarily
      from the acquisition of a property in Maryland in June 2007, a property in
      Texas in May 2008, and the benefit of net increases in leasing made over
      the last twelve months.
 Expenses
 
 Total
expenses increased by approximately $0.8 million to $46.2 million for the six
months ended June 30, 2008 compared to the six months ended June 30,
2007.  The increase was primarily a result of:
 
 o
              An
      increase in real estate operating expenses and real estate taxes and
      insurance of approximately $2.6 million, and depreciation and amortization
      of $1.0 million, which were primarily from the acquisition of a property
      in Maryland in June 2007 and to a lesser extent, a property acquired in
      Texas in May 2008.
 
 o
              Selling,
      general and administrative expenses, which increased by $0.7 million to
      $4.6 million for the six months ended June 30, 2008 compared to same
      period in 2007.  The increase was primarily a result of
      increased compensation related costs, and professional fees.  We
      had 37 and 38 employees as of June 30, 2008 and 2007, respectively, at our
      headquarters in Wakefield.
 
 These
increases were partially offset by:
 
 o
              A
      decrease in commission expense of $1.5 million, which was principally a
      result of the decrease in gross syndication proceeds in the six months
      ended June 30, 2008 compared to the same period in
  2007.
 
 o
              A
      decrease in interest expense of approximately $2.0 million primarily
      resulting from lower average loan balances outstanding during the six
      months ended June 30, 2008 compared to the six months ended June 30, 2007
      and lower interest rates during the six months ended June 30, 2008
      compared to the 2007 period.
 
 Interest
income
 
 Interest
income decreased $0.7 million to $0.5 million during the six months ended June
30, 2008, which was primarily a result of lower average interest rates on
invested funds and lower average balances of cash and cash equivalents in 2008
compared to the same period in 2007.
 
 Equity in earnings (losses)
of non-consolidated REITs
 
 Equity in
earnings (losses) from non-consolidated REITs increased approximately $2.2
million to $1.5 million, which was principally a result of our preferred stock
investments in East Wacker acquired in December 2007, and equity in earnings of
non-consolidated REITs during the six months ended June 30, 2008 compared to
losses of approximately $0.7 million in same period of 2007.
  23
  Taxes on
income
 
 Taxes on
income decreased approximately $0.7 million to a credit of $41,000 in the six
months ended June 30, 2008 compared to the same period of 2007.  The
decrease was primarily due to a lower taxable income from the investment banking
and investment services business in the 2008 period compared to
2007.  During the six month periods in each of 2008 and 2007, we had
an effective tax rate of 40.3%.
 
 Income from continuing
operations
 
 The
resulting income from continuing operations for the six months ended June 30,
2008 decreased $1.4 million to $17.9 million from $19.3 million in the six
months ended June 30, 2007 for the reasons discussed above.
 
 Discontinued operations and
gain on sale of assets
 
 During
2007, we completed the sale of five properties.  Accordingly, the
properties sold are reported as discontinued operations on our financial
statements for the relevant periods presented.  There was income from
discontinued operations of $1.3 million for the six months ended June 30, 2007
related to the properties sold.  During the six months ended June 30,
2007, we sold three of these properties and reported a $21.6 million gain on
sale of assets.
 
 The
Company will continue to evaluate its portfolio, and from time-to-time may
decide to dispose of other properties.
 
 Net
income
 
 Net
income for the six months ended June 30, 2008 decreased by approximately $24.3
million to $17.9 million compared to $42.2 million for the six months ended
June, 2007, for the reasons discussed above.
 
 Liquidity
and Capital Resources
 
 Cash and
cash equivalents were $34.4 million and $47.0 million at June 30, 2008 and
December 31, 2007, respectively. This decrease of $12.6 million is attributable
to $32.2 million provided by operating activities, less $26.3 million used for
investing activities, less $18.5 million used by financing
activities.  Management believes that existing cash, cash anticipated
to be generated by operations and our line of credit will be sufficient to meet
working capital requirements and anticipated capital expenditures and
improvements for at least the next 12 months. Although there is no guarantee
that we will be able to obtain the funds necessary for our future growth, we
anticipate generating funds from continuing real estate operations and from fees
and commissions from the sale of shares in newly formed Sponsored
REITs.  We believe that we have adequate funds to cover unusual
expenses and capital improvements, in addition to normal operating
expenses.  Our ability to maintain or increase our level of dividends
to stockholders, however, depends in significant part upon the level of interest
on the part of investors in purchasing shares of Sponsored REITs and the level
of rental income from our real properties.
 
 Operating
Activities
  The cash
provided by our operating activities of $32.2 million is primarily attributable
to net income of $17.9 million, plus the add-back of $15.8 million of non-cash
activities, $2.3 million of distributions from non-consolidated REITs, and
decreases in tenant rent receivables and prepaid and other assets of $0.6
million, which was partially offset by increases in straight-line rents of $0.5
million and decreases in accrued expenses and compensation of $1.8 million, and
payment of leasing commissions of $2.1 million.
  Investing
Activities
  Our cash
used for investing activities of $26.3 million is primarily attributable to
additions to real estate investments, including our acquisition by merger of FSP
Park Ten Development Corp. on May 15, 2008, and to a lesser extent tenant
improvements and office equipment, of approximately $37.0 million and a loan
made to a Sponsored REIT in March 2008 of approximately $1.0 million that is
classified in other assets on our balance sheet, which were partially offset by
approximately $11.7 million of proceeds received from the syndications in
process with FSP Grand Boulevard Corp. and FSP 385 Interlocken Development
Corp.
  Financing
Activities
  Our cash
used by financing activities of $18.5 million is primarily attributable to
distributions to shareholders of $43.7 million, which was partially offset by
borrowings on our line of credit of $25.2 million.
 
  24
  Line
of Credit
  We have a
revolving line of credit agreement (the "Loan Agreement") with a group of banks
providing for borrowings at our election of up to $250,000,000, which matures on
August 11, 2011.  Borrowings under the line of credit bear interest at
either the bank's prime rate (5.00% at June 30, 2008) or a rate equal to LIBOR
plus 100 basis points (3.46% at June 30, 2008). There were borrowings of
$109,995,000 and $84,750,000 at the LIBOR plus 100 basis point rate at a
weighted average rate of 3.47% and 6.20% outstanding under the line of credit at
June 30, 2008 and December 31, 2007, respectively.  The weighted
average interest rate on amounts outstanding during the six months ended June
30, 2008 and 2007 was approximately 4.15% and 6.57%, respectively; and for the
year ended December 31, 2007 was approximately 6.51%.  We believe that
we are in compliance with all bank covenants required by our line of
credit.
  We have
drawn on this line of credit, and intend to draw on this line of credit in the
future for a variety of corporate purposes, including the funding of interim
mortgage loans to Sponsored REITs and the acquisition of properties that we
acquire directly for our portfolio. We typically cause mortgage loans to
Sponsored REITs to be secured by a first mortgage against the real property
owned by the Sponsored REIT. We make these loans to enable a Sponsored REIT to
acquire real property prior to the consummation of the offering of its equity
interests, and the loan is repaid out of the offering proceeds. We also may make
secured loans to Sponsored REITs for the purpose of funding capital expenditures
and other costs which would be repaid from long-term financing of the property,
cash flows from the property or a capital event.
 
 Contingencies
  From time
to time, we may provide financing to Sponsored REITs in the form of a revolving
line of credit secured by a mortgage.  As of June 30, 2008, we were
committed to fund up to $5.5 million to one Sponsored REIT under such an
arrangement for the purpose of funding capital expenditures and leasing costs of
which $1.0 million was drawn in March 2008 and remained outstanding as of June
30, 2008. We anticipate that any advances made under this revolving line of
credit will be repaid at its maturity on December 31, 2010 or earlier from
long-term financing of the property, cash flows from the property or a capital
event.
 
 We may be
subject to various legal proceedings and claims that arise in the ordinary
course of its business.  Although occasional adverse decisions (or
settlements) may occur, we believe that the final disposition of such matters
will not have a material adverse effect on our financial position or results of
operations.
 
 Assets
Held for Syndication
  As of
June 30, 2008 and December 31, 2007, we had one asset held for syndication, FSP
Grand Boulevard Corp.
 
 Related
Party Transactions
 
 In June
2008, we commenced the syndication of FSP 385 Interlocken Development
Corp.  During 2007, we commenced the syndication of FSP Grand
Boulevard Corp. and completed the syndications of FSP 50 South Tenth Street
Corp. and FSP 303 East Wacker Drive Corp.  As part of the syndication
of FSP 303 East Wacker Drive Corp., we purchased the final 965.75 shares of its
preferred stock for approximately $82.8 million on December 27, 2007,
representing approximately a 43.7% interest.
 
 In
December 2007, we entered into a secured promissory note for a revolving line of
credit, which we refer to as the Revolver, for up to $5.5 million with a
Sponsored REIT, FSP Highland Place I Corp., that owns an office building in
Englewood, Colorado, of which $1.0 million was drawn in March 2008 and remained
outstanding at June 30, 2008.  Advances under the Revolver bear
interest at a rate equal to the 30 day LIBOR rate plus 200 basis
points.  The Revolver was made for the purpose of funding capital
expenditures and other costs of leasing.  We anticipate that any
advances made under the Revolver will be repaid at its maturity on December 31,
2010 or earlier from long-term financing of the property, cash flows from the
property or a capital event.
  On May
15, 2008, we acquired FSP Park Ten Development Corp. by merger for a total
purchase price of approximately $35.4 million. The acquisition was effected by
merging a wholly owned acquisition subsidiary of the Company with and into FSP
Park Ten Development Corp.  The holders of preferred stock in FSP Park
Ten Development Corp. received cash consideration of approximately $127,290 per
share.
  For a
discussion of transactions between us and related parties during 2007, see
Footnote No. 4 “Related Party Transactions” to the Consolidated Financial
Statements included in our Annual Report on Form 10-K for the year ended
December 31, 2007.
 
  25
  Other
Considerations
 
 We
generally pay the ordinary annual operating expenses of our properties from the
rental revenue generated by the properties.  For the three and six
months ended June 30, 2008 and 2007, the rental income exceeded the expenses for
each individual property, with the exception of a property located in Westford,
Massachusetts, which we sold on July 16, 2007, a property located in San Jose,
California, and a property located in Federal Way, Washington.
  ·
              The
      Westford, Massachusetts property had operating expenses of approximately
      $77,000 and $163,000 for the three and six months ended June 30,
      2007.  On July 16, 2007, the property was sold resulting in a
      $1.9 million gain.
  ·
              During
      2007, the San Jose, California property had one tenant in the building
      occupying approximately 19% of the rentable square footage of the
      property.  In December 2007, we signed a lease that commenced in
      2008 with another tenant for approximately 62% of the rentable square
      footage of the property.  As a result, the property had rental
      income that exceeded expenses during the three and six months ended June
      30, 2008.  For the three and six months ended June 30, 2007, the
      property had rental income of $113,000 and $213,000, respectively; and
      operating expenses of $114,000 and $239,000,
  respectively.
  ·
              The
      property at Federal Way, Washington had a single tenant lease, which
      expired September 14, 2006.  During the three months ended June
      30, 2007 a lease was signed for 8% of the space and generated revenue of
      $19,000.  The property had operating expenses of $151,000 and
      $290,000 for the three and six months ended June 30, 2007,
      respectively.   Over the remainder of 2007 we signed one
      other lease.  The two tenants now account for approximately 12%
      of the space, which generated rental income of $122,000 and $191,000 for
      the three and six months ended June 30, 2008, respectively.  The
      Federal Way property had operating expenses of $147,000 and $288,000 for
      the three and six months ended June 30, 2008, respectively.  We
      do not expect the property to produce revenue that is sufficient to cover
      its expenses during the third quarter of
2008.
  
  26
  Item
3.     Quantitative and Qualitative Disclosures About
Market Risk
 
 We were
not a party to any derivative financial instruments at or during the three and
six months ended June 30, 2008.
 
 Market
risk is the exposure to loss resulting from adverse changes in market prices,
interest rates, foreign currency exchange rates, commodity prices and equity
prices. The primary market risk to which we are exposed is interest rate risk,
which is sensitive to many factors, including governmental monetary and tax
policies, domestic and international economic and political considerations and
other factors that are beyond our control. Our line of credit matures in August
2011 and has a variable rate of interest.  Upon maturity, our future
income, cash flows and fair values relevant to financial instruments will be
dependent upon the balance then outstanding and prevalent market interest
rates.
 
 We borrow
from time-to-time on our line of credit.  These borrowings bear
interest at the bank’s base rate (5.0% at June 30, 2008) or at 30 day LIBOR plus
100 basis points (3.46% at June 30, 2008), as elected by us when requesting
funds as defined.  Generally the borrowings are for 30 day LIBOR plus
100 basis points.  As of June 30, 2008 and December 31, 2007, we had
two borrowings totaling $109,995,000 and $84,750,000 in the aggregate at the 30
day LIBOR plus 100 basis point rate, representing a weighted average rate of
3.47% and 6.20%, outstanding under the line of credit,
respectively.  We have drawn on this line of credit, and intend to
draw on this line of credit in the future for a variety of corporate purposes,
including the funding of interim mortgage loans to Sponsored REITs and the
acquisition of properties that we acquire directly for our
portfolio.  Generally interim mortgage loans bear interest at the same
variable rate payable by us under our line of credit.  We also may
draw on this line of credit to fund advances we may make under a $5.5 million
revolving credit facility (which we refer to as the Revolver) that we provided
to a Sponsored REIT, FSP Highland Place I Corp., that owns an office building in
Englewood, Colorado in December 2007, of which, $1.0 million was drawn in March
2008 and remained outstanding as of June 30, 2008.  Advances under the
Revolver bear interest at a rate equal to the 30-day LIBOR rate plus 200 basis
points.  We anticipate that any advances made under the Revolver will
be repaid at its maturity on December 31, 2010 or earlier from long-term
financing of the property, cash flows from the property or a capital
event.  We therefore believe that we have mitigated our interest rate
risk with respect to our borrowings for both interim mortgage and Revolver
loans.  Historically we have satisfied obligations arising from
interim or other financing of acquisitions through cash or sale of properties in
our portfolio.  We believe that we can mitigate interest rate risk
with respect to borrowings for interim or other financing of acquisitions as
well.
 
 The
following table presents as of June 30, 2008 our contractual variable rate
borrowings under the line of credit, which matures August 11, 2011:
 
 Payment
      due by period(in
      thousands)Total
                2008
                2009
                2010
                2011
                2012
                After
      2012Line
      of credit
                $109,995
                $109,995
                $    -
                $    -
                $    -
                $    -
                $    -Total
                $109,995
                $109,995
                $    -
                $    -
                $    -
                $    -
                $    -
 
 If market
rates of our line of credit borrowings at maturity increased by 10%, or
approximately 34.7 basis points, over the current variable rate, the increase in
interest expense would decrease future earnings and cash flows by approximately
$0.4 million annually.  We do not believe that the interest rate risk
represented by our variable rate borrowings is material as of June 30,
2008.
  27
  Item
4.     Controls and Procedures
  Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures as of June 30, 2008. The term “disclosure controls and procedures,”
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company’s management,
including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required
disclosure.  Management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving their objectives and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and
procedures.  Based on the evaluation of our disclosure controls and
procedures as of June 30, 2008, our chief executive officer and chief financial
officer concluded that, as of such date, our disclosure controls and procedures
were effective at the reasonable assurance level.
  Changes
in Internal Control Over Financial Reporting
 
 No change
in our internal control over financial reporting occurred during the quarter
ended June 30, 2008 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
  28
  PART
II - OTHER INFORMATION
 
 Item
1.     Legal Proceedings
 
 From time
to time, we may be subject to legal proceedings and claims that arise in the
ordinary course of our business.  Although occasional adverse
decisions (or settlements) may occur, we believe that the final disposition of
any such matters will not have a material adverse effect on our financial
position, cash flows or results of operations.
  Item
1A.  Risk Factors
 
 There
were no material changes to the risk factors disclosed in Part I, “Item 1A. Risk
Factors” of our Annual Report on Form 10-K for the year ended December 31, 2007,
except to the extent previously updated or to the extent additional factual
information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to
such risk factors (including, without limitation, the matters discussed in
Trends and Uncertainties in Part I, “Item 2-Management’s Discussion and Analysis
of Financial Condition and Results of Operations”).   In addition
to the other information set forth in this report, you should carefully consider
the risk factors discussed in the Form 10-K, which could materially affect our
business, financial condition or future results. The risks described in our
Annual Report on Form 10-K are not the only risks facing our Company. Additional
risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially adversely affect our business, financial
condition and/or operating results.
  Item
2.     Unregistered Sales of Equity Securities and Use
of Proceeds
 
 The
following table provides information about purchases by Franklin Street
Properties Corp. during the quarter ended June 30, 2008 of equity securities
that are registered by the Company pursuant to Section 12 of the Exchange
Act:
 
 ISSUER
PURCHASES OF EQUITY SECURITIES
 
 Period
              (a)
                
                
                
                Total
      Number of
                Shares
      (or Units)
                Purchased
                (1)
      (2)
              (b)
                
                
                
                
                Average
      Price
                Paid
      per Share
                (or
      Unit)
              (c)
                
                Total
      Number of
                Shares
      (or Units)
                Purchased
      as Part
                of
      Publicly
                Announced
      Plans
                or
      Programs
                (1)
      (2)
              (d)
                
                Maximum
      Number (or
                Approximate
      Dollar
                Value)
      of Shares (or
                Units)
      that May Yet Be
                Purchased
      Under the
                Plans
      or Programs
                (1)
      (2)04/01/08-04/30/08
              0
              N/A
              0
              $31,240,46505/01/08-05/31/08
              0
              N/A
              0
              $31,240,46506/01/08-06/30/08
              0
              N/A
              0
              $31,240,465Total:
              0
              N/A
              0
              $31,240,465
 
 (1)  Our
Articles of Incorporation provide that we will use our best efforts to redeem
shares of our common stock from stockholders who request such
redemption.  Any FSP Corp. stockholder wishing to have shares redeemed
must make such a request no later than July 1 of any year for a redemption that
would be effective the following January 1.  This obligation is
subject to significant conditions.  However, as our common stock is
currently listed for trading on the American Stock Exchange, we are no longer
obligated to, and do not intend to, effect any such redemption.
 
 (2)  On
October 28, 2005, FSP Corp. announced that the Board of Directors of FSP Corp.
had authorized the repurchase of up to $35 million of the Company’s common stock
from time to time in the open market or in privately negotiated transactions. On
September 10, 2007, FSP Corp. announced that the Board of Directors of FSP Corp.
had authorized certain modifications to this common stock repurchase plan. The
Board of Directors increased the repurchase authorization to up to $50 million
of the Company’s common stock (inclusive of all repurchases previously made
under the plan).  The repurchase authorization expires at the earlier
of (i) November 1, 2009 or (ii) a determination by the Board of Directors of FSP
Corp. to discontinue repurchases.
  29
  Item
3.     Defaults Upon Senior Securities
 
 None.
 
 Item
4.     Submission of Matters to a Vote of Security
Holders
 
 On May
16, 2008, the Company held its 2008 Annual Meeting of Stockholders (the “2008
Annual Meeting”). The 2008 Annual Meeting was called for the following purposes:
(1) to elect two Class III directors to serve until the 2011 annual meeting and
(2) to transact such other business as may properly come before the meeting or
any adjournment thereof.
 
 The
following table sets forth the names of the directors elected at the 2008 Annual
Meeting for new three-year terms and the number of votes cast for and withheld
from each director:
 
 Directors
              For
              WithheldGeorge
      J. Carter
              56,046,016
              3,286,479Georgia
      Murray
              58,795,878
              536,617
 
 The names
of each of the other directors whose terms of office continued after the 2008
Annual Meeting are as follows: John N. Burke, Barbara J. Fournier, Barry
Silverstein, Dennis J. McGillicuddy and Janet Prier Notopoulos.
 
 Item
5.     Other Information
 
 None.
 
 Item
6.     Exhibits
 
 The
Exhibits listed in the Exhibit Index are filed as part of this Quarterly Report
on Form 10-Q.
  30
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 FRANKLIN STREET PROPERTIES
CORP.
 
  Date
              Signature
              TitleDate:  July
      29, 2008
              /s/ George J.
      Carter
                George
      J. Carter
              Chief
      Executive Officer and Director
                (Principal
      Executive Officer)Date:  July
      29, 2008
              /s/ John G.
      Demeritt
                John
      G. Demeritt
              Chief
      Financial Officer
                (Principal
      Financial Officer)
 
 
  31
  EXHIBIT
INDEX
 
 
 2.1(1)
              Agreement
      and Plan of Merger by and among FSP Corp., Park Ten Phase II Acquisition
      Corp. and FSP Park Ten Development Corp. dated as of March 19,
      2008.3.1(2)
              Articles
      of Incorporation3.2(3)
              Amended
      and Restated By-laws10.1(4)
              Third
      Amended and Restated Loan Agreement dated as of October 19, 2007 by and
      among the Company, certain wholly-owned subsidiaries of the Company, RBS
      Citizens, National Association, Bank of America, N.A., Wachovia Bank,
      National Association and Chevy Chase Bank, F.S.B.31.1*
              Certification
      of the President and Chief Executive Officer of the Registrant pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
              Certification
      of the Chief Financial Officer of the Registrant pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002.32.1*
              Certification
      of the President and Chief Executive Officer of the Registrant pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2*
              Certification
      of the Chief Financial Officer of the Registrant pursuant to 18 U.S.C.
      Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.
 
 ______________________________________________________
 
 (1)
              Incorporated
      by reference to FSP Corp.’s Current Report on Form 8-K, filed on March 21,
      2008 (File No. 001-32470).(2)
              Incorporated
      by reference to FSP Corp.’s Form 8-A, filed April 5, 2005 (File No.
      001-32470).(3)
              Incorporated
      by reference to FSP Corp.’s Current Report on Form 8-K, filed on May 15,
      2006 (File No. 001-32470).(4)
              Incorporated
      by reference to FSP Corp.’s Current Report on Form 8-K, filed on October
      22, 2007 (File No. 001-32470).
 
 * Filed
herewith
 
 
  32